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The Dark Side of Student Loans
Issue #528, June 25, 2018

The Cost of Out-sourcing Convenience
Issue #527, June 18, 2018

Social Security: 66 or 70?
Issue #526, June 11, 2018

Student Loans: There’s (Unfortunately) a Lot More!
Issue #525, June 04, 2018

Co-signing a Note
Issue #524A, May 31, 2018

The Knight Frank Luxury Index and Collectables
Issue #524, May 28, 2018

The Importance of Diversification: The Myth of Diversification
Issue #523, May 21, 2018

How to Save Thousands on Your Food Bill
Issue #522, May 14, 2018

MoviePass and Other Things
Issue #521A, May 10, 2018

Degree Inflation, Long Training Periods, and “Certification”  Part III
Issue #521, May 07, 2018

Degree Inflation, Long Training Periods, and Certification” Part II of III
Issue #520, April 30, 2018

Follow-up on Several Things
Issue #519A, April 25, 2018

Degree Inflation, Long Training Periods, and “Certification”: Part I of II
Issue #519, April 23, 2018

The Kids Birthday Party Hustle
Issue #518A, April 18, 2018

A Pension Question: Part II of II
Issue #518, April 16, 2018

A Physician is an Executive
Issue #517A, April 11, 2018

A Pension Question: Part I of II
Issue #517, April 09, 2018

Is the Correction Over?
Issue #516A, April 05, 2018

Used Car Dealers, Student Loans, the Chinese, and Uncle George’s Rule
Issue #516, April 02, 2018

Starter Homes
Issue #515, March 26, 2018

Redecorating: Beware!
Issue #514, March 19, 2018

NASDAQ Closes at Record High
Issue #513, March 12, 2018

A 40% Chance
Issue #512, March 05, 2018

Several Things
Issue #511, February 27, 2018

Human Capital, Education and Wealth
Issue #510, February 19, 2018

Another Stock Market Update
Issue #509A, February 18, 2018

Some Thoughts on Savings
Issue #509, February 12, 2018

A Stock Market Upfate
Issue #508S, February 10, 2018

Who Can You Trust? Part II of II
Issue #508, February 05, 2018

The Christmas Decoration Pre-worn Jeans Hustle
Issue #Interim Bulletin #507A, February 03, 2018

2018 Outlook for Financial Markets
Issue #507, January 29, 2018

Who Can You Trust? Part I of II
Issue #506, January 22, 2018

Life Insurance Settlements
Issue #505, January 15, 2018

Commodities and Buying the Breakout
Issue #504, January 08, 2018

Buffett Wins His Bet
Issue #503A, January 04, 2018

Practice Real Estate and Free Agency
Issue #503, January 01, 2018

Outlook for 2018: Part III: Stocks and Bonds
Issue #502, December 25, 2017

My Outlook for 2018: Part Ii: Precious Metals
Issue #501A, December 21, 2017

Outlook for 2018: Hard Assets: Part I of III
Issue #501, December 18, 2017

More Thoughts on Bitcoin
Issue #500A, December 14, 2017

Fees and Good Relations with Bankers
Issue #500, December 11, 2017

Salvator Mundi
Issue #499A, December 07, 2017

Should You Rent or Own a Home?
Issue #499, December 04, 2017

A Gift Subscription
Issue #Interim Bulletin #498A, December 02, 2017

Stocks vs Real Estate: Asset Allocation: Part II of II
Issue #498, November 27, 2017

When Good Enough is Fine
Issue #497A, November 22, 2017

Stocks vs Real Estate: Asset Allocation. Part I of II
Issue #497, November 20, 2017

The Saudi Arrests and the Perils of Foreign Investing
Issue #496, November 13, 2017

Gambling and Las Vegas
Issue #495, November 06, 2017

Some Tips on Auto Insurance
Issue #494, October 31, 2017

Bitcoin and the Digital (Crypto) Currencies
Issue #493, October 23, 2017

The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017

Student Loans: But Wait, There’s More!
Issue #452, January 13, 2017

A Second Home
Issue #Interim Bulletin #451A, January 04, 2017

The Consumer Confidence Index
Issue #451, January 02, 2017


By Robert M. Doroghazi, M.D., F.A.C.C.

Leasing a Vehicle: Don’t!

Issue #471, May 22, 2017

    My opinion on leasing a vehicle can be summed up in one word:
    I am confident I’ve convinced any long-time reader of this newsletter not to lease a vehicle. The reason I write on this subject now is that I gave a talk in Youngstown, Ohio on Thursday (see below), and one of the attendees was quite positive on leasing, so it’s worthy of another discussion.
    Let’s start with the basics. You read about Duesenbergs and Ferraris that sell for 6 and 7 figures. Those are collectables. The car you drive back and forth to work every day is a depreciating asset. It will eventually be worth zero. You will never accumulate wealth buying depreciating assets. To the contrary: it is your goal to spend as little as possible, to minimize your losses.
    The best way to buy your automobiles is to pay cash. Many people now take 6 or 7 year notes to keep the payments low, to buy a vehicle they can’t afford in the first place. Consider: you buy a $30K car and take a 7-year note. After 7 years, you’ve paid $40K for a vehicle now worth, at most, about $12 or 13K. That’s not astute investing.
    From my reading, the only reason a person would lease a vehicle is because they are seduced into wanting a car they can’t afford otherwise. Here are the costs of leasing:
    1) you pay for the depreciation of the vehicle over the term of the lease, say 3 years. Problem: the depreciation of a vehicle is the greatest over the first 3 years. A vehicle loses about one-quarter to one third of its value over this period. In their spectacular book The Millionaire Next Door, Stanley and Danko recommend that the most cost-effective option is to buy a 3-year old top of the line Mercedes or BMW and drive it until it dies in 20 or 25 years, because you avoid the period of most rapid depreciation. By re-leasing every 3 years, you repeatedly expose yourself to this period of rapid depreciation. It’s like a medicine with a first-dose side effect, say the flush of taking niacin. You take a dose, flush and stop, and then take another dose and flush. You repeatedly expose yourself to the first dose side effects.
    2) You are borrowing the value of the car, so there is a finance (rent) charge.
    3) And as they say on the TV commercials, “But wait, there’s more”. The dealer, has to make a few bucks (actually, more than a few bucks), so their profit is added in.
    I believe leasing a car is just one more of the socially acceptable hustles of modern society meant to separate a high-liver from their money. You will save thousands by paying cash for the auto you can afford rather than leasing.
    I want to thank Drs. Peter Devito and Kim Howe for inviting me to speak in Youngtown. It’s the type of audience I like most, the students, House Staff and Fellows. You have no idea how often people say “I wish I heard this 20 years ago”.
    Two weeks ago Cummins Engine (CMI) reported great results and gapped up to a new high on good volume. It quickly faded, and filled in the gap. If it falls further over the next few weeks, this will be an example of a false breakout.

    Compare this to John Deere (DE). It broke out to a new 8-year high on Trump’s election (The longer the base or consolidation period, the more powerful the breakout to a new high—or a new low). It continued to trend higher, and on Friday reported blow-out results, ending the week up almost 7%. In the Barron’s interview last week (5/15), DE was specifically mentioned. They dominate the North American big tractor market, making it difficult for a competitor to break in, and have such a wide and imbedded product base, that even when sales are slack, the service department provides steady income. In fact, this point applies to many high-end durable goods, from autos to CT scanners. Sales produce about 50% of the profits, service produces 50%, and has higher profit margins.
    I do our Rotary programs. Last Tuesday was Steven Watts, a professor here at the U. of Missouri, who has written multiple NY Times best sellers, including The Magic Kingdom: Walt Disney and the American Way of Life, The People’s Tycoon: Henry Ford and the American Century (his best-seller), Self-Help Messiah: Dale Carnegie and Success in Modern America, and his current release JFK and the Masculine Mystique: Sex and Power on the New Frontier.
    RMD comment: It’s quickly obvious when you meet someone at the top of their field. The really great authors have insights and can turn a phrase that you never could.
    Someone asked “did Kennedy write Profiles in Courage (winner of the 1957 Pulitzer Prize)”. Watts thought the most likely scenario was that Kennedy had the idea and sketched the outline while he was laid up 4 or 5 months after back surgery. There was then a team that researched each particular subject and wrote the basics. Ted Sorenson (with Kennedy’s oversight) produced the final product. Watts further notes that 1) Papa Joe Kennedy immediately bought 50,000 copies, catapulting Profiles to the top of the NY Times best-seller list. 2) Papa J. also put pressure on the Pulitzer Prize committee.
    JFK once famously said, “Life is unfair”.
    RMD comment: yeah, for the other guy.
    Met a man in Las Vegas who was born in the Ukraine in 1943. After the war, his family lived in a refugee camp in France for 4 years. It was time to move on. Some wanted to go back to Russia. His dad said “you’ll be sent to Siberia”. They went back—and were sent to Siberia. His family moved to Canada. He speaks 6 languages, and runs a business that employs several hundred.
    He laments the current work ethic. He said people used to knock on his door for jobs. Now he can’t fill all the jobs with people willing to work. 

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