In 2010, NPR released its now very famous “Giant Pool of Money” podcast about the 2008 mortgage meltdown.
And – in it they interviewed a former subprime mortgage salesman who had been making $1 million per year for several years, even though he was right out of college.
In 2010, he was broke and living in his mom’s basement.
Why? Well he lived like a rock star and overspent (obviously); he didn’t save (obviously); he didn’t account for the massive tax-bite for high-earners, particularly in New York where he lived; and he made the assumption that he could always earn in a similar capacity (and he could have if real estate values had appreciated forever and rates had continued to fall… forever. 😊
It was amusing to me to see how surprised most Americans were by the largesse of that one individual b/c I knew dozens of loan officers and real estate agents just like him who lived the same way prior to 2008, and all of them went belly up after 2008.
$75 MILLION NET WORTH – FLIES COMMERCIAL
I thought of all those people when I saw a tweet this week from a sophisticated gentleman with a $75 million net worth. From his other tweets, I easily surmised that he flies commercial (not private), gets his healthcare from an HMO, and drives a fairly non-descript auto (all surmised from tweets). He well-understands how fast net worths and cash positions can change and lives accordingly.
Jobs was worth $200 million when he was pushed out of Apple in the 1980s, but he completely ran out of cash with his next venture – NeXT Computers.
He had to go begging for money from the likes of Ross Perot and Bill Gates. Perot came through, Jobs got involved in Pixar too, and then ended up back at Apple – and succeeded wildly!
BUT, it is amazing to think that Jobs ran out of cash despite his massive net worth.
11 BILLIONAIRES WHO WENT BROKE
Even billionaires can go broke.
While some of the billionaires were just fraudsters (like Bernie Madoff), many of them just ridiculously over-extended themselves and made all-in bets on single economic sectors like energy, real estate or a winery in one case (interestingly, I see lots of people doing all-in bets now in crypto, real estate, currency options and gold, so they are clearly not aware of the risk of going “all in”).
Mike Tyson burned through $400 million; Nicolas Cage burned through $150 million; and Michael Jackson died $400 million in debt.
WHAT’S MY POINT?
Many people in the mortgage and real estate industries have had epic runs over the last ten years, and I am starting to see more and more “rock stars” again.
This is just me hoping that everyone remembers to save their cash and to live lean. Very lean.
$100 million just ain’t what it used to be, and man can the tide turn quickly. 😊
FINAL POINT – OPPORTUNITIES ABOUND FOR THOSE WITH CASH
From about 2010 to 2012, one of the biggest opportunities in investment history was U.S. residential real estate.
And everyone with a bit of cash cleaned up like never before.
I know of one person in particular who bought a 200-unit condo complex for $35,000 per unit at the bottom in 2012, and those units are now worth over $500,000 each!
That is a gain of about $93 million, give or take 😊 (not bad for a guy who merely remembered to keep his powder dry).
