X-Message-Number: 19383
From: "John de Rivaz" <>
References: <>
Subject: Re: note on investment and the accountancy collapse
Date: Mon, 1 Jul 2002 15:05:05 +0100

> I have seen that Worldcom shares had fallen from $ 50 to 10 cents... Do
> think it is time to buy it? After all, even if it get back to 20 percent
> its original value by 2005, it would be a 1250 percent/year investment...

This is an accountancy issue. As I recall the accounts had some"cost of
sales" items in the "capital costs" section, and that has resulted in a
collapse of the quotation and calls for executives to be sent to prison. I
have to say that I do not understand accountancy. To my mind, the costs have
been allowed for, allbeit in the wrong columns, so surely the end result is
the same.

My initial result would be to fill your boots with the shares on the basis
that the kerfuffe is stupid. Howerver on reflection, if the masses are
really howling for blood and the managers of the company are threatened or
even really thrown into jail with criminals and perverts to work their
frustrations out on, then the company will have little future and will be
wound up. [This is even though the fixed assetts must be worth more than the
accounts stated if operating costs were incorrectly deducted from them] Most
likely any remaining value will be  taken as administative expenses by the
receiver and the shareholders will get nothing (like Global Crossing).

As to real estate (rented property) I do have positions here as well.
However it is increasigly difficult and expensive to deal and very difficult
to trade without taxation. I bought one of my properties around 1980. Since
then there has been one major slump, one minor one and two booms including
the current one. Today the annual rental is roughly two thirds of the 1980
purchase price. Or look at it another way every couple of years I get more
than my money back .. over and over again. But of course this is only
towards the end of the period of ownership - throughout most of the period
the income was relatively low, especially considering some of the rent was
spent on bringing the place up to a modern standard. Today real estate
prices are so high that you cannot buy a property as easily as a few hundred
shares - it is a big event. Some people borrow to buy to rent, but as stated
in my first note on this subject, this is a very risky idea because property
prices can fall, and when this happens loans are called in. Probably I'd be
clever to sell my property now and buy shares, the property market is high
and the stock market low. But I am not prepared to take the risk and pay the
associated taxes and costs.

I would imagine that the cryonics organisations would not be too happy with
taking real estate and/or rented propertry into a cryonics trust, although I
could be wrong. Once I did have the idea of borrowing to buy a rented
property, put it in joint names with a cryonics organisation, and set the
down payment so that the rent balances the repayments on the loan. As
inflation takes the rents up, it starts generating a real return for the
instigator, thus providing a return on the capital raised for the down
payment. Calculations would show that after fifteen to twenty years, this
would produce a fantastic return (even more than my buy outright example,
because of the leverage of the loan.)  This was just too difficult to
arrange, although theoretically it is a finacially very efficient idea. If
you think life insurance is hard to set up, you wouldn't beleive it if you
tried this!

Another bad thing about real estate for cryonics is that when the market is
in a slump, it is not a matter of getting a little less for your property,
it is a matter of not being able to sell it at all. If you use the stock
market, then you can ensure that you are on average over-funded for cryonics
and all a market slump on the day of your deanimation means is that the
cryonics organisation gets less, not that it can't raise the money at all,
or has to wait years so to do.

If you use life insurance you can (subject to the viability of the life
company) be sure as to what the cryonics organisation will get out. However
this is likely to be less than what you'd get by direct investment over two
or three decades - life companies use investment themsleves to make the
money they pay out, and obviously you have to pay their costs and the cost
of the life cover out of this before your policy gets some. If you get life
cover and die soon then this is financially the best option, but who wants
to die soon! And if you do they could be suspicious and demand a dissection
to see if you died from or as a result of an uninsurable cause.

The main reason why the "effervescent" stock market is better than real
estate is that it is so much easier to buy and sell units, and you can buy
and sell using much smaller blocks of money, thus staying within taxation
limits. Dealing costs are fixed and much lower than real estate.

Sincerely, John de Rivaz:      http://www.deRivaz.com :
http://www.longevity-report.com : http://www.autopsychoice.com :

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