As we begin 2014, I’d like to focus on the financial side of LifeNuts, a part of our lifestyle perhaps not as important as intense exercise, eating habits, and relationships but important nonetheless. Having to work long hours or in two or three jobs often translates into poor eating habits, little exercise, and obesity … and its related diseases.
Last Friday we watched “The Wolf” movie – mostly out of curiosity about
the real life character, Jordan Belfort, a person I term “an investment shark.”
An article in Barron’s explained that in the 1990s Jordan’s firm, Stratton Oakmont, bilked investors out of $300 million – including a local man, John Kilroy, a Pizza Hut franchisee who lost a lot of his life savings to this man. One of the fascinating aspects of this is that Belfort, after serving about two years in jail for his fraud, has emerged as a motivational speaker (to help you close the deal) and is currently trying to land a reality TV show. Despite selling two memoir books and making close to
a million dollars for the movie rights, he still owes ordinary people like Kilroy (Maineville, Ohio) over $100 million and has paid very little. Jordan is the quintessential con man and investment shark and, through the movie, he offers lessons to all of us in our daily financial management. LifeNuts excel in this arena, which gives them time to exercise and do the other important things in life. But most people are not interested in investing or do not have sufficient funds to invest. I hear all kinds of excuses: too time consuming, too difficult to understand, too afraid.
A writer has documented the movie and Belfort’s life, which is worth reading: http://www.beliefnet.com/columnists/moviemom/2013/12/the-real-story-jordan-belfort-the-wolf-of-wall-street.html# . Interestingly, Belfort’s website claims that corporations pay 50 grand for his motivational speeches, yet a U.S. attorney listed only $24,000 in that type of income since 2007. Again, he’s an unabashed master promoter and a compulsive liar, always willing to take
a sucker’s money.
For perhaps a more realistic view, especially about the current condition of the investment sharks, read an essay by the ex-wife of Jordan’s best friend: http://nypost.com/2013/12/09/i-was-the-wife-of-a-wall-street-wolf/ . From this, it’s fairly obvious that these sharks have hidden vast sums of money in off-shore accounts or in Switzerland. But will they get caught?
Now, if you decide to watch this movie, be prepared for the worst of Hollywood. The director, per his usual style, made the movie too long and too full of sex, drugs, and violence, which is a shame because it could have been an epic in illustrating the ways that con men operate. Instead, it’s a way for the director and his company to make money, exemplifying the Hollywood modus
operandi: inject sex, drugs, and violence and people will watch. But the worst part of this was the film studio paying nearly a million to Belfort for the movie rights.
Lesson #1. If an investment deal seems too good to be true, it probably is. Bernie Madoff and Allen Sanford attracted high profile clients, ranging from well-known celebrities, sports stars, and business owners, by word-of-mouth. Clients bragged to each other about the annual high returns and so their friends, also wanting to get that 20% annual return, trusted and invested. After all, if their friends were doing OK, it must be safe to get in the water. Henrik Stenson, the high profile golfer, lost nearly all of his retirement to Sanford. Fortunately for Stenson, his huge comeback in 2013 allowed him to amass another fortune. Hopefully he’ll keep a closer eye on it.
Lesson #2. Financial sharks like to prey upon young to middle-aged professionals, those who are earning a good income and have money to invest but little time to spend on investing research. I remember the phone calls to my office, which occasionally would reach me, from sharks with New York accents, offering investment vehicles. They often told my receptionist that they were old
friends of mine, trying to reconnect. And they tried and tried again. But I never invested with them. I now wonder if some of those calls came from Stratton Oakmont.
Lesson #3. Someone you know and trust might lure you into a business proposition. In the movie, Three Days of the Condor, the lead actor, Robert Redford, is cautioned to watch out for an
invitation from a passing car, the window rolled down, and a trusted friend inside. He listens to the advice. But some fall prey to those they trust. Many decades ago, I listened to a relative, another young professional, cheerfully bragging that he did not pay any income tax as a result of having myriad tax shelters, which were in vogue in the 1980s. I watched him year after year and
finally I dove into the fire and got burned - financially. Yes, I bought tax shelters ... from sharks.
Once one of his sharks wanted me to invest in gemstones, something I knew nothing about. He was persuasive and became visibly upset when I declined. I was lucky. My relative was not. He continued in this area of high risk and eventually got into serious trouble. I had to pay back taxes and some penalties. His loss was much higher: divorce, loss of his practice, loss of professional
license, and jail time.
A patient of mine, many years ago, offered me a chance to become an investor in a nursing home purchase. Guaranteed 20% annual return, he claimed. I said I’d check the figures with my accountant but, despite his excellent sales pitch, I never invested. As the years passed, he’d tell me what a deal I missed with big ROI (return on investment). Eventually he and his wife divorced and he dropped out of sight. A few years later his ex-wife told me that the nursing home investors lost
everything.
And, being a golfer, I was tempted by a classmate of mine (Yes, someone I knew and trusted) to become a founding investor in a new golf course. Only 50 grand and take it out of your IRA. Well, my friend invested 50K but I again declined, which was a little difficult for two reasons: there’s the friendship and classmate factor and there’s the I’ve-got-as-much-money-as-you-do attitude. But I had enough discipline to decline. The golf course was built and I played on it with my friend. Very nice. But a few years later, the summer drought brought massive watering bills and investors had to chip in more money. Decades later, he admits that investment was an awful mistake. Sometimes you have to say no.
Lesson #4. Eventually I figured out that I would learn as much as I could about investing, sort of like the Millionaire Mommy Next Door, whose website I have recommended. And, after having made my share of mistakes, I began to learn and, through vehicles of mutual funds and stocks, I reached my goal of financial independence in my early 50s. When you grow old, working because you love it is much different than working because you have to financially.
Lesson #5. Become your own investment manager. Money in itself offers a chance to exchange goods or services but too little of it can cause serious problems. LifeNuts, in the book and website, offers many examples of people who have learned how to invest. And, yes, it takes time to learn. And you’ll make mistakes along the way. If a young female high school graduate, working as a
night waitress and living paycheck to paycheck, can learn investing and become a millionaire before reaching 40, then so can you. The Millionaire Mommy proves that the investing business is not as complex as some would have us believe.
Lesson #6. I like to think that sharks like Jordan Belfort are the exception to the rule. Most money managers are ethical and competent. But the majority of them don’t beat the average stock market annual return. Sad, but true. That doesn’t mean you shouldn’t consult or invest with one. Just come to the table with your homework done: know what your goals are, know which companies or mutual funds you like, know what your tolerance for risk is. By all means, read the book, The Intelligent Investor by Benjamin Graham. It’s a classic and is highly recommended by an investor who read it when he was a young man. Warren Buffet has done pretty well by following Graham’s advice. You will, too. Good luck.
Last Friday we watched “The Wolf” movie – mostly out of curiosity about
the real life character, Jordan Belfort, a person I term “an investment shark.”
An article in Barron’s explained that in the 1990s Jordan’s firm, Stratton Oakmont, bilked investors out of $300 million – including a local man, John Kilroy, a Pizza Hut franchisee who lost a lot of his life savings to this man. One of the fascinating aspects of this is that Belfort, after serving about two years in jail for his fraud, has emerged as a motivational speaker (to help you close the deal) and is currently trying to land a reality TV show. Despite selling two memoir books and making close to
a million dollars for the movie rights, he still owes ordinary people like Kilroy (Maineville, Ohio) over $100 million and has paid very little. Jordan is the quintessential con man and investment shark and, through the movie, he offers lessons to all of us in our daily financial management. LifeNuts excel in this arena, which gives them time to exercise and do the other important things in life. But most people are not interested in investing or do not have sufficient funds to invest. I hear all kinds of excuses: too time consuming, too difficult to understand, too afraid.
A writer has documented the movie and Belfort’s life, which is worth reading: http://www.beliefnet.com/columnists/moviemom/2013/12/the-real-story-jordan-belfort-the-wolf-of-wall-street.html# . Interestingly, Belfort’s website claims that corporations pay 50 grand for his motivational speeches, yet a U.S. attorney listed only $24,000 in that type of income since 2007. Again, he’s an unabashed master promoter and a compulsive liar, always willing to take
a sucker’s money.
For perhaps a more realistic view, especially about the current condition of the investment sharks, read an essay by the ex-wife of Jordan’s best friend: http://nypost.com/2013/12/09/i-was-the-wife-of-a-wall-street-wolf/ . From this, it’s fairly obvious that these sharks have hidden vast sums of money in off-shore accounts or in Switzerland. But will they get caught?
Now, if you decide to watch this movie, be prepared for the worst of Hollywood. The director, per his usual style, made the movie too long and too full of sex, drugs, and violence, which is a shame because it could have been an epic in illustrating the ways that con men operate. Instead, it’s a way for the director and his company to make money, exemplifying the Hollywood modus
operandi: inject sex, drugs, and violence and people will watch. But the worst part of this was the film studio paying nearly a million to Belfort for the movie rights.
Lesson #1. If an investment deal seems too good to be true, it probably is. Bernie Madoff and Allen Sanford attracted high profile clients, ranging from well-known celebrities, sports stars, and business owners, by word-of-mouth. Clients bragged to each other about the annual high returns and so their friends, also wanting to get that 20% annual return, trusted and invested. After all, if their friends were doing OK, it must be safe to get in the water. Henrik Stenson, the high profile golfer, lost nearly all of his retirement to Sanford. Fortunately for Stenson, his huge comeback in 2013 allowed him to amass another fortune. Hopefully he’ll keep a closer eye on it.
Lesson #2. Financial sharks like to prey upon young to middle-aged professionals, those who are earning a good income and have money to invest but little time to spend on investing research. I remember the phone calls to my office, which occasionally would reach me, from sharks with New York accents, offering investment vehicles. They often told my receptionist that they were old
friends of mine, trying to reconnect. And they tried and tried again. But I never invested with them. I now wonder if some of those calls came from Stratton Oakmont.
Lesson #3. Someone you know and trust might lure you into a business proposition. In the movie, Three Days of the Condor, the lead actor, Robert Redford, is cautioned to watch out for an
invitation from a passing car, the window rolled down, and a trusted friend inside. He listens to the advice. But some fall prey to those they trust. Many decades ago, I listened to a relative, another young professional, cheerfully bragging that he did not pay any income tax as a result of having myriad tax shelters, which were in vogue in the 1980s. I watched him year after year and
finally I dove into the fire and got burned - financially. Yes, I bought tax shelters ... from sharks.
Once one of his sharks wanted me to invest in gemstones, something I knew nothing about. He was persuasive and became visibly upset when I declined. I was lucky. My relative was not. He continued in this area of high risk and eventually got into serious trouble. I had to pay back taxes and some penalties. His loss was much higher: divorce, loss of his practice, loss of professional
license, and jail time.
A patient of mine, many years ago, offered me a chance to become an investor in a nursing home purchase. Guaranteed 20% annual return, he claimed. I said I’d check the figures with my accountant but, despite his excellent sales pitch, I never invested. As the years passed, he’d tell me what a deal I missed with big ROI (return on investment). Eventually he and his wife divorced and he dropped out of sight. A few years later his ex-wife told me that the nursing home investors lost
everything.
And, being a golfer, I was tempted by a classmate of mine (Yes, someone I knew and trusted) to become a founding investor in a new golf course. Only 50 grand and take it out of your IRA. Well, my friend invested 50K but I again declined, which was a little difficult for two reasons: there’s the friendship and classmate factor and there’s the I’ve-got-as-much-money-as-you-do attitude. But I had enough discipline to decline. The golf course was built and I played on it with my friend. Very nice. But a few years later, the summer drought brought massive watering bills and investors had to chip in more money. Decades later, he admits that investment was an awful mistake. Sometimes you have to say no.
Lesson #4. Eventually I figured out that I would learn as much as I could about investing, sort of like the Millionaire Mommy Next Door, whose website I have recommended. And, after having made my share of mistakes, I began to learn and, through vehicles of mutual funds and stocks, I reached my goal of financial independence in my early 50s. When you grow old, working because you love it is much different than working because you have to financially.
Lesson #5. Become your own investment manager. Money in itself offers a chance to exchange goods or services but too little of it can cause serious problems. LifeNuts, in the book and website, offers many examples of people who have learned how to invest. And, yes, it takes time to learn. And you’ll make mistakes along the way. If a young female high school graduate, working as a
night waitress and living paycheck to paycheck, can learn investing and become a millionaire before reaching 40, then so can you. The Millionaire Mommy proves that the investing business is not as complex as some would have us believe.
Lesson #6. I like to think that sharks like Jordan Belfort are the exception to the rule. Most money managers are ethical and competent. But the majority of them don’t beat the average stock market annual return. Sad, but true. That doesn’t mean you shouldn’t consult or invest with one. Just come to the table with your homework done: know what your goals are, know which companies or mutual funds you like, know what your tolerance for risk is. By all means, read the book, The Intelligent Investor by Benjamin Graham. It’s a classic and is highly recommended by an investor who read it when he was a young man. Warren Buffet has done pretty well by following Graham’s advice. You will, too. Good luck.
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