This story has all the usual cast of characters: clients looking for unreasonably high yields from their savings, brokers making big commissions pedaling reckless risk and levered bets, followed by predictable devastating capital loss, shattered dreams and lawsuits…Rinse and repeat. See: New way to bet on oil wipes out billions in investor savings
“For years, brokers have been luring savers like Robinson into drilling partnerships with the promise of fat payouts. With yields on safer investments like government bonds so puny, it wasn’t a hard sell. But now this once hot business, a big source of fees for brokers and banks, is coming to a messy end.
In the past year, investors have lost $20 billion in publicly traded drilling partnerships, or $8 of every $10 they had invested, according to a report prepared by FactSet for The Associated Press. That figure does not include losses from $37 billion of bonds sold by the partnerships in the five years since 2010, many down by half in last 12 months, or losses from bets on private partnerships that don’t trade publicly and are difficult to track.”