October 1981 Treasury Bonds: Best Investment In History

With stocks, all good investment stories begin in October. Bonds are no different. In October 1981, the federal government of the United States of America auctioned off thirty-year treasury bonds at a rate of 14.8%, the highest in its recorded history. At the time, the United States was steeped in annual inflation of 10.5%.

For those who anticipated the rise of a Paul Volcker figure, or at least had the sense that interest rates were more likely to decline over the coming decades than rise, and chose to purchase U.S. government debt, the results were some of the most impressive on a risk-adjusted basis.

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The Crazy High Wal-Mart Money Center Profits

When people think about Wal-Mart, they often think of the entrenched real estate empire associated with occupying an enormous square footage and might spare a passing thought towards its lagging efforts to compete with Amazon in the growth of online sales. As a result, it is easy to completely neglect the rise of Walmart’s Money Center as a powerful source of fee profits and information-gathering.

I suspect that the online financial media, which generally caters to an upper and middle class audience, completes misses the number of individuals who are unbanked, either by choice or by necessity. In most parts of the country, the Wal-Mart Money Center is, by proxy, their personal bank that charges $3 to $6 for the processing of each check transaction. It provides other “instrument to cash” and “cash to instrument” type services, and this is an extraordinarily easy way for the bank to make money. Outside of intellectual property, it is as close to pure profit as you can find.

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Identifying Bernie Madoff Ahead of Time

Benjamin Graham once said that you should never invest in companies that have engaged in malfeasance involving their earnings results, citing the necessity to have accurate numbers in order to make an investment. Since reports of outstanding debt, net profits, and cash flow are necessary prerequisites for determining what a business is worth, unreliable accounting would render business valuation nothing more than a guessing game.

And that brings me back to Benie Madoff’s selection to have a firm called Friehling & Horowitz serve as the auditors for the investment funds held through the Bernard L. Madoff Investment Securities, LLC. And what did Friehling & Horowitz consist of? A small 500-square building previously used for medical billing that consisted of nothing but Jerome Horowitz and David Friehling, who essentially were retirees chilling in Miami.

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Bankrupting The Local Fish Store

When I was self-studying the bankruptcy code in preparation for the bar exam, I came across an old Tennessee bankruptcy case in which a pet store that earned almost $150,000 per year with only $85,000 in debt against the building and inventory went bankrupt within the third year of two brothers taking over the business after the death of their father.

In the court filings, one of the brothers claimed that the other one (who managed the day-to-day operations of the store) was responsible for the bankruptcy due to mismanagement. Specifically, he alleged that his brother alienated customers by abandoning the store’s policy of giving new fish to customers who bought some that died shortly after the purchase.

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Investment Portfolio Diversification In Real Life

I was at an estate sale not that long ago, and I came across a cancelled-stock certificate issued from the Brunswick Company. Back then, it was called the Brunswick-Balke-Collender Company, and derived much of its revenue from developing and selling equipment related to bowling allies. It has actually been a decent investment through the modern area, as it has mitigated against the bowling industry’s collapse by expanding into boating and marine technology services over the years (think of Warren Buffett using the last profit puffs at the Berkshire mills to buy up banks and insurance companies.)

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