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Investing lessons from the pandemic and before. There are three perfect investments.

The chicken are coming home to roost. Today, I am writing down many of my “brilliant” investments — especially some in real estate and a couple of other “exotic” areas, like third party lending, a hedge fund with peculiar ideas and some awful commercial real estate. But I am also writing some up. And banking the proceeds of one brilliant Beachwold investment that returned 31% IRR.

Here’s my story in a nutshell. We sold the business in September 1997 for cash. We got the cash in one Friday. Figuring I’d earn some free money (called interest) over the weekend I bought treasuries late on Friday afternoon. That pushed the price up (and the yields down). On Monday, the learned Wall Street Journal wrote that treasury yields were on their way down. They didn’t speak to me. The story was entirely made up. That was my first lesson in how little the financial press (and everyone else in that biz) knew about finance.

There are essentially three places you can find “the perfect investment.”

+ Your own business. This is the best because you can learn the gotchas, adjust to them and do better. If you mess up, you can’t get mad at someone else. You just go and do it again. But differently. Eventually you’ll get it right.

+ You can hand your money to someone else. The major thing these outsider money managers are good at is selling you why you should give them your money to “manage.” They are in the business to get fees. An ongoing percentage of your money over a long haul is nirvana. Most likely they will get more fees if they do better, but it’s better for them if they drag out your agony (at their poor performance) forever and ever.

+ Public markets. Stocks and bonds are daunting — unless you study them. Once you do, you’ll find they offer one huge plus: As you study, you find there are “strategies” that fit your brain and ones that don’t. Doing what you increasingly feel comfortable with will make them your “perfect” investment. My friend does phenomenally day-trading one large company. I don’t have his awesome skills, which he finehoned over years of reading and practicing.

How difficult is it? When I sold the business, the S&P 500 stood at 965. Today it’s 3385. That means if I had simply put my cash-out money into an S&P500 index fund today I would have 3.5 times as much money. So why did I chase all the various investments called alternative? Like real estate, corporate lending, hedge funds, biotech, private equity funds, distress real estate, roadside hamburger joints, weird eternal motion machines, broadband services in China, bottled water, LGTB magazine startups, etc. etc

Had I simply devoted my attention to learning more and more about publicly-traded stocks, I would have slowly moved money out of my S&P500 index fund into stocks whose businesses I used every day and admired — Amazon, Apple, Facebook, Google, Home Depot, Microsoft, PayPal, and maybe I would have moved money into ETFs that mimicked the tech-heavy Nasdaq.

With study comes knowledge, and confidence.

There you have it: 23 years of major successes and major idiocies.

Now, none of this journey would have been possible without the formation and building of that first business — a journey that took 28 years.

Clearly that’s where you start: Your own business.

Your own business has two financial rewards. The first is your salary. You can get that anywhere. The second is  the money you get when you sell it. You can’t get that anywhere — unless you’re selling your business. And these days, capital gains tax is much lower than it was when I sold. Much, much lower.

In short, what you control, you get good at. The money is better. But so are the emotional rewards.

One day I’ll write about what I would  and should have done differently. But for now, I’m 78, with a healthy wife, healthy two kids and healthy four grandkids. Money can’t buy that mitzvah. They all have more intelligence than I have. And the older ones (older than four) will tell me why. In great and logical detail. And they’ll be right. Papi (that’s me) is an idiot.

Watch your CDs

A year ago I put money into CDs. I got paid 2.50% — which is more ironically than one hedge fund I gave money to. (Go figure!)

I had CDs with Ally, Capital One and Marcus (the Goldman bank). If I had left them in their banks, all three banks would have rolled them over to their new one year terms — between 0.50% and a glorious 0.80%. Fortunately I got to them before they rolled me automatically over to their new miserable rates.

In contrast our portfolio (see the right hand column on the web site) was up by 1.74% just today alone — more than three times what one of those nice banks was going to pay me for keeping my money for another year in their CD.

Your bank account is not safe

This is all based on actual events.

Here’s how to steal from your bank account. First I find your mobile number. Then I port it to different carrier and buy a new cell phone from that carrier. Then I hack into your bank account and change your mobile number to my new one. Then I add new wiring instructions (i.e. my bank account) to your account. That will require confirming via digits sent to my new phone. Once confirmed, I wire myself a million bucks of your money out of your bank account, take the money out and run — long before you figure you just lost all your money.

Some banks will catch the shenanigans and alert you. Some won’t.

I’m trying to get my banker at JPMorgan Chase Private Bank to tighten access to my bank account with them. I want to have two factor authentication. The first way (also called factor) is my normal ID and password and the next way is through something else — maybe an electronic token or a second password. But so far, no luck. They’re “working” on it.

This blog — the one you’re reading now — was hacked a while back. We put in the necessity for second password and, bingo, all the hacking stopped.

If your bank is living in prehistoric times, like mine, at least change your password every couple of months. Perhaps also spread your money around. Remember the Feds will only insure a couple (you and your spouse) to $500,000. After that you can kiss your money goodbye.

I don’t think the banks are in the financial trouble they were in way back in 2008.

But I also don’t think that Covid has done wonders for collecting their loans on businesses like airlines, retailers, cruise ships, restaurants, hairdressers — all the businesses banks traditionally lend money to.

So, get your money out into other banks.

Hoisted on my own petard, again

Way back in March I bought a bunch of these 3M 9211 masks.

I was so proud of myself. N95 masks, no less. No one else had them. Then this week, I read:

Face masks with valves or vents do not prevent spread of the coronavirus, CDC says.

Reports the Washington Post:

Of all the three-word phrases this pandemic has popularized – “flatten the curve,” “six feet apart” – perhaps none has resonated as deeply as “wear a mask.” (Or, as Marco Rubio, the Republican senator from Florida, put it back in late June: “Everyone should just wear a damn mask.”)

It’s one of the simplest and most effective ways to curb the spread of the coronavirus and save lives.

In guidance updated late last week, the Centers for Disease Control and Prevention warned against wearing masks with exhalation valves or vents, a type of face covering made for hot and dusty construction work that has become a popular pandemic accessory because of its seemingly high-tech design.

The CDC recommends simple cloth masks instead. A few layers of cotton prevent most of the potentially infectious respiratory droplets from escaping into the air around you, and they are also much cooler than the form-fitting N95 masks — the ones I bought.

Here’s a simple face mask I found (and just bought) on Amazon:


There are a million different masks on Amazon. They’re all better than the N95 masks I have.

For this one, click here.

Weekend travels

From a useful travel magazine I get. Just my style.

I always wanted to know

Great news, finally

Someone had far too much time on their hands. The boobs do sort of suit him, however.

Tennis again

Played our 156th consecutive game of tennis this morning. I lost.

I know what I’m doing wrong. I’m too slow. I’m also not 23 any longer.

See you soon — Harry Newton

 

3 Comments

  1. Mike Nash says:

    Harry, please write something about the 9/11 Truther Movement of which I am a member. Too many Americans still don’t realize that the government faked 9/11. We need to change that. If you’d like to interview me maybe we can change some peoples’ minds.

  2. Scooter says:

    Why NYC will not recover from the Democratic continued lockdown.

    https://jamesaltucher.com/blog/nyc-is-dead-forever-heres-why/

  3. Glenn says:

    You have bought some really good Tech stocks this year such as Wix. Looking to see if you can write a blog on how you determine when is the right time to sell, specifically, the tech stocks you own that are booming.
    For #2 in today’s post: ‘places’ for The Perfect Investment – I remember you saying you’re a Chase private client. How often would they pitch you to join their invest arm at Chase? So true they love to sell but are unable to provide any tangible benefit they can bring other than collecting fees.
    Lastly, very curious what New Yorkers with places in Manhattan that still own who left the city will do when it gets cold out…