If I Won 25 Million Dollars in the Lottery: A Book about Money, Hope, and Happiness
176
If I Won 25 Million Dollars in the Lottery: A Book about Money, Hope, and Happiness
176Paperback
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Overview
If I Won 25 Million Dollars in the Lottery describes several ways to take your destiny into your own hands. You will learn how to:
- Harness the power to put money aside for retirement, for investment, or for the right opportunity
- Understand the rules of money that will help you control your financial future
- Control your feelings and avoid distractions from your true meaning of life
- Make your pursuit of happiness a joyous pursuit
- Live a better life and break away from this recession
- Move forward and avoid any future recessions
- Have the power to control all that you want in your life
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Product Details
| ISBN-13: | 9781440198724 |
|---|---|
| Publisher: | iUniverse, Incorporated |
| Publication date: | 01/09/2010 |
| Pages: | 176 |
| Product dimensions: | 6.00(w) x 9.00(h) x 0.38(d) |
About the Author
Read an Excerpt
If I Won 25 Million Dollars In The Lottery
Book about Money, Hope, and HappinessBy Larry Steinhouse
iUniverse, Inc.
Copyright © 2010 Larry SteinhouseAll right reserved.
ISBN: 978-1-4401-9872-4
Chapter One
Where Are We?
It is the year 2009 and it is a good time to be broke! Why, you ask? Because everyone is broke, or in fear of being broke. The heyday of the late nineties and the easy money-lending of the 2000s made it easy for too many people to spend or invest borrowed money. Let's take a bit of a time shift and later I will explain again why it is a good time to be broke.
I remember hearing a story, a long time ago, that may even be an urban legend. This is how I recall it. William Rockefeller, easily one of the richest men alive in the late 1920's, was said to be getting a shoe shine at a shoe shine stand. He over-heard the man shining his shoes bragging about how he (the shoe shiner) was going to be rich because he found "the secret" to investing in the stock market. As the story continued, Rockefeller immediately went to his office and sold all of his stocks. The stock market crashed and the Great Depression happened soon thereafter. Of course, Rockefeller retained his riches because he sold all of his stocks. He took the sign of the shoe shiner's enthusiasm as a clear warning that the stock market was no longer the place to invest.
Let me explain.
You see, as Warren Buffett puts it, "be fearful when others are greedy." If that story was non-fiction, then it is easy to understand that Rockefeller was very fearful. After all, if a common shoe shiner could brag about the riches he could make in the stock market, then how could the highly educated and learned people like Rockefeller be smarter or richer than a common shoe shiner? Not that there aren't stories about people pulling themselves up in society, but this clearly was not going to be one of them.
The Great Depression happened simply because the value of anything material has a current value. With time, the right effort, and, most importantly, demand for an object, anything should increase in value. Unfortunately, when the demand for an object is artificially inflated, the price of the asset also becomes artificially inflated. This creates artificial wealth and, most importantly, the greed factor!
The greed factor is simply the notion, "If he could do it, so could I." So if your neighbor has come over one day to tell you of the brilliant stock pick he made at $7/share and it is now $107/share, you decide you can do this as well. After all, he is of the same education and social status as you, so you must be as smart as he. Of course he neglected to tell you of the last ten poor stocks he invested in and that he is still down thousands for the year. All you know about is the mega gain, so you try it! Of course the stock you buy at $35 a share, expecting to go to $350 a share, goes down to $20 and you are extremely disappointed. I know this because it has happened to me several times.
You don't lick your wounds and give up; you continue to try to make it rich in the stock market because you continue to replay in your mind your neighbor's joy in telling you that story of his making all that money, even though you have little to no knowledge of the stock market and why a stock goes up or down.
Now you think about the equity you have in your biggest asset: your home. Interest rates are down, so you borrow the money and invest in stocks and real estate. As the common man, why wouldn't you do this? After all, you could borrow the money at about 5% per year interest while most stocks appeared to be going up over 35% per year, for a net profit of about 30%! Some stocks were going up over 100% per month and if you picked one of these, well that could be a lottery winner right there!
I wonder how many people reading this are laughing at themselves, for they have thought this very thought and borrowed money from all kinds of sources-like equity loans, or credit cards, or other sources like 401K withdrawals or even credit card advances-just to pay the "ticket" to ride the "gravy train" of future wealth.
Think about the possibilities. You could start with a small amount of capital, let's say $1000, pick the right stock or stocks and your money could double every month. If my math is correct, that would be over 2 million dollars by the end of the year. Isn't this what we expect when we go into the stock market?
Jealousy, and the idea that "this is America, the land of opportunity," makes the common man do very stupid things with his money. The Depression was said to happen because too many people borrowed money on margin to buy stocks. The demand for stocks stopped because people could not borrow any more money. This made the demand for stocks decrease and the stock prices started to fall, triggering a downward spiral of stock prices. Simply put, you had the stock holders watching the stock prices go down and selling stocks, which of course lowered the price of the stock, which of course made more stock holders sell, which lowered the stock price more, which of course caused more people to sell, which of course ...
... I think you get the point.
Unfortunately, there was another problem: leverage. Leverage is when you use other people's money to invest in or buy something. Leverage is an investor's dream! It is simply borrowing or using money that is not yours. You will pay a fee for that money, usually interest or maybe an upfront fee. You then purchase your investment asset, sometimes using that very asset as collateral for that loan.
So in the Roaring Twenties (that's the 1920's for those who are too young to have heard that expression), many people borrowed money to invest in the stock market. As the stock prices started to fall at the end of the 20's, the "lenders" started to demand their money back. Now the investors had to sell whatever stocks they had to try to repay these loans. Well here comes another selling frenzy, causing the stocks to dive further in price.
Now we have several banks and investment houses out thousands of dollars that they lent to the "shoe shiners" and other average people with no chance of ever recovering this money. This caused banks to literally close their doors and everything from small life savings to fortunes were lost by millions of people and corporations. Even the people who were responsible with money lost everything they had because the banks were irresponsible with the assets of these depositors.
Next, the corporations who lost millions because the stock price tanked had to do something to increase profits, so they simply "cut the fat." They laid off thousands and thousands of people. Now millions were out of work, leading to less money flowing into the economy, lowering sales estimates for many companies, causing demand for everything to go down, causing prices to go down, causing more losses, causing more fat to be cut and the vicious cycle continued until there was a recession and then a depression! A depression, as it is defined, is a severe economic downturn that lasts several years.
In July 1929 the Dow Jones industrial average closed just at the peak of about 347.47 dollars. Then it all came to an end. In December 1932 it was about 59 dollars. That is about an 84% loss in value. Imagine that! That means, in today's economy, the stock market which peaked in 2007 at about 14,000 dollars would be at about 2,100 dollars. Perish the thought! Unemployment was about 25% and welfare consisted of soup lines to feed the poor and homeless. Tent cities were where many of these people would live.
Now you start to think about what you have just read and you begin to realize that I was talking about the Great Depression of the 1930's, but this sounds so familiar. That is because it is happening again. Think about it; the banks, in the 10-year period of 1997 to 2007, went on a lending frenzy. To qualify for a loan you simply needed to pass the mirror test. If you could fog a mirror, you qualified for a loan. Having sold real estate in this time I was privy to some strange loans. I was told by lenders that I didn't have to ask what the income of the buyer was as long as the buyer had a decent credit score. Sometimes they could even overlook the credit score as well.
I was literally able to help people buy homes or investment properties even if they had no income. I was amazed and went with the flow. Now we are all experiencing the results of those bad loans and easy underwriting guidelines.
Money can be described as a bowl of candy. Did you ever notice that when a candy bowl is full, people will take huge handfuls, but as the bowl starts to get empty, people become picky as to which piece they want? They take less as the bowl empties until there is but one piece left that is stale and old; but it still gets eaten after it is rejected several times.
When money is flowing, people just start taking it. When banks will lend you money without thinking of whether you will be able to repay it, people will line up in droves to get their share of the easy money. Hundreds, thousands, millions, whatever the bank will give them, they will take for any reason at all.
They don't even think about how much they are taking, they just take. If the bank will lend homeowners 125% or more of the value of a home, they take it. Why not? The home values are going up 30% a year, making this low risk for the bank and the borrower. Of course the borrower can't default because after all it is his or her home and no one would risk losing a home to foreclosure, right? At least that is the theory.
Now, like in the 1930's stock market crash, people start to try and sell their homes and try to keep whatever profit they have. Of course the banks have started to tighten lending requirements and loans are harder to get, making the buying pool smaller, causing supply to be high. Now, the basic supply and demand principals come into play. With less people able to qualify for loans, the demand continues to lower and the supply continues to increase.
If you have ever shopped for a car and wanted to trade in your current car, you may have heard of the expression "upside down." This is when you owe more on your car than it is worth. This is not so terrible when your car is worth $10,000 and you owe $11,000. Actually the dealer will probably just "roll" the $1000 difference into your new loan, or you will find the thousand dollars in your savings account to make up the difference, allowing you to purchase the new car.
Now take that same scenario and imagine the car is worth $10,000 but you owe $25,000. You then come to find that the dealer you bought the car from a year ago didn't tell you that it was only worth $12,000 when you bought it. What would you do?
You would probably stop paying on the loan and let the bank inherit your problem. After all they played a part in it also, by not truly evaluating the cost of the car and giving you a loan for an overpriced car.
Now think about this. If you had a home in today's market that was worth $350,000 and you owed $500,000 on that home, because the market has plummeted as it has, should you keep it or let the bank foreclose on the home? The answer is complicated and simple at the same time. The real risk and fear is ruining your precious credit rating. How much will your credit rating really affect you in the future? You need to realize that you can still get car loans and credit cards but at a higher interest. You then need to calculate how much money that difference will really cost you. Is it worth it to try to wait out the market for the home to be worth your loan? Or should you temporarily destroy your credit rating and let the bank inherit your upside down equity problem? All this will truly cost is additional interest on whatever you would like to buy in the future. I will not give you my opinion on this at this time but it a serious thought to be had by many with this problem.
Other people have the problem of the increasing loan payment. Many people in this situation simply cannot afford the new payments so they simply have no choice but to stop paying and let the banks foreclose.
Now the foreclosures start bringing even more supply into the market and then prices continue to spiral down. The great housing recession/depression begins.
The banking industry goes into a downward spiral and the rest of the economy goes along for the freefall along with it. Everything suffers. Most consumers not only do not have the money to spend, but those who do are scared to part with it.
Almost everyone in this type of economy has the fear of poverty. Poverty becomes the thought of the day, the month, or the year for each and every person living in this type of economic environment. Every penny becomes valuable to everyone. The same people who, years before, dipped into the candy bowl full of money are now looking for those scraps and crumbs at the bottom of the dish. Unfortunately, there just aren't enough scraps to find.
So now what?
Well, as I write this, our newest President, Barack Obama, is faced with what is probably the toughest economy and some of the toughest financial quandaries of all time. He has signed bill after bill that is designed to keep companies like GM or Citicorp from failing. He has also signed other bills that will keep the average homeowner in their homes and avoid foreclosure.
Why is he doing this? Well in our minds, it is simply to avoid the inevitable: the next Great Depression. If foreclosures continue, then the price of houses will continue to fall, causing more houses to go into foreclosure, causing more prices to fall, causing more foreclosures, etc, etc. Sound familiar? It sounds a lot like the 1930's all over again.
At the time of writing this, the stock market is a little, very little, over half of its peak of about $14,000 and struggling to stay in the $7500 range. This brings more fear to just about everyone living in this economy.
You are almost at the end of this chapter and you are wondering why this book is so gloomy. As the reader you are probably asking yourself, "Why am I reading about these things that are making me even more fearful of the times?"
It is important to understand that fear is an opportunity. This is one of the lessons that will be the most important for the reader of this book to remember.
I will repeat it again: with fear comes opportunity. This is often repeated by the great Warren Buffett who, as I understand it, took that mantra from one of his mentors.
So what does this mantra mean to you? Well first I want to tell you about my karate days. I am not very athletic nor very graceful, I would consider myself the average student and I actually never did get my black belt. I tell you this because I want you to understand that the analogy I am going to make is as average as both of us.
When I was in karate class, we started to learn to spar. This is fighting for the layman. In sparring we would punch and kick each other as if we were on the street and in a real fight. I do have to admit that we were wearing padding and hitting each other with less intensity than if it were to save our lives in the street, but nevertheless I was scared. At times I would even skip or hop back so as to avoid getting hit. Or at least try to avoid getting hit.
Something that I learned, after being bruised several times, was that if I moved back, a few things happened. First, you can't throw a powerful kick or punch when you are moving backward. Think about it, you are moving away from your target. The next thing I learned was that as I moved back, I actually moved into my opponent's power range. This simply meant that his arm or leg would be almost fully extended when it hit me. This would make his punch more powerful and more effective.
The fear of the pain this caused would, of course, make me try to move back more, making more of his punches more powerful, giving me more pain, making me more fearful ... well, you get the point.
One day I realized something that made all of the difference. I stopped moving back. In fact, I started moving forward. This was great! The punches I was receiving were less powerful and my punches would connect now. Then finally my opponent was actually the one who started moving back.
You see, when I was fearful, my opponent got greedy and took advantage of the situation. When I started to adapt and stopped allowing myself to be afraid, I was able to take advantage of my opponent's weakness-which was, simply, fear. When his fear increased, I got greedy and started to win.
(Continues...)
Excerpted from If I Won 25 Million Dollars In The Lottery by Larry Steinhouse Copyright © 2010 by Larry Steinhouse. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Contents
Chapter One Where Are We?....................1Chapter Two Money Makes The World Go Around....................9
Chapter Three A Fool and His Money are Soon Parted....................21
Chapter Four The Balanced Budget....................34
Chapter Five The Lottery....................56
Chapter Six My $25,000,000....................62
Chapter Seven I Forgot to Buy My Ticket!....................75
Chapter Eight Fear vs. Desire....................83
Chapter Nine Overcome the Fear and Reach For the Stars!....................90
Chapter Ten Your $25,000,000....................98
Chapter Eleven What we think about ....................103
Chapter Twelve Income....................108
Chapter Thirteen Don't make a living, make a life....................118
Chapter Fourteen Happiness is ....................133
Chapter Fifteen Destiny....................144