Face it, making an extra buck or two is getting tougher and tougher these days. Worse, it's getting difficult to keep the bucks you already have.
What with inflation soaring out of sight, interest rates regularly setting new highs, the dollar reaching new lows, and a recession setting in, the economy is a strange new world never before seen by investors. No one seems to be quite certain where the smart money ought to go.
Nobody seems to be taking chances anymore.
And no wonder. Even expressed in everyday terms the variables influencing the economy these days are almost too complicated to deal with:
Rampant inflation means that what costs $1 today will probably cost at least $1.13 next year at this time.
The federally manipulated recession is rolling along. If you make $5 an hour today, you may be lucky to make $5.35 an hour next year at this time. But, as in the example above, the goods that cost $5 today will cost $5.65 next year -- you lose ($5.65-$5.35) 30 cents worth of goods for each hour you work.
The dollar is being battered in currency markets. That hurts when it comes time to replace the picture tube in your Sony or the fuel filter in your Volkswagen.
Interest rates are the highest they have ever been.If you want to borrow $4,000 today for a car loan . . . well, you may have difficulty borrowing it tomorrow at all. Or, if you are lucky enough to get a loan, you may find you could get better rates from a loan shark.
Even sophisticated investors are confused and wary. If you have a pillow full of money, where is it better off than in your pillow? Where is the smart money in town being invested? Real Estate?Gold? Cocoa futures? U.S. Savings Bonds? Canadian mining stocks?
Only a few months ago, there were still people making small fortunes following well-defined investment policies. Investments in precious metals have made more than a few people rich. A $20 gold piece now goes for a minimum of $400. A young couple in the District was given a 40-piece silver service for eight people when they were married in 1975. It cost their grandmother $500. Last year the couple spent $400 for four more place settings. This year a single place setting sells for $400.
In the good old days people used to play it safe by diversifying their portfolios: a little real estate, a little AT&T stock, a mutual fund or two, even some municipal bonds. These days none of those are the safe investments they used to be.
In fact, it seems that nothing is safe. While some real estate brokers say real estate is the only thing they would invest in today, others say the real estate market is about to take a nose dive. Some stock brokers say they are throwing all of their money into the market; others say the market today is nothing but a dignified crapshoot.
Edward Bennett Williams, one of the shrewdest money men in Washington, has taken to investing in a venture as risky as a baseball team. In Baltimore, no less.
"The fact is, it is impossible to protect your capital against inflation without taking a lot of risk," says economist Otto Eckstein of Data Resources Inc., a former member of the Council of Economic Adivsers in the Kennedy Administration. "And the fact is the risks have become real. You worry about the stock market going down, and it goes down. You worry about oil being cutoff, and it is cutoff."
Typical of uncertain economic climates, many people are hedging their bets, although banks report the lowest savings rates in years and everyone seems to be scrambling to convert paper assets into tangible ones. There are, of course, some investors who coolly risk large amounts on questionable options and other unorthodox investments -- even powdered rhinocerous horns (a supposed aphrodisiac which brings $300 to $500 an ounce in Hong Kong) and Iranian caviar, which has gone up 11 percent in the last year to $17.14 a spoonful.
Despite the confusion, one pattern does emerge among Washingtonians who have money to ivest: People who are good at what they do are investing in themselves. At least it's a bet they think they have some control over. Many real estate brokers, for example, said they could only feel confident investing their money in more real estate because that's the only area they know enough about. "Every time I make money," says Vicki Bagley, "I put it back into real estate."
The same is true with stockbrokers. Leslie Silverstone, a vice president at the investment firm of Dean Witter Reynolds Inc., says he is investing every dollar he can in the market. "I'm buying longterm securities," he said. "And, believe it or not, when I invest I'd rather a stock drop in price before it goes up again." He explained that curious philosophy by saying that his investing continues after his first buy, and naturally, he would rather buy more at an even lower price -- further increasing his profits when (and if) the stocks do rise.
For people like John Hechinger, smart money means investing in his lumber business. "We invest in terms of the company," he said. "We're not attracted to any faddish investments like gold, diamonds or paintings."
The same is true for the heads of other businesses. "I buy auto dealerships," says John Koons, president of JKJ Chevrolet. "I don't invest in the stock market."
Still, there are those who do invest in other unusual, or at least different, items in an attempt to keep up. Gordon Barnes, weather forecaster for WDVM-TV
"Where human beings are involved, I have no faith," says Barnes, explaining why he doesn't invest in the stock market. "My only competition is God."
And it appears to be a close race. Barnes is a one-man conglomerate. From his home in McLean, Barnes runs the Barnes Weather Service, Inc., which includes a commodities division called WeatherCom.
The bulk of Barnes' considerable profits from his ventures goes into real estate tax shelter investments such as shopping centers and apartment complexes in Tulsa, Memphis and Tucson. He does this not only to protect himself against taxes, but because, he says, the risk is low.
Barnes says he has capital to invest because his profession keeps him well enough informed to make knowledgeable decisions in the area of commodity futures.
He not only invests his own money in commodities, but for a fee he will invest for others who can come up with at least $10,000. He offers his specially tailored, long-range weather forecasts to clients gambling on the value of various grain commodities in the future. Ralph Nader, consumer advocate
"All of my money, and all of the cash we have in our organizations is invested in high-interest bank certificates of deposit," Nader says. The interest rates on those notes is always a fraction aboue the interest rates quoted on Treasury bills.
"They are the safest, most secure investment we can get, with the highest interest rates.
"We bought no options, no gold, no silver. We made all the mistakes."
But if he had all his money back, and could invest it all over again, where would Nader put it?
"I would have put every last cent into Washington Post stock," he says. "It has gone up about five-fold. The problem is, I always viewed The Post as an idealistic institution, and idealistic institutions never make money. If I had believed, as people have told me, that it was just another greedy corporation, I would have made a lot of money. And I could have gone to all the stockholders' meetings to complain about the coverage." Paul Roth, president of Roth Enterprises (theater chain)
Paul Roth's individual investment strategy is colsely linked to that of his theater empire. He and his company will take risks, but only calculated and informed risks.
"I'm as confused by the economy as everyone else," Roth admits. "And usually when I'm confused, I become conservative."
He has followed a course of moderate growth and diversification, striving for what he calls a balanced liquidity. "I don't personally or in my business have any single thing that the bulk of funds ought to be placed in."
Many of Roth's and the company's funds go for equipment and upkeep and expansion of the chain's 40 movie theaters. Other funds are put into short-term certificates of deposit or into long-term real estate investments and the stock market. "We have tried to develop a porfolio of stable growth stocks, not glamor stocks but ones that pay a good return."
Rothe shies away from any investment he doesn't fully understand, such as speculation in commodities or precious metals. What he does know are movies and the motion picture industry. "The established motion picture companies are in quite good shape," he says. "The balance sheets look good and the receipts look good and with the broadening world appetite for film entertainment, their market is expanding."
Interestingly enough, Hollywood did quite well during the Great Depression, as people flocked to movie theaters to forget their woes.
Roth not only invests in the motion picture firms, but in films as well. "You have to know a great deal about it," he cautions. "It's high risk and potentially high return and not for amateurs."
The key work in Roth's investment vocabulary is control. "The peaks are out of my control," he says, "but I think it's important that I try to control the economic valleys." George M. Ferris Jr., president, Ferris & Co. Inc.
Don't talk to stockbroker George Ferris Jr. about commodity futures. "I don't believe the average individual makes any money in the commodity futures market," he says."Only the brokers make money."
But mention the stock market and it's a different story. "The backbone for investment might well be best situated in quality equities," says Ferris. "We think that people who have been fortunate to make money in gold and other commodities should probably shift to the neglected area of common stocks."
Despite the recent chaos on Wall Street, Ferris believes common stocks are, in the long run, the best investment. "You will continue to see -- over a period of time -- dividend increases at a rate of 10 percent a year," Ferris says. "We look for selected common stock portfolois to return 15 percent (dividends and appreciation), which should more than exceed the average inflation rate of 7 percent to the end of the century."
Predictably, a lot of Ferris' own money is tied up in stocks. But he also is involved in some real estate limited partnerships and some oil and gas limited partnerships. "A great bulk is in common stocks with a smaller percentage as a buying reserve in a liquid money fund," Ferris says. "I have been moving increasingly in common stocks recently."
Ferris's scenario for the future is quite optimistic. "We envision . . . that institutions will be shifting from investments in reducing interest rates to quality common stocks with rising dividend rates. A resumption of a long run upward trend in the securities market will begin in 1980." Duke Zeibert, restaurateur
"Listen," Zeibert says, "I know what the rich guys are doing. If they have a hundred grand to throw around, they are buying 90-day notes, which are paying 12.5 or 13 percent. They're also stripping their checking acount to invest in daily interest funds, with a yield of over 11 percent."
But you, Duke, what about you?
"I'm just a poor restaurateur, and all I can invest in are pickles and aged meat. I just keep buying my meat ahead of time and age it until it is just right," he says. "All I do is put my money back in the business."
Actually, Zeibert says he invests "in Las Vegas. That's why I'm still working. It took me a while to learn, but I lost money even before inflation." Robert Linowes, attorney
"I have a very definite theory," Linowes says. "What I can't see or understand, I won't put my money in."
Investing in the stock market, he says, could be hazardous to your health. "I find it to be ulcer-producing."
Linowes, former head of the Metropolitan Washington Board of Trade, likes to put his money into tangibles, such as real estate and antiques instead. "Land is a very good investment right now, and there are some very good buys," he says. Linowes prefers to keep a real estate investment where he can "watch its development and course of action. I won't go out of the area."
Linowes and his wife have also collected antiques of all kinds for several years and consider them to be sound investments. "Their appreciation is phenomenal," he says.
"I have no interest in investing in gold. That's another ulcer-prone market. Municipal bonds are a lot better now than they've ever been, and short-term Treasury bonds," Linowes says "You look at things a lot more closely now than three or four years ago because of the uncertainty of the market and the dollar and the economy in general." Mathias J. DeVito, president, Rouse Co.
One would think the presient of one of the area's largest real estate development firms might have a good deal of his own funds tied up in various lands and properties. But because of company policy, as well as a personal distaste for real estate speculation, DeVito invests his money elsewhere.
"I don't get into real estate," he says. "Real estate speculation is very dangerous unless you have an uncanny sense of what to buy."
DeVito is quick to caution against jumping on the Washington real estate bandwagon. "Whatever someone says there is something you should buy because it's a perfect investment -- like housing -- people tend to buy it in an unreasonable way. It's not a perfect investment. They don't really analyze it."
DeVito had predicted the recent decline in soaring area real estate prices. "Whenever people have latched onto something as a perfect, riskfree investment, it ultimately doesn't become that."
DeVito has faith in the stock market and sees the most recent downturn as a temporary phenomenon. "The Fed is facing up to inflation, and that will be good for companies in the long run," he says. "This is a good time to buy stocks . . . the environment will improve. I predict that five months from now people will say, 'That was the time to buy.'"
The majority of DeVito's money is invested in Rouse stock. His "discretionary investments" are in the stock market in the form of equities and long-term bonds. DeVito also has modest amounts invested in domestic oil and gas wells. Julia Walsh, president, Julia M. Walsh & Sons, a brokerage firm
Walsh's investments are pretty evenly divided between the equity market and domestic oil and gas ventures."We are very active in developmental oil and gas, which means the oil and gas sources have been identified," she says."It's very low-risk with some potential for very high gain. It's a good safe commitment with resources in the ground."
Walsh stays away from the exploratory phase of the oil and gas business due to its high risk factor, prefering instead to finance drilling and production of proven wells. With a geologist on her firm's staff, Walsh also offers clients investments in oil and natural gas production. "It's an excellent investment in terms of being a hedge against inflation, and it also has some interesting tax shelter ramifications," says Walsh. "You own something. You own an asset in the ground."
Walsh is also involved in some real estate tax shelter investments and gold shares. "We never sell anything to our clients that we're not committed to either personally or corporately," she says. "We are very committed to equities in the long range, but you have to be very realistic and hedge your investments." Emily Womach, president, Women's National Bank of Washington
"I still think money market certificates are probably the best bargain at this time," says Womach, who describes herself as a very conservative investor. At the time she offered the advice, six-month money market certificates of $10,000 were offering yields of more than 13 percent. She also invests in real estate and the stock market, but only on a limited scale.
Womach says saving deposits at her bank appear to be stable. "We don't see too much being pulled out to invest in other things," she says.
"I'm a very conservative person. More so now than a couple of years ago, and the main reason is that the economic situation is so unusual and unpredictable." Bob Dandridge, forward, Washington Bullets
Dandridge has a marvelous "problem": he has more money than he knows what to do with. Nevertheless, he hasn't resorted to investing in long-shots that so frequently characterize the suddenly wealthy.
"I'm holding cash in savings accounts, not knowing what to do with it," said the Bullets' star, sounding like the tightest of pennypinchers, which he isn't. "I'm basically conservative."
"I am into some tax-free municipals and Treasury bills," he says. "They have a high interest rate. I've also bought a couple of pieces of real estate in Southern states, where you can get more for your dollar than here."
Dandridge says he has purchased some older homes, renovated them, and is renting them out while holding on to his investment. "It's difficult to sell in today's market," he says. But he is in no hurry.
As for the stock market, "I have no stocks at all. I know nothing about them. I'm afraid of them."
He says he is "being introduced to the concept of precious metals," because he would "like to know a little bit about them before investing in them. It even took me quite a few years to have confidence in tax-free municipals or real estate as investments."
The same is true for Oriental rugs. "I've talked to a few rug dealers," he says. "The market is at a point where now you should be looking for tangible things."
Finally, Dandridge says, he and the other Bullets rarely benefit from each other's financial prowess. "Nobody wants to seem as if they are imposing on each other's intelligence," he says. "It's so touchy . . . we wouldn't want to get each other involved in anything and then be responsible for losing everyone's money." Hugh Scott, former Senate minority leader, now a Washington lawyer
In 1935 Scott began buying art objects and other relics from the Chinese T'ang dynasty (618 A.D. to 960 A.D.). Since that time he has seen the objects -- largely ceramics and gilt bronzes as well as some silver prices -- shoot up in value 10 to 20 times.
"I have a very small collection (about 100 pieces), but I'm very pleased," Scott says. "I bought them for pleasure, but they proved to be a good investment."
Because the price of Oriental art has risen so much in the last two years, and because it has become increasingly difficult to find such pieces, Scott has been driven towards more conventional investments recently. "I believe in Treasury notes and tax-emempt bonds and money market certificates," Scott said. "I look for as good a yield as I can get under conservative investment practices." Max Fiebelman, president of Nulle and Voyd Enterprises, Culver City, Calif.
We had to leave the Washington area for our final investor, because of the unique nature of his product.
Max Feibelman sells nothing. Designed as a luxury gift for a man or woman who has everything, nothing has also turned out to be the only inflation-proof item left in the world. The motto of Max's company is: "The house where nothing really matters."
Feibelman claims nothing is a top-flight investment in these troubled times. It is non-taxable, doesn't cause cancer, probably will not be copied by the Japanese, and, as he puts it, "you have nothing to lose."
He says his product was created out of a demand for "a high-quality, totally reliable, non-nuclear, consumer-protective, ecologically harmless, cost-effective, politically popular, non-carcinogenic product which would provide equal opportunity for all."
Unfortunately, though, even nothing costs more these days: about five bucks, in fact. The 14-page booklet accompanying Feibelman's product is rich with the kind of logic that he says makes his investment worthwhile: "Crackers are better than nothing; nothing is better than ice cream; therefore, crackers are better than ice cream." For all of this he charges $4.95 in the United States and $89.95 in OPEC countries.
Freibelman claims that "when the real recession comes, you'll find that nothing is the business to be in."