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A kvetch at Goldman Sachs. Some lessons about investing in things you can’t sell. Fees and salesmanship are the reasons such things exist

I get calls to invest in private companies.

The company has a miraculous technical breakthrough. It has oodles of patents. It has great management.

And, best of all, a persuasive salesman pushing me to invest.

The usual stuff.

I get calls because I’m on a list of accredited investors — which like LinkedIn’s list — I can’t get off.

So, yesterday I signed an NDA (non disclosure agreement) and received the PPM — short for Private Placement Memorandum.

Acres of small breathless type (like the salesman) And there in small type:

The Company will pay to ABC (the seller) a cash commission (“Commission”) derived from the sale of Membership Interests in the amount of eight percent (8%) of Capital Contributions for Membership Interests sold in this Offering. The Commission will be paid out of the proceeds from Capital Contributions made at: (i) the Initial Closing, and (ii) any subsequent closings.

Such charges, when applicable, will reduce the Members’ net investment in the Company, which, in turn, will reduce the Company’s direct investment in XYZ. Each Member’s Percentage Interest will be proportionately adjusted to reflect the Commission paid from the proceeds of its purchase of Membership Interests.

Makes your little heart warm as you read how much they’ll be making … and you won’t.

Heck this is more than the front-end load that was paid in the good old days on mutual funds of  3.75% to 5.75%. I got these numbers from … Click here. 

The year was 2006. I was pretty stupid.

Goldman Sachs sold me a stake in a Goldman fund it called Vintage IV LP.

The idea was they would buy bits of hedge funds cheap. They would buy interests of investors who couldn’t sell their hedge fund interests — because of lockups. My fund would buy the interests at a major discount (like 50%) to their reputed value at the time. Over time these interests would explode in value and I’d be a zillionaire.

I just received Vintage IV LP’s miserable annual December 31, 2018 financials.

Today, nearly 13 years later, my interest in the fund is worth 1.39 times what I invested. That means that over 13 years, it’s grown 39%. That’s about 2.57% a year.

By contrast the S&P500 has grown 2.1 times. That’s about 5.87% a year. And that includes the dip in 2008/2009.

Why has my fund done so poorly? Because its managers are incompetent? Goldman doesn’t give a sh*t about its clients? Who knows?

There’s a table in the financials that shows what it calls “secondary investments.” It lists cost and “fair value.” It’s an amazing table. For example, the fund invested $10,600,000 in Project Halley (whatever that is). It’s now worth zip. It invested $6,297,459 in Project Pascal, which is now worth $15,090. Admittedly, there are some good ones. Project Hopper has gone from $784,221 to $29,476,655.

I ask myself why does the fund still exist? Why doesn’t Goldman simply give me my remaining balance — 21% of what I invested — and call it a day? Stop my agony.

The answer is — you guessed it — fees.

13 years later, Goldman Sachs is still taking fees from me for their absolutely miserable performance managing my money.

Is there anything I can do?

In a word — Nup!

Goldman is the General Partner. Like all general partners in these funds it has absolute control. Absolute.

I’d like to talk someone there. But there’s no name on my financials. No one signed them.

A few years ago when I called them, I found they’d assigned my account to a call center in Albany, New York.

Is Albany the new financial capital of the western world?

A total joy

I don’t receive many checks. But when I do, I deposit them using my bank’s photo system through my iPhone.

Works like a charm.

If you’re still schlepping to your bank to deposit checks, stop.

Thank you J.P.Morgan.

I love Google’s browser called Chrome

It’s intelligent. It does things simply and fast. Best of all, it remembers all my userIDs and passwords. I don’t need a separate password manager.

I’m off software. I’m downsizing. Getting rid of homes. Giving my clothes and shoes away.

God meant us to have empty closets.

I’m now an Amazon Associate

That means that if I recommend something you can buy on Amazon — and I do all the time — I get a commission.

I don’t know how much yet. I’ve just started. But it’s probably more than a slap in the belly with a cold fish.

I had meant to sign up for the last ten years, but focused on other things — like managing my money — compensating for the mauling that Goldman did.

I also dreamed it was too difficult.

But it wasn’t. Amazon makes signing up remarkably easy.

Which affirms my old theory — Things are always much easier than you initially thought.

Just do it.

Simply stupid. But still fun.

Amazingly simple home remedies that snopes.com verifies as truthful (well maybe not):

1. Avoid cutting yourself when slicing vegetables by getting someone else to hold the vegetables while you chop.

2. Avoid arguments with females about lifting the toilet seat. Use the sink.

3. For high blood pressure sufferers — simply cut yourself and bleed for a few minutes. This will reduce the pressure on your veins. Remember to use a timer..

4. Put a mouse trap on top of your alarm clock. You won’t roll over and go back to sleep after you hit the snooze button.

5. If you have a bad cough, take a large dose of laxatives. Now you’ll be afraid to cough. (This is my favorite.)

6. You only need two tools in life — WD-40 and duct tape. If it doesn’t move and should, use WD-40. If it shouldn’t move and does, use duct tape.

7. If you can’t fix it with a hammer, you’ve got an electrical problem.

Harry Newton. Several readers asked if I was OK (thank you), I am. It was another Harry who hurt himself on the plane and got carried off in a stretcher.

This weekend I’m attending the funeral of someone who probably did something stupid — like swimming in the ocean on vacation while overweight and out of condition.

We’re moving to earnings season. It should be O.K. Despite all the gloom and doom talk about China, Brexit, the economy slowing, the yield inversion, etc. it seems that we’re going up. Go figure. Here’s this morning’s amazing opening:

Granddaughter Eleanor knows all. She’s my best forecaster. Look where she thinks we’re going.

Disney has announced a streaming service to start in November? Eight months from now? I can’t buy it for eight months? Disney is not going to hurt Netflix. Trust me on that one. Netflix stock is moving into bargain territory. More bad news on Boeing. But its stock is rising. Go figure.

 

  • Troglodyte

    Take a look at HKTVY, an e-commerce company in Hong Kong. First mover advantage, growing at 70% clip and have built an delivery infrastructure moat. Just starting to become profitable.