Set forth below is the text of a comment that I recently put to the Goon Central board:
Personally, if I was confident that I’d been wronged and could make $500 million in a lawsuit, I’d pay the lawyer! It works the other way around too, GW.
If the lawyers were as confident as I need them to be to be sure they can win the case, they would be happy to take it on contingency.
This is what changes with the next crash. After the next crash, what Buy-and-Hold has done to us is in all the newspapers and people are looking for villains to hang from trees. A good lawyer can take advantage of that reality. But that reality is not today’s reality. So the smart lawyer and the smart client wait it out a bit.
I met one lawyer in his office. He liked the case. But he felt that his firm was not big enough to handle it. It was my conversation with him that got me thinking that maybe it was better to be patient. I liked that guy and I would have gone forward had he taken the case. But what he said about needing a big team of lawyers for this particular case struck me as being true. We are going up against heavy hitters — Vanguard, Motley Fool, the Get Rich Slowly blog, Index Universe, Morningstar, the Bogleheads Forum. This is not a job for a small firm.
I don’t want just to bring the case. I want to win the case. A case for $500 million (the case will obviously be for a much larger number — that’s a number that I have put forward as a possible settlement amount for a settlement achieved PRIOR to the next crash) needs to be brought by a team of the best lawyers in the country. Can I get them today? I probably could if I had the right contacts and that still may happen. It could be that one of my e-mail contacts will have an in with some big-name lawyers. But, if I wait until the crash, I will have lawyers lined up around the block. What’s the rush?
My preference in the early days was to bring the case and get the ugly stuff behind us. I still would bring the case today if I had a team of top-flight lawyers showing their confidence by taking it on contingency. But I need to see from the lawyers that they are confident enough to put a good bit of skin in the game. I have a funny hunch that I will see a whole big bunch more of that sort of action FOLLOWING the next crash than I am seeing today. I would rather wait and get a number far in excess of $500 million than rush things and perhaps have to settle for a number a bit smaller than $500 million. Huh? For this case?
You are essentially placing all your bets on a hope that stocks will perform in the future in a manner unlike how they have ever performed before. I am doing the opposite. I say that today’s price is comprised largely of cotton-candy nothingness. It is the product of a huge confidence game, a huge flood of dangerous, worthless emotions. When those emotions fade, you lose it all. You lose the bull market gains you are today counting as real. You also lose the public’s confidence in your SWR studies and the experts’ willingness to pretend that there is some mystical data somewhere supporting those irresponsible claims. You ALSO lose the reluctance of the nation’s top lawyers to bring this case on a contingency basis. Lawyers read the papers. They will see how mad people will be. They know that it is juries that decide legal cases and that juries are comprised of humans.
So it may be that it all flips at the same time.