Terror on Wall Street, a Financial Metafiction Novel (15 page)

AFTERWORD

My father, Gordon L. Eade, is the only man I have ever known who was able to retire at the age of 53 and live entirely off of his investments.  He did this with a “buy and hold” policy that saw him through the 1980s recession, 1987’s Black Monday, the savings and loan crises, the 1990s recession, the Dot Com Bubble, and the Financial Crisis of 2007-2008.  His comments, which follow mine, tell you everything you need to know about his strategy - and, of course, they are inextricably intertwined within the story.

     I am a writer of fiction, not a financial expert.  However, the research I have done for this book has led me to believe that the bubbles that we are currently sitting on top of call for preventative measures.  I believe that the black swans my father weathered with his method will pale in comparison  to the scenario of a full monetary collapse, the likes of which is described in the story.

     I suggest, as further reading, James Rickards'
The Death of Money (The Coming Collapse of the International Monetary System). 
Mr. Rickards prescribes an actively managed portfolio of 20 percent (physical) gold, 10 percent fine art, 30 percent cash, and 20 percent alternative funds, such as hedge funds and private equity funds; particularly those which involve hard assets, energy, transportation, and natural resources (some of the types of funds recommended by my father).

         
One more thing…

     I hope you have enjoyed this book and I am thankful that you have spent the time to get to this point, which means that you must have received something from reading it.  If you turn to the last page, Kindle will give you the opportunity to rate the book and share your thoughts through an automatic feed to your Facebook and Twitter accounts.  If you believe your friends would enjoy this book, I would be honored if you would post your thoughts and also leave a review on Amazon. 
Click here
for the book link for your review.

Best regards,

Kenneth Eade

[email protected]

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This tome has been written in the genre called 'metafiction', where I have used fictional characters to portray facts that will teach you how to invest and how to avoid the traps set by the clever brokers employed by Wall Street to transfer money from your bank account to theirs.

     My students and I  disclose all of the dirty little tricks that your broker uses to steal your money and we show you how to avoid them. I enlighten you about the returns that you should receive over the long run and that your portfolio should produce (depending on the amount of risk you take), and I have suggested the amount of risk that you should take.

     We know that the average employee who invests in the stock market earns about one half of the returns that the market provides. The result will be that a large portion of the population will retire only to live on a diet of dog food (or live with their children) unless we do something about this problem
now
.

     My characters advise you on how to set up your portfolio so that you will maximize the opportunity to obtain the best return possible, depending on the type of risk you choose. You learn how to set up your account to defer capital gains taxes until you start to cash in some of your stocks when you retire. You learn how to fight back against Wall Street and how to hurt them as they hurt you, your friends, and your neighbors.

     I believe that I can, by writing a novel with fictional characters, teach you how to invest and what to expect when you take financial risks. Investing in stocks and bonds requires accepting some risk. You cannot accumulate sufficient funds to retire in the style that you deserve without taking chances. On the other hand, it is impossible to select someone who can do this for you.

     Listening to and reading stories is by no means a passive exercise. We thrust ourselves into stories as active participants by taking a role in what we read or hear. Studies by psychologists have shown that stories are the most effective form of human communication, more powerful than any other method of packaging information. Psychologists have determined that telling stories is the most efficient means of persuasion in everyday life – that is, the most effective way of translating ideas into action. Volumes of facts and data rarely cause us to take action, whereas a story's characters can cause you to act in a manner intended by me, the author.

     Stories must give the listener an emotional experience if they are to inspire action. The most effective and efficient method way to do this, by far, is by applying metaphor and analogy. These devices are key components in how we think. When I describe things in a story, I am creating imagery that engages you in multiple ways. The brain does not distinguish between a real image and an imagined one. This is the psychic lever that opens the brain to hard wire what you will learn and store in your mind. Most stories have a sympathetic hero and they are shaped by three critical elements: a challenge, a struggle, and a resolution. As you read, you know that the hero will solve and overcome barriers during his journey to an acceptable and realistic solution.

     I have chosen this form of communication because Wall Street has convinced the majority of investors that it is possible, by using their skills, to select a portfolio of securities that will outperform the market. This false idea is so strong that it is virtually impossible to convince the man on the street that he cannot beat the market, but trying to do so is a sure path to a financial disaster.

     You will learn that Wall Street experts themselves rarely beat the market using the vast resources at their disposal.   It’s a fact that the financial services industry spends billions of dollars annually to convince the public that their research and analysis the only way to achieve success in the stock market. In fact, the apparent success that some of these experts achieve are simply gifts from Lady Luck.

     I will give you a list of things that you must not do if you are to survive the stock market’s periodic, drastic, random moves. I will show you how Wall Street uses what they know about how your brain works when you sense euphoric messages that will cause you to react in a manner that is not in your best interest.  All of this information will be presented in an appealing manner by fictional characters you will learn to love and trust.

     I have been an investor in marketable securities for more than seventy-five years.  My portfolio contains over 14,000 domestic and foreign stocks and bonds in accordance with Modern Portfolio Theory. The compound annual return of this portfolio is greater than the weighted average of its component parts. Yes, I am saying that a properly designed portfolio of securities will earn more money with less risk than a basket of stocks selected without consideration of the risks of their individual components, adequate diversification, and the effects that these individual components have on one another.

     If your broker is not skilled in putting together a portfolio of stocks, then you will not receive a return commensurate with the risks taken. There are two types of professional financial advisors whom you can trust, who know how to build a proper portfolio for you. They are a Registered Investment Advisor (RIA) and a Certified Financial Analyst (CFA). These experts have a fiduciary duty to select for you a portfolio of stocks and bonds that are suitable for your financial position.

     Compare this responsibility with that of a stock broker, who has no responsibility by law to recommend securities that meet your requirements. In fact, brokers will sell you those securities that earn them the highest commissions and/or those that reward them with paid vacations to beautiful locations. The Certified Financial Advisor has been tested to guarantee all aspects of your financial situation and should consider them in designing a portfolio to meet your needs at a risk that you can tolerate. You can be sure that a CFA has mastered the science of investing in marketable securities and has been tested to insure his qualifications are kept current.  Compare this with a stock broker who has passed a series Seven test. I will venture a guess that he does not even know what the term “fiduciary duty” means.

     Finally, I have listed a set of scams that are often used by unscrupulous stockbrokers and insurance salesman to separate you from your savings, so you can immediately recognize what a friendly-sounding salesman is trying to sell you. I will show you actual scripts used by stock brokers. Scripts like these have been crafted by experts who know how to convince you to take the action they desire.

     I will show you why the recent stock market meltdown occurred and just who was responsible, and how another event like the one we just experienced will happen again unless the recommendations I offer are not followed.

     I have also provided a list of books by authors who have vast experience advising investors and telling the public how to invest. I hope you will enjoy my book and learn from its colorful characters, who will deliver a message that every investor should know, using an interesting and exciting approach.

     I have been an investor in marketable securities since I was 10 years old. That was 77 years ago. My first investment involved purchasing some postal savings bonds. I had saved up a dollar and bought my first bond, which paid 2 1/2% per annum, from the post office.

     After serving in the Air Force (I was drafted after the war was over), I decided to use my education benefits and go to college. I joined the student body of a brand new all men’s college that copied the curriculum of Harvard’s graduate school’s MBA program.

     We used the very same books, and several Harvard full professors were part of the staffs who were lured to California with a three-hour-a-week teaching load and free rent in single family home in sunny California.

So, in effect, I received the equivalent of an MBA degree at no cost with my GI benefits.

     After graduating with honors, I was placed by the college in a bank as a trainee. My first memorable experience was when a federal bank examiner challenged my practice of taking morning coffee. You may wonder at how could I get in trouble drinking coffee. Well, the teller’s window I manned cashed municipal bond coupons, processed trade acceptances, and accepted payments on promissory notes. It was my daily practice to go to the chief cashier and withdraw $15,000 for my cash drawer, then go next door for my morning coffee before the bank opened for business.

     When I returned there was someone at my cash drawer, placing a seal on it.  The gentleman asked who I was and I said, “This is my post.  Who are you?” He answered that he was a federal bank examiner and wanted to know where I had been. I told him I was getting coffee next door at Manning’s Coffee Shop.  Then I opened my cash drawer and put the cash in its proper place. The bank examiner then said that the bank’s money does not drink coffee and wrote up the incident in his audit report.  After this and many other equally embarrassing episodes, like falling asleep one afternoon in an area that was provided for those not feeling well and throwing the bank out of balance several times, I decided that I was not going to be successful as a banker. My employer agreed.

     My next job was working for the Grande Oil Company (a subsidiary of Gulf oil located in Maracaibo, Venezuela) as an accountant.  I was placed in charge of a staff of fifty or more local Spanish-speaking Venezuelans working in the area of accounting for the plant and equipment.

     We calculated the deprecation of physical equipment based on physical life and the amortization of intangible drilling costs based on recoverable oil in each field producing sand. By massaging these figures, I could report just about any profit number needed, including the government’s share of the profits. The government had already taken most or their entire share of profits via customs duties. So the game was to come out even and adjust the books so that the prepaid customs duties exactly matched the reported profits. Of course, the government had already spent their share by changing the depletion allowance, changing recoverable oil estimates, and adjusting either the physical life of equipment or its economic life.

     After my experience abroad, I joined U.S. Steel as a computer programmer, where I learned their standard cost system, the most advanced system devised at the time.  Five years later, I was recruited by U.S. Borax and Chemical to set up a standard cost system for their mine and refinery in Boron, California; site of the largest borax mine in the world.

    Other challenging jobs I held were as a consultant to the government of Greece on industrial development, working with the staff of Aristotle Onassis, designing and installing an automated oil field in Sumatra, and even designing the Apollo re-entry backup system, among many other projects. My last job was Treasurer and member of the board of directors of a public company listed on the AMEX.

     After doing S-1 registrations and tender offers, acquiring several other companies, defending the company from shareholder lawsuits, negotiating labor contracts, firing the company’s auditor, and solving a ton of other problems, I sold my unregistered shares in a tender offer and retired at the age of 53.