Thank You for Saving My Bank
In 1985 a board member of a mid-western bank came into Bert Dohmen’s office. He shook Bert’s hand and said “thank you for saving my bank.”
He explained that the bank’s Treasury bond portfolio had had huge losses in 1982 because the bank had ignored Bert’s advice in 1978 to “sell all bonds.” Dohmen had predicted in 1978 that T-bond prices would decline from 40% to 50%. They actually declined as much as 44%.
The client said that in 1982, the board of the bank was just voting to jettison the entire bond portfolio at a big loss. But our client, a member of the board, showed them the latest WELLINGTON LETTER which said that bonds now presented the “opportunity of a life time.”
Based on that, the board decided to keep the bonds, which then staged a remarkable recovery. Keeping the portfolio saved the bank.
Forbes Billionaire Club
Another long-time client, now a member of the Forbes Billionaire club, was on the board of a NYSE–listed firm. He said the company subscribed to the $50,000/year study from a well-known econometric firm, but that they never read them. He said they subscribed as a “c…y…a” measure, but for forecasts, “we rely on the Wellington Letter.” That was a remarkable compliment, but true.
Opportunity of a Lifetime
Another client was developing 3000 acres into a high-end residential project. He needed more capital and asked Bert for advice on how to make a big profit in the markets. It was 1982 and short term interest rates had recently been over 20% and the economy was in a big recession. Long-term T-bonds yielded 15.25%.
Fortunately, our firm’s analysis had just given a major, “opportunity of a lifetime” buy signals on the bond market. Bert suggested that he buy T-bonds using conservative leverage, and financing the purchase with overnight repos, which Wall Street firms do automatically. Bert said that if the forecast came true, short term interest rates (repo rate) would decline significantly but the yield of over 15% would be locked in for his client.
His client liked the idea, but was willing to take a much larger risk. He leverage $10 million by 10 to 1. Within a few years, bond prices had soared as yields plunged. The client was still getting 15% or more yield on his T-bonds while paying less than 7.5% on the overnight repo money to finance the purchase. The capital appreciation of the T-bonds was tremendous as yields declined. The high-end real estate development is now completed and is superb.
In 1978 one of the most successful entrepreneurs on the continent, now a member of the “Forbes Billionaire Club,” was heavily exposed to the bullish side of T-bond futures, relying on the advice of a high profile interest-rate guru. Bert’s work showed exactly the opposite: he predicted that T-bonds would lose 40%-50% of their value over the next several years.
The client sold his T-bond futures and went short, although he didn’t tell Bert until several years later. T-bonds did lose 44% in three years. The client turned his position from a potential disaster to one that made him big profits.
Real Estate Crash
In 2007-2008, Bert Dohmen advised his clients that a real estate crash would occur and that he would sell all real estate. One client had a consultation with Bert and asked how sure he was about that forecast. Bert said, as sure as I have ever been.
The client told Bert several years later that based on that conversation he sold and paid off hundreds of millions of mortgages ahead of the real estate crash. He is now in the energy business and doing very well. In 2013 he got back into real estate, building large apartment complexes. He turned a potential real estate disaster into a bonanza in a new sector, and lately was able to get into real estate again at low prices.
We have many more such stories from clients with equally interesting and rewarding experiences. For us that is the ultimate reward. Our services are not just for investors, but also for business leaders.
The fact is that the CEO of a firm has to focus on running his business which is more than a full-time job. Having the impartial economic and investment analysis of someone with 40 years of experience in the markets, and is recognized as a MARKET AUTHORITY, is extremely valuable at critical times.
Having the analysis and forecasts of an experienced analyst, someone who has predicted every recession over the last 36 years, is worth a fortune. The fee for such a service is insignificant.