I didn’t know much about Andy Beal until I read the article linked below. He is now on my short list of investors to watch.
Of course watching him is not going to be easy as he does not run a hedge fund or a publicly traded company. But what I take from this article and from Beal is that the single most important weapon to have if you want to get disgustingly rich in a reasonably safe manner is patience.
Have loads of cash when others don’t. Have loads of cash when others are panic stricken.
How many of us really didn’t think that in the panic of 2008 and early 2009 that then was the time to be buying stocks? It wasn’t that hard to recognize the ridiculous valuations. The hard part was having enough cash sitting there to invest to make a difference in your net worth or investment performance.
Beal seems to have mastered the art of patience. In 2001 he had loads of cash to invest in the panic stricken airline debt area. In 2008 and 2009 he had loads of cash to invest in mortgage-backed securities.
I’ve taken advantage of a couple of panic sell-offs. Two that come to mind are everything linked to deepwater oil production in the summer of 2010 and the income trust sell-off in Canada in 2006. But I wasn’t sitting on a large enough cash position to really make a killing.
The problem if you are a professional money manager is that investors are not going to be willing to let you sit on a huge cash position for a couple of years as you wait for a panic somewhere. Who is going to want to pay you for doing nothing?
I’ve been working on a plan that will hopefully set me up to be more opportunistic and patient with my capital. What I envision is having a portfolio of residential real estate that is owned debt free. This portfolio will always produce cash flow to invest to satisfy my desire to be active. At the same time it will provide me with collateral against which I can borrow should the stock market pitch us up another ridiculous opportunity. Hopefully realizing that I’m borrowing to invest will make me wait for only the best opportunities.
Here is the Andy Beal article:
“It was 1981, and Beal, then a 29-year-old vulture investor, was scoping out two 16-story apartment buildings owned by the U.S. Department of Housing and Urban Development. The bricks were chipped and bulging off the exterior of the buildings. Tenants had pried open the elevator doors and thrown furniture down the shafts.
Beal liked what he saw.
He and a partner bought the towers for $25,000 and a promise, backed by a $2.5 million letter of credit, to fix the bricks. They did the repairs -- employing armed guards for protection when visiting the apartments -- and never tapped the credit line before selling the buildings two years later to a New York doctor for $3.2 million, Bloomberg Markets magazine reports in its August issue.
In the past three decades, Beal has made a fortune buying distressed assets. He snapped up bonds of power companies during the California blackouts in 2001, debt backed by jetliners following the 9/11 terrorist attacks and billions worth of commercial and real estate loans after global credit markets froze in 2008.
In between, the investor with a restless mind started a company to build rockets and beat a rotating team of pros at Texas Hold ’em in the world’s richest poker game.
Beal’s focus on beaten-down loans makes him look like a hedge-fund manager. He’s not; he’s a banker.
FDIC-Insured Hedge Fund
His Plano, Texas-based company, Beal Financial Corp., owns three banks. Deposits are insured by the Federal Deposit Insurance Corp. That means Beal raises money for his investments by promising, these days, to pay depositors just 1 percent a year. A small bank in New Mexico he bought in 2010 offers checking accounts. Otherwise, his 34 branches sell just savings accounts and certificates of deposit, which are less expensive to manage.
“It’s an FDIC-insured hedge fund,” says Sherrill Shaffer, who worked for the U.S. Federal Reserve for 17 years until 1997 and is now the John A. Guthrie Distinguished Professor of Banking and Financial Services at the University of Wyoming in Laramie. “
Link to entire article: http://www.bloomberg.com/news/2011-06-29/beal-becomes-billionaire-with-fdic-assets-as-he-tops-poker-pros.html
Of course watching him is not going to be easy as he does not run a hedge fund or a publicly traded company. But what I take from this article and from Beal is that the single most important weapon to have if you want to get disgustingly rich in a reasonably safe manner is patience.
Have loads of cash when others don’t. Have loads of cash when others are panic stricken.
How many of us really didn’t think that in the panic of 2008 and early 2009 that then was the time to be buying stocks? It wasn’t that hard to recognize the ridiculous valuations. The hard part was having enough cash sitting there to invest to make a difference in your net worth or investment performance.
Beal seems to have mastered the art of patience. In 2001 he had loads of cash to invest in the panic stricken airline debt area. In 2008 and 2009 he had loads of cash to invest in mortgage-backed securities.
I’ve taken advantage of a couple of panic sell-offs. Two that come to mind are everything linked to deepwater oil production in the summer of 2010 and the income trust sell-off in Canada in 2006. But I wasn’t sitting on a large enough cash position to really make a killing.
The problem if you are a professional money manager is that investors are not going to be willing to let you sit on a huge cash position for a couple of years as you wait for a panic somewhere. Who is going to want to pay you for doing nothing?
I’ve been working on a plan that will hopefully set me up to be more opportunistic and patient with my capital. What I envision is having a portfolio of residential real estate that is owned debt free. This portfolio will always produce cash flow to invest to satisfy my desire to be active. At the same time it will provide me with collateral against which I can borrow should the stock market pitch us up another ridiculous opportunity. Hopefully realizing that I’m borrowing to invest will make me wait for only the best opportunities.
Here is the Andy Beal article:
“It was 1981, and Beal, then a 29-year-old vulture investor, was scoping out two 16-story apartment buildings owned by the U.S. Department of Housing and Urban Development. The bricks were chipped and bulging off the exterior of the buildings. Tenants had pried open the elevator doors and thrown furniture down the shafts.
Beal liked what he saw.
He and a partner bought the towers for $25,000 and a promise, backed by a $2.5 million letter of credit, to fix the bricks. They did the repairs -- employing armed guards for protection when visiting the apartments -- and never tapped the credit line before selling the buildings two years later to a New York doctor for $3.2 million, Bloomberg Markets magazine reports in its August issue.
In the past three decades, Beal has made a fortune buying distressed assets. He snapped up bonds of power companies during the California blackouts in 2001, debt backed by jetliners following the 9/11 terrorist attacks and billions worth of commercial and real estate loans after global credit markets froze in 2008.
In between, the investor with a restless mind started a company to build rockets and beat a rotating team of pros at Texas Hold ’em in the world’s richest poker game.
Beal’s focus on beaten-down loans makes him look like a hedge-fund manager. He’s not; he’s a banker.
FDIC-Insured Hedge Fund
His Plano, Texas-based company, Beal Financial Corp., owns three banks. Deposits are insured by the Federal Deposit Insurance Corp. That means Beal raises money for his investments by promising, these days, to pay depositors just 1 percent a year. A small bank in New Mexico he bought in 2010 offers checking accounts. Otherwise, his 34 branches sell just savings accounts and certificates of deposit, which are less expensive to manage.
“It’s an FDIC-insured hedge fund,” says Sherrill Shaffer, who worked for the U.S. Federal Reserve for 17 years until 1997 and is now the John A. Guthrie Distinguished Professor of Banking and Financial Services at the University of Wyoming in Laramie. “
Link to entire article: http://www.bloomberg.com/news/2011-06-29/beal-becomes-billionaire-with-fdic-assets-as-he-tops-poker-pros.html
