Imagine being on a pro sports team that wins every game.
This is kind of like being on the Harlem Globetrotters. Of their 22,000 games they’ve only lost 345 times to the Washington Generals. That’s a 98.5% win percentage.
“Of course!” You scoff. “The generals are supposed to lose.”
But the fans love to watch the Globetrotters great basketball skills. The producers of the event make money off of them. And the players enjoy prestige, fame and really fat paychecks every single day.
Doubt the quality of the Globetrotters wins all you want. But there is a legit team, with an equally impressive winning percentage, in the financial world. You can join it too! But first you’ve got to know what teams you want no part of.
The Financial League Lineup
There are three teams in the financial league lineup. We all have the opportunity to choose the team we are on.
Team 1: Consumers. This team is the one that buys products and services. The cars, the houses, the latest gadgets, the iPhone 86.2++ (blackboard size), etc. They’re the ones spending the money.
Team 2: Producers. This team is the one that makes the items that the consumers buy. They are likewise the ones that create jobs and hire consumers to work for them.
Team 3: Bankers. This is the team that keeps the entire league going. They finance the consumers, enabling them to purchase their goods and services. They finance the producers, enabling them to produce those goods and services.
The Banking Globetrotters
The banking team is the Harlem Globetrotters of this league. They are clearly the team with the greatest chance of winning.
The consumers desperately need their help to keep playing. Mortgage the mansion? Finance the Ferrari? Same with the producers. They desperately need the bankers’ help. Make the machines? Finance the factories? Sell the stuff?
Give them credit – the bankers are the home team.
And what’s more, the Banktrotters are terrific passers. They use borrowed money to lend to the other teams, tie up the other guys’ collateral, and shift the risk to the borrowers. When the others can’t pay back, they get the collateral. When the other teams pay back, with interest, they get even more money. And they use that money to spin into even more profits.
But don’t the Globetrotters lose sometimes, too?
Sure. It happens as often as the Washington Generals pick up a win. Rarely, very rarely, those on the banking side, come up on the wrong end of a contest. Bankers coming out on the losing end is so rare, it’s barely considerable.
Yes, there is an occasional foreclosure that doesn’t resell, or a bankruptcy where collateral can’t be fully recouped. But that sort of thing is so rare as to be negligible. Even the mortgage meltdown a few years back wasn’t enough to dethrone 95% of the banks involved.
As long as consumers need money and producers need money, the games go on and the Banktrotters keep on winning. And that streak will go on and on.
Let’s go courtside
Just watch this action:
The producers decide to make a product that they believe the consumers will love. They take a loan of $100K with 10% interest from the bankers to finance it.
The consumers love the product, and buy it like crazy with their credit cards–at a 13% credit card interest rate.
The producers get their profits from the consumer, and pay back their 100K loan with 10% interest to the bankers. The consumers get their desired product, pay the price’s markup to the producers and the interest for the credit to the bankers.
The banker takes that money from both teams and lends again to more producers and consumers. This means more money for the bankers.
Can’t you just hear them whistling “Sweet Georgia Brown?”
There’s always room for one more on the winning team
Most people assume that you need to be a Warren Buffet to join the Banktrotters’ team. Or started studying balance sheets from your crib. Not so. You don’t have to be born into wealth or have a lifetime of hedge fund managing experience.
As a private lender, you can be on the banking team. You don’t have to have a ton of money to get money to work for you. You need the will and the smarts to spot your dollar bills, always sprinting, and always earning more slamdunks for you.
As long as consumers need the bankers to finance their wants, and the producers need the bankers to finance their production, the bankers always win. And so will you.
Is everyone supposed to know what this tune is?
not a sentence