CHAPTER FOUR: A WELL-DECORATED BANK ACCOUNT

[transcript]

Dangerous Don:   Welcome back everybody!  Welcome back to the MACHO INVESTING blog, the home of. . . . well. . . . the home of you and me and many other stock market millionaires.   I’m your host, Dangerous Don, and. . . . .

 Johnny:   . . . . . and this is my co-host, Johnny Doorknob.

Dangerous Don:  This is my co-host, Johnny Doorknob.   You folks have probably heard the name Dangerous Don.   I happen to be one of the greatest stock-market investors of all time.  And  I think we can all agree, Johnny Doorknob is the go-to guy in the Scranton financial community.

Johnny:   Thanks, Don.   And I understand you’ve got a bit of good news!

Dangerous Don:  That’s right, Johnny.   Believe it or not,  I got myself a job!   A real day job!

Tana Marie:  Wonders never cease.

Dangerous Don:   Folks, that lovely voice you just heard was my lovely wife, Tana Marie.

Johnny:   So. . . . . tell us about your new job.

Dangerous Don:   I’m now officially the chief investment advisor of a 401(k).

Johnny:  Congratulations!

Dangerous Don:   Thanks, Johnny.   Terrific 401(k) plan.   Covers all the employees of a good little company here in Scranton.   Misery Loves, Inc.   Really solid folks, solid reputation.  They make all kinds of antique furniture.

Johnny:   Know them well.   So. . . . . those guys know how to turn a buck, right?

Dangerous Don:   Doing very well for themselves, thank you!   Got about 150 employees in their factory.  And now, guess what?   I’m the Man with the Plan!   The Man in charge of each employee's financial future!

Johnny:   I have. . . . . mixed emotions.

Tana Marie:   You’re going to be changing all their investments, right?  Moving over to your MACHO INVESTING style, right?

Dangerous Don:   Took the words right outta my mouth!   I’ve got a thousand ideas!

Johnny:   No offense, but somehow I’m glad I’m not an employee of this company.

Dangerous Don:   One mutual fund I definitely want all of my employees to get into is Tajikistan Derivatives Institutional.   What a great fund!   A home-run that really brings home the bacon!

Tana Marie:   Holy mixed metaphors, Batman!

Johnny:   Why a home-run?

Dangerous Don:  Making bets against Tajiks is like stealing candy from a baby!   You know what?   Tajiks always lose!    They are the unluckiest people on Earth.   In their entire 2,000-year history, the Tajiks have lost every single bet they ever made.

Johnny:  Ahhh. . . . . . almost afraid to ask. . . . . what kind of bets does this Derivatives Fund make?

Dangerous Don:   You name it.   Are oil prices going to go up or down?   Silver futures.  Greek bonds.   The Super Bowl.   American Idol.   Flip of a coin.  Who cares?   With derivatives, you can bet on anything.   One thing for sure -- Tajiks will always make a beeline for the losing side of any bet.   It’s their nature.

Johnny:   So. . . . this, ahhh,  Derivatives Fund. . . . like, what kind of track record do they have?   How long have they been around?

Dangerous Don:  About two months now.  Buddy of mine set it up.

Johnny:  So. . . . there’s no track record.

Dangerous Don:   Not important.  What’s important is the 2,000-year track record of the Tajiks.  They never win!

Johnny:  Heck, they sound like me. . . . . .

Dangerous Don:   That's the whole name of the game in finance today.

Johnny:  What?

Dangerous Done:  You search the world, looking for folks who are unlucky.  Just naturally unlucky.  Born losers.

Johnny:   And then. . . . . ?

Dangerous Don:   You sign them up!   Get them to sign some kind of credit default swap.   Get them to bet against you.

Johnny:   How do you get them to sign?

Dangerous Don:   Tell them they're "sophisticated investors".   Some kind of garbage like that.

Johnny:   Anybody called me a "sophisticated investor" and I'd check my wallet.   Make sure it's still there.

Dangerous Don:   Fortunately for the industry, for every street-smart guy like yourself, there's fifty idiots.

Johnny:   That bad?

Dangerous Don:  That good!   There's so much Stupid Money out there, it's unreal!  The SEC ought to just give up.  Throw in the towel.

Johnny:  Throw in the towel?

Dangerous Don:   Deep in their guts, these people want to be cheated.   No point trying to protect them.

Tana Marie:   Don, maybe you could tell the folks a little about my job?

Dangerous Don:   Absolutely!   Love to!   Folks, my lovely wife Tana Marie is an Account Designer. . . .

Tana Marie:   Account Decorator.

Dangerous Don:   Account Decorator.  At the Shazam Bank. . . .

Tana Marie:  Shazam Bank and Casino.

Dangerous Don:  Shazam Bank and Casino.   They added tables a couple of months ago, right?   Blackjack?

Tana Marie:   We've got blackjack and Texas Hold ‘Em.   Plus 10 slot machines.  All in our lobby. . . . . .

Johnny:  All the banks have gambling now.  To stay competitive. . . . .

Tana Marie:  But we're not like a real huge casino or anything.

Johnny:  Plus you've got foreign exchange betting. . . .

Tana Marie:   Right.  You can bet on FOREX.  All you do is pick out some currency.  Say, the euro.  And then you bet whether it will go up or down. . . . . against some other currency.

Johnny:   Up or down. . . . as of the end of that day, right?

Tana Marie:   Oh no, no!  As of the end of each minute.  You bet which currency will beat out the other currency over the next minute.

Johnny:   I like all those Bloomberg FOREX monitors you’ve got in the bank lobby.  Pretty fancy stuff.

Tana Marie:  People love them.

Johnny:  Gives these poor suckers betting foreign currencies the idea they’re actually in control.

Tana Marie:  And don't forget, we have our "Double-or-Half" Savings Accounts.

Dangerous Don:  How's that work?

Tana Marie:  At Shazam, about 15,000 people have this kind of account.  Every month, the bank picks out two people, two account-holders.   Completely at random.  One person has their account balance doubled.  The other person has theirs cut in half. . . .

Dangerous Don:  Wow!   Double your money!   Bet that's pretty popular!

Tana Marie:  That's right.  Lots of people.  So. . . . . don't forget, there's a lucky winner every month!

Dangerous Don:   So. . . . Tana Marie. . . . tell us what an Account Decorator does.

Tana Marie:   Well, whenever you go online to look at the money in your bank account, you want to see everything all neat and orderly, right?

Dangerous Don:  Absolutely!

Tana Marie:   So, that’s our first responsibility.  To make sure the stacks of bills and coins are all neat.  People don’t want to see just a jumble of coins all over the floor.

Dangerous Don:   That's important.   That first impression.  The visual look of your bank account.

Tana Marie:   Exactly.  Especially the coins.  We’ve got to keep the coins stacked up neatly.

Dangerous Don:  So. . . . . what's the decorating part. . . . ?

Tana Marie:  Well, many people want more than just a neat-looking bank account.  That’s where I come in.  People want that little box where their money is to have carpeting.  Wallpaper.  Drapes.  Miniature furniture.

Dangerous Don:  So. . . . you can make it so your bank account has kind of a home of its own?

Tana Marie:  Exactly.  And we can color-coordinate everything that’s inside the box.  People love putting these little miniature chairs and sofas in between the stacks of dollar bills.

Dangerous Don:  Real homey. . . .

Tana Marie:   People love it.  Some people even put in little miniature windows along the wall.  Fake windows, of course. . . .

Dangerous Don:   Just like. . . .

Tana Marie:  Some people put these little stuffed animals inside their box, to “guard” their money.

Dangerous Don:  Just like. . . . .

Tana Marie:  One time, a counter-party came in. . . .

Johnny:  A counter-party?

Tana Marie:  That’s what banks have to call our customers now.

Dangerous Don:  That’s right.  Banks can’t call their customers "customers" anymore, right?

Tana Marie:  The lawyers made us do it.

Johnny:   Counter-party!   Oh my god!   What are we coming to?

Tana Marie:   Fact is, starting next month, we're not even supposed to call it a "bank" anymore.

Dangerous Don:  You call it a. . . . . . ?

Tana Marie:  Money Bazaar.

Johnny:  Bizarre?

Dangerous Don:   Interesting. . . . .

Tana Marie:   Anyway. . . . this one lady came in with photographs of her living room.  She wanted us to duplicate everything in her living room.  Even little miniature lamps. . .

Dangerous Don:   What can I say?   Takes all kinds.

Johnny:   More on that next time, right Don?   And next time, we’ll find out the reason why banks now have to call their customers “counter-parties”, right Don?

Dangerous Don:   Correcto, my friend.  Once again, folks, we are out of time.  So. . . . see you all next time. . . . .

Tana Marie:  Bye bye!

Dangerous Don:   Stay tuned to the MACHO INVESTING blog!    Believe me, you are going to make a TON of money!

CHAPTER THREE: MY FOLKS WOULD HAVE STARVED WITHOUT WOOLLY MAMMOTH MEAT

[transcript]

Dangerous Don:   Welcome back everybody!  Welcome back to the MACHO INVESTING blog, home of the stock market millionaires!  We're blogging direct from our worldwide corporate headquarters, right here in Scranton, Pennsylvania. 

Johnny:  . . . . . right here in Scranton. . . .

Dangerous Don:  I’m your host, Dangerous Don, and this is your co-host, the dean of the Scranton financial gurus, Johnny Doorknob!

Johnny:  Long story short, Don and me. . . . .

Dangerous Don:  You folks probably recognize the name Dangerous Don.  I happen to be one of the greatest stock market investors of all time.

Johnny:  . . . . . . . never got out of Scranton.  That says it all.

Dangerous Don:  You know, Johnny, just as a little bit of local Scranton. . . . . before we get into the serious stuff. . . . . . why don't you tell the folks out there about that big tooth you’ve got.   The one over your fireplace.

Johnny:  The woolly mammoth tooth?

Dangerous Don:   Yeah.

Johnny:  Well. . . . . it’s a woolly mammoth tooth.  Been in my family for something like 12,000 years.

Dangerous Don:   Long time.

Johnny:  Not for a tooth.  That enamel stuff never rots.  It’s the same as the day my folks killed the mammoth.

Dangerous Don:   Where did they kill the mammoth?

Johnny:   Best we can figure out, it was in what’s now the Ukraine.  Which was big-time mammoth hunting territory back then.   12,000 years ago.

Dangerous Don:  Your folks hunted woolly mammoths?

Johnny:   That's basically all we did.    Would have starved without mammoth meat.

Dangerous Don:   Wow!   Hunting mammoths!   Must have been kinda like. . . . .  investing, right?   Gets you pumped up! 

Johnny:   Investing gets you pumped up?   Not me.   About as exciting as watching paint dry.   Slow and Steady.  That's my motto. 

Dangerous Don:    What a family!   Hunting woolly mammoths!

Johnny:   Just trying to eat.   Wasn’t like we were different from anybody else.   Back then, everybody had to eat mammoth.   All there was to eat.   Bet your family did too.

Dangerous Don:   Okay. . . . now for some serious stuff about investing. . . . .

Johnny:  We were nothing special, hunting mammoths.  Everybody else was doing the same thing.

Dangerous Don:   . . . . . serious stuff about MACHO INVESTING.

Johnny:   Which is what our blog audience came here for.

Dangerous Don:  Right.  So, Johnny, you just retired?

Johnny:  Yes, sir.   After 45 years.

Dangerous Don:   Tell us about that.  What was your retirement strategy?   Invest in your 401(k)?

Johnny:   Never had a 401(k).   Nobody I worked for ever offered us 401(k)’s.

Dangerous Don:   Interesting.  So. . . . . . how come you know so much about 401(k)'s?

Johnny:   Trying to help out my son.  His company has the 401(k) from hell.   High management fees.  Lot of hidden fees.  No index funds.   No bond funds.   Employer match is next to nothing, year after year.   Just a death-trap.   And a bonanza for Wall Street

Dangerous Don:   So. . . . . lot of problems with 401(k)'s?

Johnny:  Don't get me wrong.  I'm not against 401(k)'s.  I'm just against the ones that are rip-offs.  

Dangerous Don:   So. . . . back to what you did yourself.   To get ready for your own retirement.  You just invested your savings on your own?

Johnny:   Might call it that.  Except calling it “investing” kind of overstates it a bit.   I just saved up $6000 every year.

Dangerous Don:  And you invested in. . . . . . . ?

Johnny:   Bank CD's.

Dangerous Don:   For 45 years?

Johnny:   Right.

Dangerous Don:   What kind of returns were you getting?

Johnny:   I figured it out once. . . .  over the whole 45 years. . . . . . interest on my CD's averaged about 4.8% a year.  Of course, recently, it's been much less than that.  But ten years ago,  I was getting over 6%.

Dangerous Don:   Only 4.8%!   Unbelievable!   I mean. . . . . what's the point?  Where's the action in a lousy 4.8%? 

Johnny:   Action?

Dangerous Don:    Johnny. . . . . with all due respect. . . . . you're missing the whole point of investing.

Johnny:   Action?

Dangerous Don:   Investing is about making money.  But it's also about showing people what you're made of.   You know. . . . . . bragging rights.  In other words, you want to kick butt and take names.

Johnny:  Show people what I'm made of?   Come to think of it, mostly just common sense.

Dangerous Don:    I’ve never invested in anything that didn’t guarantee at least a 20% return!

Johnny:  I’m lucky I didn’t know you back then.

Dangerous Don:  Think of what you could have made, if you had invested at 20%.

Johnny:   I know what I did make.  That’s all that counts.

Dangerous Don:   Are you okay with telling our audience how much you made?   Like, total?

Johnny:   Sure.   No problem.   I retired last month with over a million bucks in my savings account.   Not bad for a plumber.

Dangerous Don:  It's one heck of a big number. . . . but. . . . .

Johnny:  That’s what you end up with, when you save up $6000 every year, for 45 years, at 4.8% interest.

Dangerous Don:   But. . . . . Johnny. . . .

Johnny:   Ended up with more than folks I know who's got a 401(k).

Dangerous Don:   But. . . . . Johnny. . . .

Johnny:  Even when they had employer matches.

Dangerous Don:   But. . . . . Johnny. . . . .

Johnny:  Problem is, they had too many stock market crashes.

Dangerous Don:   But. . . . Johnny. . . .  if we had met earlier, and I had taught you how to do Macho Investing, that million bucks could have been ten, twenty, thirty million.

Johnny:   No comment.

Dangerous Don:   No regrets?

Johnny:   Nope.  You’re the guy I feel sorry for.

Tana Marie:   Please feel a little sorry for me too.  His day-trading costs us $4000 a year.   That's money right out the door, in stock-market losses.

Dangerous Don:   Moving right along. . . . folks, that was my lovely wife Tana Marie you just heard.

Johnny:   Plenty of time to talk about all that day-trading stuff next time.

Dangerous Don:  Right you are!   Folks, we’ve run out of time!  Hope you learned a lot!

Johnny:  Forgive me, folks.   I'm supposed to ask him this.   Don, what's the motto of the MACHO INVESTING blog?

Dangerous Don:  BE DANGEROUS!

Johnny:  Meaning?

Dangerous Don:   Risk equals reward.   That's what all the finance books tell you.  So, obviously, MORE RISK EQUALS MORE REWARD!  

Johnny:  Complete looney-tunes!

Dangerous Don:  And it's a lot more fun when you're dangerous.    Remember, bottom line, investing is just like bungee-jumping.

Tana Marie:  Don't you ever dare talk about that bungee-jumping stuff!   Never again! 

Dangerous Don:  So, folks. . . . .  stay tuned to the MACHO INVESTING blog.  Believe me. . . . you’re going to make a TON of money!

CHAPTER TWO: YOU CAN KISS THOSE FIRST SEVEN YEARS GOOD-BYE

[transcript]

Dangerous Don:  Welcome back, folks!  Welcome back to the MACHO INVESTING blog!  Home of the stock market millionaires!  I’m your host, Dangerous Don, one of the greatest stock market investors of all time, and. . . . .

Johnny:  And I’m the official co-host, Johnny.

Dangerous Don:   And this is Johnny Doorknob . . . .  world-famous Scranton financial guru!

Johnny:   If you say so.  We both live in Scranton.  Which kinda says it all.

Dangerous Don:   So, Johnny. . . . you recently retired?

Johnny:  Yes, sir.   From now on, I take it easy.   Enjoy Nature.   Stop and smell the roses.  Shoot a few deer.

Dangerous Don:   Sounds great!   And speaking of retirement. . . . .  folks, today we’re going to talk about 401(k)’s.   Everybody’s got a 401(k), right?

Tana Marie:   Only people who have jobs.

Dangerous Don:   Ahh, yes. . . . MOVING RIGHT ALONG!   Folks, that voice you just heard was my lovely wife, Tana Marie.

Johnny:  Don. . . . . before we talk about track records for your average 401(k). . . .  which has been completely miserable. . . . . I’d like to say a few words about the management fees.

Dangerous Don:  Okay.  You’re on the air.

Johnny:   Your average 401(k) gets hit with fees around 3%.  That’s 3% of assets.  Every year.

Dangerous Don:  Those are fees for. . . . like. . . . investment advice, right?

Johnny:    Some of them.   The mutual funds inside your 401(k) usually charge about 2% of assets.   But, in terms of fees, that’s just the tip of the iceberg.   They’ve also got revenue-sharing fees.  Wrap fees.  12(b)-1 fees.   Sub-transfer agent fees.

Dangerous Don:  Wow!  So. . . . all this adds up to around 3% a year?

Johnny:   Or more.  Let’s say on average 3%.

Dangerous Don:  Actually. . . . that ain’t so bad.  Heck, sales tax is 4%.

Johnny:   Don, let me tell you, those 3% fees are going to wipe you out.

Dangerous Don:   How do you figure?

Johnny:   Let’s go back to that first dollar you ever put into your 401(k).   Two weeks after you were hired.   From your first paycheck.

Dangerous Don:  Okay, sure!  I mean. . . . . my first paycheck. . . . that goes back a few years!

Johnny:  Let’s say you work for 40 years, before you retire.  I worked for 45 years, but that's longer than most folks, so let's say 40 years.

Dangerous Don:  Okay.

Johnny:   So. . . . okay, now you retire.  And now you take your money out of your 401(k), right?   So, that first dollar is finally going to come back out, right?

Dangerous Don:  Sure hope so!  You put it in, you take it out at the end.

Johnny:   But how much of it will be left?  Management fees for your 401(k) are 3% every year, remember?

Dangerous Don:   Right.

Johnny:   So. . . . your first year on the job, when you were first hired, they took out 3 cents out of every dollar you put in, right?

Dangerous Don:    Ahhhh. . . . . . . I guess that’s right.

Johnny:  Second year, another 3 cents.  Now, you’ve paid a total of 6 cents out of that first dollar you put in.

Dangerous Don:   Right. . . .

Johnny:   Third year, they take out another 3 cents.    Now, you’ve paid 9 cents in fees out of that first dollar you put in.

Dangerous Don:   Jeez. . . .

Johnny:  This goes on for 40 years.  Every year, they take out another 3 cents in fees from that first dollar.

Dangerous Don:   Jeez. . . .

Johnny:   So, when you retire after 40 years, that first dollar was gone a long time ago.

Dangerous Don:   Wait a minute. . . . that's crazy!

Johnny:  In fact, at 3% a year, that first dollar was gone as of Year 33.   Seven years before you retire.

Dangerous Don:   No way!

Johnny:  Think about it.  If you work for forty years, every dollar you put into your 401 (k) during the first seven years years of working. . . . .

Dangerous Dave:  Disappears?

Johnny:   Disappears.

Dangerous Don:  I’m a little. . . . . what can I say?. . . . . stunned by all this.

Johnny:   You’re wondering. . . . . can it really be that bad?

Dangerous Don:  Exactly.

Johnny:  The good news is that the fees are actually the second worst thing about 401(k)’s.  If the stock market keeps crashing every six or seven years, losing 50% or 60% each time, most people won’t have anything left in their 401(k) anyway.  

Dangerous Don:   Boy, that’s good news.

Johnny:  More on this next time, right Don?

Dangerous Don:   Right you are, Johnny.  But right now, unfortunately. . . . folks, we’ve run out of time.

Johnny:  So. . . . here's what I'm supposed to ask you. . . . . Don, what's the motto of  MACHO INVESTING?

Dangerous Don:   BE DANGEROUS!

Johnny:  Meaning?

Dangerous Don:   Take risks!   Never pass up a chance to do something dangerous.   Sky-diving.  Bungee-jumping.   Investing.  It's all the same.

Johnny:  Totally crazy.

Dangerous Don:  Remember what all the finance books say.  RISK EQUALS REWARD.   So, obviously, THE MORE RISK, THE MORE REWARD.

Johnny:  Complete looney-tunes.  

Dangerous Don:  Love to talk about it more, but we're outta time.   Okay. . . . so, folks, we’ll see you next time.  Stay tuned to the MACHO INVESTING blog.  You’re going to make a TON of money!   So long!