Making Money With No Money Down

Pie in the Sky

If you have been reading my blogs for the past 4 years and if you took my course on investing in bonds then you are ready to do what I have done since the 1970s. I remember when I had my radio show on WAMO FM in Pittsburgh in the Early 1980s, some people said that I talked about “Pie in the Sky.” Well that “Pie in the Sky” helped me buy 3 single family houses and 2 condos. 

Let’s not list the many cars that I bought. When I lived in Pittsburgh, Pa. in the 1970s and 1980s, I learned how to borrow money at a lower interest rate than what Corporate Junk Bonds were paying. I got so good at it that the banks got wind of what I was doing and gave me loans just so I can buy more bonds.

At the height of my investing with “no money down” or “no money of my own,” I had 20 banks’ lending me money at one time and from a large margin from my broker. I converted that money into a $1 Million bond portfolio. After subtracting the loan interest money from the money interest of the bonds plus bond appreciation, I was making $27,000 per year. At that time from Westinghouse Corporation as a Programmer Analyst, I was only making $26,000 per year. So for a decade, I made good money on the banks money. 

Then the banking rules changes. The government and the media started a campaign to stop people from buying junk bonds and the brokerage firms stopped lending to bond investors on margin. That shut down my business.

I am going to show you how to do what I did on a small scale with short term, a 14 year plan, as well as a 20 year plan, since interest rate conditions are favorable again. These plans come in two parts.  

Short Term Plan

You have to buy a bond that gives high interest, higher than the interest you are paying (for a loan) for your investment. You can get the lowest interest on borrowed money by keeping a good credit score.  My credit score is 786. Use this link to see what your credit rating is today!  https://www.creditkarma.com/

You can also use a margin account to borrow money for your investments as well as to buy things such as a car, furniture, or anything else. A margin account is a brokerage account in which the broker lends the customer cash to purchase securities. The loan in the account is collateralized by the securities and cash. If the value of the stocks or bonds drops sufficiently, the account holder will be required to deposit more cash or sell a portion of the securities.

For example;

Venezuela 8.5% of 10/8/2014 is a Standard and Poor’s “B” rated bond, recently selling for $997.80 per $1,000 bond. “Year to Date” Interest is 8.744% meaning that you will receive $80.15 per bond for the life of the bond. 

If you take out a $5,000 loan at 3.5%, you make 5.244% on the investment with no money of your own. That is 5 bonds giving $80.15 times 5 bonds = $400.75 gross profit. You borrowed $5,000 times 3.5% interest = $160.42 expenses. Keep in mind, you are borrowing the money for 11 months because the bonds mature in 11 months. You net in 11 months $240.33. You have not put up a dime of your own money to get this. You can make more money if you do this in a margin account and buy more bonds on margin. The more money you put into this, the more money you net.

All you have to do is pay the minimum payment on your loan. You can do this by paying on the loan yourself or by taking out two lines of credit and paying on each switching off paying on each line from the other.  

What are the risks?

This is a short term investment. That means that you have Business risk. Your inflation and interest rate risk is nearly zero because of the short time frame. You have no market risk because the bond matures in less than a year. Here is why you can’t use bond mutual funds with this because mutual funds do not mature.

Longer Term No Money Down Investments

Venezuela 9.25% of 9/15/2027 is a Standard and Poor’s “B” rated bond, recently selling for $749.90 per $1,000 bond. This is a 13 year investment with a “year to date” return of 13.233% per year.

Venezuela 9.375% of 1/13/2034 is a Standard and Poor’s “B” rated bond, recently selling for $707.85 per $1,000 bond. This is a 20 year investment with a “year to date” return of 13.66% per year.

If you can do simple math, you can figure out how much in gross interest, you can make over time with these two bonds above. But since the investment goes out well over a year, you have more risk. If you make payments on your loan supporting your investment, your risk of making a net profit will be more after every payment. You will have a business risk because in the year 2020 for example, how do you know that the nation of Venezuela will still be paying? 

That is a risk that you will be taking. If you want to sell out of the bonds before maturity, you have no guarantee that the bonds will be selling at or higher than when you bought them. That is your market risk. In my opinion, inflation will not go over 13% so I think that Interest rate and inflation risk will be low.    

In Conclusion

Investing with no money down has worked for me over the past 30 years. Can it work for you?

What Credit May Cost You

I am going to tell you a story about some people who I shall not name. So if you think this story is about you, just look straight ahead and no one will know that I am talking about you!

I have always preached since I was a teenager about the danger of using credit. When I was in my forties, I told someone when they came of age, 18 years old not to sign for anyone’s loans and told that person what can happen if they do. The person did not listen to me and cosigned for a van for a person with very very very bad credit. That person with the bad credit never made a payment on the loan. The bank came and took the Van. No one contacted the cosigner because the person who had the van made sure the cosigner never found out. That cosigner went through 4 years of college. 

Then a big name company wanted to hire the cosigner. All they had to do was check the cosigner’s credit and that person had a high paying  job. That is when the loan came back to bite the person “up the ass.” That person did not get the job and the person who screwed the cosigner had no explanation of why they did what they did.

More and more employers are checking credit reports before hiring people for good jobs.

     

According to AARP, because of bad credit, these items below will cost you more in the long run;

Car Insurance Premium

If you thought car insurance companies kept tabs only on your driving record to determine how much you'll pay for coverage, you'd be wrong. Insurers check your credit report — and poor credit drives up your premium.

Mortgage Interest Rate

If you're in the market for a home loan and your credit is spotty, you'll likely pay tens of thousands of dollars more in finance charges. According to FICO, the credit scoring company, an individual with a FICO score ranging from 760 to 850 would pay $1,426 a month for a $300,000 home loan based on a rate of 3.965 percent. A borrower with a lower score, from 620 to 639, would pay nearly $300 more each month — $1,714 for a 5.554 percent loan. Over a 30-year term, that lower credit rating is costing you an extra $103,444 in interest charges.

Homeowners Insurance

Just as car insurance companies review your credit rating, so do companies that provide homeowners insurance. The National Association of Insurance Commissioners reports that 95 percent of auto insurers and 85 percent of home insurers use credit-based insurance scores in states where it's deemed an underwriting or risk classification factor. So if your credit nose dives, your homeowners insurance premium may head north.

Your Job Prospects

Poor credit could cost you a job opportunity as I just told you. A 2012 study from the Society for Human Resources Management found that nearly half of U.S. employers use credit checks on some or all of their job applicants. I know that my daughter does before she hires anyone for a job. So if your credit history isn't so great, that could scare away potential employers and make it harder to find work. A growing number of states are passing laws to curb these credit screenings, although many states allow employers to use them as part of the hiring process.

Government Clearance

Enlisted personnel and certain federal workers need to maintain good credit in order to obtain various government clearances. Having bad credit could derail military members or government employees who are seeking promotions or career advancement opportunities.

Your Love Life

No one likes to be rejected by potential suitors, whether it's due to a lack of chemistry, your appearance or some other reason — like your credit history. A staggering 75 percent of women, and 57 percent of men, say credit scores play into their dating decisions, according to a survey of  1,000 single adults from FreeCreditScore.com. Most respondents said money management skills were just as important as looks in deciding if someone was worth pursuing. In today’s world who wants someone who is an economic burden. “I can do bad by myself.”, as I heard people say.

Your Physical Health

Financial stress can lead to headaches, sleepless nights, muscle tension, and other maladies. Researchers have even discovered that fretting over financial matters negatively affects people's brains, partially because such mental distractions make you lose focus.

Private Student Loan Rates

Federal student loans have interest rates that are set annually by the government. That's not the case with private loans. If you're considering going back to school to boost your marketability and have a poor credit rating, your student loan interest rates could soar into the double digits if you take on a private loan. Big student loan obligations could leave you with less to sock away for retirement.

Credit Card Options

Applying for a credit card almost always requires a credit check. If your credit is somewhat blemished, a bank may offer you a credit card with an above-average interest rate. If your credit is worse than that, you may be offered a credit card with an interest rate of 20 percent or more. For people who've suffered through a bankruptcy, foreclosure, or other credit catastrophe, a "secured" credit card may be your only option. Secured cards require you to put up a cash deposit as a way to assure a lender that you'll pay your bills.

Your Good Name and Reputation

It's one thing to have bad credit with traditional lenders like banks, credit unions, and other financial institutions. But if your repayment track record is seriously tarnished, you may even have a bad reputation with family and friends. Perhaps you've borrowed money and not repaid it, or you took far longer than agreed to make good on a loan. If that describes you, your good name has been dragged throw the mud. Such financial lapses will make it far more difficult to convince relatives to come to your rescue if a true financial emergency arises.

Your Life is Controlled by your Credit Score

A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of that person. A credit score is primarily based on credit report information typically sourced fromcredit bureaus.

Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. Lenders also use credit scores to determine which customers are likely to bring in the most revenue. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system.

Credit scoring is not limited to banks. Other organizations, such as mobile phone companies, insurance companies, landlords, and government departments employ the same techniques. Credit scoring also has a lot of overlap with data mining, which uses many similar techniques. These techniques combine thousands of factors but they are more or less similar or the same.

In the United States, a credit score is a number based on a statistical analysis of a person's credit files, that in theory represents the creditworthiness of that person, which is the likelihood that people will pay their bills. A credit score is primarily based on credit report information, typically from one of the three major credit bureaus: Experian, TransUnion, and Equifax. Income is not considered by the major credit bureaus when calculating a credit score.

There are different methods of calculating credit scores. FICO score, the most widely known type of credit score, is a credit score developed by FICO, previously known as Fair Isaac Corporation. It is used by many mortgage lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender. All credit scores have to be subject to availability. The credit bureaus all have their own credit scores: Equifax's ScorePower ( FICO score from Equifax ), Equifax Credit Score, Experian's PLUS score, and TransUnion's credit score, and each also sells the VantageScore credit score. In addition, many large lenders, including the major credit card issuers, have developed their own proprietary scoring models.

Studies have shown scores to be predictive of risk in the underwriting of both credit and insurance. Some studies even suggest that most consumers are the beneficiaries of lower credit costs and insurance premiums due to the use of credit scores.  

     Different lending institutions have different considerations on what is a good score for their loans. According to creditscoring.com, Fannie Mae, and Freddie Mac consider that any buyer with a credit score above 620 is good, while Lending Tree and Bankrate.com among others consider anything above 750 to be excellent. CBS.com states "The best number to have is 720 or above. If your score is 720, there's really no need to try and raise it because lenders lump you in the same category as folks with a score of, say, 800 or 820." My credit score is 786. When I want to buy something such as a house or a car, I have no problem getting it. I walk into a bank and ask for a loan and all I hear is “when do you want it?” That is the advantage of having a high credit score.

How much do you know about Financial Risk?

As I grew into my teenage years, I learned my first big lesson in family financing.  I learned that most people had no clue what the hell they were doing when it came to savings and investing.  That is still true today and is the reason why many people are taken advantage of by banks, insurance companies, and brokerage firms.

The first thing you should be concerned about when saving or investing money is the amount and kind of risk that you are taking.

1.      Let’s start with Mr. Smith, a 27 year old Home Heating and Cooling Specialist that wants to start an IRA for himself. He wants to take $1,000 per month from his pay for his investments. He also wants to take the $2,000 from his tax return every year and add it to his $1,200 per year savings.

2.      Mr. Smith wants to add his money into his IRA once a year. To safe guard his money throughout the year; he placed his money into an intermediary. What is an intermediary?

A.      A financial intermediary is a financial institution that connects surplus and deficit agents. The classic example of a financial intermediary is a bank that consolidates bank deposits and uses the funds to transform them into bank loans.

B.      A brokerage firm that is separate from banking.

C.      None of these

D.     Both of these

3.      Mr. Smith wants to make sure that his savings are insured in case of a banking collapse. He checks to see if they have;

A.      SPIC

B.      FDIC

C.      SIPC

D.      DFIC

4.      If Mr. Smith has the insurance above and he has $100,000 in the bank and the bank goes out of business, he will get back

A.      $200,000

B.      $75,000

C.      $100,000

D.     $99,000

5.      Mr. Smith moved his money after the first year, $3,200 to a well-known international brokerage firm located in New York that is in the top 5 firms in the world. He asked if they have insurance. What insurance is he asking that they have?  

A.      SPIC

B.      FDIC

C.      SIPC

D.     DFIC

6.      Mr. Smith checks the firm’s fee schedule to see if the fees are in line with what he wants to pay knowing that every brokerage firm sets different fee rates and schedules.  Fees will be different for;  

A.      Stock

B.      Bonds

C.      Mutual Funds

D.     All of these

7.      His broker told him that he will be safe if he bought into a "Retirement Date Funds" or "Target Fund." This fund;

A.      Makes investments in other mutual funds that buy individual stocks and bonds.  

B.      That matures on a given date

C.      That targets profitable companies

D.     None of these

8.      Some (one) of the fee(s) he found in a Target Fund can be;

A.      a 12-1b fee

B.      a sales load or commission for investing in the fund

C.      None of these

D.     Both of these

9.      Mr. Smith is opening a Traditional IRA. That means on a bond mutual fund, it is not a very intelligent thing to do to buy municipal bonds in that fund as you are already exempt with municipal bonds from taxation on the interest income!

True

False

10.  A Corporate Bond and a Mutual Fund is the same thing.

A.      Yes, they both mature

B.      No, only bonds mature

C.      Yes, they both give monthly interest

D.     Yes, they both give interest at the end of the year.

11.  A stock carries more market risk than bonds.

True

False

12.  An “AAA” bond carries more business risk than “A” bonds?

            True

            False

13.  More than likely, a “BB” bond gives higher interest than an “AAA” bond.

            True

            False

14.  A bond that matures in 4 years has less interest rate risk than a bond that matures in 10 years.

            True

            False

15.  A bond that matures in 4 years has less inflation risk than a bond that matures in 10 years.

            True

            True

16.  A bond that matures in 4 years has less market risk than stocks.

            True

            False

17.  Mr. Smith meets an insurance broker at his son’s football game. He says that he can give him an annuity investing his money in a junk bond fund that will give him $1,000 per month guaranteed for the rest of his life, if he gives Mr. Smith $300,000 today. Does this rate of return sound right?

A.      Yes because that rate comes to 4% per year.

B.      No because that rate comes to 4% per year.

C.      He can make more money than that.

D.     Take it and run!

18.  Would it be smart to put this annuity into Mr. Smith’s IRA?

Yes

No

19.  What type of product is this annuity?

A.      Banking

B.      Insurance

C.      Brokerage

D.     None of these

20.  Instead of buying an annuity, Mr. Smith can invest his money into several individual Junk Bonds over several years and achieve a higher return than the annuity. That is because the company overseeing the management of Mr. Smith’s annuity must pay expenses from his portfolio.

True

False 

21. The money in Mr. Smith's bank account carries no risk.

True

False

22. Mr. Smith's bank account carries inflation and interest rate risk.

True 

False

 Answers

1.      A

2.      A

3.      B

4.      C

5.      C

6.      D

7.      A

8.      D

9.      True

10.  B

11.  True

12.  False

13.  True

14.  True

15.  True

16.  True

17.  A

18.  No

19.  B

20.  True

      21. False

      22. True

If you got more than 9 wrong, you better read up on my financial blogs before committing money for long term savings and investment.

Knowing What You Want Out of Your Investment

As I told you many times before, gambling is not investing. Speculating is not investing. Buying a home to live in is not investing. So what is investing? An investment is to commit money or capital to achieve a return. The investor knows how much money or capital they are committing and how much they expect to get at the end of the investment.  When you speculate in something, you expect to gain a profit but you have no idea how much or when. Gambling is when the person has no idea what they are putting their money into and hopes that they can get a fast profit.

   

   Many people are expecting a guarantee. A guarantee is an assurance of something that assures a specific outcome. In the case of investments it could be a guarantee that the investment would give you a percent of return or if the investment fails, you would get your money back. Before we go any further, in the world of gambling, speculating or even investing, there is no such thing as a guarantee. 

I   If someone say that they can guarantee you a fix rate of return, then you know that the person talking can't be trusted. 

I have a friend that I knew for decades. The friend came to me and asked me about this investment opportunity that some investment salesman told him about. The friend wanted to know if this was a good investment. If someone has to come to me and ask if an investment is a good investment then they already know what the answer is going to be? NO……

When looking at bond investments, the investment of choice for me, here is why I wrote the course on investing for anyone who wants to know about bond investing. Click on the link below.

http://greedyfriendsstockclub.blogspot.com/2012/06/greedy-friends-stock-club-stock-and.html#!/2012/06/greedy-friends-stock-club-stock-and.html

Just about any vehicle is a good investment, speculative, or gambling instrument for someone. Most are not good for me. What you as the person putting up the money have to determine is;

   1. Am I investing, speculating, or gambling? An investment is allocating money for a corporate bond. You know how much you are putting up for the investment, for how long, and you know when you will get the money. Allocating money for a stock on the New York Stock Exchange or money for a mutual fund is what you would do when you want to speculate. You want to gamble then just buy the next hot stock talked about on the Financial Cable TV channels.

   2. Once you find out what you want to do, figure out how much risk are you willing to take. For example, if you want to invest in a “AAA” bond because it has very little business risk, that is great. But if the bond is only giving .5% interest and the inflation rate is 2.3%, you are already losing money, 1.8%. You have to beat inflation to make money.

    3. Have some idea where the country is in the interest rate and inflation cycle.  If the talking heads on TV and the representatives from the Federal Reserve is talking about tightening  interest rates soon, you may only want to buy bonds that mature in less than 5 years. If the inflation rate is only 2% and if you are investing in bonds that is giving say 10% then you can afford to go out 10 years in maturity because a yearly increase in interest rates for 10 years will probably total lower than 10%.

   4. Look at the Standard and Poor’s ratings, we know that if a bond is above BBB+ then we know to check the interest rate of the bond. If the bond is less than a B- then we know that the bond is carrying a very high business risk.

For bond investing, this is all that you need to know about how to select bonds that you want to invest in.

  

LANTHEUS MEDICAL IMAGING 9.75% 05/15/17

I just finished some junk bond research and found one that looks very interesting. Lantheus Medical Imaging 9.75% of 05/15/2017. This bond has 4 years and 7 months until maturity. So the “Yield to Maturity” is approx. 12.215%. This means that inflation is probably not a threat for the life of the bond.  This bond is rated Caa2 by Moody’s and B by S&P. This bond is not on bond watch. According to these ratings, the bond will not be going into default anytime soon. But nothing is guaranteed. The debt ranking is “Senior Unsecured.” The resent price of the bond was $930 giving $97.50 per year in interest. It pays every May 15^th and Nov 15^th until maturity. It pays $1,000 on May 15, 2017.

To find the bond in your bond store use this CUSIP No. 516545AC4. People who took my bond free online course know what I am talking about.

Who cares what Congress and the President does with this budget crap. We all know that sooner or later the national bills have to be paid. All the politicians are going to do in the end is declare victory for their side and go home. So we really do not have to care about that. If the bond holder is not paid, the company goes into chapter 11 bankruptcy.   

What do they do?

LANTHEUS MEDICAL IMAGING, a global leader in developing, manufacturing and distributing innovative diagnostic imaging agents, is dedicated to creating and providing pioneering medical imaging solutions to improve the treatment of human disease.

Their proven success in discovering, developing, and commercializing innovative medical imaging agents provides a strong platform from which to bring forward breakthrough new tools for the diagnosis and management of disease. LANTHEUS has a rich heritage and expertise in cardiovascular imaging and nuclear medicine, having pioneered many of the most significant products used in medical imaging.

Our current imaging agents primarily assist in the diagnosis of heart, vascular and other diseases using nuclear imaging, echocardiography and magnetic resonance imaging (MRI) technologies. We also have a full clinical and preclinical development pipeline of next-generation and first-in-class products using Positron Emission Tomography (PET) and MRI technologies.

Our vision is to be the leading provider of innovative medical imaging solutions to improve human life. We are committed to developing next generation and first-in-class imaging agents to assist physicians in the diagnosis of heart, vascular and other diseases.

With direct operations in the United States, Puerto Rico, Canada and Australia, we have a long and distinguished history of developing and commercializing innovative market-changing products.

This company sounds like that it will benefit from the full implementation of Obamacare!

What do the employees think?

Being an investor is one thing. Working for Lantheus Medical Imaging is another. This is a comment written in the Blog, “Glass Door” by one of the company’s employees, “Leadership of the company is a joke. The goal of the company is to manipulate the bottom line to make it attractive to perspective buyers. This has mostly been accomplished by layoffs. At least 33% of employees have been laid off in the four years since Lantheus has acquired the business...and the layoffs continue. Long time employees were once very supportive of one another but now it is every man (woman & child) for themselves. Senior Management has created a toxic and stressful environment where everyone is fearful of losing their jobs. Salaried employees are expected to work at least 50 hours a week at the site. Hourly employees have had their work schedules staggered to accommodate odd work schedules without the company having to pay them overtime.”

“Advice to Senior Management – The Company is being run out of sheer greed with minimal regard for the well-being of its employees. It unfortunately represents all too much of a microcosm of the worst of what is happening in the business world today.”

Investor Relations

• Phone: 978-671-8001
• Email Address: ir@lantheus.com