I’m the type of person that when I like a movie I watch it over and over again. I am sure that there are many of you who do the same. The reason is that brilliant and creative people produce these movies. Whether or not you consider Hollywood a hot bed of leftists or not, all stories contain (even if they are biased) both sides of every issue. There are always little subtleties that one catches with repeated viewings.
Today I was watching, “Wall Street, Money Never Sleeps”. A line was spoken which reminded me of a twenty-five million dollar refinance we did in 2007. The reason that this was interesting to me was that the majority of our investers wanted to take out maximum leverage so they could get their hands on some cash. At that time our loan to value was about 25%. I, as managing member and largest share holder, said,”N0”, but I did allow each investor to take out their down payments so that they had, “ZERO” dollars invested. Therefore, the checks they received every month were simply found money because they had nothing invested. Folllow?
As things turned out, when the “CRASH” hit in 2009, our investments were not over leveraged. The result was that (thank you God) we have remained profitable every month and have not had to lay people off or cut saleries. Yes, people have complained because their monthly checks went down twenty to forty percent. The beauty of it was our partners had nothing invested.
Hopefully, as things turn around, the equity will rise and the monthly checks will increase. By the way, we are invested in multy-family housing, and because of the mess at Freddy-Mac, and Fanny-Mae there won’t be any houses built any time soon. And banks are not lending on houses unless the buyer is very well qualified.
So back to my original point… By watching good movies over and over, one can pick up subtleties that may give good guidance. In this movie, the particular subtle line was,”The mother of all evil is speculation, leveraged debt, borrowing to the hilt”. Now for those who think nothing good comes out of Hollywood, thank you Oliver Stone and your writers.