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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

Social Security
Issue #450, December 26, 2016

My Outlook for 2017: Part II of II
Issue #449, December 19, 2016

My Outlook for 2017: The Market
Issue #448, December 12, 2016

Medicine in 20 Years
Issue #447, December 05, 2016

Higher Interest Rates
Issue #446, November 28, 2016

Trump and the Markets: The Bad and Ugly
Issue #445A, November 23, 2016

Trump and the Markets: The Good
Issue #445, November 21, 2016

Negative Trends: The Suits aren’t Makin’ Steel
Issue #444, November 16, 2016

The New DOJ Fiduciary Rule
Issue #443, November 07, 2016

Barron’s Conference, Part IV of IV
Issue #442, October 31, 2016

Barron’s Conference, Part III of IV
Issue #Interim Bulletin #441A, October 26, 2016

Barron’s Conference, Part II of IV
Issue #441, October 24, 2016

Barron’s Conference, Part I of IV
Issue #440, October 20, 2016

This Newsletter
Issue #439A, October 12, 2016

Memoirs of US Grant: Vol II
Issue #439, October 10, 2016

More Points on Collecting, Investing and the Economy
Issue #Interim Bulletin #438A, October 05, 2016

Personal Memoirs of US Grant
Issue #438, October 03, 2016

Ideas for a High School Part-Time Job
Issue #Interim Bulletin #437A, September 29, 2016

Collecting, Investing, and the Economy
Issue #437, September 26, 2016

Free College
Issue #436A, September 22, 2016

A Military Commitment to Pay for Med School
Issue #436, September 19, 2016

When a CD isn’t a CD
Issue #435, September 12, 2016

I Made a Mistake
Issue #Interim Bulletin #434A, September 07, 2016

What is Your Spare Time Worth?
Issue #434, September 05, 2016

Credit Cards and Bonus/Loyalty Points
Issue #433, August 29, 2016

The Write-off of Student Loans
Issue #Interim Bulletin #432A, August 25, 2016

412 Retirement Plans
Issue #432, August 22, 2016

Join the Club
Issue #Interim Bulletin #431A, August 18, 2016

The Case for Precious Metals and Hard Assets
Issue #431, August 15, 2016

When the US went off the Silver Standard
Issue #430, August 08, 2016

Why NOT to Open a Restaurant
Issue #429, August 01, 2016

Some Tips on Life Insurance
Issue #428, July 25, 2016

More Observations on Negative Interest Rates
Issue #427, July 18, 2016

Issue #426, July 11, 2016

Is a PhD Worth It? Part II of II
Issue #425, July 04, 2016

Is a PhD Worth It? Part I of II
Issue #424, June 27, 2016

Avoid Part-time real Estate Agents
Issue #423, June 20, 2016

Issue #422, June 13, 2016

The Problem with Auction Reserves
Issue #421, June 06, 2016

Make Full Use of Your Capital Investments
Issue #420, May 30, 2016

The Fed’s Announcement
Issue #419, May 23, 2016

Quit While You’re Ahead: A True Story
Issue #418, May 16, 2016

The Precious Metals
Issue #417, May 09, 2016

Negative Secular Trends: Part Ii of II
Issue #416, May 02, 2016

Negative Secular Trends: Part I of II
Issue #415, April 25, 2016

Not Winning is not the same as not Losing
Issue #414, April 19, 2016

Behavioral Economics: Part II: Weaknesses
Issue #413, April 11, 2016

Behavioral Economics: Part I: Valid Points
Issue #412, April 04, 2016

The Most Important Books I’ve Read
Issue #411, March 28, 2016

Secret to Success: Take Risks and do Things Differently
Issue #410, March 21, 2016

The Over-Priced Food Presentation Hustle
Issue #409, March 14, 2016


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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