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In an interview on CNN, Steve Rattner, Obama's auto industry turnaround chief and by background a "private equity guy", said that Romney had used "every trick in the book" He then referred specifically to Romney's $100 million IRA, revealing that he had talked to his fellow industry people and, "None of us had even known that there was a possible trick, if you will." Damn, Mr. Rattner, I wasn't born yesterday. Give it up!
If one makes quick resort to the compound interest tables and/or attempts to place Romney's results in the context of financial industry standards for return on investment one might conclude that $100 million in 33 years is an un-worldly pile of money, even fantastical. Forget that Romney should, respectfully, unearth the golden goose and show it to the American people, and that if he did so even I would vote for him---it's just that when I contemplate Mitt's kind of investment return I don't give a damn who wins this election, I just want to learn the secret tricks of Private Equity---perhaps the most apt term ever coined in the financial industry.
Lest I be accused by Mitt-lovers of misquoting people, the term "golden goose" is one which Mitt himself used in his memoir, "Turnaround"---, to wit, "How could I walk away from the golden goose, especially now that it was laying even more golden eggs." Forget about the goose and the fact that no one has ever seen the goose, I'll settle for one of the eggs---especially one which hatches into a $100 million golden-chick-IRA.
Bill Cohan of Bloomberg in a recent article uses a SEP-IRA figure of $30K a year as Romney's possible contributions through 1999, resulting in $450,000. A quick check of the compound interest tables shows that it takes a return of more than 50% a year for a subsequent 10 years to get you to the $100 millon range by 2010. Even if I use ten times Cohan's figure, $5 million in 1999, it would require annual returns of 25% to produce $100 million. Heretofore, only dictators of banana republics have achieved these kinds of results in general, and specifically, Mitt most likely is the first person in the U.S. to have achieved a result of such magnitude in an IRA---(I think I am safe in that unfounded assertion because if any other person had achieved Romney's results they would certainly not be careless enough to admit it in public.)
In the above example I have most likely left myself wide open for criticism---an interest rate is not the same as an asset appreciation; could be the early years were really loaded; he transferred undervalued assets to his IRA and so what; etc. (Really makes me wonder about those years, '01 and '02). I may be all wet so I invite others to use their own examples of how to grow an IRA to $100 million or more---in fact, $100 million may not be enough, so please enlighten me.
By way of context, some money managers tried to steer people away from Bernie Madoff's fund when it was showing returns of 11%---which was thought suspect. Madoff was at least smart enough not to put a 25% figure out there. As for hedge funds, there are estimates of historical returns all over the map including one which says one could do better by investing in bonds. An acceptable range might be 7-12% on average. As far as the average retirement plan for "you people"---well, that's another subject.
In all sincerity, are we in some kind of time warp here, or a parallel universe? Romney's tax returns are the only way for us to understand the truth about Romney's golden goose and how it informs us, or doesn't inform us, about his potential policy-making. What we are seeing so far in Romney's extra tax breaks for the rich is not comforting. We need to get a look at those golden eggs, Mitt, all of them, including the secrets behind your fantastical IRA. Kidding aside, how the hell did you do it? Even your pals in Private Equity want to know---at least I think they do.