Author Topic: The Janitor with $8million  (Read 10616 times)

act0fgod

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The Janitor with $8million
« on: February 10, 2015, 12:41:43 AM »
Saw this article on the front of MSN news where a janitor amassed over $8million. 
http://www.msn.com/en-us/money/savingandinvesting/heres-how-a-janitor-amassed-an-dollar8-million-fortune/ar-AA9bo3m
No earth shattering news but there were two points in the article/video that I wondered about. 

1) Why would someone want to die with $8million?  My wife and I were running numbers on http://www.firecalc.com/ and with cutting savings in half until retiring and then tripling our current spending in retirement the average on the calculator has us amassing over 15million by 80 and over 25million by 90.  I know people here would say retire now but we enjoy our work and want to reach the point where we are eligible for our pensions.  Instead we are going to start spending greater amounts on things we actually enjoy (travel, hobbies and likely kids here soon) but not sure if we will cut our savings in half and can't see how we could triple our current spending in retirement.

2) The lady at the end says it's unreasonable to expect the growth in the stock market observed in the last 40 years.  I'm not sure where I stand on this position but she seems to discount the power of the live frugal and save mentality.  Thoughts?

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Re: The Janitor with $8million
« Reply #1 on: February 10, 2015, 01:52:25 AM »
Impressive story. I was about to say that should convince naysayers but I read the comments and alas, it did not. They either said he lived like a pauper, he was dumb because he died with that much money, or that it isn't possible to save money like that anymore.

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Re: The Janitor with $8million
« Reply #2 on: February 10, 2015, 06:48:21 AM »

1) Why would someone want to die with $8million? 

It sounded like he gave a lot of it to community organizations upon his death.  Maybe his plan was to make sure he made a difference after he left the world. 

OutBy40

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Re: The Janitor with $8million
« Reply #3 on: February 10, 2015, 07:37:45 AM »
Some people don't have to TRY to be frugal - to some of us, the appeal of amassing "stuff" just holds no value.  Apparently, this was one of those people.  Impressive story, no doubt.

jackiechiles2

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Re: The Janitor with $8million
« Reply #4 on: February 10, 2015, 07:42:59 AM »
Looks like a good investment strategy is investing in stocks that pay dividends-not that that's news to anyone.

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Re: The Janitor with $8million
« Reply #5 on: February 10, 2015, 08:02:19 AM »
2) The lady at the end says it's unreasonable to expect the growth in the stock market observed in the last 40 years.  I'm not sure where I stand on this position but she seems to discount the power of the live frugal and save mentality.  Thoughts?

Quote at the end is from someone who owns an asset management firm.  Of COURSE she wants us to believe that getting good returns on our own is going to get harder!

going2ER

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Re: The Janitor with $8million
« Reply #6 on: February 10, 2015, 08:20:39 AM »

1) Why would someone want to die with $8million? 

2) The lady at the end says it's unreasonable to expect the growth in the stock market observed in the last 40 years.  I'm not sure where I stand on this position but she seems to discount the power of the live frugal and save mentality.  Thoughts?

1)It may not be that he "wanted" to die with $8 million. He may have just been a saver that did not live a consumerist lifestyle and with compound interest, that is what he ended up with.

2)When he made his investments there was no guarantee that they would pay off, same as now. You hope that you have a good balance, but we don't know what the future will bring and maybe we will see that growth again? maybe not? But we do know that if you don't invest and save you won't see any return.

ltt

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Re: The Janitor with $8million
« Reply #7 on: February 10, 2015, 08:55:52 AM »
I'm not sure I would trust the advice of the woman at the end of the article.  There are not enough specifics in this article to know how he saved/invested/lived, etc.

skyrefuge

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Re: The Janitor with $8million
« Reply #8 on: February 10, 2015, 09:37:48 AM »
Looks like a good investment strategy is investing in stocks that pay dividends

No, it shows that a good investment strategy is to invest in stocks. Full stop. Sure, limiting himself to dividend-paying stocks wasn't the worst thing that he could have done, but he likely would have been better off just investing in the stock market as a whole (ignoring the fact that broad market-based investing was difficult/impossible for much of his life!)

If he had invested $10k in 1992 in an equal-weighted basket of the 6 dividend-paying stocks mentioned in the article (AT&T, Bank of America, CVS, Deere, GE and General Motors), it would be worth $77263 today. GM going bankrupt sure didn't help things!

If he instead had just put that $10k in a total stock market index fund (VTSAX), it would be worth $81208.

Morningstar Growth of 10k chart

2) The lady at the end says it's unreasonable to expect the growth in the stock market observed in the last 40 years.  I'm not sure where I stand on this position but she seems to discount the power of the live frugal and save mentality.  Thoughts?

Even better, on the video, she prefaced this statement with "there's a big risk here". OHMYGOD, you are so dumb! Or evil! Or both! "Risk"?!? Even assuming that she's right about future returns, what is the risk here? That a young janitor today trying to repeat this guy's strategy would only end up with $6M when he died rather than $8M? Oh, shit, better to just not invest at all then!

I also love this in the video:

Mustachian guest: It can be done. In America we need to start believing back in the American dream and stop buying the stuff that's on commercials.
Four hosts whose job it is to sell stuff: .....[crickets]

Eric

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Re: The Janitor with $8million
« Reply #9 on: February 10, 2015, 09:58:39 AM »
2) The lady at the end says it's unreasonable to expect the growth in the stock market observed in the last 40 years.  I'm not sure where I stand on this position but she seems to discount the power of the live frugal and save mentality.  Thoughts?

Even better, on the video, she prefaced this statement with "there's a big risk here". OHMYGOD, you are so dumb! Or evil! Or both! "Risk"?!? Even assuming that she's right about future returns, what is the risk here? That a young janitor today trying to repeat this guy's strategy would only end up with $6M when he died rather than $8M? Oh, shit, better to just not invest at all then!

No, it's better that you invest with me because I'm the expert and can manage this risk for you.  All for the low, low fee of 2%.

ChrisLansing

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Re: The Janitor with $8million
« Reply #10 on: February 10, 2015, 06:39:12 PM »
Looks like a good investment strategy is investing in stocks that pay dividends

No, it shows that a good investment strategy is to invest in stocks. Full stop. Sure, limiting himself to dividend-paying stocks wasn't the worst thing that he could have done, but he likely would have been better off just investing in the stock market as a whole (ignoring the fact that broad market-based investing was difficult/impossible for much of his life!)

If he had invested $10k in 1992 in an equal-weighted basket of the 6 dividend-paying stocks mentioned in the article (AT&T, Bank of America, CVS, Deere, GE and General Motors), it would be worth $77263 today. GM going bankrupt sure didn't help things!

If he instead had just put that $10k in a total stock market index fund (VTSAX), it would be worth $81208.

Morningstar Growth of 10k chart

2) The lady at the end says it's unreasonable to expect the growth in the stock market observed in the last 40 years.  I'm not sure where I stand on this position but she seems to discount the power of the live frugal and save mentality.  Thoughts?

Even better, on the video, she prefaced this statement with "there's a big risk here". OHMYGOD, you are so dumb! Or evil! Or both! "Risk"?!? Even assuming that she's right about future returns, what is the risk here? That a young janitor today trying to repeat this guy's strategy would only end up with $6M when he died rather than $8M? Oh, shit, better to just not invest at all then!

I also love this in the video:

Mustachian guest: It can be done. In America we need to start believing back in the American dream and stop buying the stuff that's on commercials.
Four hosts whose job it is to sell stuff: .....[crickets]

I bet he let the dividends reinvest automatically.  I bet DRIP investing is a big part of his getting to $8 million. 

skyrefuge

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Re: The Janitor with $8million
« Reply #11 on: February 10, 2015, 07:52:32 PM »
I bet he let the dividends reinvest automatically.  I bet DRIP investing is a big part of his getting to $8 million.

Well yeah, the reinvestment of earnings is the key to compounding wealth-snowball that is the stock market, and he would have been an investing dumbass if he'd just spent all his dividends instead. But you don't need dividend-paying companies to achieve that snowball; non-dividend payers will compound your wealth just as well (or even better), by reinvesting their earnings without needing to involve you.

Again, focusing on the dividends is missing the forest for the trees. It's like theorizing that Tampa, Orlando, and Miami have warm weather because they're three of the cities in Florida that have names that end in vowels. No, they have warm weather because they're cities in Florida. This guy got to $8 million because he invested in the stock market.

ChrisLansing

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Re: The Janitor with $8million
« Reply #12 on: February 11, 2015, 12:33:29 AM »
I bet he let the dividends reinvest automatically.  I bet DRIP investing is a big part of his getting to $8 million.

Well yeah, the reinvestment of earnings is the key to compounding wealth-snowball that is the stock market, and he would have been an investing dumbass if he'd just spent all his dividends instead. But you don't need dividend-paying companies to achieve that snowball; non-dividend payers will compound your wealth just as well (or even better), by reinvesting their earnings without needing to involve you.

Again, focusing on the dividends is missing the forest for the trees. It's like theorizing that Tampa, Orlando, and Miami have warm weather because they're three of the cities in Florida that have names that end in vowels. No, they have warm weather because they're cities in Florida. This guy got to $8 million because he invested in the stock market.

There must be a little more to it than that because many people have "invested" in stocks and lost money.    Apparently he was a long term investor, not someone who sold every time the price dropped.     He also seems to have preferred blue chips.    He many have done better with other methods/preferences, but he may have done much worse too.   From what little detail there is in the news story, it seems he was focused on relatively safe stocks.   It seems to have worked.   

Yes, I agree, the biggest takeaway from the story is that he saved and invested in stocks.     

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Re: The Janitor with $8million
« Reply #13 on: February 11, 2015, 12:39:11 AM »
There must be a little more to it than that because many people have "invested" in stocks and lost money.    Apparently he was a long term investor, not someone who sold every time the price dropped.     He also seems to have preferred blue chips.    He many have done better with other methods/preferences, but he may have done much worse too.   From what little detail there is in the news story, it seems he was focused on relatively safe stocks.   It seems to have worked.   

Yes, I agree, the biggest takeaway from the story is that he saved and invested in stocks.   

Can we please not get into an argument regarding indexing vs stock picking and/or total market vs value investing? That's a topic for the Investor's section of the forum. FWIW, there is some data supporting value investing, but there is also a ton supporting NOT picking stocks. So, you're both right, to a certain extent.

The key points to this story are that the dude lived a reasonable life, saved the excess, and gave back to the community that provided him his livelihood.

Kaspian

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Re: The Janitor with $8million
« Reply #14 on: February 11, 2015, 10:41:58 AM »
2) The lady at the end says it's unreasonable to expect the growth in the stock market observed in the last 40 years.  I'm not sure where I stand on this position but she seems to discount the power of the live frugal and save mentality.  Thoughts?

I think it's "unreasonable" to expect the growth of the last 3 years, but 40?  If 40 years isn't a decent sized sample of data to draw a fairly reasonable conclusion from, I'm not sure what is.  The S&P 500 has been around since 1957. 40 years is a sample of 70% of its history. I can live with that as a relative growth benchmark.

And "risk"?  The actual risk of not investing is the loss of capital gains and devaluation of your savings due to inflation.

One Noisy Cat

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Re: The Janitor with $8million
« Reply #15 on: February 11, 2015, 03:44:42 PM »
   The asset manager quoted says don't expect returns like we've had the last 40 years. Fine, but would she have forecasted great gains ahead in 1975 when the DJIA was essentially flat for a decade?

Poorman

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Re: The Janitor with $8million
« Reply #16 on: February 11, 2015, 04:26:42 PM »
2) The lady at the end says it's unreasonable to expect the growth in the stock market observed in the last 40 years.  I'm not sure where I stand on this position but she seems to discount the power of the live frugal and save mentality.  Thoughts?

I think it's "unreasonable" to expect the growth of the last 3 years, but 40?  If 40 years isn't a decent sized sample of data to draw a fairly reasonable conclusion from, I'm not sure what is.  The S&P 500 has been around since 1957. 40 years is a sample of 70% of its history. I can live with that as a relative growth benchmark.

And "risk"?  The actual risk of not investing is the loss of capital gains and devaluation of your savings due to inflation.

Bonds have been in a bull market over most of that time with declining interest rates providing wind for the sails of the stock market.  That won't be the case over the next 40 years.  When interest rates decline from 19% to less than 2% it tends to juice the returns of every asset class.  What happens when rates go from 2% to the mid-teens again?  We'll find out eventually, but the lady is probably correct that returns will be lower.

dude

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Re: The Janitor with $8million
« Reply #17 on: February 12, 2015, 08:35:02 AM »
That's a fairly widely-held sentiment, but as with all such sentiments, they are worth exactly nothing.  Nobody knows what the future holds. period.  It could be double-digit returns, or flat, or negative.  Anyone who says they know is just flat-out speculating.

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Re: The Janitor with $8million
« Reply #18 on: February 13, 2015, 08:50:58 AM »
That's a fairly widely-held sentiment, but as with all such sentiments, they are worth exactly nothing.  Nobody knows what the future holds. period.  It could be double-digit returns, or flat, or negative.  Anyone who says they know is just flat-out speculating.

You forgot to drop the mic. Thanks for ending that ridiculous argument.

anisotropy

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Re: The Janitor with $8million
« Reply #19 on: February 15, 2015, 08:04:08 AM »
Something doesn't quite add up for me. To get to 8M from 0 it roughly means "investing 300 a month at an 8% rate over 65 years".
It also implies he had ~$1 million 30 years ago on a janitor's salary for 40 years (assuming worked from 20 to 60).

I have no clue what a janitor's salary was in 1950s to 80s, but I would guess it was in the neighborhood of 5k-10k/yr (edit, 10k-25k is way too high). Our office cleaning lady made about 35k a year in 2014. Given all of the above, I doubt very much he had earned a janitor's wage all his life, and he probably had some sort of income that we are not aware of.

Then I found these:
http://edition.cnn.com/2015/02/05/us/vermont-frugal-man-donates-millions/
http://www.huffingtonpost.com/2015/02/04/man-leaves-millions-to-library_n_6616416.html

"Read was in the Army during World War II before working as a mechanic with his brother for many years. After the garage was sold, Read could have taken some time to relax, but "he didn't take to retirement very well," Rowell said."

Well, that solved the mystery for me. Mr. Read retired from his part-time janitor position in 1997. This would mean he had worked as a mechanic after 1945 to likely 70s or 80s, the biggest boom period America had ever seen. I believe that is how he was able to be a millionaire by the 1980s. Mr. Read was married but his wife died in 1970s and I could not find any mention of children.

So now we have a much clearer picture of his life:
1. Mechanic (perhaps even gas/service station co-owner) for 25 years
2. Invested in Stock Market
3. No children
4. Then worked part-time as a janitor as "he didn't take to retirement very well".

Sure his frugal ways played a major role in becoming wealthy, but I would argue that 1 and 2 (and maybe 3) played a even bigger role. And 4 is just a headline grabber, all of these has nothing to do with his part-time job as a janitor.

so no, his story is not as amazing as the media would like us to believe, but hey, who wants to read a boring story? If anything this is an advertisement for the financial industry to get people to invest. It's funny that the avg/overall market rose more than the ones mentioned in the article over the last 30 years.
« Last Edit: February 15, 2015, 12:54:36 PM by anisotropy »

ChrisLansing

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Re: The Janitor with $8million
« Reply #20 on: February 15, 2015, 08:40:30 AM »
Something doesn't quite add up for me. To get to 8M from 0 it roughly means "investing 300 a month at an 8% rate over 65 years".
It also implies he had ~$1 million 30 years ago on a janitor's salary for 40 years (assuming worked from 20 to 60).

I have no clue what a janitor's salary was in 1950s to 80s, but I would guess it was in the neighborhood of 10k-25k/yr. Our office cleaning lady made about 35k a year in 2014. Given all of the above, I doubt very much he had earned a janitor's wage all his life, and he probably had some sort of income that we are not aware of.

Then I found these:
http://edition.cnn.com/2015/02/05/us/vermont-frugal-man-donates-millions/
http://www.huffingtonpost.com/2015/02/04/man-leaves-millions-to-library_n_6616416.html

"Read was in the Army during World War II before working as a mechanic with his brother for many years. After the garage was sold, Read could have taken some time to relax, but "he didn't take to retirement very well," Rowell said."

Well, that solved the mystery for me. Mr. Read retired from his part-time janitor position in 1997. This would mean he had worked as a mechanic after 1945 to likely 70s or 80s, the biggest boom period America had ever seen. I believe that is how he was able to be a millionaire by the 1980s. Mr. Read was married but his wife died in 1970s and I could not find any mention of children.

So now we have a much clearer picture of his life:
1. Mechanic (perhaps even gas/service station co-owner) for 25 years
2. Invested in Stock Market
3. No children
4. Then worked part-time as a janitor as "he didn't take to retirement very well".

Sure his frugal ways played a major role in becoming wealthy, but I would argue that 1 and 2 (and maybe 3) played a even bigger role. And 4 is just a headline grabber, all of these has nothing to do with his part-time job as a janitor.

so no, his story is not as amazing as the media would like us to believe, but hey, who wants to read a boring story? If anything this is an advertisement for the financial industry to get people to invest. It's funny that the avg/overall market rose more than the ones mentioned in the article over the last 30 years.


MECHANIC DIES WITH 8 MILLION DOLLARS   Still seems like a pretty grabby headline to me.     Being a mechanic isn't really like being an orthodontist, in terms of income.     Granted the word janitor probably makes for a better headline but it's still quite a story even if he was a mechanic most of his working life. 

STOCK BROKER DIES WITH 8 MILLION DOLLARS - Now there is a boring story.   

anisotropy

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Re: The Janitor with $8million
« Reply #21 on: February 15, 2015, 12:51:09 PM »

MECHANIC DIES WITH 8 MILLION DOLLARS   Still seems like a pretty grabby headline to me.     


Only to the ones unaware of how lucrative the business can be. Not to mention Mr. Read was likely a partial owner of the shop with his brother. But let's work backward and see how much he might have made.

Since 1975 (conveniently the year he "retired") the market has risen around 20 times.

This means Mr. Read's net worth was roughly $400k by 1975. Without knowing how much he received from the sale of the shop, we can only assume he was making on average 10k to 25k a year as a mechanic between 1950 and 1975. That translates to anywhere between 65k to 85k a year in today's dollar.

So no, he was never the poor minimum wage worker some thought he was. He was just like most people on this forum, middle class, perhaps a small business owner, lived frugally, and invested in stocks.

In fact, it is very misleading to use Mr. Read's case as a success story to people making less than 50k/year today. But no one wants to know that.

One Noisy Cat

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Re: The Janitor with $8million
« Reply #22 on: February 15, 2015, 07:37:11 PM »
Something doesn't quite add up for me. To get to 8M from 0 it roughly means "investing 300 a month at an 8% rate over 65 years".
It also implies he had ~$1 million 30 years ago on a janitor's salary for 40 years (assuming worked from 20 to 60).

I have no clue what a janitor's salary was in 1950s to 80s, but I would guess it was in the neighborhood of 5k-10k/yr (edit, 10k-25k is way too high). Our office cleaning lady made about 35k a year in 2014. Given all of the above, I doubt very much he had earned a janitor's wage all his life, and he probably had some sort of income that we are not aware of.

Then I found these:
http://edition.cnn.com/2015/02/05/us/vermont-frugal-man-donates-millions/
http://www.huffingtonpost.com/2015/02/04/man-leaves-millions-to-library_n_6616416.html

"Read was in the Army during World War II before working as a mechanic with his brother for many years. After the garage was sold, Read could have taken some time to relax, but "he didn't take to retirement very well," Rowell said."

Well, that solved the mystery for me. Mr. Read retired from his part-time janitor position in 1997. This would mean he had worked as a mechanic after 1945 to likely 70s or 80s, the biggest boom period America had ever seen. I believe that is how he was able to be a millionaire by the 1980s. Mr. Read was married but his wife died in 1970s and I could not find any mention of children.

So now we have a much clearer picture of his life:
1. Mechanic (perhaps even gas/service station co-owner) for 25 years
2. Invested in Stock Market
3. No children
4. Then worked part-time as a janitor as "he didn't take to retirement very well".

Sure his frugal ways played a major role in becoming wealthy, but I would argue that 1 and 2 (and maybe 3) played a even bigger role. And 4 is just a headline grabber, all of these has nothing to do with his part-time job as a janitor.

so no, his story is not as amazing as the media would like us to believe, but hey, who wants to read a boring story? If anything this is an advertisement for the financial industry to get people to invest. It's funny that the avg/overall market rose more than the ones mentioned in the article over the last 30 years.


The original story mentions "stepchildren" and the ZsaZsaPost article quotes a stepson. He married when he was 39 and she died 10 years later. No word on how old her children were and whether he had to support them when he worked at the gas station.
   While he may have done better with index funds (although those didn't exist before the mid 1970s), he was someone who DID invest  in the market despite growing up in the Great Depression. And a lot of people in the hospital and library will benefit from this.

Zamboni

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Re: The Janitor with $8million
« Reply #23 on: February 15, 2015, 08:14:26 PM »
Meh, the richest guy in my brother's town is also a janitor.  He is an immigrant who worked most of his life 2 shifts:  1st shift at the local boat factory, second shift at the local high school.  So 80 hours a week.  In all of his spare time (basically weekends) he bought residential real estate until he pretty much owned all of the rental property in town.  The boat company eventually got into financial trouble and asked him for a loan; he refused.

Basically what it boils down to is that neither of these guys spent much money at all outside of their investments.

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Re: The Janitor with $8million
« Reply #24 on: February 16, 2015, 02:19:27 AM »
Basically what it boils down to is that neither of these guys spent much money at all outside of their investments.

Bingo. Let's not get caught up on the details.

clarkfan1979

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Re: The Janitor with $8million
« Reply #25 on: February 16, 2015, 05:38:26 AM »
I was a little surprised that Diane made a prediction regarding the stock market over the next 40 years. How can anyone predict anything accurate over that length of time? I think the audience must be largely uneducated about investing and it's a scare tactic to drive business.