It’s October 3, 2008 and Treasury Secretary Henry “Hank” Paulson was on every channel declaring Public Law 110-343 had been passed by 110th United States Congress under the George W. Bush Administration in emergent fashion.
The Emergency Economic Stabilization Act of 2008 created The Troubled Asset Relief Program also known as TARP. A unprecedented bailout of over $700 billion dollars was committed to buy toxic assets from banks and insurance companies designated Too Big To Fail.
This was merely window dressing to stop the world’s Crisis of Confidence and forestall a global economic implosion. Economic historians over a decade later estimate the actual cost to the US Government was over $29 trillion dollars.
This was about three years after I left one of those Too Big To Fail institutions to pursue a different line of work but I still maintained close communication with my best and worst former client…my Dad.
I was watching the talking heads on one of the market news stations and in financial advisor parlance, one of them said flippantly, “Looks like Hank is giving the Bigs (Big Banks) a Put.” The US Government was insuring their survival. So I called my Pop and prefaced my statement with,
“You are going to think that I am the dumbest (expletive, expletive, expletive) on Earth and probably will deny we are related after I say what I think you should do, but I just saw Citi (Ticker: C) print a trade at $.86…I think you should buy one-million shares.
As expected with his usual caustic sarcasm, he did not disappoint. “No way you come from my loins…I’m gonna smack your Momma right in the mouth (Jackie Gleeson…Smokey and the Bandit).” We laughed for a second and then I said, “No Dad…I’m dead serious!”
I can’t be sure now but as I recall, he suggested something to the tune of “I could (Expletive) up an anvil with a rubber mallet!” Paints a picture don’t it?
So for years thereafter, upon greeting him at any and every chance, the first words out of my gloating mouth were always, “So…How’s your Citi Doing?” Always one with a snappy retort, I learned a slew of new ways to employ his unique brand of not-so-subtle covert diplomatic artistry. He had a way of telling you to Go to Hell and make you look forward to the trip.
Dad was the prototypical investor. Listen to everyone except his advisors and then run with the pack. He was one of the more Exuberantly Irrational souls with whom I had the pleasure, and pain, of working. He was no quitter though. He was always the last man standing at capitulation time before he just couldn’t take it anymore and could almost single-handedly pick a market bottom as evidenced by going to cash moments before a turnaround. It was pure unadulterated fear that would dictate his actions. I would implore him that you only memorialize a loss when you actually sell out. Stay in the game.
“Nope. I’m gonna sit on the sidelines for a while until the market comes back!” Loosely translated…Buy High and Sell Low.
So let’s vault forward about five years. With the benefit of the lessons learned still seared into his brain, he finally saw the logic in playing defense. His advisors put together the type of portfolio you would expect for an eighty-year old man. He HATED it with the white-hot intensity of a thousand suns.
I was in the life settlement business for a couple of years by this time and I had danced around the subject all that I could before he insisted on understanding what I had chosen to do professionally. Selfishly, I tried to avoid eye contact or answer any direct line of questioning but to no avail.
So, over the course of several months, we would discuss how the life settlement industry worked and why I was so passionately entrenched in the alternative investment space with an asset class he, or almost anybody at the time, had never heard of. But Dad was a very thoughtful man when it came to the security of his family. He was a big believer in life insurance. It wasn’t much of a stretch for him to see its value as an investment.
I will never forget the day the lightbulb came on for him. He said something to the effect…”I still have almost the exact same amount of money I had five years ago. My guy at Big Broker Dealer Inc. has gotten his fee every quarter in advance like clockwork and I’m over here just treading water while the market has skyrocketed.”
So he said, let’s get your sister over here and talk about what you are doing. In the simplest terms, I laid it out for her. In midstream, Dad starts selling it to her. He got the concept far earlier than he let on but apparently enjoyed playing dumb (like a fox) knowing that it was good for me to constantly be trying to find a new way to break through to him so he’d understand. He was always a worthy adversary in a Devil’s Advocate sort of way. I didn’t appreciate that then but I do now. PSA…Listen to your parents…their IQ grows exponentially as you age.
Long story shortened, we all agreed to take a position in one of our client’s early portfolios. Has it performed like we had all hoped…of course not. But my Dad always had an angel on his shoulder.
We ultimately had to insist that he move into a nursing home as he had become too unstable to live by himself any longer. My sister should be sainted for all that she did for both of my parents in their sunset years. I shall never measure up to her.
With the risks of old age better managed by the caregivers at Westminster, we had to face the consequences of trading one problem for another. The tab for his stay was around $230 a day. He insured every other potential liability you could imagine except long-term care. As mentioned previously, his nest egg was what was left after he liquidated his portfolio at the pinnacle of the crash.
The annual payment for his nursing care was coming due and sis and I were facing a pretty big liquidity crisis. Then, as randomly as life itself plays out, the largest policy in his portfolio matured. His share of the death benefit was $385,000. I promise I’m not making this up. With Dad’s steadfast reluctance to give me even a hint of an “Atta Boy,” he started singing (quite poorly I might add) “We’re In the Money” when I delivered the news.
The Tale of Two Decisions is this. Although from a Monday morning quarterback’s perspective, do I personally (Greedily) wish he’d listened when I told him to buy Citigroup in 2008? But I can also tell you that if that had been my money at risk and my child’s legacy on the line, I don’t know if I could have done it either.
The decision that WAS NOT made would have stretched the boundaries of his sanity and no amount of money would have been worth putting my Dad or my sister through that.
The net effect of the decision that WAS made is that the remaining position in Dad’s life settlement portfolio will pay she and I more than our equal share of the capital he committed to subscribe. All the volatility in the markets, the geo-political landscape and all the rest of it just doesn’t matter. That let my family sleep at night.
I keep wondering what the split-adjusted value of Citi would be worth now if he’d made a different choice? But I know exactly what the value of the decision he did make is and that is really quite comforting.
As hard as it is to admit, Dad was probably right about me after all!
As the markets change, it’s not a bad time to look for more stable options. Senior Life Settlements are a great place to start. If you’re ready to add the diversification benefits of a non-correlated asset class to your portfolio, call West Coast Settlements at (657) 254-4300 or send an email to firstname.lastname@example.org.