It's very difficult to buy a note from someone who doesn't
understand the time value of money.
And very few people do.
Most people cannot understand why they shouldn't get (as an
example) $10,000 for their $10,000 mortgage note. "After all,"
he might say. "It says $10,000 right on it."
Since you are telling him that in the end he will have to take less
for his note than what he thinks is "fair," many times the note
holder just won't trust you.
I have found the following approach is often successful:
Pull out a $10.00 bill and a $100.00 bill. Say, "What would you
say if I told you that you could have the $10.00 bill right now or
the $100.00 bill six months from now. Most people will choose the
$100.00 six months from now. Then say, "how about the $10.00 now or
the $100.00 year from now?" If he still says he'll take the $100.00
a year from now, keep increasing the time it will take for him to
get the $100.00 until he chooses to take the $10.00 bill now.
When he does that, say "You now understand why notes are discounted.
Actually, you understood it all along. The fancy name for it is
the time value of money, but most of us haven't put that name
to it. You have told me that a $10.00 bill now is worth more than a
$100.00 bill year (2 years, whatever he chose) from now. So the
important factor is not what amount is printed on the piece
of paper -- whether it is a dollar bill or a mortgage note --
but WHEN YOU GET THE MONEY."
"Your note has $10,000 written on it, just like this bill has
$100.00 written on it. But your note is like this $100.00 bill
that you don't get for a long time. Its value depends on when it
is paid off."
So he doesn't think you are trying to trick him, point out (before
he does) that his note provides monthly payments and the $100.00
bill doesn't. Tell him that is why it is more valuable than a note
that does not have any monthly payments, and you will pay him more
than you would for such a note (there are such things,
of course -- balloon notes, where all the payments plus interest
accrue to be paid in one lump sum at the end of the term).
Don't get into detail. Don't try to impress him with what you
know. That's not why you are there. You have a choice: You can
impress him with how knowledgeable you are, or you can buy his note.
Keep it simple. You have one job to do in this mission: You must
make him understand that it doesn't matter what is printed on the
piece of paper -- whether it is a $100.00 bill or a note -- what
matters, what determines value, is WHEN THE MONEY IS PAID."
W. J. Mencarow is the president of The Paper Source, Inc. and
editor of THE PAPER SOURCE JOURNAL: www.PaperSourceOnline.com
Did you like this article? You can get many more like it, plus
the latest news of the note business, new note investors, new laws,
court decisions, etc. affecting the business, interviews with the
experts and much more every month in THE PAPER SOURCE JOURNAL.
With your subscription you also get
THE PAPER SOURCE REGISTRY OF
NOTE INVESTORS, the most accurate compilation available of true
note buyers (not brokers) and what they buy. We've been doing this
for over 20 years, and we know who the real players are.
See
www.PaperSourceOnline.com/subscribe.html
"The Paper Source Journal has been a very valuable source of information for me. I've been a subscriber for most of your years of publication."
--Nick Buschur, Grants Pass, Oregon, #1 Broker for the largest note
investment firm in the world for an unprecedented 3 years in a
row, est. annual volume $15.8 million.
********************************************************************
Why Were Taxpayers Forced To Bail Out AIG?
by W. J. Mencarow
$150 billion of your tax money went to bail out the insurance
giant AIG.
But how much do you know about where your money went?
* AIG is the 18th largest corporation in the world with offices in
over 130 countries.
* It is the world's largest insurance and financial services
company.
* Insurance companies are the foremost private intelligence
gathering organizations on earth. Medical records, driving records,
bank information, personal histories -- essentially your life story
is on file with your insurance company. AIG is now sharing all
that with the federal government.
* AIG's founder C.V. Starr (Clinton prosecutor Ken Starr's uncle)
was a CIA asset (an intelligence asset is someone not officially
part of the intelligence agency who supplies it with information).
It is alleged by some in the intelligence community that AIG has
been a key player in CIA black ops for decades.
* AIG has a fleet of over 400 aircraft. Former AIG employees
claim that some are used by AIG in the illegal drug trade.
* Coral Marie Talavera Baca Lehder is the wife of Carlos Lehder,
Colombian guerrilla leader and co-founder of the Medillin drug
cartel. She managed the AIG branch in San Francisco. On June 22,
2001, she resigned and reportedly moved to Cuba.
* One of AIG's directors, Frank Wisner, Jr. is the son of CIA
co-founder Frank Wisner. Junior has most recently served as a
director of -- are you ready? -- Enron. (Would you want this guy on
your board? Why would AIG, if not for his CIA link?)
He's now presided over two of the biggest bankruptcies in
history.
* The former CEO of AIG, Maurice "Hank" Greenberg, resigned in
2005 under criminal investigation, later "cleared." AIG paid a
$1.6 BILLION fine and faced criminal charges for some of its
executives (not to worry, they got the money back plus over $148
billion more from the taxpayers).
* Greenburg's successor at AIG, Martin J. Sullivan (a leader of
the Asia Society, a New World Order front group), received
"multimillion dollar payments" from the taxpayer bailout of AIG,
according to New York Attorney General Andrew Cuomo -- even though
Sullivan had left the company before the bailout.
* Sullivan was ousted on June 15, 2008 and apparently took some
$35 million in termination payments and benefits (almost $12
million for each of the three years he was CEO, in addition to his
multi-million in salary, stock, options and other benefits). He
was also given a golden parachute, landing another multimillion
job as chairman and CEO of C.V. Starr and Company (yes, that Starr).
* He was succeed by Robert B. Willumstad, who lasted three months.
To his credit, Willumstad reportedly refused a $22 million
severance payment ($7.3 mil a month, on top of his salary, stock
and other perks). The shameful fact is that AIG's board offered
it!
* Willumstad's successor is Edward M. Liddy, most recently a
Goldman Sachs board member. George W.'s last Treasury Secretary,
Henry Paulson crafted the multi-billion dollar AIG taxpayer bailout.
Before he became Treasury Secretary, Paulson was the chairman and
CEO of Goldman Sachs.
* Now that the federal government owns 80% of AIG, nobody will be
able to peer into its myriad intelligence operations or be able to
substantiate allegations that it is the world's largest illegal drug
cartel.
