Graham Seibert Autobiography draft Jan 15, 2013 Page
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InvestingSome people are born with the will to power. Others are born with what my friend Dugan Barr’s father called the “acquisitive instinct.” I’m definitely not one of the former. Every time I have been thrust into authority, I have been quite quick and willing to pass the responsibility on to somebody else. However, I am to some degree one of the latter. My family name was “moneybags.” If I got a total of $20 for Christmas, chances are I would still have that money at Easter. I liked the potential to buy things more than any particular thing in itself. I was an avid Monopoly player as a youth, successful to the point that other kids refused to play with me. I had a knack for coming up with winning trades. Investment was in our history but not my immediate family. My mother’s mother’s father had done quite well in the stock market, coolly deciding in 1929 that the show was about over and selling out. My mother’s father the doctor quietly invested his excess in real estate throughout the Depression. Neither died tremendously rich, but they were comfortable. My parents’ life was different. My father came of age during the depression and worked first with FDR’s makework CCC’s – the Civilian Conservation Corps – and then for a dog food company, presumably for a dog’s wages. He came into his own during the war, working night and day as a sheetmetal man installing galleys, latrines, and morgues on liberty ships, which enabled him to buy a house at a fairly young age. At that time, however, he was married, attending Berkeley at the same time to get his bachelors, and then in his 30s was whacked with huge medical bills from my sister. These setbacks had kept him from ever really getting ahead of the game of life. It it is safe to say that I did not have a model for investing. Ours was a very middle-class neighborhood in which nobody I knew invested, not even to the point of having vacation houses, and my family was certainly not in a position to do it. I had, however, occurred along the way that that’s what some people did and I was interested in it. When I went to work for IBM in 1966 I lived fairly frugally. I made a good salary, bought an economical car – Volkswagen – and lived in a not terribly expensive apartment. Times were good. I had it a few extra dollars every month, and I looked for a place to put them. Providentially, a fellow who had joined IBM in a year after I did, Steve Miraglia, became bored with IBM. He decided to follow his first love, stock market investing. He and I had talked about it quite a bit while he was still at IBM. I became one of his first clients when he became a broker. I have never known a broker to have such a magic touch. When IBM asked me to go overseas in 1968 I suddenly earned quite a bit of money – I was able to invest just about my entire base salary, which would have been $10,000 or $12,000 a year. That was a lot of money in 1968. I wrapped my father into the business,. He managed my affairs, and seeing how well Steve did, opened his own account. When I returned from Vietnam after four years I had $100,000. That was a lot of money in 1972. I continued working with Steve for the four years I was in Germany, 1972 to 76. This was not quite as good a run for stock market, but we still did quite all right. When I returned to the United States in 1976 I was financially secure. I immediately bought a rental house, and then a house for myself to live in, and within another few months two more rental houses. The down payments were relatively small, the interest rate sustainable, and the properties almost paid for themselves after taking the taking into consideration the tax advantages of rental property ownership. At the time I married Mary Ann McCleary my estate was probably about $300,000, including four pieces of property and my brokerage account. This was in 1981, when property was appreciating quickly due to inflation. I went into business for myself in 1980, after leaving Booz Allen. I felt comfortable enough that I left without having any prospects for work, or any real knowledge of what it would be like to be a freelance consultant. I simply wanted to be independent. I started knocking on doors, and for three or four months didn’t have much work. However, within a year I had some fairly steady business, and in it within a year and a half I was ahead of the game. One of the things one of the first things I did was to set up a pension fund. I looked for and found an actuary who could help me with this. A guy named Joe Bolcar. We set up a defined benefit pension plan, with the most pessimistic possible expectations. We said that I would retire at age 55, the earliest allowable, at full salary, the maximum possible, and we minimized the expected rate of return on my investments. Setting all these parameters as we did, we were able to establish a system whereby I put one dollar into the pension fund for every dollar I took as income. Thus my tax-deferred savings grew rapidly. The plan was that if we needed money to live on, I could withdraw it from my after-tax brokerage account. As things turned out, Mary Ann and I made enough money that we were able to live quite comfortably without having to draw on my savings. With contributions of $20,000 or more per year my pension fund grew appreciably. In 1989 we moved to the large house in Bethesda. We used we did a three-way swap, selling an investment property that we had in Washington, converting our residence in Washington into a rental, and moving into the new house. Because the residence was owned outright, we were wound up taking on a new mortgage but there wasn’t any cash involved in the transaction, or at least not much. So we increased our base. We did it at the height of the housing market, unfortunately, but some things cannot be planned. My wife was really champing at the bit to get a bigger house, and although I didn’t want it, and never liked the house, I had to concede that since we had the money there wasn’t any good reason not to move to a larger house. This was in 1989. Mary Ann started her company, Capital Trade, in 1992. I insisted that, after having talked so long about her desire to be her own boss, she make the leap. Just about the only other thing I insisted on was that she and her partners immediately set up their own pension plan. They didn’t fund it as richly, or invest as well as me, but they still did OK. Throughout the decade of the 1990s I invested in a good many technology companies, chief among them being Oracle and Cisco Systems. I had the advantage of working with Cisco products, seeing where the Internet was going, and likewise of working with Oracle products and watching how their market was expanding. By the turn of the millennium we had more dollars between us than we do even today. I was feeling quite wealthy. As I recount elsewhere, when my business partner screwed me in 1998, I simply retired. In 1998 and 99 I wrote a book on investing, putting forth a number of ideas that seemed good at the time but haven’t really gone anyplace. In the decade of the 2000’s my investments have more or less marked time. This is a better result than many investors, but certainly not what I would have hoped. I unwound our real estate holdings around the year 2000. They tie you down, whereas financial assets can be managed from anyplace. I wanted to be positioned to retire overseas. I thus missed out on the big run-up in real estate prices fuelled by irrational government policy. I played the crisis of 2007 better than that of 2000, however, and despite the turmoil and a period of inflexibility caused by the divorce came through relatively intact. As I go into the second decade of the millennium, living entirely on Social Security and my pension, I am invested quite conservatively, primarily real estate and precious metal ETFs. I anticipate that the United States financial system is likely to collapse within a couple of years, and I want to have a minimum amount of assets still in the United States where they can be nationalized or whatever, a minimum dependence on Social Security, and a maximum of after-tax money money overseas where we will be able to survive, living as frugally as the situation demands. Download 412.6 Kb. 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