I've often said that the best place to measure the pulse of anything is on the street. By that I mean every day people will tell you all you need to know about the economy; one does not need to rely on doctored up government numbers to figure out what is going on.
For example, a few years ago I had this client who was the ultimate contrarian indicator. The night before the NASDAQ collapsed in March of 2000, he called to say he had bought a bottle of Dom Perignon. He said he was going to pop the cork the next day when his investment account went over $1 million. Needless to say, he's still got the cork in the bottle.
Two years ago, the same fellow called me to say that he was transferring his IRA into a real estate IRA, and was going to buy a condo on the water with the proceeds. I immediately called my realtor, and told her to dump my condo, which we did at a very nice profit. In addition, I sold some office space too.
Yesterday, I spoke to two people. The first guy was in really bad shape. He was a ground maintenace guy at a local Junior College, and he said that he had bought two waterfront investments that has sucked his retirement plan dry. He said that he was hoping to retire after the purchases, but now he says he may never have the money to retire.
The second guy is a realtor whose phone is ringing off the hook with bankers trying to unload foreclosed properties. He recently sold a waterfront home for $475,000 that was listed by the owner last year at $875,000.
You can see how my street economic system works. And believe me, it really does! If I had an infomericial selling this "system", I would have made a fortune.
While the witches on Wall Street continue to frolic and drive the indexes higher, I am rather pleased at how individual investors have stayed cautious and did not get caught up in the hype. Of course I am referring to the latest AAIA survey that showed that individual investors are not as optimistic as they should be with the market at an all time high.
In the past, individual investors were used as contrary indicators. When they bought, the big boys sold and vice versa. But, is the individual investor really that smart, or are they tapped out. By this I mean, did they put all their money in real estate, and now they can't get it out? Maybe investors are more sophisticated, better-educated, better-informed than and less emotional than investors in the past? Only time will tell.
So, who are the witches on Wall Street? This should not come as a real shocker, but the witches driving the markets are hedge funds, private equity, and institutions caught with too much sidelined cash, as well as short sellers who are running for covering.
Back in February, the press was putting images of fear on the front pages of the business section of USA Today. Today, fear is nowhere in sight.
Actually, there really was a WITCH OF WALL STREET. Her name was Hetty Green (1835-1916), and we could learn a lot from this old witch.
These quotes on Hetty Green came from the book, The World's Greatest Eccentrics by Jay Robert Nash, 1982
She was one of "the world's richest woman and the shrewdest female who ever invested a dollar. After her father's death in 1865, Hetty inherited approximately $5 million. After getting her inheritance, she dedicated herself to becoming the richest woman in the world."
Only days after the end of the Civil War, Hetty began to buy up great quantities of government bonds, which most financiers of the day thought to be useless. Their value soared during the Reconstruction era, and Hetty added several more millions to her coffers. In 1867,she married Edward H. Green, executor of her father's estate, who was also a millionaire. Shrewd Hetty made sure that her spouse signed a contract that their fortunes would remain separate before walking to the altar. When Hetty discovered that her husband was spending money carelessly, she separated from him, actually driving him out of all the family business in 1885 and predicting that he would die a pauper.
She was right; Green died in 1902 with only a gold watch and $7 to his name, albeit his miserly wife did pay for his modest lodgings at the end of his life. Hetty nevertheless complained about having to support her dying spouse: "My husband is of no use to me at all. I wish I did not have him. He is a burden to me."
Hetty's investments centered in stocks and bonds; she also bought up railroads. By the end of her life, her real estate holdings were enormous: she owned two square miles of choice property in Chicago, along with several skyscrapers, especially in the Southwest.
How to negotiate with a mortgage broker or lender
Hetty could be ruthless in her business dealings. She would get her way with any banker or borrower through charm or tantrum. On one occasion, demanding that a bank return to her all of her liquid assets that minute, a sum exceeding $1 million, she pulled at her clothes, cried, screamed, and stamped the floor, finally squatting on the floor and threatening to remain in that position until she was given her money, "right now, right away and in cash!" The banker complied and his bank failed the following day.
What's obvious to some is not so obvious to others
Mrs. Green had a sixth sense concerning money and seemed to be able to smell financial disaster days in advance. One of her female friends asked her if her accounts were safe at the Knickerbocker Trust Company, then rated the second-largest trust company in New York. She said, "If you have any money in that place get it out the first thing tomorrow."
The friend withdrew her savings the following morning. A day later, on October 21, 1907, the National Bank of Commerce announced that it would no longer accept checks from the Knickerbocker Trust Company. Some days later the trust company closed its doors, its officers declaring the institution insolvent.
Buy only during financial panics
Financial panics were Hetty's specialty. She could predict months in advance when and where a panic would ensue. At such times Mrs. Green would stalk through Wall Street buying bargains. She knew what the bargains were; she knew what stocks were being sold for less than their value… This is what she meant when she said she bought cheaply and sold dearly."
On being frugal
Anything modern annoyed the pernicious Mrs. Green. Cars were wild extravagances, according to Hetty, who once barked to a New York Herald reporter: "Jesus did not ride in automobiles- an ass was good enough for Him!" Next to modern conveniences, Hetty despised lawyers and doctors.
"I had rather that my daughter should be burned at the stake," Hetty once said, "than to have to suffer what I have gone through with lawyers!" Doctors were nothing but money-grubbing quacks to Mrs. Green, men who invented illness for profit.
Attire meant nothing to Hetty Green. She wore the same black dress for twenty years- beneath which was a petticoat fitted with special pockets containing stocks, bonds, and cash amounting to millions.
Edward Hatch Jr. of Lord and Taylor met Hetty Green during one of her rare appearances at a social function. He was appalled at her attire, telling her, "Mrs. Green- just consider that veil through which you are looking at me. It is torn. It is faded. It looks like hell. You come down to the store some morning and I'll give you one of the best veils we have in stock."
"You will? How sweet of you."
Hetty was at Hatch's store the first moment the clerks opened the doors the next morning. She tried on the most expensive veil Lord and Taylor had to offer, and Hatch had it charged to his own account. Delighted, Mrs. Green turned to Hatch and said: "I wonder if you have any skirts that you could let me buy at reduced rates."
Hetty's eating habits were as bizarre as her penchant for ragged apparel. She ate in the cheapest restaurants she could find and ordered the cheapest items on the menu.
When Hetty died, she left a fortune estimated at $100 million.
We could use a little bit of Hetty Green in all of us these days. If we did, no one would have lost money in 2000, during the real estate bubble, or be deep in debt.
