21

The Investment Plans

Dave was familiar with Jerry’s investments, but to make sure he had included everything, he provided Jerry with a list of his holdings for his review. Dave met with John in early May to obtain a list of his investments. Dave wanted to present several options, as well as to make specific recommendations for Jerry and John since their investments were somewhat different.

Dave had reached a point where he wanted to talk about his overall concept with Jerry. Since they both worked in the city, Dave decided to call Jerry and see if he was free for lunch. As it turned out, a lunch meeting Jerry had scheduled had been canceled and he was available. Dave suggested a quiet café near their offices where they could talk in private. They agreed to meet at noon.

Dave arrived just before noon, and Jerry joined him a few minutes later. Dave asked the waiter to seat them in a rear corner booth so they could talk in private. They both ordered sandwiches, and Dave removed a tablet from his briefcase to take notes.

“Did you review the list of your investments I sent?” Dave asked.

“Yes. They look complete,” Jerry replied.

“I plan to call John in a few days to see if he’s received the list I prepared for him,” said Dave. “I’ve developed three plans for us to consider. I’d like your gut feeling and to see if you have any other concepts that I should develop.”

The first plan simply moved their assets into money market investments. For IRA-type investments, Dave suggested creating a self-directed IRA account to hold the proceeds using a direct rollover. This would avoid any adverse tax effects of the investment changes. This plan would offer a safe harbor until the crisis was over. There was a low risk of market fluctuation, and the investments would earn the rate the money market accounts were paying at the time.

The second plan would be to convert their assets to gold during the period of the downturn. This option held the possibility to realize capital appreciation if the price of gold increased because of the crisis in the Middle East. It, too, was a safe hedge against a loss and had the possibility of some gain during the crisis.

The third plan would be to convert IRA assets to a safe harbor, similar to the other two plans, and sell the after-tax investments to fund the required margin for the short sale of stocks that would be expected to drop in price during the crash. When the price of the securities that were sold fell short and a temporary bottom, or lull, took place, the short sales would be covered and the profits invested in a safe-harbor investment to protect the gain.

Jerry suggested that when they considered the best option for each family, they might use portions of all three plans. Dave agreed and pointed out that the plan for their parents’ assets could be very different from their own plan. They agreed to have a meeting of the six adults and try to develop more specific plans for each situation. Jerry said, “I’ll ask Jackie to set up dinner at our house within the next several weeks.”

“That sounds fine,” Dave replied. They finished their lunch and headed back to their offices.

That evening Jerry told Jackie about his meeting with Dave. She agreed to call the wives to set up another dinner meeting. Jerry suggested the end of June to give Dave time to get his plans prepared.

Jackie called Mary later that evening to see what would fit her calendar, and Mary suggested they have the dinner meeting at her house on the last Saturday in June. Jackie agreed and told Mary she would call Alice to see if that met with their schedule.

When Jackie finished the dinner dishes and got the kids settled, she called Alice. Dave answered, and Jackie asked him if that was OK with them to review the investment options. He took a minute to talk with Alice and confirmed that would be fine. Jackie told him the meeting would be next door at Mary and John’s home at 8:00 p.m. He asked if they should bring anything. Jackie responded, “Just some good ideas.”