No B.S Friday: Think you can get away with letting someone else manage your wealth? Read this.
So, there’s a deli in America worth $100 million.
No, this isn’t one of these stories about the land being worth more than the business – though you can dig up many of those.
No, this just seems to be your garden variety securities fraud.
Hedge fund manager David Einhorn warned of dangers for retail investors that he sees in the market, and one of his main examples was a tiny New Jersey deli with a market capitalization of more than $100 million.
The Paulsboro, New Jersey-based Your Hometown Deli is the sole location for Hometown International, which has an eye-popping market value despite totaling $35,748 in sales in the last two years combined, according to securities filings.
“Someone pointed us to Hometown International (HWIN), which owns a single deli in rural New Jersey … HWIN reached a market cap of $113 million on February 8. The largest shareholder is also the CEO/CFO/Treasurer and a Director, who also happens to be the wrestling coach of the high school next door to the deli.
“The pastrami must be amazing,” Einhorn said in a letter to clients published Thursday.
Hometown reported more than $600,000 in expenses last year, up from about $154,000 in 2019. The company also reported a net cash gain of $2.2 million from financing activities, such as selling stock, in 2020.
Wow. I mean sure. You can totally be a high-school wrestling coach and a multi-millionaire. You totally can. I’ve seen people go on that journey.
But it doesn’t come through a deli with less than $20K in revenue a year… unless something fishy is going on.
But funny things do happen.
Peter Switzer wrote an interesting note on the passing of infamous American fraudster, Bernie Madoff:
The world’s biggest investment fraudster, American Bernie Madoff, has died in jail after operating a Ponzi Scheme that told investors there was $60 billion under his management, while in reality it was only $17 billion.
But that was still a lot of money to seduce out of thousands of wealthy New York and Florida investors in particular, including film director Steven Spielberg and actor Kevin Bacon.
And while the story is a great one for the gossip columns, what’s the moral of the story for anyone who knows they have to rely on an expert to grow their wealth?
In the end, Madoff, the infamous swindler who burned so much of his clients’ money, has died in a federal prison at age 82, but that was always going to happen as he received an incredible 150-year sentence!
People trusted him because he had a good pedigree as he was a former chairman of the Nasdaq stock market, but his consistent and fantastic returns should have been picked up by regulators, who were clearly asleep at the wheel.
When they finally woke up, Madoff was exposed as someone running a Ponzi Scheme, where new money coming in paid for the returns of existing customers, covering up the fact that the money wasn’t invested as promised and the big returns were just lies.
What do we take from all this?
The moral of the story for me is that you have to take responsibility for your own money and your own journey.
Not partial responsibility. Total responsibility. 100%.
And people wonder why I don’t branch out into other investment vehicles. I’ve got a strategy that works for me. Business for cashflow. Real estate for wealth.
But it works for me. I don’t spread myself too thin trying to get in on this and that.
I know where my expertise is at, and I take responsibility for that.
The financial highways are littered with the wreckages of wealth left by people who thought they could get away with letting other people manage their money.
Don’t let it be you.