In Search of the Perfect Investment

The Big Gotcha in today’s world is to let today’s “miserable” world get to you — especially all those depressing stories in the media — the newspapers, the TV, the magazines, etc.

Maybe I’ll start Good Times Magazine. I’ll only focus on success stories and great opportunities — of which there are zillions.

I’ll stress caution and checking. Or checking and caution.

If you already run a business, get on the phone. Call your ex-customers and sell them something. I wish someone would call me, flatter me and sell me something fun.

If you don’t already own  a business, buy one. I’m starting to look at 4 to 8 unit building rentals in nice places.

I feel wonderful today. Some of my private equity funds recently paid out a few sheckels (after selling some of their investments at a good price — remarkably good for the “lousy” economy).

Our new little bank is doing so well that it’s about to do a secondary offering. And most of the original stockholders seem to be excited: they’re ponying up.

Zippy’s house: Why you should buy a house now. My friend Zippy bought his townhouse for $130,000 in September, 2007. He borrowed $120,000 — or 92% — from a local bank. He stopped paying the bank back in April. He still owes the bank $120,000. He’s about to sell the place for $47,650 — 37% of what he paid.

That 63% drop in the price of his townhouse suggests the buyer got a deal.  There are others around.

The postscript to this story: The bank will pay Zippy as much as $3,000 in “moving expenses” (a bribe not to trash the place and let the sale go through). The bank won’t pursue him for the monies he still owes — approx $72,350, since Zippy doesn’t have a job.

When he bought the house, he was making $85,000 a year. So, why did the bank feel it necessary to lend him 92% of the purchase price?

Who knows? They were different times then.

Yes, they were different times. From today’s New York Times.

Rogue Trader at Société Générale Gets Jail Term
PARIS — Jérôme Kerviel, the former Société Générale trader whose rogue dealings almost brought about the French bank’s demise, was convicted of breach of trust and other crimes Tuesday and sentenced to at least three years in prison.

Mr. Kerviel, 33, was also ordered to pay restitution of €4.9 billion, or $6.7 billion — the entire amount the bank lost in unwinding his trades in early 2008. …

Caroline Guillaumin, a spokeswoman for Société Générale, said the damage award was a “symbolic” sum that the bank did not expect would be paid.

“But it is important, and we are satisfied, because it recognizes that the entirety of the bank’s losses are attributed to Jérôme Kerviel’s actions,” she said. …

Mr. Kerviel’s rogue bets — the largest ever attributed to a single trader — exposed one of France’s most prestigious financial institutions to risk greater than its own market value and brought it precariously close to collapse.

The unwinding of an estimated €50 billion in unauthorized open positions on Mr. Kerviel’s trading book in late January 2008 cost Société Générale €4.9 billion, the equivalent of about $7 billion at the time.

Mr. Kerviel acknowledged at his trial that he had falsified documents and entered fake trades to hide his activities, but he maintained that his bosses had deliberately turned a blind eye to what he was doing and had tacitly encouraged him as long as it was profitable. ..

During the trial, he described himself as “someone who tried to do his job the best he could, in the interests of the bank.” He added: “My objective was to help it make money.”

In a newspaper article last year, he was quoted as saying that he had taken “crazy risks” for “astronomical gains that brought me, sometimes, great joy.”

Daniel Bouton, the former chief executive and chairman of the bank, has described Mr. Kerviel as “a crook, a fraudster and a terrorist” who acted alone and nearly destroyed the bank.

Mr. Kerviel had been placing bets outside his trading limit for more than two years. The bank has said it booked €1.4 billion in profit in the fourth quarter of 2007 from his unauthorized dealings.

But when the market turned against him, eight large transactions entered into the bank’s computers in mid-December exposed the bank to €50 billion in risk. His last and, by far, biggest gamble was discovered Jan. 18, 2008. It was the unwinding of those trades, from Jan. 21 to Jan. 23, that led to the loss of €4.9 billion.

In the aftermath of the scandal, Mr. Kerviel spent five weeks in pretrial detention and became something of a French folk hero. Much was made of the fact that someone from such a modest background — his mother was a hairdresser, his late father a metal-shop teacher — could dupe so many of his bosses, many of them well-bred graduates of France’s best schools.

There’s always a gotcha.This is the cabinet some moron designed for the kitchen of the house we built several years ago. Notice the microwave oven space with absolutely no ventilation. To Wolf’s credit (Wolf made the oven), the microwave lasted three years before the lack of ventilation and the overheating finally killed it. We replaced the $500 Wolf with a $149 GE  — thank you Lowe’s. And it fitted perfectly (once we’d removed three sticking-out screws holding the top). But no ventilation.

Susan’s brilliant solution. Cut a hole in the left wall where the oven vents; drill some holes at the top of the cabinet. That way we have created a vent. We were lucky.

There’s a moral to this story. But it’s the same old one — CHECK, CHECK. CHECK. Why would anyone  put a microwave oven in a completely confined, unventilated space? Clearly, because it looks good.

And by the time it blows up, they’ll be long gone. But you’re still be living there. Tough.

Four favorite cartoons from this week’s New Yorker. They’re wonderfully sick.

You can only understand this next one if you’ve tried to park a car in New York City. The signs here give “impossible to understand” a whole new meaning.

Harry Newton who wonders why he suddenly feels so good — maybe because the microwave works. Maybe because gold is dong OK. Maybe because we’re holding it together. Eeking forward, slowly. But eeking forward.