Millionaire Widow Wiped Out by Madoff Swindle; Now an Elder Care Worker and Maid
January 23rd, 2009WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
What word—besides WARNING—do I generally include in posts about investing?
DIVERSIFICATION
What the *&%$ are people thinking when they put ALL OF THEIR EGGS IN ONE BASKET!? Any one basket. For f*&%’$ sake.
If my tone seems… apoplectic, you simply wouldn’t believe the situation my father is facing. YOU WOULD NOT BELIEVE IT.
Oh well, F*&$ it, why not tell the story…
My dad, a widower, lives in a falling down stucco box that happens to be in one of the “wealthiest” parts of Southern California. When I say falling down… How can I put this… A combination of seismic activity, dry rot and “settling” has ripped open the walls in a few places. The foundation is not just cracked in many places, it has cracked open. There’s running water, but since the gas line broke and he didn’t fix it, there’s no gas. In other words, no hot water.
I’ve taken thermometer readings of 39F (4C) in the house in winter. Then he takes a cold shower.
“I’m from Wisconsin, Kev, this is nothing,” he says, lips blue.
I camped in that place toward the end of my days in the U.S. Seriously, camped. I had a propane stove and I built a hot water shower out of a galvanized steel trashcan, electric waterpump and re-purposed propane bbq. Did my dad ever use my half assed hot shower? No.
It’s actually much worse, but I’ve said enough already. You get the picture.
In 2006, a real estate developer offered my dad—please be sitting down—$2 million for the place. I pleaded with him to take it.
“Dad, it’s the top. It’s not going to keep going higher.”
“Ahhh bullshit, Kev! I’m holding out for four.”
I just shook my head.
“Pigs get slaughtered, dad. Try to keep that in mind.”
This is a brief encapsulation of something like dozens of “conversations” I’ve had with my dad about this situation. And if you think I sound tense about it, woh, don’t go near my sister. What does my sister do? She’s a real estate agent. That’s right. Do you think he listens to her?
Oh Hell no. No way, what would his own daughter, a real estate agent, possibly know about the market?! Baah. Women.
I’d essentially tried to forget about all of this years ago. Old farts are old farts—I’d have better luck trying to talk to the wall. I gave him a hug at the airport that last time, and frankly, I couldn’t begin to imagine what was going to become of him.
I got an email from my sister two days ago. A house a few hundred yards from where my dad’s property is just sold. Now, before I tell you how much it sold for, let me say that this house was bank owned (there are several bank owned properties there now) and in very bad shape, just like my dad’s. I think it was built the same year. It’s the same model.
Ok, the thing just sold for $1.2 million.
The fact that he’s closing in on a loss of a cool million dollars on his stupid gamble isn’t the real kicker.
He has a nonsense, teaser rate home equity loan that resets about a year from now. I won’t say how much it’s for, but it’s far more than he can ever pay off, but (thankfully) it’s far less than the property is worth.
HE WILL NOT BE ABLE TO REFINANCE THIS.
He just tried to take out a home equity loan. Nope. The ATM is closed, grandpa. The computer says you won’t be able to pay and we don’t want another foreclosure on our books.
He’s 76 years old and was working about 60 hours per week in a transportation business that revolved around corporate clients. What do you think has happened to that business?
He is now burning though what little savings he had, and his social security check doesn’t even cover the monthly payment on the nonsense loan…
The guy has worked his ass off since he was 13 years old, and when he could have walked away a millionaire, he decided to go for more. Now, if he doesn’t play his remaining cards very carefully… Well, this could become a tragedy about a dozen different ways by my math.
Many of you have watched family members blow it in spectacular ways over the previous couple of years. I know, because you have written to me about these situations.
Well, this is my story. This is my own dad.
If you know of any possible way of getting through to the crusty, old fart consciousness, please, let it rip.
The circumstances in the story below are quite different from what’s going on with my dad, but there are elements of it that are close. Anyway, now you know why I decided to post this one.
Via: Philly.com:
When Maureen Ebel’s uncle called her at 10:45 p.m. Dec. 11, she feared a death in the family.
Instead, her Uncle Leonard gave Ebel news of another kind of disaster that would upend her life: New York investment manager Bernard L. Madoff had been charged with massive fraud.
Ebel, 60, a widow who lives outside West Chester and winters near West Palm Beach, thought she had $7.3 million with Madoff.
It became sickeningly clear over the next day or so that all her money was gone. “The thought that I have to work now as long as I can stand up to feed myself” shattered her comfortable world, she said.
Six days after Madoff’s arrest for allegedly bilking investors in a $50 billion Ponzi scheme, Ebel had a strenuous temporary job caring for a wealthy friend’s 93-year-old mother and keeping her house, pushing the vacuum cleaner and ironing.
“The first day, I went home and cried,” Ebel said.
Ebel, a retired nurse with blond hair and big blue eyes set on a broad face that turns red with emotion, is no stranger to hard work. She got her first job at age 14. But she believed she had moved on for good.
Not so.
“This is my fate,” said Ebel, who is still pained by her husband’s death in 2000, when he was just 53.
“I was married, had a fabulous marriage to a man I loved and worshiped, a physician. We traveled. We had a very fine life. And he’s dead. He died, and every penny I had in the world has been stolen.”
Dude, I hear you. I told my parents to get out of the stock market in December 2007, now I´m telling them to get out of the dollar. Thankfully, my mom bought like a 10z bar of gold or two, it´s something. Also, they own their home and the land is fairly arable, and they´re in medecine, so they´re not in dire straights, except for living in North America. I´m sure they won´t get out of stocks now for hope of a rally, which will still be a loss, inflation adjusted. I´m starting to get to the point where I can trade for a living (maybe in a month if I integrate recent lessons), I do analysis all over the place, I keep abreast of this stuff, they won´t listen.
My friend who´s about your age, he´s looking at starting a hedge fund because he´s pulled like 800% in the last few months, mostly on ultrashort ETFs. His dad wouldn´t listen to him until the DOW was at 10500, fortunately he got out on October first and turned his nest egg to my friend, who made 80% on it within two weeks. It´s really worth it when they listen to you, even if only psychologically, but sometimes in % terms. He had to wear a suit to meet with his own dad just to make the point clear.
Cognitive dissonance rules the nation.
Well, you probably know that I can relate with regard to an immediate family member who is rather averse to listening. 🙂 I’m from Wisconsin and have lived here all my life, and when I tried to take a shower two years ago in January while the landlady was rustling up a replacement for our old dead water-heater, I couldn’t do it! And I’m not exactly a pampered pansy despite what a lot of people prefer to think about homosexual men. I had to take a “bucket bath” (boiling a quart of water on the stovetop and making warm water by mixing that in a bucket with three gallons of ice-cold water from the tap, and then bathing in the shower-stall with that water, a bar of castille soap, and a washcloth). It got me clean enough, but it takes longer than a regular shower, and a regular shower is still more effective.
As to the rest of the story, all I can say, is “Wow!” And I hope your father can do his situation some good with that $1G he will likely (knock on wood) get.
Tragic story with your dad.
Comparable single-family homes in the Orlando, Florida, area shot up from the $120k range 15 or so years ago to $350k a few years back… just in time for my sister and her husband to buy near the peak. They’re doing just fine for the moment, but when the next wave breaks or the “3 years fixed!” period expires… may their chains rest lightly upon them.
pd …
i have traded for a living for nearly 15 years now. I can tell you from hard won experience that if your friend is making 80 % returns in 2 weeks and it is a pattern with him (her), then he is taking too much risk, and will eventually implode. I don’t know you, and I have no wish to get into an argument, I will just tell you that trading with that kind of leverage will eventually blow your accounts, no matter how much equity you have. If the models are right, and we are going into a depressioin environment, that money if lost will be irreplaceable.
please be careful, I have seen too many people exterminate themselves … myself included.
cybele
Oh, how embarassing. When I said “$1G”, I meant “$1M“. Not a big deal, but I don’t want people to think I’m some kind of mouth-breather!
pdugan is very young. He’ll figure it out, probably after experiencing great pain. There’s no education like trading your own account for years.
Dagobaz: I thought the exact same thing when I first heard about his % gains in November (that’s 800% in four months, I don’t know about weekly). I figured he was leveraging with more than 50% options or something. Nope, straight up buying ETF equity with a single-digit % stop-loss. The ETFs are, of course, leveraged 2:1, so to limit your loss to 10% you have to use technical indicators to time an entry withing 5% of the top, which is do-able with momentum oscillators and a bit of luck. He has acknoledged that luck has played a part.
As for leverage, I’ve already experienced the pain trading gold, I was using a 1:30 margin trying to catch the bottom as it moved toward 700 in Sept. then decided “fuck it, I’m going to go short with the rest of this mafia” and within ten minutes got margin called by the biggest single one-day move on gold ever. That lead me to take a break from trading for a few months. Once in June I didn’t follow my own rules about setting limit orders above fractals, and watched a $50 profit short position turn into a $300 dollar loss within five minutes. Suffice to say, I’ve learned my lesson there, first don’t bother shorting gold unless you get bearing signals on the 1-day, second, risk management is king, following that I only use leverage when I already have positions in the money and the momentum follow-through is looking good, and at that my stops are set to balance the added risk with already open profit, keeping me within a 1.5% loss limit.
Also, for those who don’t want to day trade or don’t have the time, here’s a really easy way to make bank on any market, particularly highly liquid ones like large-caps, currencies and commodities. Throw three Smooth Moving Averages on the screen, a 13 period, an 8 period, and a 5 period. Look for a fractal (five candle-stick bars with highs or lows forming a V or ^ pattern) where the close of each bar is above the 8 period average. Set a limit order to buy above the fractal (if it’s a “^” shape), or a limit order to sell short below the fractal (if it’s a “v” shape). Adjust your stop loss to the 13 period average, keep moving it up as the trend follows through. Check gold’s 1-day chart and you can see massive amounts of profit without leverage using this technique. The hardest part of it is patience. Anyone can do this with a small time commitment.
Active traders can follow through on the trends by selling a portion of their positions as the 15 minute or 1 hr momentum tops out and then scoop some more back up as the momentum bottoms. If you’re a real grinder, you can even play off the 1 and 5 minute charts. You can know to cash out of the trend when you’ve got a fractal formation and the 1-day momentum is topping out. I use the Awesome Oscillator to check momentum, it’s simple and elegant, and easier to read than the stochastics, RSI, MACD and so forth.
For example, on monday you would have seen a fractal forming on the 1-day, with the top in the mid 840s. If you set a limit order at 847 or so, you’d wake up tuesday to find yourself well in the money. Then on thursday you’d set a fractal at 867 or so, you’d wake up friday even more in the money. The AO just crossed into positive territory, I wouldn’t be surprised if we get well into the 900s before any kind of significant pull-back.
Of course, all models are inevitably wrong, and this one must be too eventually, but check out the charts and see how often the exceptions are relative to the profit pulls. Do the math, that’s good %.
Since you asked, and believe me my heart is breaking when I say this, but I think you should ask your Dad to come to live in New Zealand with you. And if he says no, I would threaten him with commital in an institution for the elderly insane.
I’m laughing (sort of) when I write that, but after all I’ve been through with my Mom…if there is an opportunistic way to save him from himself…well then I say do it.
When a person (whether its your father or not), makes decisions like he has, not repairing the gas line (how does he bathe? how does he hold down a job if he doesn’t bathe), ignoring the “truth” about what is happening in the world around him (yeah like 3/4 of the planet) its time for those who love him to take action.
Maybe your Dad wants all that we don’t want for him. But I guess someone should ask him some very pertinent questions. Do you want to die a pauper? What do you want us to do when you can no longer take care of yourself? Do you want us to put you in a Medicaid supported nursing home? Or maybe do you want to sell the house, have some money to “play” with where you can live on your own for awhile somewhere else off of what you might get for the house?
My Mother pretty much laid the law down before she had her stroke. Preserve the capital. I also think she saw in her minds eye something coming down the pike where she would be ought of control.
She put my name on her checking account. She gave me power of attorney over ALL her affairs. Sometimes I feel weak in the knees thinking what kind of hell I would have been in without her foresight. But there you go, those Capricorns, always in control of the money. Mom, her brain drying up from lack of circulation or toxic metal overload OR BOTH – knowing that she had to put someone in charge.
Anyways – I didn’t mean to digress so – but Kevin, there are ways to talk to your father about these things without threatening him. I think!
But someone will need to take care of your Papa and finance the gig if he lives into old age, and I for one am planning for Medicare and Medicaid to be going down. Even if they do not per se – they might exist for emergency situations.
Ah criminy. I’ve just had Mom puke tonight. Hmph, I’ve had the weekend care giver situation for seven years now by choice. I wouldn’t give up wiping my Mom’s bottom or cleaning up her puke for $2 million. Nope.
I won’t have a kid of my own to take care of me (sheesh, if I had kids they would have abandoned me a long time ago due to my weirdness) but this whole experience of caring for my Mom has humbled me, sent me to the heights of supreme understanding of the human condition, and made me so sad sometimes, that I have had to become my parent’s parent.
Sounds like that’s what you need to do. Whatever it takes.
@Eileen
As I wrote in the post, he showers. He just takes cold ones.
Someone else also suggested that we ask him to move here to NZ. I already tried that. Just after Owen was born. Nope.
Re: Threatening my dad. First of all, I don’t want to threaten him. People do stupid things all the time. As long as they’re not hurting anyone else, if they want to act stupid, that’s their problem, as far as I’m concerned.
I feel very strongly about that because I’m sure people think that the way Becky and I live our lives is stupid and all we want is to be left alone.
Second, my dad has never backed down from any fight, ever, as far as I know. I was staying with him once and someone tried to break down the front door. I grabbed my shotgun and by the time I got there my dad was standing there with an ax handle. The sound of me chambering a cartridge convinced the burglar to take off. Given the choice between a guy with a shotgun and my dad with an ax handle, I’d rather encounter the guy with the shotgun.
His whole life has been a struggle. He expects to have to fight. He was an MP in the Army for a few years. You don’t do that if you like to avoid fights!
His gate is a kind of crooked lurch and he still suffers debilitating pain from 60 year old football injuries. Hi soles of his shoes wear at sharp angles because of this.
So, no, threatening him wouldn’t work even if would do it, which I wouldn’t.
Those questions you mention are very good. In addition, how about, “Do you want to die without meeting your grandson?”
Sorry Kevin,
Uh that was a really stupid thing I wrote. “Threatening him with a mental institution.” My God. Am I a heartless person? No. Sometimes I don’t think when I write and it comes out all wrong, like that paragraph did. So please just put an overstrike through that nasty.
And I really do relate to your Dad. I do. I don’t know what I’d do if I had a loan on Mom’s house that I couldn’t pay. It’s odd for me to say that I’m very attached to a “thing,” a house. Imagine. But I think it is the lifestyle I have when there. Its a space of my own.
There must be good memories for your Dad in that house. He must love being there. But if he can’t afford it, well then. I guess he could become like one of those vigilante’s and fight off the bank when they come to foreclose. But to what avail? Maybe that is what he wants. A last stand. I don’t know.
But I do think it would be good to get thinking of his future, as well as your own about his grandson. Yes, that is excellent. If he is not working, take a trip to New Zealand. See if while he is away that he would agree to have your sister perhaps renting the house out for awhile? Feed two birds with one scone.
I think my Mom started formulating her plans in 1990, a year after my father passed on. She was born in 1917 so she would have been 73. I honestly just had to check my math on that. In numbers that seems like an eternity ago, but it feels like it was just yesterday that the roof caved in on her life. Sounds like that would be the way to go. Help him to make a plan.