Bloviating billionaire and reality TV actor Donald Trump constantly brags about how he built a “really great business,” even when asked unrelated questions that have nothing to do with his business. Seemingly, it’s his fallback answer to every question.
But a University of Texas finance professor crunched the numbers and analyzed that the real estate tycoon has drastically underperformed the real estate market averages by wide margins.
According to Professor John Griffin, Trump would have been better off taking his stated net worth in 1976 and investing it in an REIT index, an unmanaged portfolio of publicly traded real estate investment trusts.
“Mr. Trump has underperformed the real estate market by approximately $13.2 billion, or 57%,” since 1976, professor Griffin says, who compared Trump’s stated net worth with four decades of returns on the FTSE NAREIT All Equity REITS Index, Market Watch reports.
Griffin’s analysis begins with taking Trump’s professed net worth of at least “$200 million,” a number he told the New York Times in 1976. He hypothetically invested the $200 million in the FTSE NAREIT All Equity REITS Index, and claims the compounded return would have equated to $23.2 billion by the end of 2015.
In other words, Trump would have been even wealthier if he had taken daddy’s inheritance and just plopped it in the real estate index. He’d have $13.2 billion higher net worth than he claims to have.
But it gets even worse for Trump, according to the professor.
“These numbers do not take into account leverage,” Griffin explained. “The REIT equity funds have current leverage ratios around 36%, while Trump is documented to have been levered to 69%. If one were to lever the REIT returns at Trump’s rate, then the index’s performance would be considerably higher.”
Moreover, Trump, who is a legendary exaggerator, may be overstating his net worth two-fold or more. A Forbe’s magazine study puts Trump’s net worth at $4.5 billion, less than half of Trump’s $10 billion number.
Trump somehow thinks his name alone is worth $3 billion, which may explain part of Trump’s exaggeration.
Of course, out of the $23.2 billion Trump could have had if he had not relied on the same skills taught at defunct Trump University, taxes and living expenses would have to be deducted, and Trump’s lifestyle isn’t cheap.
Also, deducted from the total would have to be Trump’s buying off corrupt establishment politicians in both parties, like Harry Reid , Nancy Pelosi , Charles Schumer , Anthony Weiner , Mitch McConnell and Hillary Clinton.
But Trump could have saved all that money given to crony politicians if he’d just went with the index.