Applying the litmus test

Richard Romer-Lee uses the common sense of qualitative analysis to worm out investment pitfalls

In his report to investors in 2001, Warren Buffett observed that "you only find out who is swimming naked when the tide goes out". Unfortunately, in the latest bout of market meltdown, a number of advisers and investors have been left facing the bare cheeks on display left behind by Madoff and, in the closer-to-home UK retail market, Arch cru. It is always desperately sad that real people's hard-earned cash gets caught up in debacles from which some fairly straightforward analysis should keep them away. It is not always easy to spot investments that go wrong but there are some aspects...