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Analyzing the business history and net worth of Donald Trump – is the Donald a Doofus?

Posted by mandyf on December 9, 2011

How much money Donald Trump is actually worth and whether or not his reputation for being a financial wizard has not only been disputed regularly the past few years, but it looks like Trump may actually be a bad businessman. In fact, a very bad one. The Donald would vehemently argue against this and tell you his name is the most valuable in not only the country but the world as it is synonymous with luxury, power, wealth and style. The evidence against all of that may surprise you if you are a fan of Donald Trump however.

Photo by Gage Skidmore

To get an accurate look at Trump, his fortune, and his history in business you have to go back to the beginning. Not everyone is aware that Trump did not build his fortune on hard work and his own ingenuity – he inherited it. Trump got his start working for his father who brought him into his real estate development firm. Donald Trump did have one particular strength which was selling his father’s name and reputation to secure favorable terms on little or no collateral deals – something he would do with his own later. He did move his father from middle class styled housing into commercial development. Nobody can take that away from him as they were good moves at the time.

When Trump finally took control of the company in full is when the problems started. Trump has often alluded that it was the economy that was the problem and not him, and that many real estate developers went under at the same time. The problem with that however is that during the 1980’s real estate development was booming. Even halfway competent real estate developers were making money hand over fist until 1989. Why wasn’t Trump? The crux of the problem seemed to rest in the fact that all those low and no collateral deals that vaulted him to prominence came back to bite him. It only took one failed project to set in motion a string off events where he suddenly had to start raising money to pay creditors.  On paper, Trump was very wealthy. In tangible assets however he had very little aside from his personal holdings which were not enough to satisfy his corporate debts even if he chose to do so. This led to bankruptcy number one which was just above two billion dollars of debt.

Trump did resurrect the company briefly while fully insulating his personal assets, but his personal assets were not overwhelmingly large in terms of how people think of Trump. Much of his worth was tied to stock prices and when the stock collapsed so did his billion dollar image. He could barely pay the interest on the bailout loan much less carry out the grand restructuring plans he sold investors and creditors on as to how he would rebuild his casinos and pay them back. Before long it was evident there were problems as stock prices fell back into the single digit range and there was no hiding his casinos were not turning a profit.

Eventually Trump righted the ship and rode the economic boom experienced during the Clinton administration. At least for a few years Trump did appear to be the master of the art of the deal and all the other accolades he heaps upon himself. The new century brought new problems however. Trump believed he could run any business. He believed he could turn a profit on anything – and try he did. He became more heavily invested in casinos, office buildings, golf courses, and anything he could lay his hands on. The problem with that was twofold according to most analysts: Aside from casinos which he once again ran into unprofitability, he only invested in projects that were aimed at the very very rich for the most part that were wholly dependent on a good economy and people willing to overpay to associate with his name. The second issue was that some say he got involved in too many deals. Far too many specifically he really knew nothing about.

Photo by Raul654

Consider his string of golf courses, his purchasing beauty pageants, and strings of high end New York City real estate that  sat largely vacant. Trump of course said it wasn’t his fault, it was the economy, it was partners that didn’t share his vision and were jealous of him, or any reason under the sun but his own fault. Many point out that had Trump actually been willing to listen to economists and a financial planner rather than being so egotistical as to believe he had all the answers his second bankruptcy could have been avoided in 2005.

With two major bankruptcies under his belt Trump still somehow managed to find people to believe in him again and pony up the dough to finance his grand schemes. Trump started selling his name as a brand around late 2005 but there were few takers initially as he still had a slight stink of failure on him. Within a year however thanks in part to his television show the Apprentice enjoying success and the appearance that he had turned the corner, more and more money poured in. He attached his name to anything he could with the proviso he receive a 10% stake in the ownership. Mistakenly and stupidly in some cases, there were investors that associated the Trump name on something he sold his name to doing well which they took as a signal that Trump himself was running that company well.  As they say, a  sucker is born every minute and a fool and his money shall soon be parted.

This was a key period in the evolution of Trump. Trump personally was becoming fairly wealthy with tangible assets for a change. Not nearly as wealthy as he claimed according to almost everyone including anonymous leaks within the IRS, but he was doing well. Each year when Forbes magazine released their list of the wealthiest Americans and people in the world, Trump made the cut. Unlike most people that appeared on the list that professed they would rather not have their net worth publicly known or claimed the figures provided regarding them were too high, Trump always claimed that his net worth was too low. He wasn’t talking about $50 million too low or even a few hundred million but sometimes as much as $2-$3 billion dollars or more too low.

Many people speculated at the time this was simply a matter of ego, but another view of it was that Trump had to oversell himself. For the most part, almost every business he owned was failing. Creditors were starting to ask questions and the government was sniffing around again to see if he was making good on his business reorganization promises. To a certain degree, although it would be difficult to prove, the only business Trump has run profitably on his own for any significant period of time  is the sale of his name which he was given for free at birth and therefore couldn’t lose money on.

As 2009 rolled around it became evident once again that not all was well in Trump town. In 2008 Forbes estimated that Trump was worth $3 billion, however Trump countered he was worth $7 billion. A year later Forbes had what they said was a more accurate view of his worth which was $1.6 billion. The biggest flops he currently is dealing with are his extraordinarily overpriced and largely unpopulated Chicago condo tower and to the surprise of no one his casinos. As more and more forensic accountants are digging into his current bankruptcy hearing over his Atlantic City casinos which bondholders bailed out once already in the latest go round to the tune of $1.2 billion, there is a growing belief that Trump may not even be a billionaire.

It is hardly an unheard of concept that the Donald is more a product of creative accounting than actual cash. In 2006 there was speculation he was only worth about $250 million, a claim Trump tried to sue author Timothy O’Brien over. Even the New Yorker had stated in 2005 that Trump wasn’t actually a billionaire. The reason some speculate Trump takes such offense to such claims again goes back to his name – It is the only thing he has ever been able to actually conduct transactions upon that make him money consistently. If it is ever definitively proved that Trump is not a billionaire and perhaps never was one aside from a few short lived stints to that elite list, Trump’s name would hold far less value than it currently does. It is already dropping to the point that the Wall Street Journal reported on February 26 of 2010, Trump now had one of the worst Q Score (a tool to track public opinion) ratings of any celebrity – and that included Lindsay Lohan, Amy Winehouse, Michael Vick, and other habitually troubled stars.

The photo says it all

One thing fans and critics of Trump agree on is that when it comes to making money he can actually put in his pocket separate from his business ventures he does a very good job. They both also agree that Trump does, and has for quite some time, done a lousy job running businesses financed with other people’s money. The track record can no longer be disputed as he has either been  corporately bankrupt, in bankruptcy reorganization, or preparing to file bankruptcy for the better part of twenty years. The government records do not lie about this. In the final analysis of Donald Trump’s business history and net worth it sure does look like a lot of smoke and mirrors. You have to ask yourself how good he is if he cannot make money running a casino which is designed to be as fail proof a moneymaker as there is in even the worst economic situations.  If you happen to win Powerball or have a few hundred million dollars lying around – or even just fifty million or so – and Donald Trump approaches you saying “Have I got a deal for you!” it may be advisable to run for the door as fast as you can.  The list of people that lose money being in business with Trump that wind up in court may be longer than those that actually make money they ever get to spend from investing with him. Remember being worth a figure on paper and being able to actually convert that number into real cash is quite another thing.

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