ERE-sourced loan experiment

[Lucky C]

Also this reminds me of a great "investment" I once made. A guy at work wanted to borrow $20 because his homeless friend needed the money right away and he wouldn't have it until pay day. He asked me directly with no one else in the room and if he had asked a group I would have ignored it, but I reluctantly gave him the $20. Within a week he gave me $30 back. I don't think I've ever made a 50%/week ROI on anything else!

Now as good as that looked as % ROI, it's not something I would have wanted to do again or at a more significant dollar amount. This 50-something guy's 20-something female homeless friend seemed to be taking advantage of him and his attraction to her. It seemed more likely that the money was going to a con artist than to someone who truly needed it. I didn't feel good "payday loaning" this naive coworker who seemed to be in worse financial shape than me.

In his mind, he absolutely needed the money. So much so that he was willing to put himself in the awkward position of asking a coworker he hardly knew to borrow it. He needed it even if that meant spending $10 to give away $20. He was blind to how spending all this money on the girl may harm his finances and his marriage. When the girl told this 55-year-old man, who looked 55, that he didn't look a day over 40, suddenly he knew that to be true. One of the last days I was working with him, he made a comment about how much he was trying to help her, which I interpreted as shelling out a lot of money for her, and how he just hoped he was doing the right thing. Not sure what happened to him. He was a temp worker, and his contract was not renewed.

[Mister Imperceptible]

Since it was already offered, if anyone is interested investing in a 100% collateralized loan, let me know.

[Lucky C]

Well for fun I will guess we'll see a decent downturn over the next year, which should at least put MI in the black, but not what I would call riches. Mediocre returns on an absolute basis but great returns relative to the S&P500. I'm projecting based on my own bets, though I am only wagering about 10% of NW on those types of trades. Far from a leveraged bet.

[Seppia]

Sorry people but why don’t we stop trolling MI?
He’s asking for a loan for reasons that are his, and offer terms we are free to negotiate.
Whether we agree on his strategy / we are interested in his offer is one thing, but I don’t see why we should be rude.

[Mister Imperceptible]

When everybody is convinced the crisis is coming, the black swan event would be prosperity. How would your portfolio react to you being wrong? Also remmember, the market can stay irrational longer than you can stay solvent, etc

I feel surrounded by warmth and caring men.

I am going to eat some ice cream.

Although the portfolio has performed very well over the last year.

I actually did feel warmth at the time, I was at the hospital and they had given me a bunch of happy drugs and several times I asked the nurses for ice cream, quoting Forrest Gump and saying Lieutenant Dan, iiiiiiiccccceeee creeeeeeeaaaaammmm!”

[Fish]

Whenever I read a MI post I’m amazed by how far off our models of other humans are. I’m surprised that MI expects there might be someone in this small group who is 1) like-minded, 2) with excess capital, and 3) willing to take the other side of this trade. As with anything: time will tell who is right. But I have to give him credit for trying.

Anyway let me propose this constructive suggestion that should be acceptable to humans “of honor” (but to be clear I have zero interest and am not offering).

1. Instead of giving money to MI, you agree to spend $X buying his investment of choice, and hold for an agreed duration.
2. At the maturity date, you liquidate the investment at current market value. If there are gains, you withhold your 6% plus any transaction costs including capital gains taxes, and disburse the remainder to MI. Otherwise MI covers your loss and adds enough $ to get the APY to 6%.

It is up to MI and the other party to evaluate creditworthiness and willingness to honor the agreement.

[Mister Imperceptible]

@Fish

Not possible for the majority as only accredited investors are eligible to participate in the fund and the minimum investment is $50,000.

A collection of smaller loans from those seeking yield higher than conventional bond instruments would make this win-win. You don’t have to “take the other side of the trade.” One group (the lenders) are buying a bond instrument and the other party (Mister Imperceptible) is using the proceeds to invest for capital gains.

My investment does not have to appreciate for the loans to be repaid, I have collateral, income, and a mortgage cash-out refi that will be completed soon that will provide an influx of cash greater than the amount of the loan being requested here.

[jacob]

What I'm curious about is how to get into the hedge fund in the first place?! Usually such entry tickets are reserved for accredited investors which means $1M in liquid assets and/or an annual income in excess of a quarter million or something like that. Hedge funds will sometimes have a few spots for non-accredited investors, but that's usually reserved for "friends and family", this being the reason why that option exists in the first place.

In the latter case, I can understand the urgency because this is likely a once in a lifetime chance or at least until $1M is accumulated. In the former case, there will be other funds. Junior gold companies and the funds that speculate on them will always exist.

Add: MI beat me to it. I was just presuming that you're not accredited? If you are then $50k should be easy to raise. It's either ~2 months of gross salary or 5% of your portfolio which shouldn't change things materially.

[Mister Imperceptible]

https://www.ecfr.gov/cgi-bin/retrieveEC ... 2.0.46.176

(6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years

I was just presuming that you're not accredited? If you are then $50k should be easy to raise. It's either ~2 months of gross salary or 5% of your portfolio which shouldn't change things materially.

None of which I want to liquidate at this time. I am refinancing my property, which will provide ample capital, however the lenders are moving at glacial speed and at this point I cannot be sure that the funds will be deposited into my account before December 31.

If I apply for a conventional loan somewhere in the system it will affect the mortgage application.

Selling $50,000 of physical gold would incur premiums of $1,500 and capital gains taxes as I bought heavily in the 2018 trough between $1,200-$1,250.

I would rather pay an ERE forumite interest on a loan instead of paying capital gains taxes on precious metals. Additionally, I anticipate a move in the near-intermediate term and I do not want to incur the premiums on round-trip sale and repurchase of $50,000 while missing a fractal upward move.

I wonder how the market will react to the sabre-rattling regarding the bill the US just passed wrt Hong Kong, considering “trade deal” optimism and continuous repo-market operations have together have kept everyone levitated.

When the biotech bubble bursts I won’t make $200k+ anymore. I have to get in now.

The Hilary tweet in 2015 helped temporarily crush XBI. In late 2019 and election year 2020 I fully expect Elizabeth Warren’s ravings to potentially impact my income. My income in 2015-2016 was not impacted, but Democrat-tweet plus liquidity crisis might make this time different.

Again this request would not have been made if the mortgage lenders moved at any kind of a reasonable speed.

[Lucky C]

With your income and debt repayment you can probably get tons of credit if you don't have it already, and a credit card cash advance could help, though it probably wouldn't get you close to what you're looking for. Still you could try calling your credit card company and asking what can be done to raise your cash advance limit.

Combine that with other ideas e.g. charging everything and temporarily carrying a balance, taking out a small personal loan, selling a few things you don't need, borrowing a smaller amount from someone you know (written promise that you'll repay in 2 or 3 months) etc.

And call your lender and tell them that if they don't get their act together with the refi, you're going to go find a different lender.

[Peanut]

You don’t have any high-income/nw colleagues or friends in real life?

[Mister Imperceptible]

I have asked several colleagues and all have denied to loan money.

My parents and extended family are poor. I have only a few friends, all of whom grew up poor with me. Asking them to loan me money so I can invest in a hedge fund is too much as they can barely hold their heads above water.

[Peanut]

I think I knew about your family’s background, understand all that.

But why did your colleagues pass?

[Mister Imperceptible]

Various reasons were given:

“My daughter is buying a house and I am helping her.”

“I am building a house right now and that is taking up all my money.”

“My current client does not pay me until 30-45 days after the work and I have to cover all of the costs up front.”

“Years ago I loaned someone 8 grand and they never paid me back. Never again.”

Etc

[fiby41]

Do you have payday moneylenders around you? Or a gold financing company? Take a gold loan when you walk in with your bars as collateral, they check for quality and amount and walkout with the cash.
Example https://www.muthootfinance.com/services/gold-loan
You are a resourceful person so finding something like this https://www.cognizant.com/InsightsWhite ... Market.pdf
to identify local players shouldn't be impossible.

[Mister Imperceptible]

The payday lenders exist within the system as I understand it and so any loan application that requires a pull on credit- car loan, personal loan- will affect the mortgage loan application.

I have inquired about a loan with my local coin dealer, no dice. Stated both he and his wholesaler run cash businesses because there is too much risk otherwise. I imagine there are too many experiences of being burned that have dissuaded them from such loans.

I have read about the gold loan market in India before. That is great to have, as far as I have seen we have no such market in the US, where gold is an esoteric asset, not widely owned and ownership is concentrated. Even if I could find such a lender, I would suspect any formal application would still be in the system and as such would also affect the mortgage application.

[Mister Imperceptible]

The need for a bridge loan is resolved. My credit union provided $50,000 at 7.5%, payable over 60 months. I first received assurances from the mortgage lenders that a letter of explanation (LOX) would be required explaining that the proceeds from the refinance would be used to pay off the personal loan, but that this would not impact the mortgage application.

[giskard]

I just found this thread today.

Two comments: firstly, this was entertaining. Secondly, with gold now at $1900 / oz and most of the other commodities on the uptrend how did this investment work out for you MI?

[Mister Imperceptible]

My only regret is not having more access to credit, because if I took out a million more in debt, I would have over two million more in assets right now. I feel my talent is being wasted in my current line of work.

Interestingly I saw an episode of Gold Rush on Discovery channel last night (have never watched the show, probably should) and after a long hard season a mine boss gives his whole team $60k each worth of gold in a jar as payment. I made more than that with capital gains from investing the proceeds of the first loan, and I took out several loans. Sums up the relationship between capital and labor.

At first I only sought to defend myself from financial engineering. Turns out I make a good financial engineer.

The thread would have been more entertaining if the trolling posts from @Augustus and @bigato were not gone.

[Seppia]

I’m so happy this turned out great for you.
Big congrats.