TV investment shows

[Elle]

"Suze" is a mess re: investments - her editor must clean
up her book
advice. She's made specific fund ticker recommendations
on-air along
with rationale that didn't match the ticker.

For this to be believable, you would have to provide first
source citations.

Much of the rest is a freak show of people who've made
reckless self
destructive decisions, so hard to get interested in
despite some
useful tax and misc info.

This would seem to be America of whom you are writing. I do
not call them freaks, since it's counterproductive. They
made mistakes.

 

[Don]

On 2008-01-08 12:32:23 -0800, Rich Carreiro <[email protected]> said:

Good thinking, but I would want to put some into foreign currencies
stashed away in Swiss banks, foreign stocks, etc., just in case the
good old USA goes out of business in the turbulent and unpredictable
21st century.

 

[Don]

If one has enough assets such that investing them entirely in US
Treasuries throws off enough income to provide lasting financial
independence, then doing so is an excellent idea, not a bad one.
You're financially independent. Why risk that by making unneeded
investments in risky assets?

There comes a point when even risk need not be considered. How many
people are there whose only assets are a big house and a whole lot of
stock in a company that Grandfather founded? I would suspect there are
many. That allocation would be considered risky and foolhardy for a
small investor, but for those fortunate people, even if the stock
declined to half or less its current value and the house lost value
too, there would still be plenty of dividends coming in for a
comfortable life style.

 

[Douglas Johnson]

There comes a point when even risk need not be considered. How many
people are there whose only assets are a big house and a whole lot of
stock in a company that Grandfather founded? I would suspect there are
many. That allocation would be considered risky and foolhardy for a
small investor, but for those fortunate people, even if the stock
declined to half or less its current value and the house lost value
too, there would still be plenty of dividends coming in for a
comfortable life style.

And if they or the management drive the company into the ground? I know a
people who were in that or similar situations who are now bankrupt. You can't
ignore risk. Diversity is the friend of the rich and poor alike.

-- Doug

 

[joetaxpayer]

You can't

ignore risk. Diversity is the friend of the rich and poor alike.

-- Doug

Lest someone claim that TIPS or T-Bills would eliminate the risk, keep
in mind, governments fail, hyperinflation destroys money. I'm not
suggesting I expect such a thing to occur, but I never expected to utter
the sentence "that's where the World Trade Center used to be." Black
Swan events do happen. To add to Doug's point, diversity means across
countries as well as asset classes.

JOE
www.blog.joetaxpayer.com

 

[Don]

And if they or the management drive the company into the ground? I know a
people who were in that or similar situations who are now bankrupt. You can't
ignore risk. Diversity is the friend of the rich and poor alike.

-- Doug

Yes, true. And I would think avoiding risk and doing careful planning
would be especially prudent for the rich who want to become still
richer, leave more to their heirs than they started with, etc. But I
would guess that rich people whose eggs are all in the one basket of a
family owned company usually make out OK. Some do drive the company
into the ground and end up bankrupt for sure, but many just end up with
a lot less wealth, but still enough to keep the mansion in shape and
the cars and horses and the beach house in good condition.

 

[Douglas Johnson]

But I
would guess that rich people whose eggs are all in the one basket of a
family owned company usually make out OK. Some do drive the company
into the ground and end up bankrupt for sure, but many just end up with
a lot less wealth, but still enough to keep the mansion in shape and
the cars and horses and the beach house in good condition.

The original premise is that our rich friends owned a house and a lot of stock
in grandpa's company and nothing else. If the company goes bankrupt, the stock
is worthless, but you still have the operating costs on the house (call it 5% a
year) and no income to support it.

If the house is worth $10 million, they can sell it as quickly as possible
(there is usually a long time on market at that end of things). They can still
have a pretty nice life style, but the mansion is gone.

People in the original situation often are reluctant to sell the stock, that's
why they are not diversified. So when they want to buy something that cannot be
financed out of current dividends (like little Buffy's wedding), they borrow. So
our friends may well have quite a lot of debt. If they have borrowed against
the stock, they could end up with a negative net worth. This is what happened
to some acquaintances I mentioned earlier.

While they are not likely to end up eating dog food, they might. They
certainly lose the mansion.

-- Doug

 

[Don]

People in the original situation often are reluctant to sell the stock, that's
why they are not diversified. So when they want to buy something that
cannot be
financed out of current dividends (like little Buffy's wedding), they
borrow. So
our friends may well have quite a lot of debt. If they have borrowed against
the stock, they could end up with a negative net worth. This is what happened
to some acquaintances I mentioned earlier.

Or they could turn the mansion into a bed and breakfast and get income
that way. Some European castles are open to tourists for a fee. But I
was assuming, perhaps naively, that there is a kind of upper limit
beyond which more wealth is meaningless and also a kind of lower limit
on the disappearance of family wealth no matter how bad things become.
But you are probably right--there may not be such limits. If one
becomes accustomed to the things billions can buy, it would be
devastating to have to make do on a few hundred million.