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Money Rebel

Steve Abramowitz

WHEN WE’RE YOUNG, we simplistically view our family’s money journey as one long road with clear signs that tell us to “speed up,” “change lanes” or “get off.” It’s only later, as we gain wisdom, that we can discern how messy the journey is—and how each of us ended up turning onto a different street to pursue financial freedom in our own unique way.

By exploring the money stories of three family members, I have come to better understand my own financial journey.

Business lessons. “Stevie, let’s go already. Stop with the sports page. I need to get downtown.”

“Okay, Dad. The Dodgers are back in first.”

“Stevie, there’s a time for baseball and there’s a time for business. I want to talk to you on the ride in. You’re 14 now and you need to get serious about life. Remember, Stevie, I started with nothing. We never owned a house, so I didn’t even know what a mortgage was.”

I hated these lectures. It was like being in school on the weekend. I wish he would have taken Richie with him, like he usually did.

“I’m worried about you, Stevie. You’re like your mother and grandma. You’re too soft. The world is a rough place and I don’t want you to be taken advantage of. Mommy doesn’t drive so she takes taxis everywhere. Then they take her the long way around and charge her double.”

“Dad, I’m not going to be taken advantage of.”

“Richie is tougher than you. He won’t paint the apartment for a tenant who’s always late or if he’s one of those types who keeps asking for more.”

Always it’s Richie, Richie, Richie. I win the freshman prize for my essay on what happens to real estate values as neighborhoods change and my father doesn’t even come to hear me talk.

“Sometimes, I think you’d be better off working for someone and letting Richie do the real estate. He’ll always cut you a piece of the action.”

He’s afraid that, left to my own devices, I’ll fritter away my inheritance.

“Let’s start with rents. Don’t be a big man. Raising rents to the ceiling is insensitive, and you don’t want to lose good tenants. And pay attention to how rental prospects come across. Sometimes, the kind of people they are is more important than how much they make.”

“Dad, there’s a Howard Johnson’s 28 flavors. Can we stop for a chocolate mint?”

“Later, Stevie, please, there’s more to learn. Keep your eye on the ball, and that’s expenses.”

Here comes lesson No. 100.

“Stevie, holding down expenses is almost more important than raising rents. Rents usually go up gradually and so do most expenses, like utilities, insurance and taxes. And your mortgage stays the same. But repairs and maintenance can go haywire. They’ll determine how much cash you have left at the end of the month.”

I thought about Mommy and how she surprised me with that new Elvis Presley LP.

“You have to be smart. Say a sink needs a new knob. Maybe $100 to replace it. But to get the knobs to match could be $500 if you buy the whole fixture. At that funky place in Brooklyn, they don’t have to match. The people have more important things to worry about, like having enough for food and buying clothes for their kids. They couldn’t care less about which knobs they get. But on 35th Street, that lawyer couple, they have to match. Otherwise, you’ll get a phone call the next day.”

Grandma always set aside some food on her plate. She said it was for God and all his people everywhere. It didn’t matter whether they were rich or not.

“Stevie, don’t drift off on me. We’ll be there soon and we’ve got more ground to cover. Let’s talk about the people who work for you. They should be loyal, no stealing, no excuses to stay home, no ‘it’s snowing’.”

“Dad, I’m getting hungry. Are we near the bridge yet?”

“Yes, Stevie, it’s coming up. You want versatile people, people who can do more than one thing. Take Seymour. When I was just starting out, he looked after the TV parts business, then he ran the record stores. Now, he does the real estate.”

“I think the first game of the doubleheader is about to start. Can we turn it on?”

“When we get to the office, Stevie. Another important thing: Salaries are a big part of expenses. You can’t go overboard, but you have to be fair. Everyone needs to put bread on the table and they’re depending on you. Always pay on time. If you want loyalty, you have to show loyalty. And be generous with gifts. Like Lucy Griffin, the manager at 35th Street. Her husband died two years ago. She works and she has a kid a little younger than you. Every Christmas, I give her a bonus and bring over clothes you grew out of.”

“Hey, Dad, we’re here. I’m going to the office and turn on the game.”

“Okay, Stevie, I’ll park and meet you there.”

Running to the office, I promised myself I’ll never ever own any real estate. I’m going to be a sportswriter.

Sibling rivalry. My brother and I spent many summers at Raquette Lake Boys Camp in the glorious Adirondacks of Upstate New York. The annual baseball game against hated rival Brant Lake marked the final week of summer vacation. The lead changed hands several times when, in the bottom of the ninth and the score tied four-four, Richie came up with two outs and a man on third. He smacked the first pitch inside the third baseline and into left field, knocking in the winning run. Richie ran up to me crying, and together we jumped up and down until my front tooth chipped when it bumped against his forehead.

My brother surpassed me on another playing field as well. He grew into the favorite son—considerate, social and enamored of my father’s business exploits. I would become the renegade, aloof, moody and contemptuous of my father’s fixation on real estate. I never relinquished my role as academic star, but a kooky one isolated in his room playing baseball board games and Elvis Presley songs that vibrated throughout the house. Besides, in a family that viewed teachers as underpaid public servants, scholastic recognition was small consolation.

Smooth sailing in our family served my brother well as an investor. Feeling accepted for the person he was, he had nothing to prove. He could be a steady Eddie. He started before the advent of index mutual funds and, unwilling to pay high active management fees, fashioned his own diversified stock portfolio. He mostly held firm for 40 years, capturing the entire bull market beginning in 1982, persevering through the tech debacle of the early 2000s and the financial crisis of 2008.

Exiting childhood with more to prove than Richie, I fiddled around with exotic trading strategies for far too many years. Despite my more complex understanding of how markets work, I surely underperformed my brother. I squandered my knowledge and my results on old family agendas and personality issues.

Richie had won the game, and it was now time to take some chips off the table. But his phenomenal success with an index-fund-like stock portfolio bred overconfidence just as he approached retirement and its nemesis, sequence-of-return risk. Unfathomably, rather than allocate a substantial part of his nest egg to short-term Treasury instruments to protect his withdrawal plan, Richie took a deep plunge into a single stock. As the country’s only dual defense contractor and major manufacturer of commercial aircraft, Boeing became 17% of what had for decades been a scrupulously diversified portfolio.

My brother had come full circle from a stay-the-course investor to a high-wire act. He didn’t imagine, however remote, encountering one of Nassim Taleb’s black swans. In 2018, Boeing’s 737 MAX 8 airliner tragically crashed in Indonesia and then again five months later in Ethiopia. A constitutionally long-term investor, Richie was loath to sell, but he eventually liquidated the remaining half of his original position. Even so, my brother was luckier than most. He had ample cash flow from a thriving law practice until he retired and reliable passive income from his commercial real estate.

Over the years, Richie and I collaborated on many real estate deals, some in California but most in Florida. His generosity has been unwavering. He found most of the deals, his office did the paperwork and mailed me the closing papers, and he managed the properties. I just signed, barely skimming the documents. For all this, my brother never asked for a dime. Stevie was a pro bono client.

Chastened by my bouts with the fiendish market and supported by family and therapy, today I’m docked in the comparatively calm waters of mutual and exchange-traded index funds. I still do some splashing around, but in a very small pool. No longer needing a proving ground, I frolic in hobbies and find meaning with family and friends—what I should have been doing all along.

Royal treatment. Last month, my wife Alberta received a royalty check for a series of Spanish textbooks her father wrote 80 years ago. Dean of Admissions and Guidance at Los Angeles Valley College, Bob died of a massive heart attack at age 49, when Alberta was eight. He never got to hear the acclaim or see the widespread adoption of his books at high schools across the country. He never knew his royalties would support his family through Alberta’s childhood, pay for her undergraduate and graduate education, and provide the down payment for her first home.

Alberta’s mother Rose had been abandoned by her own father in the Depression. Losing the two most important men in her life consigned Rose to a constant state of nervous apprehension. Despite lucrative royalties, a pension and Social Security income, she lived as if in constant financial peril. Mother and daughter lived in a one-bedroom apartment for some years, a condition of relative deprivation that was a source of unhappiness.

A woman twice broadsided by randomness finally saw the dice fall her way. As often happens, need is a catalyst for opportunity. With a desire for high cash flow but with a low tolerance for risk, Alberta’s mom became attracted to municipal bonds’ twin allure of tax-free income and safety. Rose began purchasing munis a few years before interest rates peaked in the early 1980s, and continued for many years as rates fell and bonds embarked on a multi-decade bull market. Alberta’s mom reaped an entirely unanticipated capital gains windfall, in addition to relatively low-risk, tax-free income.

The bonds proved a boon for us after she died, with the interest supplementing our income. Looking to build up a reserve for a house down payment and wanting diversification for our stock investments, we held on to the bonds, letting them mature one by one to avoid commissions and the bid-ask spread.

In many ways, Alberta grew up as the poor little rich girl, always on the outside looking in. She strove to honor her dad’s memory through academic achievement. She published her psychology honors thesis, was awarded a prize from the American Society of Criminology, and graduated Phi Beta Kappa from Berkeley, before earning a PhD in clinical psychology.

But Alberta’s greatest accomplishment was not in academia, but in our family. Soon after we married, I collapsed with a serious depression that cost me my job as director of research in the University of California, Davis, psychiatry department. Negativity and irrational fears plagued me for many years. All that time, Alberta juggled a private practice with raising our son Ryan, in effect a single working mother.

Her husband, the other kid, could be quite primitive. My helplessness panicked me, but Alberta remained calm. One time, I interrupted a patient hour, pleading that she not ever force me to work again. In a soft reassuring voice, she said she wouldn’t let anyone put that pressure on me. Not believing her, I threatened to let my psychologist license expire. She implored me not to shut the door. She still held out hope.

From time to time, I ask Alberta why she stayed with me.

“Steve, love doesn’t end when earnings do.” Only half-jokingly, she says my sense of self-worth could use some more therapy.

My money journey was fueled by my alienation. A teenager’s dream of becoming a sportswriter and a subsequent career as a clinical psychologist were passions in their own right. But they were also acts of defiance. As I achieved independence from an overbearing parent, my need to rebel diminished. Alberta understood my depression was precipitated by alienation—alienation that blocked me from creating a new professional and financial identity.

But that identity has belatedly emerged, one that includes rendering psychological services, investing in the stock market and managing a once-demonized real estate business. No, I never became a sportswriter. But I have written many professional articles and contribute regularly to HumbleDollar. It is, I think, an identity that fits me well.

Steve Abramowitz is a psychologist in Sacramento, California. Earlier in his career, Steve was a university professor, including serving as research director for the psychiatry department at the University of California, Davis. He also ran his own investment advisory firm. Check out Steve’s earlier articles.

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