I believe the key to building real net worth is possessing the ability to make your assets work for you. Financial success is NOT about how much you can earn. There is a new acronym out there called HINRY ( High Income Not Rich Yet ). Making $350,000 a year does not make one wealthy.
What does the term "wealth" mean? The definition of wealth is "a great quantity or store of money, valuable possessions, property, or other riches". If a $500,000 object ( i.e. a house ) is possessed by someone, yet the debt they owe on the house is $450,000, then they truely only possess $50,000 in wealth ( i.e. Net Worth ).
Tuesday, October 28, 2008
Wednesday, October 22, 2008
Vanguard's Emerging Markets (VWO)
I'm not convinced that equities have hit bottom, but I do know we must be very close. One area that has sunk faster than the S&P 500 is emerging markets. While the broader markets have been down about 35-40%, emerging markets have dropped 50-65%. Even though I don't know that we have seen the bottom yet, I do know that entering emerging markets at this time has become almost irresistible.
How can one possibly resist a graph like this...
Vanguard's Emerging Markets ( VWO ) Exchange Traded Fund is at its lowest point EVER since it's inception - $22.19 !!! Yes, emerging markets are perhaps one of the most risky areas, but it's going to be quite difficult to lose money at these prices.
Learn More About Emerging Markets
How can one possibly resist a graph like this...
Vanguard's Emerging Markets ( VWO ) Exchange Traded Fund is at its lowest point EVER since it's inception - $22.19 !!! Yes, emerging markets are perhaps one of the most risky areas, but it's going to be quite difficult to lose money at these prices.
Learn More About Emerging Markets
Monday, October 13, 2008
Some Advice
Stay the Course
The last 9 business days have been quite a ride. Today we had some relief from the relentless 22 percent plus freefall of the Dow and S&P 500 over the course of two weeks. Many people paniced and sold their equities at a very low price in an attempt to salvage the remaining value of their shares. For those that held steady and remained in the equities market were rewarded for their patience. The markets gained back almost half today of what they gave up over the last two weeks.
Dollar Cost Averaging
In spite of the gains today, there remains great value right now. Now is the time to be buying. I do think we'll continue to see some erratic behavior in the markets, but one should seriously be considering buying as much as possible at these fire sale prices. These are certainly the times that the Warren Buffet's of the world get richer. The past 1+ year has been an opportunity to store up cash and wait for the existing real estate and credit bubbles to completely deflate. Now ( and the next several months ) is the time to pounce.
Not only is now a good time to buy large quantities of equities, but it's also a wonderful time for those slow and steady Dollar Cost Averagers to round up a greater number of shares with the same dollars. Case in point, I contribute $174 out of each pay check to my 401K. Although the value of my existing shares has dropped about 30 percent, I will now be able to get about 30 percent more shares with my same $174. I went from purchasing 8.4 shares last month for $174 to 12.9 shares purchased with $174. That is the power of Dollar Cost Average.
Diversification
Up until today, the Dow lost 38% of its value since July 2007. During the same period, the S&P 500 lost 42%. Me? I appeared to beat the markets with only a 26% reduction in asset values. As I stated toward the end of last year, I intentionally have been storing up cash this year in anticipation of the financial meltdown in this country that would bring buying opportunities. Fortunately, by the time the market crashed the last two weeks, I held about 27% of my portfolio in cash. I attribute my beating th market to the fact that I was not overexposed in equities. Additionally, over the past two years I've included gold and platinum bullion coins in my portfoliio. With equities tanking, commodities have gone up considerably. I've seen a 40+ percent increase in my bullion values over the past 9 months. Gold, too, has helped diversify myself such that my overall portfolio downturn did not match the S&P 500.
The last 9 business days have been quite a ride. Today we had some relief from the relentless 22 percent plus freefall of the Dow and S&P 500 over the course of two weeks. Many people paniced and sold their equities at a very low price in an attempt to salvage the remaining value of their shares. For those that held steady and remained in the equities market were rewarded for their patience. The markets gained back almost half today of what they gave up over the last two weeks.
Dollar Cost Averaging
In spite of the gains today, there remains great value right now. Now is the time to be buying. I do think we'll continue to see some erratic behavior in the markets, but one should seriously be considering buying as much as possible at these fire sale prices. These are certainly the times that the Warren Buffet's of the world get richer. The past 1+ year has been an opportunity to store up cash and wait for the existing real estate and credit bubbles to completely deflate. Now ( and the next several months ) is the time to pounce.
Not only is now a good time to buy large quantities of equities, but it's also a wonderful time for those slow and steady Dollar Cost Averagers to round up a greater number of shares with the same dollars. Case in point, I contribute $174 out of each pay check to my 401K. Although the value of my existing shares has dropped about 30 percent, I will now be able to get about 30 percent more shares with my same $174. I went from purchasing 8.4 shares last month for $174 to 12.9 shares purchased with $174. That is the power of Dollar Cost Average.
Diversification
Up until today, the Dow lost 38% of its value since July 2007. During the same period, the S&P 500 lost 42%. Me? I appeared to beat the markets with only a 26% reduction in asset values. As I stated toward the end of last year, I intentionally have been storing up cash this year in anticipation of the financial meltdown in this country that would bring buying opportunities. Fortunately, by the time the market crashed the last two weeks, I held about 27% of my portfolio in cash. I attribute my beating th market to the fact that I was not overexposed in equities. Additionally, over the past two years I've included gold and platinum bullion coins in my portfoliio. With equities tanking, commodities have gone up considerably. I've seen a 40+ percent increase in my bullion values over the past 9 months. Gold, too, has helped diversify myself such that my overall portfolio downturn did not match the S&P 500.
Monday, October 6, 2008
Credit Default Swaps
Credit Default Swaps are emerging now as one of the key culprits in our current economic crisis. Apparantly, the total amount of this credit derivative product is in the range of $60 trillion. Yes, TRILLION. To put that into perspective, that is almost 6 times the entire US Gross Domestic Product. Yet, this $60 trillion of "insurance" only covers about $5 trillion in corporate bonds.
More importantly, however, the world of Credit Default Swaps is completely unregulated since the Commodity Futures Modernization Act of 2000 intentionally barred regulation of these trades.
As Warren Buffet has been declaring for 6+ years now, these types of instruments should not exist without collateral behind them of which there is none for Credit Default Swaps. Basically, investment firms like Lehman Brothers are out of business because they gambled with CDSwaps and lost and now the dominos are beginning to fall in the rest of the worldwide economy.
More importantly, however, the world of Credit Default Swaps is completely unregulated since the Commodity Futures Modernization Act of 2000 intentionally barred regulation of these trades.
As Warren Buffet has been declaring for 6+ years now, these types of instruments should not exist without collateral behind them of which there is none for Credit Default Swaps. Basically, investment firms like Lehman Brothers are out of business because they gambled with CDSwaps and lost and now the dominos are beginning to fall in the rest of the worldwide economy.
Wednesday, October 1, 2008
Hang In There...
I've allowed entirely too much time ( 6 months ) to pass since my last entry. Things certainly have changed haven't they? Particularly, the last two weeks. Like you, I've been absorbing a lot of information about the current financial situation we all find all ourselves a part of in this country.
It appears that Congress will go ahead and pass the Economic Rescue Plan tonight in spite of it failing on Monday. There, apparantly, have been several changes to the bill that make it more palatable for the members of congress. The bill is certainly not perfect and, based on many Congressman's comments on C-SPAN this evening, they are not convinced it will solve all our problems, but they clearly don't have a choice and must pass something.
The other evening I watched Bill Clinton on Larry King Live. He had some very interesting comments. He mentioned that the government bailouts of Chrysler and Mexico during his tenure actually allowed the government to make money from those situations. He was pretty optimistic that the Treasury Department could sit on these faulty mortgages for a while and then make money off them as the economy improves. He felt like much of the $700 billion could be paid back and that the government could actually see a profit. That, obviously, will only reveal itself over time, but that would certainly be a positive for the country.
Like you, I've seen a substantial reduction in our Net Worth since August 2007. I did not move all our money into cash early on, but I have slowly put us in a situation where our portfolio is made up of about 25% cash at the moment. I have not purchased any risky instruments this year as I continue to store up cash waiting for the precise time to pull the trigger on new purchases. Like the year 2000 and 2001, the upcoming year will present MANY MANY opportunities for acquiring shares at very low prices. Today, Warren Buffett bought $3+ billion of GE stock. This is what smart people do. But, let me be clear, they are not market timers. These people are long term investors who prepare themselves for downturns in the economy so as to take advantage of low prices. Capitalism is a boom/bust economic model. For those who believe the economy can only continue to go up are fools.
Of course, you have to be able to stomach these hard times. Personally, this is the toughest situation I've seen in my lifetime. Over the years, I've had a couple rare situations where our investments dropped $5,000 in one day. On Monday, in one day, I saw our funds drop $11,000. Now, what if I would have panicked and immediately moved that money to a Money Market fund? I would have lost that money. Yet, I'm staying the course and just the next day our investments were back up about $6,000. Additionally, with my current mix, I'm on target to make $10,000 in dividends alone. There is no way I could have achieved that in a Money Market fund.
Hang in there. Be a long term investor in low cost funds and do not be a "trader" coming in and out of the market with the intent to time the market.
It appears that Congress will go ahead and pass the Economic Rescue Plan tonight in spite of it failing on Monday. There, apparantly, have been several changes to the bill that make it more palatable for the members of congress. The bill is certainly not perfect and, based on many Congressman's comments on C-SPAN this evening, they are not convinced it will solve all our problems, but they clearly don't have a choice and must pass something.
The other evening I watched Bill Clinton on Larry King Live. He had some very interesting comments. He mentioned that the government bailouts of Chrysler and Mexico during his tenure actually allowed the government to make money from those situations. He was pretty optimistic that the Treasury Department could sit on these faulty mortgages for a while and then make money off them as the economy improves. He felt like much of the $700 billion could be paid back and that the government could actually see a profit. That, obviously, will only reveal itself over time, but that would certainly be a positive for the country.
Like you, I've seen a substantial reduction in our Net Worth since August 2007. I did not move all our money into cash early on, but I have slowly put us in a situation where our portfolio is made up of about 25% cash at the moment. I have not purchased any risky instruments this year as I continue to store up cash waiting for the precise time to pull the trigger on new purchases. Like the year 2000 and 2001, the upcoming year will present MANY MANY opportunities for acquiring shares at very low prices. Today, Warren Buffett bought $3+ billion of GE stock. This is what smart people do. But, let me be clear, they are not market timers. These people are long term investors who prepare themselves for downturns in the economy so as to take advantage of low prices. Capitalism is a boom/bust economic model. For those who believe the economy can only continue to go up are fools.
Of course, you have to be able to stomach these hard times. Personally, this is the toughest situation I've seen in my lifetime. Over the years, I've had a couple rare situations where our investments dropped $5,000 in one day. On Monday, in one day, I saw our funds drop $11,000. Now, what if I would have panicked and immediately moved that money to a Money Market fund? I would have lost that money. Yet, I'm staying the course and just the next day our investments were back up about $6,000. Additionally, with my current mix, I'm on target to make $10,000 in dividends alone. There is no way I could have achieved that in a Money Market fund.
Hang in there. Be a long term investor in low cost funds and do not be a "trader" coming in and out of the market with the intent to time the market.
Sunday, April 13, 2008
Individual Development Accounts
Here are two very contrasting stories...
In 2007,the four major investment banks ( Bear Sterns, Lehman Brothers, Merrill Lynch and Morgan Stanley ) responsible for the sub-prime lending crisis handed out year-end bonuses totaling $39 billion. Yet, that number is three times the combined profits of all the firms last year. So, while the economy soars toward recession and the government is bailing out these investment banks, the executives are receiving bonuses in the billions.
In spite of all these crappy people in the ranks of the money business, there are also other people creating opportunities for the less fortunate, yet ambitious, people in our society. There are accounts called Individual Development Accounts that have been created that assist the poor in our society.
In 2007,the four major investment banks ( Bear Sterns, Lehman Brothers, Merrill Lynch and Morgan Stanley ) responsible for the sub-prime lending crisis handed out year-end bonuses totaling $39 billion. Yet, that number is three times the combined profits of all the firms last year. So, while the economy soars toward recession and the government is bailing out these investment banks, the executives are receiving bonuses in the billions.
In spite of all these crappy people in the ranks of the money business, there are also other people creating opportunities for the less fortunate, yet ambitious, people in our society. There are accounts called Individual Development Accounts that have been created that assist the poor in our society.
Saturday, April 12, 2008
Bizarre Request
Several weeks ago, I was telling a few of my co-workers that AT&T asked for my physical Social Security card in order to remove my cell phone from our family plan. AT&T claimed they could not acquire enough information about my credit history to remove my phone from the plan Completely fucking bizarre request especially since I was removing, not adding, a name/plan to the account. I came to the conclusion that this is another tactic these dishonest telecom companies use to make it difficult to change and/or terminate a plan. Basically, the premis is that people will react just like I did "whoa, you not only need my SSN, but you actually need to have the card???". That is insane and wrong.
Additionally, as I was telling this story to some of my co-workers, one jackass in our Development group ( and, yes, he is a real jackass ) chimed in and said "man, I'd hate to see your credit history". Well, when I got pre-approved for our new home loan a few days ago, my credit score was 826. It was the second highest credit score our banker had ever seen. So, once again, this guy I'm referring to was speaking out of his ass again like he normally does.
Additionally, as I was telling this story to some of my co-workers, one jackass in our Development group ( and, yes, he is a real jackass ) chimed in and said "man, I'd hate to see your credit history". Well, when I got pre-approved for our new home loan a few days ago, my credit score was 826. It was the second highest credit score our banker had ever seen. So, once again, this guy I'm referring to was speaking out of his ass again like he normally does.
Wednesday, April 2, 2008
Sub-Prime Mortgage Crisis
I've been curious how most of the sub-prime mortgage crisis is going to be funded. In other words, who is going to pay for the failings of the sub-prime mortgage companies. We've heard a lot in the news lately. There has been lots of talk around whether or not the government would step in and cover these losses.
Well, I had a rude awakening the other day. Dayna and I have decided to pursue a mortgage on a new house. I set up an appointment with our trusted lender at Valley National Bank. Lynn Majors at VNB was very good to us when we refinanced our existing home and, as a result, I wanted to give her our repeat business.
As Lynn was working up the Good Faith Estimate, she was walking through the closing costs with me. Turns out that Fannie Mae ( FNMA ) has decided to gracefully allow the rest of us with good clean records to finance the sub-prime crisis. YES!!! This nice new fee within everyone's closing costs now is not a trivial $20 or $30 bucks. FNMA lobbed a nice big fat fee of $420 onto our closing costs specifically for finding the sub-prime problem. And, mark my word, I bet once the crisis is over and paid for that good ol FNMA just decides to keep that fee on all mortgages.
Well, I had a rude awakening the other day. Dayna and I have decided to pursue a mortgage on a new house. I set up an appointment with our trusted lender at Valley National Bank. Lynn Majors at VNB was very good to us when we refinanced our existing home and, as a result, I wanted to give her our repeat business.
As Lynn was working up the Good Faith Estimate, she was walking through the closing costs with me. Turns out that Fannie Mae ( FNMA ) has decided to gracefully allow the rest of us with good clean records to finance the sub-prime crisis. YES!!! This nice new fee within everyone's closing costs now is not a trivial $20 or $30 bucks. FNMA lobbed a nice big fat fee of $420 onto our closing costs specifically for finding the sub-prime problem. And, mark my word, I bet once the crisis is over and paid for that good ol FNMA just decides to keep that fee on all mortgages.
Monday, March 24, 2008
Sweet 16
Saturday, March 22, 2008
San Antonio Practice
The Ags practiced in San Antonio today. About 1000 fans showed up to get a glimpse of the boys. Today is going to be quite a day.
Monday, March 17, 2008
My Bracket
My Bracket as it stands right now.
I'm considering Pittsburgh over Memphis though and I'm not convinced I should have Duke winning it all at this point.
Dayna's cousin, Heather, is pulling hard for Drake this year. If A&M is able to get past UCLA, we'll have chance to play them in the Sweet 16. That would be cool. Drake has a very good team this year.
I'm considering Pittsburgh over Memphis though and I'm not convinced I should have Duke winning it all at this point.
Dayna's cousin, Heather, is pulling hard for Drake this year. If A&M is able to get past UCLA, we'll have chance to play them in the Sweet 16. That would be cool. Drake has a very good team this year.
Saturday, March 15, 2008
Karas Criterion
Dayna always gets a kick out of me this time of year as I spend hours on perfecting "my formula" for picking the winner of the NCAA Basketball Championship. One day, I tell her, it's all going to pay off!!! Each year I learn something new from gathering all my statistics and punching my numbers into the spreadsheet. I have several years worth of data now to peruse as I tweak the information and gently modify the formula each year.
Based on years of advanced calculations now ( hehehe ), here is what I can share with you.
Over the last three years, the Karas Criterion breakdown has consistently provided this information about the Sweet 16...
6 of the Criterion top 10 have advanced to the Sweet 16
3 of the 11 - 20 teams have advanced to the Sweet 16
3 of the 21 - 20 teams have advanced to the Sweet 16
4 of the 31 - 40 teams have advanced to the Sweet 16
Never pick a team ranked below 40 to make it to the Sweet 16.
So, here is where things stand with the Criterion just one day before Selection Sunday.
Based on years of advanced calculations now ( hehehe ), here is what I can share with you.
Over the last three years, the Karas Criterion breakdown has consistently provided this information about the Sweet 16...
Never pick a team ranked below 40 to make it to the Sweet 16.
So, here is where things stand with the Criterion just one day before Selection Sunday.
Wednesday, March 12, 2008
Tuesday, February 5, 2008
Gotcha Capitalism
I found an intriquing book while in Philadelphia. Dayna loaded up my iPod with the latest NPR PodCasts and they had a piece on Bob Sullivan's Gotcha Capitalism. It was such a compelling story that I had to pick up the book in the airport. I was instantly captivated.
The theme of the book is how Credit Card, Phone and Cable companies and those like them are completely unrestrained by any government regulation to reign in the fees and the interest rates they subject their customers to.
I will include some details from the book regarding how these companies get away with this, but I thought I'd share something I learned in the book that I did not know ( at least the extent of it ).
Not only does the Credit Card company hit you with interest and fees, but everytime you use your card, the business in which you are making the purchase from must pay a fee for accepting the credit card. Apparantly, the typical contract is for the business to pay .20 cents AND 2.65% for each transaction.
So, if I make 100 purchases in a month at an average of $20 a purchase for a total of $2,000, then the credit card company has made $73 off me from the businesses I use.
That's 100 purchases times .20 a purchase = $20 plus
$2,000 times 0.0265 = $53
For a total of $73
Wow !!!
The theme of the book is how Credit Card, Phone and Cable companies and those like them are completely unrestrained by any government regulation to reign in the fees and the interest rates they subject their customers to.
I will include some details from the book regarding how these companies get away with this, but I thought I'd share something I learned in the book that I did not know ( at least the extent of it ).
Not only does the Credit Card company hit you with interest and fees, but everytime you use your card, the business in which you are making the purchase from must pay a fee for accepting the credit card. Apparantly, the typical contract is for the business to pay .20 cents AND 2.65% for each transaction.
So, if I make 100 purchases in a month at an average of $20 a purchase for a total of $2,000, then the credit card company has made $73 off me from the businesses I use.
That's 100 purchases times .20 a purchase = $20 plus
$2,000 times 0.0265 = $53
For a total of $73
Wow !!!
Thursday, January 31, 2008
American Eagle Platinum Proof One-half Ounce Coin
I had a chance to visit Philadelphia again this year for our annual Disaster Recovery exercise. I wanted to take some time to stop by the US Mint again to pick up a special coin to commemorate Parker's birth in 2007. I was hoping to pick up the 2007 American Buffalo Gold Proof One Ounce Coin, but they were completely sold out.
I wanted to pay about the same amount I did for Morgan's 2006 American Eagle Proof Gold Coin, so I found the beautiful 2007 American Eagle Platinum Proof One-half Ounce Coin.
Both kids now have a little something special to honor them in the year of their birth.
I wanted to pay about the same amount I did for Morgan's 2006 American Eagle Proof Gold Coin, so I found the beautiful 2007 American Eagle Platinum Proof One-half Ounce Coin.
Both kids now have a little something special to honor them in the year of their birth.
Tuesday, January 22, 2008
Tax Credits
Children are so wonderful in so many ways. Fortunately, we also live in a country that tries to honor the family and provides nice tax credits for people with children. This year, Dayna and I are benefiting from a $2,000 child tax credit ( $1,000 for each child ) that helped us achieve a nice refund from the IRS for $5,546.
I've decided to use the refund each year to fund a "children's expense" account that will assist with child-specific costs like The Little Gym, swimming and music lessons for the kids. Since they are the ones providing the bulk of the refund, I felt like that money should be earmarked to fund their activities.
Along with the encouraging news provided above, I also feel compelled to comment on the looming recession. Prior to today's stock freefall, my investments were down a full 10% from just 8 days ago. Once the new figures hit my Quicken account, I'm guessing I'll see another 2 - 5% hit. The market right now is not for the faint-hearted, but I'll remain steadfast in my diversified portfolio and again look for more bargains later this year as I store up cash for another purchase. Good luck to everyone.
I've decided to use the refund each year to fund a "children's expense" account that will assist with child-specific costs like The Little Gym, swimming and music lessons for the kids. Since they are the ones providing the bulk of the refund, I felt like that money should be earmarked to fund their activities.
Along with the encouraging news provided above, I also feel compelled to comment on the looming recession. Prior to today's stock freefall, my investments were down a full 10% from just 8 days ago. Once the new figures hit my Quicken account, I'm guessing I'll see another 2 - 5% hit. The market right now is not for the faint-hearted, but I'll remain steadfast in my diversified portfolio and again look for more bargains later this year as I store up cash for another purchase. Good luck to everyone.
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