In Search of the Perfect Investment

Debt is wonderful. It allows you to buy things you can’t afford. It juices up your investment returns.

These days, debt is cheap. Everyone should have lots of it.

Debit is dangerous. If things go awry, you can lose what you just bought. You can lose everything — like the 35% — you invested on top of the debt.

Debt is good because you get to deduct the interest. You’ll owe Uncle Sam less. Everyone says borrow. You save on taxes — if you paid the interest.

Entrepreneurs, like me, hate debt. We worry we’ll lose everything.

There are creative ways to borrow. Some lucky borrowers get a floating rate loan. Their interest payment drops when interest rate falls — as interest rates have done recently.

One day interest rates will rise and borrowers will wonder what happened.

Some lucky borrowers pay only the interest, not the principal. They pay the loan off when they sell the place or get another loan to replace the first one.

This “strategy” has risks. Your loan may become due when things are at their worst, like 2008. At that time, your lender may be helpful or hurtful.

You can’t predict anything with banks these days, since they change employees faster than I change underwear. And they probably sold your loan to a faceless monster — an institution with a computer run by insane rules and children, who apply the insane rules.

Would be borrowers love today’s low rates. These rates are deceiving. Borrowers forget the huge fees and heavy paperwork. There’s closing costs, financing costs, appraisal fees, lawyers bills, etc. There’s also aggravation costs. Like Drive Yourself Nuts costs. Some banks don’t know what paperwork they want. One filled-in paper leads to another request. They bug you with endless requests for more. They don’t know what they want. They don’t know what will make them happy — if anything.

In the old days banks had managers. They cared about long-term relationships. They wanted you as a client forever. They believed they earned more money as you grew your business and your life. They recognized your time frames. The time you were in a hurry to snag a bargain, they’d move Heaven and Earth to help you.

Today banks don’t understand business. Banks are run by computers and children. whose only motivation is to avoid problems. Doing nothing is the perfect way to never get into trouble with a bad loan, the regulators, the press, the New York Times, the Wall Street Journal, or even this blog. God forbid.

The worst is that today’s “banks” don’t want to do banking. They don’t want to lend you money so you can make money with their money. They’d rather make money with their own money — by trading tulip bulbs, or sub-prime mortgages, or derivatives, or crappy housing loans.

I was going to borrow $2.5 million at under 3% interest. Cheap money. I figured Blind Freddie could make more on the market owning stocks. Heck Verizon is paying 4.4% dividend yield,. So borrowing the money was a no-brainer.

The bank appraised my New York apartment. That took weeks and weeks and $1,500 and determined the apartment was worth far more than it was worth and far more than I wanted to borrow. I felt great. I lived in a palace. Then they wanted a oodles of financials, tax returns, guarantees, paperwork and more paperwork. They kept making up new things they wanted…

I suggested a list would be in order… But the list produced more lists and more demands.

I don’t even remember what the demand was that broke my patient, quiet demeanor.

But finally I got the message, their higher-ups wanted to lend me the money –they got a commission — but the children in the back office wanted to protect their tushies. They wanted to make their “work” look good, not expose themselves to making a mistake.

In the end I crashed my loan with words about “sticking your latest demand in that special place the sun doesn’t shine.” That did it. They never called back and I lost my $1,500. But I happily went out and played tennis.

I still don’t owe anyone any money.

That comforting thought allows me to sleep at night.

Thank you, Todd Kingsley, the only financial adviser I’ve stuck with for 20+ years. He’s turned away revenue (potentially in his pocket) “because peace and quiet is better long-term for my clients.”

He’s a master at saying NO. I wish I had listened to him more and said “NO” more often. I’d be a better tennis player today!

The hardest word in the English language to say is NO.

Practice saying it three times.

This is on the cover of this weekend’s BusinessWeek.

Summers is following today’s latest marketing ploy: Sell “Gloom and Doom” and they will flock to your door for consulting, for newsletters, for whatever rubbish you’re peddling. Mr. Summers was once president of Harvard. He nearly bankrupted the school with his insane spending and investing ideas. The man couldn’t organize a queue to an outhouse. Don’t get me started.

Funny, amazing stuff

+ Search the word “download” in Microsoft Bing and you get “download google chrome.”

+ There were two piles of nice shiny apples in the supermarket. I bought one of each. Neither was organic. One cost 77 cents. The other — a Honey Crisp — cost $2.35.

+ I bought an ultra-slim LG DVD Writer at Best Buy. Their price was $39.95. While waiting in the checkout line, I checked Amazon’s price on my iPhone, it was $27.95 — 30% less. I showed the cashier my iPHone. She honored the Amazon price.

+ LOS ANGELES – Dozens of Russian athletes at the 2014 Winter Olympics in Sochi, including at least 15 medal winners, were part of a state-run doping program, meticulously planned for years to ensure dominance at the Games, according to the director of the country’s antidoping laboratory at the time. For more, click here.

+ Vanity Fair has a published a piece on “a scientific explanation of how Donald Trump’s children turned out (relatively) normal.” It begins, “Like any smart businessman, he outsourced the job.”

+ We asked our investment banker for advice on re-investing $241,000 our building had in a CD that is coming due. They recommended a CD paying 0.50 % per year. I said that was “too low.” They came back with one paying 1% — twice as much. Go figure.

Wonderful Italian take on Passover.

Favorite cartoons:

Thought for Claire and Michael.

“I want my children to have all the things I couldn’t afford. Then I want to move in with them.” – Phyllis Diller

Harry Newton, who has three favorite grandchildren (the only ones).

From the weekend: First Peter. Then Eleanor and happy mother Anne.

 

And Sophie, dressed to kill, or something.