Why I prefer dividend growth stocks

People have asked why I prefer dividend stocks.  Let me count the ways here, here, here, and here.  The reasons summarize my preference for dividend stocks relative to alternatives.  Today I’ll outline why dividend stocks in general and div growth stocks in particular are great investments.

As a Dividend Farmer I strongly subscribe to the following wisdom. 

"The key to success [in investing] lies in avoiding losers, not in searching for winners."  

-- Howard S. Marks

"Avoiding serious loss is a precondition for sustaining a high compound rate of growth."  

-- Roger Lowenstein

"Rule #1:  Never Lose Money; Rule #2:  Never Forget Rule #1."  

-- Warren Buffett

Minimizing risks and avoiding large or frequent losses are critical to growing my nest egg.  I look for stable firms with solid cash flow inertia.  Companies with these characteristics are less risky in my opinion. 

Dividend paying stocks with long histories of payments conform to the stable, solid cash flow, low-risk category for several reasons.  Companies possessing long histories of dividend payments are good; those with long histories of dividend growth are even better.  Here’s why…

Risk Reduction

Reducing or stopping dividend growth or payments results in pain for shareholders and management.  Management teams work hard to avoid the market penalties levied on companies that interrupt their dividend streams.  Because protecting the dividend stream is important it reduces the probability the events or decisions will interrupt the stream thereby reducing investment risk.

Firms paying dividends become relatively conservative with their cash in order to protect the dividend stream.  They can’t be too conservative because that leads to problems as well, but they also become reluctant to take outsize chances with their investments.  Doing otherwise courts disaster.

 

The net result is a measured approach when it comes to corporate investment decisions; firms aren’t likely to throw barrels of cash at low probability, high payout ventures.  This means dividend growers have an inherent brake preventing their investments from hurtling down the road toward financial doom.

Cash-flow & Value Growth

Firms growing their dividend streams provide several channels for building cash value.  The more ways a firm can build value and throw off cash, the less likely there is for plateaus or value declines to occur.  This reduces risk.

Dividend firms do enjoy market appreciation.  Granted, the appreciation for dividend firms is generally lower than that of go-go growth firms.  Then again, the downside volatility for div payers and growers can be much less resulting in a superior long-term advantage for the div crowd.

If I had to assess the probability of dividends being paid out this year, next year, or in five years by a long-running div payer, I believe the odds are generally greater those dividends will continue than are the odds a non-div paying firm will enjoy consistent market appreciation over similar periods.  I’ll take the odds on consistent dividend payments over sporadic up-and-down moves in the underlying stock value every time.

This perspective is extended for dividend growth companies.  If a firm has been slowly growing its dividend each year for 25 years it’s more likely next year’s raise will occur than a market gyration will spin the stock valuation higher.  Extended over 5, 10, 15 years or more of an investing life and the delta in probability for continued dividend growth vs value appreciation widens.

Think of it in terms of expected payouts.  If the probability of a $1,000 annual dividend payment is 100% and the probability of $1,000 in stock doubling during the same year is 50% the expected payouts are $1,000 x 100% = $1,000 for the dividend and $1,000 x 50% = $500 on the strict appreciation side in year one.  Extend this scenario into years 2 through n and consider the widening gap in expected payout.  Once again, the odds are with the dividend stream vs appreciation.

Compound growth is also an important reason I prefer div growth stocks.  Compound growth can be calculated for both dividend and non-dividend payers.  With a non-div stock, however, the value may grow, but that’s it.  If you start with one share at $100 appreciating at 10% annually, you have $110 in value at the end of the first year, but only 1 share.  Value grows but ownership claims do not. 

However, if you have a dividend paying share at $100 that doesn’t appreciate, but offers a 10% dividend, you will have $110 in value at the end of one year and 1.1 shares in ownership claim.  With a dividend payer both value and ownership grow and compound, assuming you reinvest your dividends.  Firms that increase their dividend payments each year add frosting to this compounding advantage.

Forecasting

Last, but not least, I find it easier to measure, manage, and forecast reasonably high probability cash flow streams from dividends than I do the arbitrary value appreciation in the market.  The ability to measure, manage, and forecast dividend flows from a stable firm producing tangible results every quarter or month reduces my investment risk.

 

I have a better chance of predicting the future cash flow stream from a Dividend Champion over the long run than correctly guessing the value of a firm or portfolio in a year, let alone 15.  If a target is out there e.g., retirement, college fund, etc. it helps to see it and have steady aim in order to hit it.  Dividend firms offer that steady aim and dividend growers reach the target with greater speed – both of which are important in achieving my investment goals.

Div Tip #12: Patience pays. So do dividends.

Dividend Tips

“The stock market is designed to transfer money from the active to the patient.”

“Our favorite holding period is forever.”

“Time is the friend of the wonderful company, the enemy of the mediocre.”  

Warren Buffett has been investing successfully for a long time.  If anyone knows what’s required to succeed as an investor, it’s Buffett.  His thoughts above on patient investing are prescient; offering simple, clear guidance for future investing success.

Buffett’s words are time-tested, resulting from experience across a range of investing techniques, strategies, and philosophies.  He’s learned from the best, invested with the best, and offers advice among the best in the business.  Patience wins.

Patience coupled with dividends is a wonderful vehicle for long-term investment success.  In 2018 an estimated $1.36 trillion in dividends were paid out globally.  You don’t have to be active to catch the action; you just have to put out the bucket and wait.  Dividend Farming is a great way to do it.        

Div Tip #11: Minimize losses to maximize gains.

Dividend Tips

Many investors believe they have to swing for the fence in order to have impressive returns over their investing life.  The problem is that hitting it out of the park on a regular basis is incredibly difficult.  The occasional home run won’t be sufficient to offset all the losses, large and small, that happen between the big hits.  Those frequent losses drain your returns and possibly your investment account.

The occasional big return is a low probability event while frequent losses are high probability events.  To pin your long-term investment strategy on a series of low probability wins is betting against the house.  You’re gambling.

Investing in multiple high probability events e.g., dividends, even though smaller in production, produces better long-term results.  Those small, high probability events add up.  They also minimize the possibility of taking an outsized loss which can easily happen chasing big wins.  Large losses are difficult to make up and can put you behind the power curve which is dangerous investment territory.  Avoid the danger.  Minimize your losses to maximize your gains.  Your retirement self will thank your investing self for doing so.   

How to lose $53,900 on a rental town home (Part 7): Lessons

You’ve heard the backstory and the bellyaching.  Below are 8 lessons taken from it.  All can be applied to investing in areas other than real estate and support the 14 Reasons Dividend Stocks Beat Real Estate Investing.

1) Financial Analysis:  When investing, don’t let the wonderful numbers in a spreadsheet hypnotize you.  Pay strict attention to cold, hard cash.  Dividends, anyone?

2) Financing:  Creativity in financing is so named because of the novel ways in which it can empty your pocket.  If the terms seem too good to be true, they are.  Complexity kills.  So does fiction.  Financing not require to get dividends.

3) Leverage:  It looks good on paper and great when it works.  It can be catastrophic when it doesn’t.  You should think about losing your principal and then some with real estate.  If that thought gives you pause - keep thinking, but don’t act.  Getting into similar trouble with stocks is impossible unless you’re foolish enough to use leverage when not needed.  No need for leverage with dividends.

4) Timeframe:  The window of time you anticipate holding an investment in a projected short-term venture is liable to be much longer than imagined.  Count on it.  If you can’t afford to hold the property at least twice as long as you think, you may not want to hold it at all.  However, if you’re a buy and hold investor, short horizons aren’t a problem.  Think dividends stock.

5) Expense Forecasting:  When forecasting expenses, it’s nearly guaranteed your vision of realistic at the beginning will be drastically altered by the end.  Think about a bad end and work back from there.  Minimize, not theorize, expenses at every possible point.  You won’t know where break-even is until you arrive.  Reducing expenses lowers the break-even point, increases margin of safety, and gets to safety faster.  No operating expenses with dividends.

6) Workload:  In most cases, work expands to fill the time available.  With real estate the work can easily expand to fill time you have and time you don’t.  Think about dealing with property issues during holidays, late nights, weekends, family events, and even critical healthcare emergencies.  These challenges happen at the least convenient time you can imagine and those you can’t.  Dividend stocks present no such hardships.

7) Management:  It’s possible to find others willing to manage your real estate or stock investments.  However, hiring said folks to do so can be more expensive than you’d like while providing headaches of a different sort.  Minimize your expense and your headaches by investing in areas that don’t require as much of either to be successful. DIY Dividend Farming.

8) Exit:  It’s possible to find yourself under water with real estate quickly and deeply; to the extent you can’t surface without loss of financial life.  When that happens, good exits don’t exist and even the bad ones consume time and money you might not have.  Dividend stocks can be sold 5 days a week, excluding holidays, any time during the day.  Accessing cash is available with the stroke of a key on a computer.  Exit is a matter of minutes if needed.  Real estate doesn’t offer a ready off-ramp.

Does this mean all real estate investing is evil?  No.  However, it was evil for me for the following reasons:

1) I used too much financial leverage trying to juice my ROI.  Cash flow was an afterthought.

2) My DIY repair skills weren’t sufficiently honed for land-lording.  Operating costs were greater than expected because I had to outsource work.

3) The time soak involved in dealing with a rental property exceeded my estimates.  My quality of life was diminished without a positive financial offset.  I paid dearly to waste my time.

The moral of the story is this:  

If you want to make a small fortune in residential rental properties, start with a large one.

If you have excess time, money, and handyman skills rental real estate may be a great investment vehicle with which to achieve financial freedom.  However, if you’re like me and countless others, dividend investing requires less time and work, it’s less stressful, and a more reliable means of achieving the financial freedom you want. 

How to lose $53,900 on a rental town home (Part VI): Freedom:

No matter how relieved you may be at reaching the conclusion of this series, it can’t compare to the relief of rental property freedom.  Trust me.

By this point I’d held the property for 9 or 10 years.  Rental rates had slowly ticked up to nearly the break-even point on the monthly bank note.  However, rent wasn’t covering operational expenses on top of that so losses continued. 

Property value had been rising slowly but was still under water relative to purchase price.  My LTV was improving but not to the point where bringing less than a 5-figure check to the table to get out was possible.  On the bright side, the tax saving angle was working great.   Gotta love a business in which the tax boondoggle is paying off but nothing else is.

The misery continued into the 11^th year while the rent, value, and LTV metrics improved.  Glacially.  The light was visible at the end of the tunnel but barely.  It was a point at which selling at then market value meant bringing less than $5,000 to the closing table to unload the sinkhole.  That was close enough for government work as far as I was concerned so I listed the property.

 

To help matters, the realtor involved new the history of the property.  She was a kind, gracious soul who offered to reduce her commission by 1.5%.  Bless her heart.  150 basis points doesn’t sound like much, but it meant reducing the check to the lender at close by a like amount since the money saved on realtor commission could be applied to the note.  Again, bless her.

The property was put under contract considerably under original purchase price.  Looking back at the paperwork, the property was originally purchased at $147,000 and sold at $128,000 resulting in a $19,000 equity bath.  Fortunately, the dent that had been put in the note over time reduced the amount left outstanding.  If recall serves correctly, I brought just over $3,200 to the table to buy my freedom and escape the rental albatross.

$53,900. 

That was total damage including the equity dunking plus operating losses for the period I owned the rental town home.  That figure works out to an average of $4,900 per year for the 11 year period; just over $400 per month.  The numbers don’t include time spent traveling, haggling, fixing, painting, or any of the other memorable moments spent on the “investment”.

Had that money instead been put into Dividend Champion stocks paying 4% or so and left to compound, the difference between what I lost and what may have been would pay for over 12 years of my kids’ college tuition room and board at my state’s flagship university.

As the illustrious Paul Harvey used to say, “And now you know the rest of the story.”  In the final post, I’ll leave you with a few lessons you can apply to real estate investing if you choose that mission.

How to lose $53,900 on a rental town home (Part V): Property Management Blue(s):

This series (here, here, here, and here) may feel long, but not as long as the 11 years required to take a bath on this venture.  Many investors think property management is the panacea to their rental headaches.  I’ll discuss why that may not be so.

At first blush, Blue seemed like a good idea.  They would receive 10% of the rent to take care of everything: property showing, background checks, repairs, the whole shebang.  What could go wrong?  One should never ask that question.  Ever.

 

For starters, Blue required a $250 maintenance account held by them at all times.  They would have discretion on minor repairs and expenses, below $250, and would provide notice if an expense greater than $250 was required.

What this meant was that Blue would make minor changes and repairs not otherwise approved and deduct the expense from the account.  They would send a bill stating the repair account fund needed replenishment.  This happened frequently, giving Blue a nickel and dime vehicle each month. 

Also, it became apparent the vendors to which Blue outsourced repairs and refurbishment were billing higher than market rates.  I’m sure this was a requirement to get Blue a cut as middleman.  Instead of dealing with renter and contractor headaches directly for $X there was a different, yet similar set of headaches with Blue to enjoy while payed $X plus.  

To put salt in the wound, Blue would collect the rent from the renter the first of the month, but wouldn’t take their 10% and pay out the balance until after the 20^th of the month.  The property note was due the first of the month.  Blue enjoyed the “float” of an interest free loan on the rental income for three weeks before releasing the balance of funds.

Needless to say the Blue contract lasted the year for which it was signed.  Afterwards, activity reverted to self-management from whence it came.

We’re on the home stretch now.  Rental real estate freedom is in the next post!

How to lose $53,900 on a rental town home (Part IV): Trapped:

The previous post outlined the vagaries and headaches of land-lording.  Today I’ll discuss how to get trapped in a property.

Given the things going wrong thus far, even a 6 year-old might have asked why I didn’t just sell the money pit and move on.  Remember the financing piece?  I put down the minimum amount I could to drive the leverage component of my investment.  That decision was coming back to haunt me.  In spades.

Money Pit

Coupled with the steep decline in property value, I was in trouble.  Selling it meant bringing a ton of money to the table to get out because the property was under water financially.  Over 20,000 leagues.  I didn’t have and couldn’t get that kind of coin.  Refinancing wasn’t available because the loan to value (LTV) was under water due to the small down payment.  The coffee shop, car trunk lenders had vanished.  Go figure.  Alternatively, defaulting on the loan, letting the property revert to the bank, and having that mark onward was a possibility.  At this point, a degree of rational thought kicked in. 

I could lose a pot full of money at once by selling the property or defaulting.  Alternatively, I could continue muddling along, suffering much smaller losses over an extended period of time hoping the value would recover sufficiently that I might be able to climb out of the abyss.  Default wasn’t a serious consideration.  Given what happened in 2008, I could have joined the party but I’m not wired that way so defaulting was out.  Consequently, losses mounted as I hunkered down to wait it out.

Years passed.  Renters came and went.  Tramping an hour round trip to take care of repairs and suffer no-shows became tiresome.  Then I decided to hire a property management firm.  They could handle the nitty-gritty and the headaches.  Writing them a check was all that was required for operational relief.  Paying them was better than paying AND having the managerial joy.  A company called Blue (name changed to not offend the guilty) was hired to take care of things.  The fun continued.

I’ve covered the financial analysis, financing, land lording, and financial entrapment.  In the following post, I’ll discuss the property management fiasco and costs.

How to lose $53,900 on a rental town home (Part III): Land-lording

Part I and Part II of this series began the tale of my odyssey as a real estate investor ultimately leading me to believe dividend stocks were a superior investment vehicle.  Real estate looks easy on paper.  Unfortunately, you have to manage the property which entails more than is captured on paper.  The landlord part of the equation is one a prospective investor should not discount!  The tale continues…

Spreadsheet models built and analyzed.  Check. 

Financing secured.  Check. 

Property selected and purchased.  Check. 

Kick back and watch the rental income arrive in torrents, right?  Right?

The venture started well.  It didn’t take long to get a renter lined up.  The fellow paid cash from his construction business and was consistent with his payments.  Consistently late.  I tolerated this for about 18 months, then let him know he needed to change his payment ways or move along.  He moved along.

From then on, renters departed at the end of every 12 month contract.  The rental market was declining and renters could find more economical rentals at every turn.  Not only did my turnover rate meet or exceed my expectations, but the price at which I could re-rent the property declined with each transition.

Turnovers required more repairs and refurbishment than anticipated.  Complete carpet replacement because the renter changed the oil on his motorcycle in the living room; repaint to mask the smell of pets or cigarettes; plumbing issues from water-soaked bathroom floors or leaky pipes in the wall to leaking water heaters were not uncommon.  Several of these issues were non-trivial.  In total, the frequency and scale of expenses was well above my originally “conservative” estimate. 

Adding insult to injury, it was an hour round trip to the property to address these issues or show it to prospective renters who, often as not, would no-show the appointment.  Did the $35,000 operating abyss include time spent traveling to and fro?  Nope.  That’s frosting on the cake of economic loss. 

Costs were mounting.  Valuable time was consumed.  Net profit had evaporated.  But I still had the tax deduction, principal pay down, and property value appreciation going for me.  Can I get an Amen?  Didn’t think so. 

The tax savings piece was in play because of the almost monthly cash deficit.  Coupled with the depreciation expense, the tax savings component was playing out better than anticipated.  Negative cash flow will do that.  However, the tax savings showed up once a year while cash losses could be monthly depending on the status of the rental i.e., rented, in transition, under repair, etc.

The principal pay down worked only during the months in which rent was being collected.  Mostly.  Unfortunately, market conditions were sliding and rental rates were going south.  At one time, market rents were down nearly 35% from where they opened when the property was first acquired.  This meant rental income was no longer covering the full bank note, let alone expenses.  The equity bucket was being filled by yours truly as much as by renters.

Surely you’re thinking the property value appreciation was making up for the rest, even if it wasn’t compounding at 5% annually.  If so, that would have helped the ROI, at least on paper.  Even if it had it wouldn’t have resolved the negative cash flow.  But even that wasn’t the case.  The reason rental rates were tanking was because the market as a whole was collapsing.  In fact, the value of the property dropped by nearly 25% from its purchase price.

To be brief, the net profit (cash) was negative, the principal pay wasn’t materializing, and the property value appreciation was off the charts on the down side.  The only thing working out well was the tax dodge component because of the continual losses.  That’s not how you want to operate a rental property, business, or even your dog’s budget.  So why not exit?  Ahhh, the sweet spot is next.

In the Part IV, I’ll discuss the reason I couldn’t quickly sell and exit.

How to lose $53,900 on a rental town home (Part II): Financing

In the first post, a faulty financial model was described that led me astray from the start.  Today, I’ll walk through financial boondoggling you can try if you’re serious about finding a money pit of your own.

Opt for a 5-year Adjustable Rate Mortgage (ARM).  If the market’s right, you can go all out with a “no doc” interest only loan which may not be possible in many places, but look anyway.  They’re popular just before a real estate crash.

Get an ARM with a comfortably low interest rate.  After 5 years the rate will float with LIBOR or another index, but never mind that, the property won’t be held that long.  Plan on using a 1031 transaction before the 5-year period ends to flip the initial money pit for a larger version with no tax consequences.  The road to hell is paved with good intentions so if you intend well, carry on.

The best bet is to find a lender writing loans from coffee shops or car trunks.  Lenders of that ilk can help lock in the kind of amazing ROI the spreadsheet said was available from the start.

Ignore Pascal’s Wager entirely.  Invest as if risk didn’t exist.  Hoarding cash as if there’s a smidge of risk means missing all the whales.  That’s not good.  Go all in and wager your kids’ college money.  They’ll thank you when they get their first student loan bills.

To summarize, think financial utopia – not armaggedon.  Become enamored with models in spreadsheets using fictitious calculations.  Treat assumptions about vacancy rates and repair expenses as gospel.  More on that later.  Believe there is no risk associated with the interest rate of the loan, the term of the loan, or the length of time the loan will be held.  Details. 

Failing to build a margin of safety into the plan is a fantastic way to launch with gusto a money-losing proposition.  That’s the easy part.  Shopping for the property is the fun part.  The paying part?  That’s ahead.

In the next post I’ll discuss the joys of rental ownership, or as friends and family put it, slumlording.

How to lose $53,900 on a rental town home (Part I)

In September of 2018 I wrote blogs here and here outlining reasons I think dividend investing beats the socks off real estate investing.  This series digs deeper and demonstrates how easy it is to lose a ton of money in rental real estate.   (Seriously, if paid in quarters it would be 215,612 quarters x .2 oz per quarter = 2,695 pounds or 1.25 tons!)  You can achieve this feat (fate?) if you keep reading and follow the instructions.

How does one achieve such a magnificent task?  It took time and diligence, but I managed.  Here begins the recipe for disaster that unfolded over a decade.

To start, get caught up in how readily wealth can be created through real estate.  Oh, the magic.  There are plenty of books to help you out.  Don’t mistake wealth on paper for wealth in the wallet.  They’re not the same.

 

How to lose a ton of cash on a rental property:  Financial Analysis:

Here’s how to go about mixing the unfortunate cocktail.  Start with an excel spreadsheet and a little imagination to develop a profitability model containing 4 ROI components within the expected total return:  net profit, tax savings return, renter-paid principal reduction, and property value appreciation.  Work that model through many gyrations until great riches are certain, line up the financing, and go shopping.

Net Profit is easy to explain.  Receive $xxxx in rent then pay $yyy in mortgage, operating expenses, and taxes.  What’s left, presumably positive, is net profit. 

Do your market research on rent, but confine the search to an area within roughly a half-mile radius of the target property.  Determine that rent in the area for that type of property is 20-35% higher than the expected bank note given some form of creative financing.  Do NOT under any circumstances check on rental rates outside that radius and for the love of Mike don’t investigate whether or not a builder is putting up a complex with similar floorplans at lower price points within 1 or 2 miles. 

  

Assume the property will be rented at least 11 months of every twelve, on average, given projected rates of turnover.  Bake in less than appropriate costs for on-going maintenance and repairs assuming renters treat well a property they don’t own.  Also presume the property won’t be held long and therefore large renovations won’t be a factor.  Remember, in real estate expectations around rental turnover and expenses can cause problems if set inappropriately.  By all means, be inappropriate.  For the purposes of this exercise, let’s say the imputed Net Profit is 8% which is a nice return on your investment.

Depreciation-related Tax Savings Return is what happens when a rental property is depreciated on a straight line basis over 28.5 years.  Stir in this paper “loss” to offset some or all the cash earnings to reduce your tax burden.  Then consider the taxes saved as a form of profit to grow the ROI.  The added margin may be fairly small, but might equate to a point or so in the total return model so add 1% to the 8% Net above.

Throw a fistful of Renter-paid Principal Reduction into the model.  This component is based on the premise that the renter actually pays down the mortgage principal and not the borrower.  In essence, the renter is paying into the equity bucket.  Those equity payments are added to the net profit and tax savings items above to goose the ROI even further. 

In normal amortization tables, the principal portion of a mortgage is a fairly low percentage of the total payment e.g., 15% during the early years of a mortgage.  However, the principal paid by the renter can equal or exceed the net profit.  When added to the model it bulks up the total return by an impressive figure.  Let’s say the principal pay down component is equal to another 8%.  Now the ROI equation includes 8% net profit + 1% tax savings + 8% in principal reduction for a 17% total return.  And the good stuff lies ahead.

Finally, add expected property value appreciation to the analysis.  In a go-go market factoring in 5%+ compounded annually may be a conservative assumption. 

  

If an investor bought a property for $120,000 with an annual appreciation rate of 5%, he might expect to see the price climb to $126,000 at the end of the first year.  If the down payment was $20,000, then a $6,000 increase in property value relative to the $20,000 down adds another 30% to the return so include that in your formula for riches.  Tote up an ROI of 17% from the previous 3 items then tack on a respectable 30% for a grand total return on investment of 47% in year one.  By now you should see disaster brewing; if not, continue. 

Conveniently forget or ignore the fact that financial leverage cuts both ways.  Deeply.  The way the leverage is structured may further spice your recipe.  Forget that, too.  You’ll learn more in the long run. 

Generally speaking ROI is calculated upon the capital put into the deal and not the total deal value.  Therefore the smaller the down payment, the larger the ROI.  This is the beauty of financial leverage.  However, the ugly is out there, too.  In spades.  Aim for the smallest down payment a creative lender can offer on a rental and throttle anyone hollering Caveat Emptor in your presence.

With these ingredients, an impressive and completely unrealistic total return on a rental property is within reach.  The ROI can be further juiced with aforementioned creative financing.  There’s plenty out there, just turn over a few rocks.  A fabricated ROI spun from this yarn makes wild profitability a near certainty, at least on paper.  With ignorance and confidence success is assured.  Right?  Ignore the possibility that reality is waiting in ambush with truth that doesn’t map to the Excel model.  Easier done than said.

To summarize, begin the adventure playing monopoly with a spreadsheet, get caught up in paper returns (profit, principal pay down, depreciation tax savings, and property value appreciation) and do not focus on silly things like real money.  Cold.  Hard.  Cash.

In the next post, I’ll discuss how creative financing widens the money sinkhole.