Archive for December, 2012

“John Bell” and Wayne Yamamoto

Posted in Internet Frauds and SCAMS on 6, December 2012 by nathanbusch

Strange: a John Bell and a Wayne Yamamoto both appear on a data mining list owned by the University of New Mexico Computer Science Department, which apparently originated at the Carnegie Mellon University Computer Science Department.

Strange indeed!

Nathan A. Busch

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The New “John Bell” SCAM is, most probably, USA Graphite (OTC:USGT).

Posted in Internet Frauds and SCAMS on 6, December 2012 by nathanbusch

One of my audience members has indicated that he received the “John Bell” research on 4th December 2012 and that that research report indicated that the “magic stock pick” is involved in mining graphite. That company is, most likely, USA Graphite (OTC: USGT).

Not surprisingly, USA Graphite claims graphite mines in … where else for a “John Bell” pick but … Nevada. So, we can simply interchange USGT for TFER and immediately see where this stock pick is going to end.

Before 9th November 2012, this company saw no trading activity and its shares were listed at a price of 67¢ per share. On 12th November, 2500 shares were traded and the closing price was 60¢ per share. By 21st November, the share price had dropped to 40¢ per share on trading volume of 32,900 shares. On 4th December, the trading volume was 13,200 and closing price was 49¢ per share. On 5th December, 2012, the trading volume exceeded 815,000 and the closing price was about 55¢ per share. It appears, then, that the earliest fools received the name of the company early on 5th December 2012 and decided that that day was a good day to start losing their money.

USA Grahite was, up until about 13th January 2012, Magnum Oil, Inc. and PTM Publications Incorporated before it was Magnum Oil. By 29th February 2012, the company had changed its name to USA Graphite, Inc. The company is organized in Nevada and has its principle place of business at 848 N. Rainbow Blvd., Suite 3550, Las Vegas, Nevada. The telephone number is 603.525.3380. In the annual report filed with the Securities and Exchange Commission, the company stated that:

Our management has decided to focus our business on acquiring or merging with one or more operating businesses. Our efforts to identify a target business are not limited to any particular industry. As of February 29, 2012, we have not yet identified a potential merger or acquisition target. There can be no assurance that our management will be successful in negotiating the merger or acquisition of this target business and as such we continue to search for opportunities for other mergers or acquisitions.

We intend to focus our search on businesses in North America, but we will also explore opportunities in international markets that are attractive to us. We will focus our efforts on seeking a business combination with a privately held business in the oil exploration sector. We believe that owners of privately held small or middle-market companies may seek to realize the value of their investments through a sale or recapitalization or through a merger with a public company to access capital to fund their growth.

There is no assurance that we will successfully identify a potential target business, enter into any definitive agreements with any target business, or finally consummate a business combination with any potential target business.

For the fiscal year ended 29th February 2012, the company reported a net loss of $54,722 and a working-capital deficit of $139,722. The total assets were valued at $8,847 and the total current liabilities were $148,619.

Also, the reported CEO, CFO, Treasurer, and one of the directors was Patrick DeBlois and the secretary of the company was Eden Clark. The biographies of each of these people is as follows:

Patrick DeBlois has been the president, chief executive officer, chief financial officer, treasurer and a director of our company since October 27, 2010. Since 1999, Mr. DeBlois has been a director and is the proprietor of the Minakwa Lodge located in Northern Ontario. Mr. DeBlois has grown his resort from a grassroots venture to a global success story. Mr. DeBlois holds a diploma in Wildlife Management and GIS mapping from Cambrian College. Mr. DeBlois devotes approximately 7-10 hours a week to our business.

Eden Clark has been our secretary since December 15, 2010. From 1997 to 2001, Ms. Clark was a founding team member of Onvia.com Inc., a publicly traded company on NASDAQ, assisting it in the growth from a small start-up to more than 300 employees and $140 million in revenue. From 2002 to 2008 she was founder and CEO of Be Jane, Inc., a media and web company focused on the niche segment of women’s home improvement and décor, leading breakthrough partnerships on new initiatives with such companies as MSN and Bank of America, and was featured in hundreds of national TV and print media such as TIME, Entrepreneur, People Magazine, Wall St Journal, CNN, The Today Show, and more. From 2008 until present, Ms. Clark became president of eDivvy.com Inc., a private payment technology company, leading the company’s strategic initiatives, branding, and business development efforts. Ms. Clark devotes approximately 3-5 hours a week to our business.

As at 29th February, Patrick DeBlois owned 77,000,000 shares of USA Graphite. Thus, if the share price rises from 65¢ per share to $1.65, and if he still owns the shares, he will have a capital gain of $77,000,000. Not bad for a few months worth of work.

By 31st August, the total assets amounted to $2,003 and the total current liabilities amounted to $170,206. The company executed a share split and, as at 31st August, the authorized share position was as follows: (1) 10,000,000 preferred shares that had not yet been issued; and, (2) 800,000,000 shares, of which 169,400,000 had been issued and are now outstanding. As at 31st August, Patrick DeBlois still owned the 77,000,000 of the common shares, which he apparently purchased for 0.1¢ per share and the 92,400,000 were purchased for 0.1¢ per share: however, it is not at all clear as to who purchased the 92,400,000 shares.

On 8th November 2012, Patrick DeBlois and Eden Clark resigned from the company and Wayne Yamamoto was appointed as the President, CEO, CFO, Treasurer, Secretary, and Director of of the company. Wayne Yamamoto has no experience in mining, graphite, or materials science. The available biography states that:

Wayne Y. Yamamoto, brings over 30 years of successful leadership and innovation in the area of information technology, software development and corporate financing. Mr. Yamamoto was the President of Call/Recall which is the first company to develop and patent terabyte optical storage technology. As the CTO of W&W, Mr. Yamamoto led a team to create the first interactive television system for the cable industry. At Quark, Mr. Yamamoto was a member of a 5 man executive management team that led Quark to worldwide expansion, while maintaining industry high profit margins. Mr. Yamamoto has also held executive positions or served as a board member of several startups including ResTech, Sierra Medical, Photonic Storage Systems, Clareos, Arbor Software, and Solutions Technology.

It is not at all clear as to who currently owns the 169,400,000 issued and outstanding common shares of the company. However, it is probably a safe bet that Patrick DeBlois is currently empty handed.

As of the time of writing this blog, it is not clear that USA Graphite has removed the first shovel of soil to start a mine for graphite. The 8-K filed on 19th November 2012 states that:

On November 19, 2012, USA Graphite, Inc. (the “Company”) entered into a Property Option Agreement (the “Option Agreement”) with Nevada Mineralss Holdings, Inc. (“NV Minerals”). Pursuant to the terms and conditions of the Option Agreement, NV Minerals shall grant the Company with the right and option (the “Option”) to acquire one hundred percent (100%) of the mining interests in that certain Property known as the Blue Wing Mountains Graphite Project (the “Property”) which is comprised of a total of one-thousand nine-hundred and eighty-five acres (1985 acres) and is located in the Churchill, Elko, Pershing, and Washoe Counties of the State of Nevada. In order to exercise the Option, the Company shall be required to: (i) pay an initial cash payment of fifty thousand dollars ($50,000) to NV Minerals; (ii) issue an aggregate of five million (5,000,000) restricted shares of the Company’s common stock to NV Minerals; (iii) pay an additional aggregate payment of four hundred fifty thousand dollars ($450,000) over a three (3) year period; and (iv) pay a production royalty (the “Royalty”) to NV Minerals equal to two percent (2%) of the net smelter returns, per the terms and conditions of the Option Agreement. The Company will also provide funds for the conduct of a program of work to be undertaken by NV Minerals for the benefit of the Property of not less than $1,000,000 over four years. The Option Agreement also provides that the Company shall have a one-time right to purchase fifty percent (50%) of the Royalty in the Property for five hundred thousand dollars ($500,000). Pursuant to the Option Agreement, NV Minerals has agreed to enter into an eighteen month voluntary lock up agreement for the initial 1,000,000 shares it will receive upon execution of the Option Agreement.

The above description of the Option Agreement is intended as a summary only and which is qualified in its entirety by the terms and conditions set forth therein, and may not contain all information that is of interest to the reader. For further information regarding the terms and conditions of the Option Agreement, this reference is made to such agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by this reference.

This company is almost a carbon-copy of TFER.

Like Jammin Java, this company has a few pennies in assets, huge liabilities, which means that it is technically bankrupt, no business plan, and apparently no operational graphite mine.

Tesla has been in business since about 2003 and has been using graphite in the batteries for its automobiles since long before USA Graphite was Magnum Oil, Inc. Thus, absolutely no basis exists to conclude that USA Graphite is supplying the graphite for the batteries used by Tesla in its automobiles. Also, it is almost a given certainty that USA Graphite does not have a contract with Tesla to supply any graphite. This appears to be a pure “penny-stock” SCAM.

Of course, the fools of subhuman intellect over at Motley Fools are touting USA Graphite as an up and coming investment opportunity. See http://beta.fool.com/jdhutche/2012/11/30/tesla-motors-rally-mode-ev-buzz-grows/17585/.

I hope that this helps.

Nathan A. Busch

“John Bell” and Tesla Motors

Posted in Uncategorized on 4, December 2012 by nathanbusch

On 4th December 2012, I received the following e-mail from our mysterious “John Bell”.

*************

Urgent Reminder: My pick is THIS Thursday!

Tomorrow I’ll send you all of my research about Thursday’s pick.

This research will give you the exact reasons I’m picking this company.

BUT, it won’t give you the company’s name or symbol.

I’ll be releasing the name and symbol on Thursday morning only.

I’m super excited right now.

F**k Christmas. Seriously. This is what gets me excited.

Seeing people turn hundreds into thousands, thousands into tens of thousands!

I’m always brutally honest about the confidence I have in my picks.

Nine months ago I released a pick and told you I wasn’t 100% confident – It still doubled!

With this pick I’m beyond confident.

The product this company produces is used in every Tesla Motors vehicle.

This one is HUGE.

John Bell

*************

When I receive further information, either from “John Bell” or the audience of this Web log, I will update this post. However, as a preliminary matter, I would not consider Tesla Motors to be an outstanding investment opportunity. Given that it has a long-standing habit of losing money, I would not consider any vendor of Tesla Motors to be a particularly good investment opportunity.

Given the history of “John Bell”, the company that he might select may produce items that could be used in electric automobiles produced by Tesla Motors but whether his “magic stock pick” actually provides any parts for the Tesla Motors automobiles is another matter. To reinforce this position, remember that “John Bell” touted Jammin Java because it had “partnered” with Amazon. A simple fact checking operation indicated that Jammin Java had only advertised coffee on the Amazon website and only five, yes 5, pounds of coffee were available. To say that “John Bell” stretches the truth about the connections between his “magic stock picks” and actually functioning companies is, well, generous.

Further information will be posted here as it becomes available.

I hope that this helps.

Nathan A. Busch

Investment Stupidity, Part 2.

Posted in Investing on 1, December 2012 by nathanbusch

This is a missive about financial stupidity. If you think I am giving you either tax advice or investment advice, then you are sorely mistaken and you should find someone else to bother. If you want to learn about an alternative to stupidity, then you are welcome to read on.

If you think that the rates of return cited in this missive are outrageous and completely unattainable, or require a Ponzi scheme to obtain, then you should return to watching some nonsensical “reality” show on television. The returns cited were obtained for real-money portfolios using real-world investment strategies.

Recently, a friend came to me seeking my thoughts about a predicament in which he found himself. He is aged 60 years, has a retirement account of about $300,000, which is contained in a conventional IRA, and a ROTH IRA in which he has about $12,000. He wants to withdraw $1,000 per month from his retirement assets, wants to draw Social Security at aged 62, wants to preserve capital, and wants to grow the net value of his retirement account. Of course, his requirements are mutually incompatible and, he has already made a serious mistake. Throughout the following discussion of his situation, it is assumed that the friend is married and that each will maintain a ROTH IRA and the combined ROTH IRAs will be considered as a single unit.

As to the mistake: by starting his draw on Social Security at age 62, he has immediately taken a 25% reduction in his monthly income from that institution for the rest of his life. If he were to refund the amount already withdrawn to the Social Security Administration, and continue to work until he was 65, he would establish a situation in which he could have an income from Social Security at 100% level, possibly increase the actual amount of the eventual monthly income from Social Security and, perhaps, substantially reduce his anxiety about his retirement.

As to the conventional IRA: even if the funds were in some other type of qualified retirement account, the law allows him to roll the conventional IRA, or the qualified retirement account, into a ROTH IRA. Of course, he would incur a substantial tax bill as a result and he would not be able to withdraw any amount from that ROTH IRA for five years. This would not be an entirely negative proposition as he should work until at least 65 in order to shore up his Social Security account. As to the taxes on his retirement account, those would easily be regained depending upon how aggressive he would be willing to be in his investment strategy. Even if he were to invest the assets in his ROTH IRA only modestly aggressive and have annual returns of about 10%, he would regain the entirety of the assessed tax before the end of his 63 year, by which time he should still be gainfully employed. It should not be missed that the assets in the ROTH IRA grow tax free forever and all distributions after the first five years of the life of the IRA would be free of taxes. If he did not withdraw any amount from the ROTH IRA until year 20, by which time he would be 80, the ROTH IRA would have in excess of $1,500,000 in nominal dollars and a present value of about $706,000 assuming an average annual inflation rate of 3.74%. If he made no withdrawals until after his 86th birthday, his account would exceed $1,000,000 in present day dollars.

Of course, if he could do no better than 10% per year in average annualized returns, then he should just punch out and go home. By the way, since 1970, Chevron has given average annualized returns of about 12.7%. I would not consider Chevron to be a particularly risky company into which one could invest. If my friend were to invest his ROTH IRA at a modest rate of 12.5%, his portfolio would be in exceed $1,000,000, in present day dollars, before his seventy ninth birthday and would exceed $2,000,000, in present day dollors, before his eighty sixth birthday. Even before his seventieth birthday, he could withdraw his requisite $12,000 per year, in present day dollars, or about 2.4% of the total value of his ROTH IRA for the rest of his life and never run out of money. It is simple to show that, starting on his seventieth year, he could withdraw $25,000 per year, in present day dollars, and never run out of money. Again, if he can do no better than 12.5% per year in the stock market, he is doing something seriously wrong.

I would consider the lower limit of a modestly aggressive investment strategy to give an average annualized return of no less that 16%. In this case, his ROTH IRA would exceed $1,000,000, in present day dollars, before his seventy fourth birthday, $2,000,000, in present day dollars, before his eightieth birthday, and $4,000,000 before his eighty sixth birthday. All, of course, tax free.

Now, let us consider the case in which he would not, or could not, roll over his conventional IRA, or qualified retirement plan, into a ROTH IRA. In this case, my friend could simply take distributions from that conventional IRA starting at age 59 1/2, pay the taxes on the distributions, and then put the after taxes proceeds, not to exceed $12,000 for 2012 and $13,000 for 2013, until he reached the age of 72. The age of 72 is critical as he will have passed what I term a “time horizon” in his investment strategy. After age 72, he could simply pocket the required minimum distributions from the conventional IRA and go on a vacation. Such vacations would probably benefit him and all around him as none would then be at risk of going insane as a result of his hyperventilating anxiety attacks. I would apply the rule that this ROTH IRA is a “just in case” account should he fall into dire straits and need some money. Of course, he could not withdraw any of the funds from the ROTH IRA until he was past the age of 65, since by then the five-year limit would have expired.

Suppose that he had his conventional IRA invested at a modest investment vehicle that provided him with a 10.0% per year return. Further, assume that the assets in the ROTH IRA are invested in a similar vehicle also providing a 10.0% per year return. The value of the ROTH IRA in both nominal and present day dollars is given in the following Table I. In Table I, the start of the present year, which is 2012, is assumed to start on year labeled “0” upon which the individual is of age 60 years. The present value is computed as at the beginning of the year labeled “0”.

Table I: The value of the ROTH IRA assuming that the required minimum distributions, after taxes, from a conventional IRA were deposited into a ROTH IRA for the first twelve years of the investment strategy. It is assumed that both the Conventional IRA and the ROTH IRA are invested in a conservative investment vehicle that returns a 10% per year yield. The value at the beginning of the relevant year is given in the column labeled “Begin. Value”, the value of the ROTH IRA at the end of that same year is given in the column labeled “Ending Value”, and the value of the ROTH IRA in present day dollars, which is for year 2012, is given in the column labeled “End. Val. {P.V.}”.
Year   Age Begin. Value Ending Value End. Val. {P.V.}
-1   59 12,000 13,200 13,200
0   60 25,200 27,720 25,757
1   61 40,720 44,792 40,120
2   62 54,573 60,031 51,831
3   63 70,695 77,765 64,722
4   64 89,442 98,386 78,932
5   65 111,109 122,219 94,518
6   66 135,219 148,741 110,882
7   67 161,741 177,915 127,849
8   68 190,915 210,007 145,469
9   69 223,007 245,308 163,796
10   70 258,308 284,138 182,884
11   71 297,138 326,852 202,792
12   72 339,852 373,838 223,581
13   73 373,838 411,221 237,073
14   74 411,221 452,343 251,379
15   75 452,343 497,578 266,548
16   76 497,578 547,336 282,632
17   77 547,336 602,069 299,687
18   78 602,069 662,276 317,771
19   79 662,276 728,504 336,946
20   80 728,504 801,354 357,279
21   81 801,354 881,489 378,838
22   82 881,489 969,638 401,698
23   83 969,638 1,066,602 425,938
24   84 1,066,602 1,173,262 451,640
25   85 1,173,262 1,290,589 478,894
26   86 1,290,589 1,419,647 507,792
27   87 1,419,647 1,561,612 538,434
28   88 1,561,612 1,717,773 570,924
29   89 1,717,773 1,889,551 605,376
30   90 1,889,551 2,078,506 641,906
31   91 2,078,506 2,286,356 680,641
32   92 2,286,356 2,514,992 721,713
33   93 2,514,992 2,766,491 765,263
34   94 2,766,491 3,043,140 811,441
35   95 3,043,140 3,347,454 860,406

It should not go unnoticed that after the twelfth year, the individual would be drawing between $12,000 and $15,000 per year, in present day dollars, net of taxes, which would satisfy his requirement of withdrawing $1,000 per month from the retirement portfolio.

Whilst the results in Table I appear to be favourable, let us consider the situation of both the conventional IRA and the ROTH IRA if these were in conservative investment vehicles providing an average annualized return of 12.5%. After the twelve-year time horizon has passed, the individual will received an annual required minimum distribution of about $20,000 to $33,000 per year, in present day dollars, net of taxes. The values of the ROTH IRA through age 95 of the individual, assuming no withdrawals are taken, are given in Table II.

Table II: The value of the ROTH IRA assuming that the required minimum distributions, after taxes, from a conventional IRA were deposited into a ROTH IRA for the first twelve years of the investment strategy. It is assumed that both the Conventional IRA and the ROTH IRA are invested in a conservative investment vehicle that returns a 12.5% per year yield.
Year   Age Begin. Value Ending Value End. Val. {P.V.}
-1   59 12,000 13,500 13,013
0   60 25,500 28,688 26,656
1   61 41,688 46,898 42,007
2   62 57,129 64,270 55,492
3   63 75,679 85,139 70,859
4   64 97,914 110,153 88,373
5   65 123,153 138,548 107,146
6   66 151,548 170,491 127,096
7   67 183,491 206,427 148,338
8   68 219,427 246,856 170,994
9   69 259,856 292,338 195,198
10   70 305,338 343,505 221,095
11   71 356,505 401,068 248,838
12   72 414,068 465,827 278,597
13   73 465,827 524,055 302,123
14   74 524,055 589,562 327,634
15   75 589,562 663,257 355,300
16   76 663,257 746,164 385,303
17   77 746,164 839,435 417,838
18   78 839,435 944,364 453,121
19   79 944,364 1,062,410 491,384
20   80 1,062,410 1,195,211 532,877
21   81 1,195,211 1,344,612 577,874
22   82 1,344,612 1,512,689 626,671
23   83 1,512,689 1,701,775 679,588
24   84 1,701,775 1,914,497 736,974
25   85 1,914,497 2,153,809 799,206
26   86 2,153,809 2,423,035 866,692
27   87 2,423,035 2,725,914 939,877
28   88 2,725,914 3,066,653 1,019,242
29   89 3,066,653 3,449,985 1,105,309
30   90 3,449,985 3,881,233 1,198,643
31   91 3,881,233 4,366,387 1,299,859
32   92 4,366,387 4,912,186 1,409,621
33   93 4,912,186 5,526,209 1,528,653
34   94 5,526,209 6,216,985 1,657,735
35   95 6,216,985 6,994,108 1,797,717

Even with the assets of both the conventional IRA and the ROTH IRA invested at a modest average annual yield of 12.5%, the ROTH IRA contains a sizable and comfortable amount of money for late in retirement. Of course, should any of the money be withdrawn, that margin that is available late in the retirement years will be substantially reduced.

The natural question to ask is: would a 15 year time horizon make a substantial difference in the value of the ROTH IRA over employing only a 12 year time horizon. If the after-taxes required minimum distributions were transferred to the ROTH IRA for the entire 15 year time horizon rather than for a 12 year time horizon, the value of the ROTH IRA at the 35th year would be $1,932,122, which is a mere $134,427 benefit over the 12 year time horizon strategy. It would be better to take the required minimum distributions after the expiration of the 12 year time horizon and take the wife to Saint Johns.

When the investment strategy starts to yield an average annualized return in excess of about 12.5%, both the risk and the volatility associated with the investment will rise substantially. If one were to attempt to obtain returns in excess of about 12.5% in the conventional IRA, it is entirely likely that assets will be liquidated to satisfy the required minimum distribution for any given year at a time that the assets were significantly undervalued. Such a move could severely impair the ability of the conventional IRA to regain enough value to allow resumption of the normal and expected values of the required minimum distributions. However, the ROTH IRA is found in a completely different situation.

The ROTH IRA is considered an asset of last resort. The corpus of that asset will not be accessed unless the individual is living on the streets, and he finds all of the dumpsters in the city completely devoid of any type of nourishment no matter how foul or decayed. Thus, the corpus of the ROTH IRA will readily survive the volatility inherent in the more aggressive investment strategies and, if proper weighting techniques are employed, will even easily survive complete loss as to one or two companies the shares of which were held in the ROTH IRA. Given this basis, let us consider the circumstance in which the conventional IRA is invested in a vehicle that provides a 12.5% average annualized yield and the ROTH IRA is invested in investment strategies yielding 16%, 22%, and 25.9%. For those doubters, these investment strategies actually exist and these are actual long-term annual returns, dating to before 1998, for these investment strategies. The results are to be found in Table III, for the 16% case, Table IV, for the 22% case, and Table V, for the 25.9% case. It is essential to remember that these valuations are obtained tax free and all distributions are obtained tax free.

Table II: The value of the ROTH IRA assuming that the required minimum distributions, after taxes, from a conventional IRA were deposited into a ROTH IRA for the first twelve years of the investment strategy. It is assumed that the Conventional IRA is invested using a strategy that provides a 12.5% per year average annual yield and the ROTH IRA is invested using a strategy that provides a 16.1% yield.
Year   Age Begin. Value Ending Value End. Val. {P.V.}
-1   59 12,000 13,500 13,013
0   60 25,932 29,174 27,108
1   61 43,107 48,495 43,437
2   62 60,278 67,813 58,550
3   63 81,391 91,565 76,208
4   64 107,271 120,680 96,818
5   65 137,541 154,734 119,664
6   66 172,685 194,271 144,823
7   67 213,488 240,174 172,588
8   68 260,859 293,467 203,281
9   69 315,858 355,340 237,266
10   70 379,711 427,175 274,948
11   71 453,844 510,575 316,780
12   72 539,913 607,402 363,270
13   73 626,839 705,194 406,551
14   74 727,760 818,730 454,989
15   75 844,930 950,546 509,198
16   76 980,964 1,103,584 569,866
17   77 1,138,899 1,281,261 637,762
18   78 1,322,261 1,487,544 713,748
19   79 1,535,145 1,727,039 798,787
20   80 1,782,304 2,005,092 893,958
21   81 2,069,255 2,327,912 1,000,467
22   82 2,402,405 2,702,705 1,119,667
23   83 2,789,192 3,137,841 1,253,069
24   84 3,238,252 3,643,033 1,402,364
25   85 3,759,610 4,229,562 1,569,447
26   86 4,364,908 4,910,521 1,756,438
27   87 5,067,658 5,701,115 1,965,707
28   88 5,883,551 6,618,994 2,199,909
29   89 6,830,802 7,684,653 2,462,015
30   90 7,930,561 8,921,882 2,755,349
31   91 9,207,382 10,358,305 3,083,633
32   92 10,689,770 12,025,992 3,451,029
33   93 12,410,823 13,962,176 3,862,198
34   94 14,408,966 16,210,087 4,322,356
35   95 16,728,809 18,819,910 4,837,339

If one is willing to assume a somewhat higher level of risk and its attendant volatility by using an investment strategy that yields a 22% per year return, then the values of the ROTH IRA for each year through until the individual is of age 95 years are as given in Table III.

Table III: The value of the ROTH IRA assuming that the required minimum distributions, after taxes, from a conventional IRA were deposited into a ROTH IRA for the first twelve years of the investment strategy. It is assumed that the Conventional IRA is invested using a strategy that provides a 12.5% per year average annual yield and the ROTH IRA is invested using a strategy that provides a 22.0% yield.
Year   Age Begin. Value Ending Value End. Val. {P.V.}
-1   59 12,000 13,500 13,013
0   60 26,640 29,970 27,848
1   61 45,501 51,188 45,849
2   62 65,742 73,960 63,857
3   63 91,613 103,065 85,779
4   64 124,544 140,112 112,408
5   65 164,943 185,561 143,504
6   66 214,231 241,010 179,666
7   67 274,362 308,657 221,799
8   68 347,721 391,187 270,970
9   69 437,220 491,873 328,431
10   70 546,409 614,710 395,654
11   71 679,618 764,571 474,369
12   72 842,134 947,401 566,613
13   73 1,027,404 1,155,830 666,347
14   74 1,253,433 1,410,112 783,635
15   75 1,529,188 1,720,337 921,568
16   76 1,865,610 2,098,811 1,083,779
17   77 2,276,044 2,560,549 1,274,543
18   78 2,776,773 3,123,870 1,498,884
19   79 3,387,664 3,811,122 1,762,713
20   80 4,132,950 4,649,568 2,072,981
21   81 5,042,198 5,672,473 2,437,861
22   82 6,151,482 6,920,417 2,866,965
23   83 7,504,808 8,442,909 3,371,600
24   84 9,155,866 10,300,349 3,965,059
25   85 11,170,156 12,566,426 4,662,976
26   86 13,627,591 15,331,040 5,483,739
27   87 16,625,661 18,703,869 6,448,970
28   88 20,283,306 22,818,720 7,584,098
29   89 24,745,634 27,838,838 8,919,028
30   90 30,189,673 33,963,382 10,488,929
31   91 36,831,401 41,435,326 12,335,158
32   92 44,934,309 50,551,098 14,506,355
33   93 54,819,858 61,672,340 17,059,720
34   94 66,880,226 75,240,254 20,062,520
35   95 81,593,876 91,793,110 23,593,864

By allowing a very high level of risk and its attendant volatility in using an investment strategy that yields a 25.4% per year return, then the values of the ROTH IRA for each year through until the individual is of age 95 years are as given in Table IV.

Table IV: The value of the ROTH IRA assuming that the required minimum distributions, after taxes, from a conventional IRA were deposited into a ROTH IRA for the first twelve years of the investment strategy. It is assumed that the Conventional IRA is invested using a strategy that provides a 12.5% per year average annual yield and the ROTH IRA is invested using a strategy that provides a 25.4% yield.
Year   Age Begin. Value Ending Value End. Val. {P.V.}
-1   59 12,000 13,500 13,013
0   60 27,048 30,429 28,275
1   61 46,918 52,783 47,278
2   62 69,066 77,700 67,086
3   63 98,017 110,270 91,775
4   64 135,689 152,651 122,467
5   65 183,154 206,049 159,348
6   66 242,676 273,010 203,521
7   67 317,315 356,980 256,524
8   68 410,913 462,278 320,214
9   69 528,285 594,321 396,837
10   70 675,470 759,904 489,107
11   71 860,039 967,544 600,302
12   72 1,091,489 1,227,925 734,386
13   73 1,368,727 1,539,818 887,720
14   74 1,716,384 1,930,932 1,073,068
15   75 2,152,346 2,421,389 1,297,115
16   76 2,699,042 3,036,422 1,567,941
17   77 3,384,598 3,807,673 1,895,313
18   78 4,244,286 4,774,822 2,291,038
19   79 5,322,335 5,987,627 2,769,387
20   80 6,674,208 7,508,484 3,347,610
21   81 8,369,457 9,415,639 4,046,562
22   82 10,495,299 11,807,211 4,891,449
23   83 13,161,105 14,806,243 5,912,740
24   84 16,504,026 18,567,029 7,147,268
25   85 20,696,048 23,283,054 8,639,555
26   86 25,952,844 29,196,950 10,443,418
27   87 32,544,867 36,612,975 12,623,912
28   88 40,811,263 45,912,671 15,259,674
29   89 51,177,324 57,574,489 18,445,759
30   90 64,176,364 72,198,409 22,297,072
31   91 80,477,160 90,536,805 26,952,504
32   92 100,918,359 113,533,154 32,579,950
33   93 126,551,622 142,370,575 39,382,358
34   94 158,695,734 178,532,701 47,605,048
35   95 199,004,451 223,880,007 57,544,563

Investment strategies exist that will provide a long-term average annual rate of return of 28.7%. Using these types of strategies will yield a ROTH IRA with a valuation in excess of one-half billion dollars, in nominal values, and in excess of $134,000,000 in present day values. Of course, when one reaches these valuations, investments into individual companies may be sufficiently large as to move the market value of the relevant shares. It may very well be that the smaller portfolios can realize annual growth rates in excess of 27% to 28% but these growth rates will be increasingly difficult to maintain for larger portfolios.

Then there is the Magic Formula Investing of Joel Greenblatt ….

I hope that this helps.

Nathan A. Busch