Leave the clowns at the circus

I had set aside some money to invest into stocks. So opened an account with Internaxx bank and took out a cheap subscription under a special offer with the Porter Stansberry tipping sheet.

It was around 2010 and I did remarkably well, quickly building up a nice little portfolio and collecting dividends and watching as the values increased. What could go wrong? I had a phone call from some broker in the UK who specialised in pre IPO stocks and floatations so listened and the guy explained how using CFD’s you could leverage up your position and take control of a much bigger slice of the action and make a huge amount of money…….. I think some rich guy like Warren Buffet once said if you do not fully understand what you are investing in just give it a miss. So a new account was opened and I started off making my fortune.

Well no, I ended up with a black hole which had these things called margin calls which gobbled up cash like there was no tomorrow. I quickly realised that this was not working and bailed out pretty quickly but then got into leveraged trading on gold……… It was an interesting 6 months and taught me that I was not really understanding what was going on and I would never cut it as a trader so there was something positive at least.

One man I knew inherited from his parents their entire and sizable estate, which was put in trust; and there was a trustee named by the last surviving parent to settle the debts of the estate, sell some real property, and pay a set amount of money per month for life to the trust beneficiary.

Zero. ($0). No monthly payments happened. A month, three, six, a year passed. My friend was ultimately told the decedent’s debts exceeded the trust assets, and there were no funds left in the trust. Debts included substantial fees for financial advisors, the trustee, and lien(s?) on property my friend had no way of knowing even existed.

I said, “get a lawyer. Now!”

Nobody would take the case. My faith was totally ruined and I now do not have the belief that it is a good idea to appoint anyone as a financial advisor, least of all anyone working in banks as financial advisors or as trustees. Even with a scrupulous outside and unaffiliated CPA accountant, and regular financial reports by that objective third party CPA, there is no way to understand if a financial advisor or trustee is or will be faithful, because most heirs and beneficiaries don’t even know how to understand even simple financial reports. It seems to me that trusts as a means of conveying property after death just make trustees and lawyers wealthy at the expense of bereaved people who are the rightful heirs.

The sizeable estate my friend was to inherit was somehow mysteriously bled dry. I figure the best thing to do if you are wealthy is to give your money away while you are alive to those you wish would have it after your death. There is too much opportunity for uncheckeable theft, otherwise. Heirs and beneficiaries are not as financially savvy as financial advisors, and are vulnerable prey.

In the fall of the year 2005 and when the real estate market was going crazy and all kinds of real estate investors were giving speeches and masquerading as advisors, I attended a local seminar about real estate investing.

I already had my rural land property/investment business model developed and most of my current advisors in place. A mortgage broker was speaking about loans for real estate.

These so called mortgage financial advisors were recommending people take interest only loans to fund their real estate purchases because the rates were low and it cash flows easily. There are many problems with this dumb advice.

Here are some:

• Debt at some point has to be paid back. Anybody who has done any investing and used debt with real estate, stocks, or a business knows this. Delaying indefinitely paying off a debt is foolish.
• Even if an interest only loan for any type of investment cash flows today, it might not tomorrow, next month, or next year. The investment might quit paying. For example:
• The tenant lost his/her job. The property flip did not work as the foundation crack was not discovered during the euphoria when the property was bought. Funds (from more debt) were needed to fix the crack when an engineer who looked at the property to buy it discovered it.