Payback Time: Making Big Money Is the Best Revenge! [NOOK Book]

Overview

Don?t get mad, get even?
 
Phil Town?s first book, the #1 New York Times bestseller Rule #1, was a guide to stock trading for people who believe they lack the knowledge to trade.  But because many people aren?t ready to go from mutual funds directly into trading without understanding investing?for the long term ? he created Payback Time.
 
Too often, people see...
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Payback Time: Making Big Money Is the Best Revenge!

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Overview

Don’t get mad, get even…
 
Phil Town’s first book, the #1 New York Times bestseller Rule #1, was a guide to stock trading for people who believe they lack the knowledge to trade.  But because many people aren’t ready to go from mutual funds directly into trading without understanding investing—for the long term – he created Payback Time.
 
Too often, people see long-term investing as “mutual fund contributing” – otherwise known as “long-term hoping.”  But the sad truth is that mutual fund investors are, to a stunning degree, pinning their hopes on an institution that is hopeless.  It turns out that only 4% of fund managers consistently beat the S&P 500 index over the long term, which means that 96% of fund investors see a smaller return on their nest egg than a chimpanzee who simply buys stocks in the 500 biggest companies in America and watches what happens.
 
But it’s worse than that.  The net effect of hitching your wagon to mutual funds is that over a lifetime they’ll fritter away as much 60% of your nest egg in fees.  Once you understand how funds engineer this, you’ll rush  to invest on your own.
 
Payback Time’s risk-free approach is called “stockpiling” and it’s how billionaires get rich in bad markets.  It’s a set of rules for investing (not trading but investing) in the right businesses at the right time -- rules that will ensure you make the big money. 


From the Hardcover edition.
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Editorial Reviews

From the Publisher
“Finally, an investment book that’s easy to understand and actually works in the real world.  PAYBACK TIME will make a lot of people very, very rich!”
--T. Harv Eker, author of the New York Times #1 bestseller, SECRETS OF THE MILLIONAIRE MIND
 
“There's never been a better time then now to start over and finish rich!  Recessions make millionaires and Phil Town's strategy for stockpiling wealth in the stock market is a fantastic vehicle for achieving that goal.  You'll realize when you read this that it’s still possible to recapture your dreams of a richer, better future.”
 --David Bach, #1 New York Times bestselling author of START OVER, FINISH RICH and THE AUTOMATIC MILLIONAIRE
 
“Masterful in its insights...brilliant in its simplicity and practicality! With uncompromising clarity, Phil Town exposes the truth about how poorly mutual fund managers perform, then proceeds to teach a very precise methodology for finding, evaluating, and investing in valuable businesses. PAYBACK TIME is a must read for everyone who's ready to take complete control of their financial freedom, and wants to do so with confidence, safety, and sound investment principles.”
--Tony Martinez, Founding Partner, Wealth Without Risk, LLC
 
“Town knows how to play by the rules in the ‘making big money’ game. Consider his book a gift to your financial library.”
--Robyn Spizman, New York Times bestselling author and founder of The Giftionary.com

“An incredible book that will teach you how to achieve financial independence faster than you ever thought possible.”
--Brian Tracy, President, Brian Tracy International
 
"Town has nailed it…PAYBACK TIME gives you the insight and mindset to maximize your investments.”
--Joe Sweeney, President of Corporate Financial Advisors and author of NETWORKING IS A CONTACT SPORT

From the Hardcover edition.

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Product Details

  • ISBN-13: 9780307461889
  • Publisher: Crown Publishing Group
  • Publication date: 3/2/2010
  • Sold by: Random House
  • Format: eBook
  • Sales rank: 302,234
  • File size: 10 MB

Meet the Author

PHIL TOWN has addressed millions of people, sharing the stage with such respected public figures as Bill Clinton, Colin Powell and Rudy Giuliani. He appears frequently on CNBC as an investing expert.  Currently, he makes his home in Jackson Hole, Wyoming.
 


From the Hardcover edition.
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Read an Excerpt

CHAPTER 1

HOW the WEALTHY USE DOWN to GO UP

"There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction."
—John F. Kennedy
 
The best investment strategy I know is so counterintuitive, so shockingly upside down, such a crazy way of thinking about investing that hardly anyone who uses it wants to even try to explain it. It’s not at all hard to do, but it is hard to explain. It just sounds so . . . impossible. But smart investors do it all the time and, man, does it work! I mean it really works. It’s an “I can do whatever I want the rest of my life” kind of works. It works so well, it’s the secret to the investing success of the best and richest investors in the world. Seriously.
 
I know that sounds like hype, but honestly it’s impossible to overstate the effectiveness of this strategy. It really is the basis of the biggest fortunes in the world, including those of quite a number of Forbes’s World’s Billionaires list. For example, #3 is Carlos Slim Helu, the Mexican telecom entrepreneur who is worth $35 billion and is currently buying into cheap media, energy, and retail assets, including the New York Times, using this strategy. Lakshmi Mittal, #8, of India, created a $19 billion fortune and now runs the world’s largest steel company, ArcelorMittal. He built ArcelorMittal using this strategy in Eastern Europe in the 1990s after the Berlin Wall came down. Number 15 is Bernard Arnault of France, who built a $16 billion fortune by acquiring Christian Dior with this strategy.
 
Number 16 on the World’s Billionaires list is Li Ka-shing of  China, who made $16 billion acquiring energy, banking, and utility companies with this strategy. Charles Koch and David Koch are ranked #19 with $14 billion each, which they got by using this strategy to build Koch Industries—one of the largest, privately held corporations in the United States. Michael Otto of Germany is ranked #23 and is using this strategy to take advantage of weak markets in the United States to buy up shopping centers in America. Don Bren is #26. He used it to become the sole owner of the Irvine Company and bank $12 billion. The Irvine Company is one of the largest construction companies in California and the developer of about a fifth of Orange County.
 
 
The list of billionaires who used this strategy to become mega-wealthy goes on and on but wouldn’t be complete without mentioning that the world’s second wealthiest man, Warren Buffett (worth $37 billion), the world’s best investor, used this strategy of investing to build his immense fortune and to increase his ownership and compounded return in companies like American Express, Washington Post, GEICO, and Coca-Cola.
 
This strategy is also the basis of thousands of little fortunes, including mine. In fact, as any of the billionaires I mentioned above would agree, it’s much easier to use the strategy if you are a small investor. Being a big investor is actually a huge disadvantage in using this strategy. Mr. Buffett once said, “Anyone who says that size does not hurt investment performance is selling. The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money.”*
I used this strategy to build my wealth by buying shares of bioscience, software, and other private companies. And soon, if you pay attention and are willing to do a bit of fun work, you’ll discover that this incredible strategy can be the basis of your fortune, too.
 
STOCKPILING
 
I call this amazing strategy “stockpiling” . . . as in “stash,” “accumulate,” and “collect.” It means exactly as it sounds—stockpiling, as in piling up stocks. Not just any stock at any price, though. The essence of stockpiling is to buy stock in a business you’d be excited to own all of, then hope the price goes down so you can “stash,” “accumulate,” and “collect” as much as you can afford at as low a price as possible. Sounds strange, I know. But again, all of the billionaires I listed above and many more on Forbes’s World’s Billionaires list are stockpilers of businesses. (Note: This list might have changed by the time you read this but not the stories behind these guys’ wealth-building strategies.)
 
Buy a Business, Not a Stock
“Buy a Business, Not a Stock” was a chapter title in my first book. It’s such a key way of thinking that I can’t reiterate it enough: You must stop thinking that stock investing is any different from buying a business. When you buy a business you’re buying shares of the business. If you buy some percentage of the total shares, you become a part owner. Buy all the shares and you own the whole business. There is no difference between that process and buying public stock in a business. As long as you treat owning shares of public stocks as different from owning a piece of a business, you will fail to understand and execute the stockpiling strategy. A typical stock investor is unhappy when the price of his stock goes down, because he has no understanding of the true value of the business that stock represents. But that’s because typical stock investors are not investors at all. They don’t understand stockpiling, so they inadvertently have become speculators and outright gamblers.
 
The unfortunate truth is that the financial services industry has conned many millions of people into their game of stock speculation via mutual funds. I’ll have a lot more on that in the next chapter. For now, let’s just remember that for this book and for the rest of your investing career, you must think of stocks as shares of a business, and yourself as the owner of that business. So if you buy just ten shares of Coca-Cola, you’re a part owner of Coke—not a stock investor in Coke. Got that? When you begin to think like this, you’re joining some truly great investors like Buffett, and you’re on the first step toward becoming a solid stockpiler of stocks, er, businesses.
 
“The basic ideas of investing,” Buffett says, “are to look at stocks as a business, use a market’s fluctuations to your advantage, and seek a Margin of Safety. That’s what Ben Graham taught us. A hundred years from now, these will still be the cornerstones of investing.”
 
From the late 1990s until 2008, Warren Buffett bought very few public stocks. He mostly just sat on about $45 billion of Berkshire Hathaway’s cash, waiting patiently for Mr. Market to become fearful enough about the future to bring the prices of wonderful public businesses down to levels at which he was willing to buy. In May 2008 Mr. Buffett told his fans at the annual Berkshire conference that he hoped the stock market would drop 50 percent so he could finally put all his cash to work. Then the market crashed, and in October 2008 he invested $20 billion in public companies.
 
But here’s the classic part of the story: As prices of the businesses Berkshire owned—and still owns, as of this writing—plummeted, and the Berkshire stock price dropped accordingly, Mr. Buffett was attacked, again, for being over the hill and out of touch. The proof? The prices of businesses he owns were going down.
 
This is not the first time he’s been accused of losing his touch. In the late 1960s he was sitting on a lot of Buffett Partnership cash. His unwillingness to chase high prices disturbed enough Buffett Partnership partners that Mr. Buffett dissolved the partnership, gave his partners back their money, and shifted his stockpiling strategy to Berkshire Hathaway, where he would no longer be required to deal with limited partners whining about his lack of investing activity.
 
Of course, he turned Berkshire into the world’s most successful investment vehicle. Ten thousand dollars invested in Berkshire in 1969 is now worth $40 million. Again in the late 1990s, as mutual funds racked up big gains by buying technology stocks, Mr. Buffett was accused of being behind the times. His ideas became more popular after the Nasdaq plunged 85 percent during the dot-com bust.
 
The fact is, stockpiling is something people either get right away or never understand at all, no matter how much sense the strategy makes or how much money the people who practice it make.
 
The Secret to Risk-Free Stockpiling Is Knowing Price Is Not Value
 
Okay, there’s obviously more to stockpiling than just buying a stock and hoping the price goes down. What Warren Buffett and a lot of other billionaires know is that the price of a stock doesn’t always have a whole lot to do with how much that business is actually worth. To put it another way, you have to learn how to look beyond stock price and at a business’s value.
 
The one and only secret to stockpiling is to make sure the value of the business is substantially greater than the price you are paying for it. I swear to you that’s all there is to it. If you get this right, you cannot help but get rich. Most investors make the mistake of thinking the price they paid has some necessary connection to the value of the thing they bought. I don’t know why stock market investors think that when it’s so manifestly and obviously not true in any other sort of market they buy in regularly. Surely they bought a used car sometime in their lives. They wouldn’t confuse the price being asked for a used car with the value of that car, would they? Just because a guy is asking $5,000 for his old Toyota doesn’t mean it’s actually worth $5,000. If you’re reasonably smart, you go look the car over; you make sure its got an engine that works and the body isn’t a disaster. You check to see what similar cars are going for and use that price as a guideline, but only if it’s reasonable.
 
Why wouldn’t investors do something similar when they buy stock? Because they don’t know how to calculate the value of a business the way they do with cars. Well, we’re going to fix that in this book.
 
I’m going to show you how to calculate value—and make sure it’s higher than price—in Chapter 4, but for right now just understand this: price is just the amount you paid. That’s all it is. It doesn’t mean a damn thing other than that. If you want to know the value of the thing you bought, well, that’s an entirely different question. Price is what you pay but value is what you get. Those two things can be and often are quite different. We’ll start our lessons on how to stockpile undervalued companies and make millions with that: Price is not the same as value.
 
Since I haven’t taught you how to figure out the value of a business yet, allow me to make my point with an example from my horse farm. I wasn’t a very good rider but I wanted to learn, so I was looking for a horse that knew a lot more than I did about what I’m supposed to do. My partner, Melissa, got a lead on a Level-4 dressage horse that was for sale because the owner died. The family was wealthy, so they were just looking for a good home for the horse. Melissa called and found out they’d bought the horse for $60,000 plus shipping from Germany. They wanted $35,000 for a quick sale. She told them we weren’t interested but they should call us back if they didn’t find a buyer at that price. Two weeks later they called and offered us the horse for $10,000. We drove over for a look. We could see why they were having a problem selling him. He needed to get his feet trimmed and reshod. He needed to be fed better. And he hadn’t been ridden for months. I got on him and he tried to toss me, but he was too out of shape to get into it. I wasn’t impressed. A big, bony, out-of-shape, cantankerous horse wasn’t what I was in the market for.
 
Melissa, however, is the former owner of a horse-importing and -training business and she’s been a national champion rider several times. She knows horses. She took a ten-minute look at this guy moving around the arena, pulled me aside, and said, “Let’s take him home. He’s amazing.”
 
Where I just saw the superficial problems, she saw a $60,000 horse and a great horse to teach me to be a better rider. We paid $6,000 and loaded him up, and he’s in our barn now with new shoes, getting fat. What’s his value? I’m sure even in this market, he’s at least a $20,000 horse. Maybe a lot more. The lesson? Superficial problems that have nothing to do with value can have a big impact on price.
 
Before we get back to businesses and the details of calculating value, I want you to notice one more thing about the purchase I made: It was essentially risk-free. There was no way I could lose money on that horse. Even if he died, I’d make money on the insurance.
 
Think about that for a second. If we know the price of a thing is less than what it’s worth (its value), then something remarkable becomes possible: We can buy it and be certain we will make money.
 
“Certain?” you ask. “Come on. There’s no way to be certain you’re going to make money.”
 
Yup, there is a way to be certain and it’s really simple. Just put on your logical, rational hat and follow me: If the value of the thing you bought is greater than the price you paid, you are guaranteed to make money. You have gotten rid of the risk of making the investment. The only question is how long you have to wait for the price to come back into line with the true value.
 
In the case of our horse, Sherman, we bought him so cheaply we could sell him for a profit immediately after doing some basic maintenance. If we want to sell him for the maximum amount—his full value as a Level-4, 17-hand, beautiful dressage horse with amazing action—we’ll have to be more patient and wait for a better market when the price will come up to the value.
 
The same thing applies to owning shares of a business. If you buy at a price well below the long-term value, you may not be able to sell for a profit immediately. In fact, the price may go down before it goes up. There’s no guarantee that the short-term price for Sherman won’t fall lower. But in the long term, the price will come up to the value. True for a horse. Especially true for a business.

From the Hardcover edition.

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Table of Contents

Introduction The Road from Rule #1 to Payback Time 1

Chapter 1 How the Wealthy Use Down to Go Up 11

Chapter 2 Mutual Fund Investing Makes No Sense 31

Chapter 3 Three Ms Equal No-Risk Investments 49

Chapter 4 Payback Time Means "No Fear" 89

Chapter 5 Eight Baby Steps to Wealth 133

Chapter 6 Just the FACs, Ma'am 165

Chapter 7 A Tale of One Family 183

Chapter 8 Free Money with a Berky 215

Chapter 9 Join the Rule One Revolution 243

Epilogue ? Before You Go Play 253

Acknowledgments 265

Index 267

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Customer Reviews

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( 18 )
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Sort by: Showing all of 18 Customer Reviews
  • Posted June 3, 2010

    more from this reviewer

    Rehash of Rule #1 with lots of "use my site!"

    If you've read "Rule #1", then this book won't give you much more info. It's mostly rehashing the same stuff from the first book, with Phil spending a bunch of time explaining why he hates mutual funds.

    And I swear every other freakin page, he's promoting his website where you can use his calculators. Well, you can use them once you register .

    Well, that's IF you can register. The site doesn't seem to be working ...couldn't put in my phone #, but now that I think about it, I'm okay with that. After all, WHY does the site need our phone number and address?

    ( And good luck trying to e-mail the "support" on the website. All I got was an auto reply. If they think I'm going to call their support phone number, they're crazy. I'm through giving them money)

    Read this book if you want, but you're not going to get much more out of it than the first one.

    1 out of 1 people found this review helpful.

    Was this review helpful? Yes  No   Report this review
  • Posted March 4, 2010

    Payback Time Is Worth It

    I just finished reading Phil Town's Payback Time... It's a good sequel to Rule #1, and investors who aren't happy with their mutual funds will be pleased.

    Town expands on his system of analyzing companies based on their meaning, management, and moat, and adds in a few new wrinkles (specifically, his vehement hatred for mutual funds). While I don't think mutual funds are anathema to investors like Town does, he effectively presents his viewpoint that money managers are eating away at your absolute return to simply mirror the market when you could get the same return in broad market ETFs. Moreover, Town reinforces his point that you can earn huge returns by following the value method of investing espoused by Buffett and Graham.

    Some experienced investors may choose to use different methods from Town (such as determining forward P/E's and estimated forward growth rates). But Town appears to have been very successful using his system, so novice investors may be better served by his easy to use method.

    All in all, it's a compelling read and there's some legitimate wake up calls for the average investor who dutifully ship their money off to a mutual fund in the hopes that some day they will have a sufficient nest egg to retire on.

    1 out of 1 people found this review helpful.

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  • Anonymous

    Posted December 16, 2012

    Must read

    Everyone should read this book

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  • Posted March 10, 2011

    A must for anyone wanting a better life!

    I have bought and read his first book Rule 1 and now this book. Much to my delight this book also gave me even more tips.
    I have a simply Roth and a 401k with my place of employment. Guess which one is doing better? The one I direct! Four years ago I saw him live talk about his method and followed what he told me then without the book. Those stock picks are still making me money today. That is how easy he makes it. Reading his books will help you feel comfortable in picking and holding your stocks. Really easy to read and understand. Get a note book, grab your lab top, open the book and get ready to win and win big!

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  • Posted May 5, 2010

    more from this reviewer

    I Also Recommend:

    Great Purchase

    I have to say that this is worth the time to purchase and read..

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  • Posted April 8, 2010

    I Also Recommend:

    Wish I had this book years ago...while I was in college.

    This book is a tool kit to understanding the stock market and investing.
    I found it easy to read and to comprehend. Any one who wants to get ahead must read this book.

    0 out of 1 people found this review helpful.

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  • Posted March 5, 2010

    Payback Time - A must read for anybody who wants to secure their financial future.

    After reading Rule #1 by Phil Town, I could not wait for Payback Time to be released, I read the first 2 chapters and that only made me want more. I finally got Payback Time and I actually sat down and sent through the entire book in 1 day, I am thrilled with the informaiton in the book and the honest approach to stock piling stock. The information on how to find a GREAT company that is undervalued is something I look forward to using in my own trading. Great Job Phil!

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  • Anonymous

    Posted March 5, 2010

    It's Payback Time!

    Phil Town is well known in the investment world, from his various television appearances and former NYT Best Seller, Rule #1.

    Phil greatly expands on the concepts of Rule #1 Investing in a simple, easy to understand way. If you have stock or mutual funds, this is a great read to learn how to better take control of your personal investments. If you're just getting started, it's great information, too.

    One thing is for certain -- brokers and fund managers have taken our monies long enough, it's so nice to be in control!

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