A Cautionary Tale of “Safe”, Blue Chip, Dividend Stocks…..In Greece

Everywhere you look these days, the advice given on what to do with your money is to just buy stocks in general, and dividend stocks in particular. I agree with the idea of buying the stocks of companies that actually give you a portion of their earnings every quarter. What I don’t agree with is the idea that any time is a great time to put all your money in these stocks. They say just close your eyes and buy the index of big, safe, blue chip stocks and you will beat the performance of 90% off all the teams of money managers out there forever. Can it really be this easy?

Here is what happened to one investor who tried to do this in Greece:

I was visiting Greece a few weeks ago and was talking with a relative of a relative of mine. I don’t want to give any identifying details on this person but I will give you an idea of what kind of person this is. This man, I will call him Manos, is over 85 years old and is still very active and sharp as a whip. He has had a long impressive career as a medical specialist for a few years in the US and many more in one of the top hospitals in Athens. He has a very nice family, wife, kids, grandkids, and enjoys spending time with them.  As a doctor in Greece, he made a good salary for Greece although I don’t know the details. What he did tell me was about his investment a few years ago of his retirement money into Greek stocks. Manos was not buying risky penny stocks or companies with no earnings. He bought the stocks of the biggest banks in Greece that paid what he thought to be solid, safe dividends that he can rely on in his retirement.

Most people don’t follow the Greek stock market but know from the news that Greece has a lot of economic problems. So how bad are their problems? I don’t know exactly, but I know that they are bad enough that virtually all the bank stocks that Manos bought are down 95% or more. One of the bank stocks he mentioned went from around 40 Euros to about 0.13 Euros. He started with over 300,000 Euros and now has less than 10,000 Euros. How does someone, let alone someone in his eighties, come back from that loss? The short answer is that you can’t.

In 2007 the index was above 5000. In 2016 the index was below 500. A 90% decline.In 2007 the Greek Stock Market (ASE) index was above 5000. In 2016 the index was below 500. A 90% decline.

 

Poor Manos, but that is Greece.  It can’t happen in the US right?

Yes and No. The US is in a different situation from Greece with respect to printing our own currency. As far as having companies that go bankrupt when the economy turns bad, we are in the same boat. Investors that came of age and into investing in the last 8 or so years have only seen a rising stock market.  People have a short memory. How many people remember that Citibank today is really about 90% lower than where it was before the financial crisis? How can that be? Citibank is trading around $40 a share. Yes, that is after they had a 10 for 1 reverse split.  And in case you don’t know what a reverse split is, it is like Photoshop for ugly stocks.

CITIGROUPIn 2007 Citigroup was above $500. In 2016 it is $44. An over 90% decline.

Bank of America

In 2007 Bank of America was above $50. By 2009 it fell below $5. Another 90% decline. Today’s price is still down over 65% from the 2007 high.

     So what are you suppose to do, never buy stocks and just live in an underground bunker with 30 years worth of lentil beans?  No, but don’t put every dime of your resources into stocks at nosebleed levels when everyone is chasing yield and piling into anything with a 2% or better yield and a downside risk of 30-50%. Go and buy some low fee ETFs or like Vanguard’s VT or VTI or something similar. But also have money in other things like some real estate, precious metals, and cash. If you are loaded up to your eyeballs in stocks, when they fall (and they will), not only will you not have money to buy them much cheaper, but you will most likely be selling at the bottom. It’s human nature.

 

How A Team Of Subway Pickpockets In Athens Greece Almost Ruined My Trip

 

Subway pickpockets of tourists in Europe
This is the train I was in when they tried to pickpocket me. The accomplice stood where the girl with the blue shirt is standing with her back towards the open door. The pickpocket was about where the girl with the backpack is standing.

About a week ago, I was in Athens Greece visiting family and kicking off a two month trip around Europe. I was getting on the train on a very hot July afternoon and I wasn’t really expecting any problems at my aunt’s local train stop. I also had my backpack on which probably marked me as a tourist. That was probably my first mistake.

Waiting on the platform I didn’t notice any group of suspicious people. I admit, I was looking at the woman security guard who had what looked like some kind bullet proof vest on, but she had no gun.  Anyway, there weren’t many people standing around me, but when the train pulled in and I moved from my spot a little to get in a car that looked less crowded, it seemed that there were now five or six people standing with me at the train door that I wanted to get on. I guess not thinking anything of this was my second mistake.

As you can see from the picture above, there is some kind of metal divider in the middle of the train door entrance. I walked in on the right of the divider behind a guy that went into the train first. The man in front of me stopped only about three feet into the train and I was stuck behind him because another guy came in behind me. So now I couldn’t move forward or backward because there was someone in front and behind me. I also couldn’t move to the left because of the metal divider and I couldn’t move to the right because it also had a metal divider. I was boxed in! I have rode New York City subways all my life and everyone knows that when you get on the train, you move all the way in to let the people behind you get in and also to get your own personal space if there is room. The strange thing was that the guy in front of me did not move. He just stood there with his back to me. If the train was packed, this would have been his only choice, but the train had a lot of standing room. This made no sense to me. For a second I thought it was some cultural thing to not care as much about personal space as Americans do. Before I could consider if I should ask him to move forward so at least I can walk out to all the available standing space, it dawned on me that he was doing this on purpose.

I immediately looked down at my two front cargo shorts pockets and put my hands over them. When I looked down at my left pocket, sure enough, the guy on my left on the other side of the metal divider had one arm with a folded jacket over it covering what he was doing with his other hand. His hand had one of the two buttons on my left pocket open. In another second or two he probably would have had what was in my left pocket. I had 900 Euros and my credit cards and ATM cards in my left pocket and my passport and $1200 US dollars in my right pocket.

After I grabbed my pockets I pushed both of them out of the way breaking their box they had me in. The pickpocket said to me “Take it easy!” in English. I said to him “I know what you’re doing!”.  I turned to face them with my back to the opposite door making sure no one was behind me. At this point I wasn’t sure how many of them were working together.  I was looking at everyone, including women and children, not sure if they are working with them. I just stared down the three I knew for sure were in on it as the train pulled out of the station. I wasn’t sure if they were going to try to jump me and get out at the next station.  I just stood there with my arms and legs apart and watched them while they acted nonchalant like nothing happened. No, I am not Chuck Norris or an MMA fighter; I just figured that they do their thefts in a non confrontational way so they would probably not try to continue with me after they have been exposed. The rest of the people on the train didn’t seem to notice what was going on and I doubt would have got involved if the situation got worse for me.

When the train pulled into the next stop, about six people got off. I can’t say all of them were working together, but there were definitely three and maybe up to five of them. Had they known what was in my pockets, I don’t think they would have given up after my resistance. Of course, if they pulled out a gun or knife I would have given them whatever they wanted because money and passports are just things that are replaceable.

So besides this article being a travel tip on staying alert, what does this incident have to do with anything? Well it shows you the importance of diversification even in a micro sense. If I had everything in one pocket and they stole it, I would be in a really bad position and probably have to really delay or cut my trip short. If they just got the Euros and credit cards, I still had cash and my passport in the other pocket. Had I lost the passport, it would be the most devastating in terms of getting new travel documents, but I would still have cash and credit cards.

Now you might be thinking, “If you didn’t have all of that in your shorts, you wouldn’t have this problem in the first place.”.  That is true, but the only other place to put them is my backpack which can also be stolen. This incident made me think that I need some kind of passport and money holder that goes under my clothes that pickpockets do not even have on their radar.

Just because this happened in Greece, it doesn’t mean that Greece is more dangerous than many other tourist countries. As a matter of fact when I was around 14 years old around 1985, my cousin (who is only a few months older than me) and I got robbed in broad daylight in Times Square in New York City on Thanksgiving Day.  This was no pickpocket either, the guy steered us to the outer edge of the sidewalk while many people walked by. He picked us because he followed us into McDonald’s and saw my cousin break a $10 bill to buy a 50 cent ice cream cone. He said he had a knife and would stab us if we didn’t empty our pockets. We emptied our pockets with one hand while we continued to eat our ice cream with the other hand. He got about $15 between the two of us. He then told us to walk and not turn around. As we walked away eating our ice cream and walking towards the 49th Street subway station, my cousin asked how we would get on the train with no money. I told him not to worry because I had a $20 bill in my sneaker. I guess even back then I was weary of putting all my eggs in one basket.

 

What Can A Billion Dollars Buy You? Not Much

A billion dollars can not buy you much

 

When people daydream about being rich, they believe that if they had a billion dollars, they could buy anything they wanted. What they don’t realize is that they can already buy pretty much what they want.

There is a saying: “Money isn’t everything, unless you don’t have any”.  But what if you have more money than you could ever spend? What can a billion dollars buy you that mere millionaires or thousandaires can’t buy? Even if billionaires can buy things that mere mortals can’t buy, is the quality worth the price or do they just spend one hundred or one thousand times the normal price of something just so they can feel special? Let’s take a look at the things they buy and compare them to what an average middle class person has to settle for:

     Housing:  Billionaires often have very large and maybe many houses in different places.  Sometimes you hear about their houses on those lifestyle shows. Often you hear that someone has a house with thirty bedrooms and thirty eight bathrooms. Besides the obvious questions about why they have more bathrooms than bedrooms, do they ever really sleep in more than one bedroom? I can only sleep in one bed at night. So the only thing better about their house is maybe the quality of materials and the number of rooms and square footage. With that comes the requirement to have a staff to maintain the garden, pool, cleaning etc. Their money does not buy them a bed that somehow let’s you sleep for five minutes yet gives you the equivalent of eight hours of rest. So they get the same thing the average person gets except it is bigger with more expensive materials.  Even middle class people have Mcmansions with more rooms than they use so this is not that exclusive.

     Cars:  Most billionaires are not really into cars except maybe a few nice cars to drive or be driven around. Let’s use the example of billionaires who really are into exotic cars. What can they buy that the average person can’t?  Well they can buy a Bugatti Veyron for over a million dollars and about 1000 horsepower.  It can do zero to sixty in a probably 3 seconds and probably tops out at 200 MPH. Forget about the fact that they are never in a big enough hurry that the zero to sixty time will make a difference, or that they will never get it close to 200 MPH unless they are on a closed track, the car does nothing special. It still has four wheels a seat and a steering wheel. It doesn’t have an anti-matter engine  and it doesn’t fly. It is not that much better performance wise than a $60K Corvette or BMW.  Surely it is not twenty times better as the price suggests.

     Food:  Yes, they can buy the finest food, but so can you. Maybe you can’t afford to spend $200 every day in a restaurant on steaks that cost $15 in the supermarket, but you can still eat very well and very healthy if you chose to. Also, just because they can buy the finest filet mignon and lobster, they can’t  eat it every day or eat unlimited amounts because there is only so much you can eat of those types of foods before it severely affects your health. Billionaires can also buy the finest wine, but you also can’t drink unlimited amounts of that either. Most people can’t tell the difference between $20 wine and $200 wine anyway.

     Travel:  Here is a secret most people don’t realize: billionaires can only buy private planes that fly as fast as regular commercial planes. No matter how much you are willing to spend, you still have to fly at the normal speed to your destination. There is no such thing as walking through a portal in New York and two seconds later walking out of a portal in Singapore.

I could go on about things like jewelry, art, vacations, education, etc, but the conclusion will still be the same.  There is nothing new under the sun. Whatever a billionaire can buy, most people can buy the same thing that functions the same way. And no matter how much money you have, you cannot buy more time.