Personal Finance on a Napkin

April 5, 2012 9:10 AM

Napkin finance. Each sketch links to a post about investing. From a financial planner best known for losing his house.
posted by xowie (17 comments total)

That's one magic napkin.
posted by CynicalKnight at 9:19 AM on April 5, 2012

The Laffer Curve?
posted by symbioid at 9:20 AM on April 5, 2012

Wow, some of these (especially this one) can/should serve as my poker strategy going forward. Although, I guess poker is just a microcosm of capitalism, in which I too often feel like a time-biding subletter...so, not much of an escapist fantasy there.

Also, Chrome-unfriendly but works fine in Firefox.
posted by obscurator at 9:37 AM on April 5, 2012

But prices just kept rising, and when people kept buying, that made it seem safer. I knew from my work as a financial adviser that following the crowd could be costly. But like everyone else, I felt safer in a crowd.

An economy that is dependent on contrarian foresight is an economy that is doomed to fail.
posted by gauche at 9:38 AM on April 5, 2012 [1 favorite]

That house losing article is a fascinating litany of fuck ups and not seeming to get it. I agree with him, though, about having a contractual obligation to your bank and a moral obligation to your family.
posted by Forktine at 9:45 AM on April 5, 2012

In 1995 he was looking for a job as a security guard and found himself working the phones at a Fidelity Investments call center. By 1999 he was a Merrill Lynch financial adviser and a certified financial planner. That's a hell of a jump in 4 years. Perhaps that's why he decided to buy a half million dollar house he could not afford.
posted by cmdnc0 at 9:50 AM on April 5, 2012 [2 favorites]

<rant>
I really want to know who these people are who can draw on the backs of napkins without the ink bleeding all over the place, or the napkin completely disintegrating and falling to pieces.

Have you ever tried it? It's impossible! Maybe I'm just using cheap napkins, but I'm firmly in favor of replacing the "back of the napkin" idiom with its predecessor, "back of the envelope," if only because envelopes were actually designed to be written on.
</rant>
posted by schmod at 10:04 AM on April 5, 2012 [5 favorites]

I was amused that he starts the article by saying how his family's situation is different from all the other lose-your-house stories out there, and then it turns out to be exactly like all the other ones I've read: caught up in the market, thought "they wouldn't lend us the money if we couldn't afford it," decided to buy because they couldn't stand living a few months in a "cookie cutter" neighborhood (oh the suffereing!).

Will look at napkins now.
posted by not that girl at 10:14 AM on April 5, 2012 [2 favorites]

FTA:
We borrowed 100 percent of the purchase price.

“Wow. I guess if they’re willing to lend it to us it must be O.K.”

The market’s continued strength meant we could borrow even more. It was easy. In late 2004, a year after buying the house, we refinanced our mortgage with World Savings Bank, which later ended up in the hands of Wells Fargo, using one of the pick-a-payment loans that let you choose your own payment each month.

We picked the lowest possible payment, the one that added to our balance each month instead of subtracting from it. And we added a line of credit with Wells Fargo.

The extra borrowing power was important, because while my income was growing rapidly it wasn’t enough to support all our expenses.

we were also borrowing against the house to finance our lifestyle.

and this is my favorite one...
The line between business expenses and personal ones is sometimes hard to draw when you run your own business, and during those heady times it seemed even harder.
(No, it isn't really. Here's a helpful hint from me to dumbass: If it's not related to your business, it's a personal expense.)

Jesus H. Tapdancing Christ. This guy was a financial adviser?!?!?!?!?!???!??!?!!! He seriously actually gave advice to other people on how to handle money.

I bought my house in the same market, under the same conditions he did. I am not a certified financial anything. I just know that I like getting as much as possible for the money I spend, and I despise being in debt. I know you can't just pull hundreds of thousands out of your ass for a house, but I did save up for a 20% down payment.

I wouldn't ask this clown for advice on anything let alone buy his book. If he wrote a book called "I'm an idiot. Don't listen to me," I would maybe read the jacket.
posted by prepmonkey at 10:14 AM on April 5, 2012 [5 favorites]

I had an accountant who did my personal taxes, try to set me up with an ARM back in 2005 or so. I wonder how he is doing, I haven't seen him since then.
posted by Xoebe at 10:38 AM on April 5, 2012

Never have I seen such a poor use of Venn diagrams.
posted by chemoboy at 11:19 AM on April 5, 2012 [1 favorite]

True story, when I was refinancing my home a week or two ago:

Mortgage advisor: (after many, many sheets of paper I had to sign). Okay, sign this. This paper basically states that I am a licensed mortgage advisor.
Me: Mortgage advisors have to be licensed?
MA: Yup, it's the law.
Me: But what about all those shady loans and predatory lenders that led to the housing collapse?

One guess when that law got passed.
posted by Deathalicious at 11:34 AM on April 5, 2012

If it's not related to your business, it's a personal expense

"The line between business and personal expenses is where it stops being related to business and starts being personal. See? It's perfectly simple!"
posted by LogicalDash at 3:03 PM on April 5, 2012

"The line between business and personal expenses is where it stops being related to business and starts being personal. See? It's perfectly simple!"

But in hindsight it is clear that we were spending more than we should have on things like recreational gear and family trips for ourselves and our four children.

There are things where the line is questionable, certainly, but it looks like a lot of the spending was clearly on the personal side of the line.
posted by jeather at 3:21 PM on April 5, 2012

Moral of the story: never take out an adjustable rate mortgage. And then REALLY never take one that lets you pay less than the interest every month.

I'm not going to say this guy is a bad financial adviser just because he screwed up. It is way easier to give other people good advice than it is to take it yourself.
posted by gjc at 3:56 PM on April 5, 2012

The old saying about good judgment coming from experience and experience coming from bad judgment? About the nicest thing I can say about this guy is that he rapidly accumulated a lot of experience. Hopefully that's translated into good judgment, but I made the mistake of reading about his history before clicking through to his blog and now I wonder if his gross analytical failures are going to persist or not.
posted by BrotherCaine at 5:54 PM on April 5, 2012 [1 favorite]

Bistromathics itself is simply a revolutionary new way of understanding the behaviour of numbers.
posted by hypersloth at 8:14 AM on April 6, 2012