Archive for April, 2009
Invest Like Seth Klarman
Posted by: Todd Metheny in Business Profiles, Value Investing on April 30th, 2009
If you consider yourself a value investor, and, like much of the value investing community, devour every word written by and about value investing and investors, you probably already know about Seth Klarman. Klarman is a hedge fund manager whose investing style has been compared by many to a young Warren Buffett. Like Buffett and other value investors, Klarman tries to focus on investing in companies that are trading significantly below what he views as the companies’ fair value. Unlike Buffett, who focuses mostly on large cap stocks (companies with a market cap of more than $10 billion), Klarman tends to focus more on small caps (companies with a market cap of less than about $2 billion). Large caps tend to be followed by lots of analysts, and are less likely to be mispriced (or as mispriced) as smaller cap stocks that have a lesser following.
Like Buffett, Klarman will also make large bets on a particular stock if he’s firm in his convictions. He trusts himself. Klarman is also well known for keeping large amounts of cash on hand in good times. This theoretically lowers returns a bit during a bull market, but also lowers risk. Klarman has been known to say that there is too much focus on returns – without any regard for the risks that were taken to create those returns. I’d have to agree. If you’re investing in risky investments and putting large amounts of money at risk, and some of those investments pan out, you could look very good on paper – but you also put your money at risk. Klarman will keep half his money in cash and still outperform the overall market with his portfolio as a whole. This is a testament to how talented he really is.
Klarman also wrote a famous book called Margin of Safety, which has become something of a collector’s item in investing circles. It sells for hundreds of dollars. I have a copy in ebook form that was sent to me awhile back. I haven’t read it yet. I’ve been told that it’s an excellent book on value investing, but that it’s unnecessary at that price. I would suggest getting it at the library, if you can, but most libraries don’t have the book either. A book you might consider that focuses on special situation investing as well is You Can Be a Stock Market Genius by Joel Greenblatt. Klarman also contributed a chapter to the new edition of Benjamin Graham’s investment classic Security Analysis. Anyone that considers themselves a value investor should check this book out.
Anyway, I was combing through some of the material at the excellent blog, Old School Value, and I came across an article filled with excerpts from Klarman’s Baupost Group annual letter. Here are a couple things that caught my eye:
“Robert Rubin once observed that some people are more sure of everything than he is of anything. One can see the investment universe as full of certainties, or one can see it as replete with probabilities. Those who reflect and hesitate make far less in a bull market, but those who never question themselves get obliterated when the bear market comes. In investing, certainty can be a serious problem, because it causes one not to reassess flawed conclusions.”
“One must also balance one’s own perception of the truth with one’s best assessment of what others believe. In investing, other people’s perception of reality influences price more than any underlying truth; your own assessment, even if correct, if valueless if it is already reflected in the market price.”
Klarman is also known for believing that once you identify a security that you believe is undervalued, you also need to look for a catalyst that will unlock that value and bring the price into line with your view of its true value. He’s a wise man, indeed. Keep this advice in mind if you’re trying to pick your own. Thanks for reading.
Penelope Trunk – Brazen Careerist
Posted by: Todd Metheny in Business Profiles, Careers on April 29th, 2009
If you haven’t heard of Penelope Trunk, it’s time for you to start reading her blog, Penelope Trunk’s Brazen Careerist. I have just recently started reading it and combing through some of the old articles. She’s a phenomenal writer. Her writing is, for lack of a better word, honest. Her openness fascinates me. She takes an introspective look at her failures and recognizes them with a rare sort of confidence. She’s an entrepreneur who has had her share of success and failure – she’s taken a business public, only to subsequently be part of a merger, and later a bankruptcy. She sold equity in her blog and started another business when she was able. She makes a solid living as a freelance writer and a public speaker. To say the least, I’m impressed with her. (So much so, that I’m considering buying her book.)
Her blog is so good that it sort of makes me feel bad about my blog (my blog has a crush on her blog). When I have a weakness, I hide it as thoroughly as I can. When I fail at something, I try to make sure that no one ever finds out about it. She publicisizes her failures with a confidence I wish I had. She has an authoritative voice, but it isn’t off-putting. It can be endearing. I really feel like I know her just from reading her blog. That’s what great writers are capable of. Check out this post, where she shares the beginning of the end of her marriage. Or this one, where she talks about her divorce. She’s a strong woman, but she combines that with carefully placed vulnerability – you don’t see it much, but it means something when you do. And she’s the rare type of writer that can effectively convey it.
I’m really glad I found her blog when I did, which I guess was yesterday. I’ve been to her blog before a couple times, but I never really gave it a chance. I used to occasionally read her stuff on Yahoo Finance, but I was never as impressed as I am now. In fact, I don’t ever remember being very impressed at all. On the couple occasions I did happen to visit her blog, I wasn’t struck by her brilliance the way I am now. The articles on Yahoo Finance are written for a very broad audience, and maybe they’re too broad to touch anyone. For whatever reason, I never appreciated this blog until recently. It’s mostly a collection of career advice, which brings me to why I’m glad I found it now. Several of my upcoming posts are career oriented, mostly focusing on advice that people have given me over time. I’m going to focus on things that have really stuck with me, and how they affect (or have affected) my choices. I would say that most of Penelope’s advice is excellent. She has articles about blogging, careers, personal branding and a variety of other issues. Her blog can be risque at times, but that’s probably why so many people read it. Anyway, it’s something I think it worth reading, and I wanted to share it with my readers. Check it out and let me know what you think. Thanks for reading.
Choosing a Career
Posted by: Todd Metheny in Careers on April 28th, 2009
Have you heard the expression, “do what you love and the money will follow?” I’m not sure I agree with that phrase. I just don’t think it’s true. I believe it’s true to an extent, but it’s one of those sayings that clearly needs to be qualified. You may love to paint, or act, or sing, or play baseball. You may love one of these things so much that you’d like to do it for a living. The problem with any of these professions, is that a limited amount of people can make a living doing them. The principles of supply and demand apply, regardless of how you’re attempting to make your living. For example, there are around 306 million people in the United States. An economy of all writers and artists and athletes would not thrive – they’d have to buy their goods, services and food from someone, and someone in turn would have to want to pay them for their specific skill that they’re trying to make a living at.
For most people, these jobs are hobbies. Something they love to do and would spend their time doing in a perfect world. That doesn’t mean that you can’t incorporate something you love into your everyday work. My wife has lots of classmates at her medical school that love team sports and being around them. Many of them go into orthopedics or rehabilitation medicine, where they’ll be working with athletes on a regular basis. Things like this don’t always transfer, of course. You may love to paint, but hate teaching art. Teaching isn’t for everyone, and it’s not all about you and creating your art the way a career in art would be. Even if it’s connected to something you really love, you have to decide whether that’s going to be something you actually want to do.
As for the quote I led off this entry with, I do think it’s important to do something you enjoy to some degree. If you like your job and feel challenged by it, you’ll be more productive and be better at it. The better you are at what you do, the more likely you are to make money at it. In that regard, I think the quote is true.
Deciding what you truly want to do is the hardest part (for me at least). There are some great books and resources that focus on that topic, such as What Color is Your Parachute. Once you decide what you want to do, the key is to figure out how to get there. I would suggest writing out a step by step plan with a timeline. Research has shown that people who write down their goals are more likely to achieve them. Find out what’s required to become whatever it is you want to be. Pick something you really want and make it happen. Start taking the preliminary steps immediately. If you need to get licensed, or take classes or read up on something, start doing that as soon as you can. Begin. Everything else is arbitrary. Good luck. Thanks for reading.
Best Rental Truck Rates
Posted by: Todd Metheny in Reviews on April 27th, 2009
In honor of the fact that my wife and I will be moving in a little over a month, I thought I would take a look at which company offers the best rates for renting a moving truck. We feel like we have a lot of stuff, but moving an 800 square foot condo and a small storage space shouldn’t be too much to do (hopefully). We’ll probably rent a truck and then be able to get everything in one trip. Which begs the question, which rental truck company should we rent from? Price is the prime consideration, but we also want to be getting a reliable product from a company that we can count on to have the reservation we’re looking for, at the time when we request it. Based solely on my own perceptions, I think that most rental truck companies are national – although there may be some regional companies. I would think that covering a fairly large area would be necessary in this business, so as to be able to allow people to drop off the trucks at a different location than the one they picked it up from. Without further ado, here’s what I found:
Uhaul – Uhaul will give you a truck for 3 days and about 280 miles at the following rates: $150 for a ten footer (apartment worth of stuff), $156 for a fourteen footer (1-2 bedrooms), $163 for a seventeen footer (2-3 bedrooms), $203 for a twenty-six footer (4+ bedrooms). I can’t find anywhere on Uhaul’s site that simply breaks down their prices for me and explains how much per mile and per hour or day. This would be the most convenient for actually comparing one company to the next. What they do is allow you to put in where your moving to and request an instant quote that I suppose just instantly figures these factors for you. A lot of people have complained about their service, including Jim over at Bargaineering in his article, I Hate U-Haul Truck Rental. I’ve never had a serious problem with them, but I’ve used U-Haul multiple times in my life and never found them to put forth much effort from a customer service perspective.
Budget – Budget truck advertises $19.99/day + mileage for moves taking place Monday-Thursday and moving locally if you book online. Unfortunately, I had the same problem navigating their site that I did with U-Haul. When I clicked on terms and conditions under the deal, I couldn’t find how much they charge per mile. Since I’m moving to another city, this local rate offer wouldn’t help me.
To find out the prices, I had to go through as though I was going to reserve the truck, just like I did with U-Haul. For 3 days and 314 miles, they offered the following prices: $134.10 for a 10 ft., $144.90 for a 16 ft., or, oddly enough $110.70 for a 24 footer. The only thing my wife and I could come up with as to why the largest truck would be the least costly is that there tends to be smaller demand for such a large truck, and they want to give people incentives to take these trucks out of their cache first, so there are more of the trucks available that people want. This truck is also harder to drive and park, of course. Advantage – Budget over U-Haul on price.
Penske – The quote I received from Penske included unlimited mileage and “special” internet rates of $143 for a 12 or 16 footer or $152 for a 22 or 26 footer. Not included in this quote is a $9 “environmental” rate that they don’t explain. They also advertise that you can save an additional 10% if you’re a member of AAA. Advantage – Budget over Penske on price (narrowly).
My take: There you go. I believe Hertz rents certain sizes of trucks as well, but may have limited availability, as this isn’t their primary business. They also might have better customer service if that tends to be important to you. I don’t know. The prices end up being fairly negligible. I would still go with the cheapest one, which looks to be Budget (aptly named). If one is more convenient than another, you could easily justify using that one and not feel like you’re setting back the frugality movement. I think I’m going to look at the cost of hiring a mover sometime later this week (maybe tomorrow). Thanks for reading.
New Ideas from Dead Economists, Part 12 (Special Interest Groups)
Posted by: Todd Metheny in Economics, Reviews on April 24th, 2009
This is part 12 (I know it’s getting ridiculous) of my review of New Ideas from Dead Economists by Todd Buchholz. Here are parts 1 (Adam Smith), 2 (Thomas Malthus), 3 (David Ricardo), 4 (John Stuart Mill), 5 (Karl Marx), 6 (Alfred Marshall), 7 (Thorstein Veblen), 8 (John Kenneth Galbraith), 9 (law and economics), 10 (John Maynard Keynes) and 11 (Milton Friedman) if you’d like to look back. Any of the entries can stand alone, of course.
If you’re the type of person that complains about bureaucracy, this is the chapter for you (I am one of you). Among other things, this chapter looks at the incentives on politicians. What do politicians maximize, Buchholz asks? Politicians maximize their power and their ability to gain votes. All of my posts look at the theories and ideas that economists have developed over years of study and experience. But how do we apply the best ideas without the politicians mucking it up?
Special interest groups and lobbyist have a tremendous amount of power in this country. Special interest groups aren’t, contrary to public opinion, lobbying Congress to try to get them to increase efficiency and the national wealth. They’re lobbying a very specific interest, without regard for what’s right, or what’s best for America, or what’s best for you or I. Why? Because whatever their special interest is, they’re getting paid to support that interest.
Buchholz offers the example of the Associated Milk Producers, which ranks high on the list of donators to congressional campaigns. Milk producers enjoy the government legislated price supports, because it guarantees that they will get a good price for their milk. Economists, on the other hand, would prefer to allow the market to set prices (economists hate price supports). Suppose the milk producers comprise 1% of the population – if they lobby Congress to raise productivity, they only receive 1% of the benefit. if they lobby Congress to support their interest exclusively, they reap 100% of the benefits. There is no incentive for patriotic lobbying. This political activity hurts society, but they only absorb 1% of that hurt, while they’re reaping a great deal of benefit from the activity.
Why don’t consumers organize to defeat this process? Because it’s difficult to organize and because it doesn’t pay. If the total cost to consumers is $10 million, and the population equals 250 million, it costs each consumer about $.04, but it benefits each producer by $4. Plus, it’s easier to organize the producers.
Lobbyist for sugar growers represent only .0002% of the American population, keep the price at about triple the world price. They benefit from this, but so do the producers of corn sweeteners (the predominant US crop), who make a lot of money from artificially high sugar prices. Log Cabin maple syrup actually doesn’t have any maple syrup in it – can you believe that? It’s corn syrup – because it’s cheaper. That’s what artificial price supports do.
This is how motivated organizations take advantage of consumers, who have a smaller stake in the outcome. I know I sound like I’m trumpeting an anti-establishment, but I’m really not. I’m just pointing out some of the flaws in the current system. I’m sure you’re already familiar with them. It’s what gets discussed around dinner tables all across the country. It’s why people are cynical when it comes to politics and politicians. It’s not a perfect system. Nothing is when real people are involved. People will usually act in their own interest. Usually, in a free market system, acting in your own interest helps the group as a whole. In this case, however, we’re dealing with virtual monopolies and oligopolies, and that tends to be a negative thing. In any case, it’s historically been the best system for creating wealth in the history of the world. For all of our flaws, we’re doing it better than most governments are. Hopefully America is not dead yet. Thanks for reading.
Berkshire Hathaway Shareholders Meeting
Posted by: Todd Metheny in Uncategorized on April 23rd, 2009
Anyone who follows this blog with any regularity knows that I am a big Warren Buffett fan. As such, my wife and I have a small investment in Berkshire stock. We put our money here because we liked the idea of having a small part of our fates intertwined with the investing legend, and so we could go to the meeting. Of course, if you want to go to the meeting, you don’t have to be a shareholder.
We got our annual report, including our letter just a couple weeks ago. I had, of course, already read and reviewed the letter online (on the day it was posted). You can read a compilation of Buffett’s letters by category, or read any of them for free here. When you get your packet from Berkshire, if you’d like to go to the meeting, you have to drop a postcard in the mail with your name and how many meeting credentials you’d like to have. We asked for four, because at the time there was a good chance my brother-in-law and his girlfriend (also my wife’s best friend) were going to come with us. Something came up, and unfortunately they can’t go.
That being the case, we have two extra tickets to the meeting. The fun thing about that is, I get to give them away on the blog. So if anyone is interested, email me at the blog’s email address and let me know. I’ll give them to anyone who will pay the cost of shipping them to you. If more than one person emails me about them, I’ll do a drawing or something. If you clicked on the link, you realize that this offer doesn’t carry a tremendous amount of value – you can buy tickets to the meeting on eBay for five bucks or so. Buffett started putting these out there when he realized that people were selling tickets to the meeting for hundreds of dollars on a for profit basis. His companies tend to make money (lots) off the meeting, so he has a reason to make it easy for you to get there. In any case, I think it’s cool that he does this. I think shipping them to you will only be slightly cheaper for you than buying them that way. But the offer is out there if anyone is interested. The problem might be finding a room that weekend. I’d have to know you pretty well for me to allow you to stay in our room;) I know the hotels are gouging people and there aren’t many rooms left (we got ours a couple months ago). If you’re already going, maybe I’ll see you there.
We’ll definitely be going to see the Berkshire movie that morning, and of course we’ll see the entire question and answer session. I don’t know if we’ll go to any of the other stuff yet or not. I’m really excited about going, though. It’s been on my list of things I’d like to do for several years. Whenever you have the opportunity to hear someone who is great at what they do speak about their area of expertise, I think taking it is a good decision. It’s an added bonus that Buffett is sort of a finance celebrity and all around nice guy. Anyway…thanks for reading.
Money Hacks Blog Carnival – Earth Day Edition
Posted by: Todd Metheny in Uncategorized on April 22nd, 2009
Happy Earth Day everyone! This is my first time hosting a carnival. It’s a daunting task sorting through so many submissions. We had 106 total submissions, and most of them are posted here. The only thing I really did as far as weeding some out was not to accept more than one from any one blogger. I think that’s how we’re supposed to handle it, I don’t know. Anyway, there are lots of good things to read here. If it’s your first time visiting my blog, welcome! I hope you’ll look around (and come back). Thanks for reading.
Editor’s Picks
nickel presents How to Protect Yourself from Identity Theft and E-mail Scams posted at fivecentnickel.com.
Jae Jun presents Best Small Companies Fair Value Estimates posted at Old School Value.
Frugal Dad presents Advantages Of Renting and Borrowing Over Buying posted at Frugal Dad.
FFB presents 9 Ways To Save On Baby Costs posted at Free From Broke.
MoneyNing presents 25 Debt Reduction Tips For Your Immediate Action Plan posted at Personal Finance Blog by Money Ning.
Investing
jim presents Consumer Reports America’s Best Brokers posted at Bargaineering.
MoneyNing presents Ins and Outs of a Stock Exchange posted at Investing School.
Zach Scheidt presents Rosetta Stone Brings IPO Market Back into Focus posted at ZachStocks.
Verna Morris presents The Definitive Silver ETF Guide (Five Minute Edition) posted at ETF Database.
Ryan Suenaga presents Don’t Get Too High, Don’t Get Too Low posted at Uncommon Cents.
PicktheBrain presents Investing in Stocks for Beginners posted at Beginner Investing.
Dan presents Advanta High Yield Notes: 8.5% – 11% Yield Worth the Risk? posted at Darwin’s Finance.
The Smarter Wallet presents Technical Trading Indicators Predict That The Stock Market Rally Won’t Last posted at The Smarter Wallet.
Money Beagle presents Seeking Advice: Choosing Between A 401(k) Or Roth IRA posted at Money Beagle.
The Investor presents Six ways in which stop losses can damage your wealth posted at Monevator.
Lisa Spinelli presents Stock Market Investing Tips 101: Creating a POA Revisited posted at Greener Pastures: Personal Finance.
Jeff Rose presents Managing Your Money While Deployed, One Soldier’s Story posted at Good Financial Cents.
Matt SF presents Dollar Cost Averaging: Would You Prefer 1 Dart or 12 Darts to Hit the Bullseye? posted at Steadfast Finances.
D4L presents International Income Investing posted at Dividends Value.
Frugality and Saving Money
ChristianPF presents Whats the best FREE personal finance software? posted at Christian Personal Finance.
Joe Caterisano presents Budgeting Tips posted at Penny Pinching.
Jeff@StretchyDollar presents Converting a Super-Spender to A Frugal Saver, Part II posted at StretchyDollar.
Kate Kashman presents Can Fitness Be Frugal and Successful? posted at The Paycheck Chronicles.
Hank presents Spending a Huge Amount on HBO and Cable Every Month Can Actually Save You Money posted at Own The Dollar.
Viviana presents The Lean Times » Blog Archive » Extreme Earning posted at The Lean Times.
Amanda presents Need a deal? Just ask! posted at Value For Your Life.
Tyrone presents Tips on Budgeting posted at Millionaire ACTS.
Jim DeSantis presents 3 Reasons That Can Cause Your Family Budget To Fail posted at Free Family Budgeting eBook from On Line Tribune.
Jason presents The Balanced Budget: Every Penny Has a Purpose posted at Automatic Finances.
Dorthy Wilden presents Save Money with a Las Vegas Wedding posted at Cheap Wedding Dresses.
Chance.pfsr presents Rudder Review posted at Personal Finance Software Reviews.
J. Money presents Personal Finance Mags = The New Black. posted at Budgets are Sexy | A Personal Finance Blog.
Aryn presents Control Impulse Spending with the 10-Day Rule posted at Sound Money Matters.
FMF presents Two Real-Life Examples of How Asking for a Discount Can Pay Off posted at Free Money Finance.
Wren Caulfield presents First Bike Commute of the Year! posted at True Adventures in Money Hacking.
Sarah Eliza presents Devastate Boredom: Top 5: Free Music by the Mile… (gallon? bushel? ipod?) posted at Devastate Boredom.
Debt and Credit
Silicon Valley Blogger presents Lending Club Investment Performance, Loan Returns: Should You Invest Via Direct Lending? posted at The Digerati Life.
PicktheBrain presents Is a College Education Worth a Lifetime of Debt? posted at School Loans.
Surfer Sam presents NEW !! Best Free College Scholarships for College Students. Scholarship Search Program and Application ! Surfer Sam posted at Surfer Sam and Friends.
Neal Frankle presents Dieting For Dollars posted at Wealth Pilgrim.
PFCreditCards presents The Credit Card Debate posted at PF Credit Cards.
Deposit Accounts presents Keep More of Your Money: Tips for Better Banking posted at Deposit Accounts.
kathryn presents Free Money from the Government posted at Out of Debt – Christian Finances and Debt Help.
apply4-credit presents Do’s and Don’ts: Tips for Considering Loans posted at Apply4-Credit.com.
PT presents Credit Cards for Teens posted at Prime Time Money.
Mr. CC presents Secured Credit Cards – What are they? posted at Ask Mr Credit Card.
Leave Debt Behind presents Are You Responsible for Your Deceased Parents Debt? posted at LeaveDebtBehind.com.
CreditCardAssist.com presents Balance Chasing – is it Happening to You? posted at CreditCardAssist.com.
MBR presents Jumbo Mortgage Rates posted at MonitorBankRates.com.
Steve presents Free Credit Report and Credit Score from American Express and Experian posted at Personal Finance Start-Up Blog.
vh presents Debt-to-Income Ratio: Frugalist begs to differ posted at Funny about Money.
MLR presents Warning Sign: Are You In Too Much Debt? posted at My Life ROI, Getting the Best Return On Life.
d. ninja presents Uh-oh…I bought something from Wal-Mart. posted at Punch Debt In The Face.
Economy
kyle presents Suburban Dollar – Dave Ramsey’s Town Hall for Hope posted at Suburban Dollar.
Britannica Blog presents Do Americans Support Capitalism, and Which Capitalism? posted at Britannica Blog.
Dorian Wales presents On Causality and Correlation in Economics posted at The Personal Financier.
Chris presents Is my money safe in a bank? posted at Home I Own.
Roshawn Watson presents Mark to Market NOT Mark to Myth posted at Watson Inc.
Income
Madison presents Lending Club Referral Bonuses posted at My Dollar Plan.
Richard Ryan presents Message Magic posted at Message Magic.
Travis presents Money for Time, or Time for Money? | personalwebguide.com posted at Personal Web Guide.
pfincome presents 3 Personal Motivation Tips to Build Passive Income posted at Passive Family Income.
KCLau presents Learning to be Happy with Less posted at KCLau’s Money Tips.
Real Estate
Tallahassee Housing presents How To Find The Bottom Of The Real Estate Market posted at Tallahassee Real Estate Blog.
Miss M presents The Complete Guide for the First Time Home Buyer posted at M is for Money.
Tim Johnson presents Looking for Housing’s Bottom? Check Your Psyche for These 3 Signs posted at Relocation.com.
Taxes
Chief Family Officer presents Works for Me: How I keep track of charitable donations posted at Chief Family Officer.
Todd presents Tax Day Resolutions posted at HarvestingDollars.
TStrump presents 10 Tax Commandments posted at The Strump – Financial Blog.
Insurance
Patrick @ Cash Money Life presents How much life insurance should you purchase? posted at Cash Money Life.
Savings Toolbox presents Property and Casualty Insurance – What You Should Know posted at Savings Toolbox.
Debt Free Destiny presents Tips from Within the Auto Insurance Industry posted at Debt Free Destiny.
Other
Len Penzo presents A Simple Way to Break Your Habit to Overspend posted at Len Penzo . Com.
Winson Yeung presents Tips On How To Create Blog posted at Best Online Affiliate Marketing Secret.
Sun presents PNC Bank Sucks posted at Earn More Invest Wisely at The Sun’s Financial Diary.
Broke Grad presents Who Should Pay For A Date? posted at Broke Grad Student.
Nate Desmond presents 9 Essential Free Programs Every College Student Must Have posted at Debt-free Scholar.
Studenomist presents Living on Your Own Isn’t Cheap posted at Financial Independence in Your 20s | Studenomics.
Hall Monitor presents Two Colts Neck High School students accused of counterfeiting money posted at DetentionSlip.org.
Jorge presents Achieving Financial Independence: April?s Checklist posted at Independent Minded.
Karin Le Blanc presents How To Expand And Strengthen Your Network posted at Internet Business.
Sarah Johnson presents Your Unique Selling Proposition – Sarah Johnson, Copywriter posted at Sarah Johnson Copywriting.
Wojciech Kulicki presents 5 Ways to Fight Financial Stagnation posted at Fiscal Fizzle.
Peter presents What Should I Put In My Safe Deposit Box Or Fire Safe? posted at Bible Money Matters.
Finance Tips 101 presents Scholarships Come In All Shapes And Sizes posted at Finance Tips 101.
Ben presents Best Deals Sites Online: FatWallet posted at Money Smart Life.
Billeater presents Electric Choice- Compare Electric Providers, Switch and Save posted at Billeater.
The Happy Rock presents Marriage and Money – Giving Your Partner A Choice posted at The Happy Rock.
FIRE Finance presents FREE Health Care for the Unemployed – Take Care Clinic posted at FIRE Finance.
WIlf Gerrard-Staton presents Lucky Stars Lottery as a business. posted at Lucky Stars.
Jack Schmidt presents Here’s the “Naked Truth” About Money posted at SectorMatic Money Journal.
Erika Collin presents 50 Terrific Twitter Tips for Job Seekers posted at MBA Jobs.
WC Porter presents Buying Shiny New Things Without The Guilt posted at The Writer’s Coin.
Michael Gvirtzman presents Budget Planning Tool posted at Mind Listings.
Stephen Dean presents Conversion Rates Are Relative — Copywriting Dean posted at Copywriting Dean.
Matt B presents Treat Your Finances as if You are Running a Business posted at Financial Methods.
That’s all you get. Thanks for reading!
Applying Price to Rent Ratio
Posted by: Todd Metheny in Real Estate on April 21st, 2009
My wife and I went to St. Louis this weekend to look at potential places to buy. We’re looking at multi-family homes and intend to rent the additional unit(s). We’re at the beginning of what may be a long process. Lots of the places were somewhat comparable. We’re dealing with several areas of the city, all located pretty close to the hospital where my wife will ultimately work.
To aid us in our analysis of the properties, we’re basically using a variation of price to rent ratio. Price to rent ratio is a good way to compare properties for investment purposes. What complicates things for us is the fact that we’re going to live in the place we buy. This is both good and bad. It’s good, because more attractive financing options are available if a unit is going to be owner-occupied. You pay a lot more for the money you buy if you’re buying solely for investment purposes. On the other hand, when you’re going to live somewhere, you approach the purchase differently than if you were looking solely for investment purposes.
Of course, a place that you would want to live is probably also attractive to tenants, so in that way not that much changes. The place with the best economics though, might not be the place we want to live the most. In our case, some of the places on the lower end, in lesser neighborhoods have better price to rent ratios than some of the places we’d really like to live. You pay premiums for both location and upgrades. We’re struggling with this. After all, the reason we’re doing this is because we think it’s an attractive investment opportunity we might not take advantage of when we’re older. We want to buy a place that’s a sound investment, but also have a nice place to live.
Some of the places are absolute bargains as far as the ratios go (we’re targeting places with ratios of 12 or below). Of course, the numbers we’re using were supplied by the current owners who are trying to sell the places. They might not be honest. When the tenants were there, we asked what they were paying. One of the places was reporting that they were receiving $800 per unit (2 units). In reality, one of the places was empty and the other, according to the tenants, was renting for $750. The number was close, but clearly not $800 per unit. To be conservative, we’re rounding everything down a considerable amount before figuring our ratios. In any case, it’s a good way to be able to compare the units to one another.
Besides the ratio, we’re considering other factors, of course, such as proximity to my wife’s work, the probable cost of rehabbing the units, the quality of tenant the places are likely to draw and lots of other things. We’re sort of developing a scoring system that starts with the price to rent ratio and works on a system of pluses and minuses from there based on what we want. The system is a work in progress, but if it ends up being something that makes any sense at all, I’ll share it here.
Aesthetics obviously play a large roll in choosing the place you want to live. We’re getting hung up on this pretty consistently. Part of the reason is because my wife and I have slightly different ideas about what we want, but I think we’re getting closer together as we go. My wife is working really hard combing through the listings and figuring out what sort of places we need to be looking at. As we go, we’re trying not to lose site of the fact that this is an investment property. The places aren’t as nice as the condo we live in right now, and most of the places in the city are much older than the building we live in now. Hopefully we’ll find what we’re looking for. If you’re selling a multi-family home in St. Louis city, and want to sell it for a fraction of its actual value, please let me know. If you have any thoughts or insight into the process and what we’re trying to do, that would be great to know, too. Thanks for reading.
The Best Low-Cost Online Brokers
Posted by: Todd Metheny in Managing Finances, Value Investing on April 20th, 2009
My wife and I keep our retirement accounts with Vanguard. In those accounts, we have a mix of low cost index funds. We also have a small amount of money at Vanguard in taxable accounts, but we typically dump that money into our retirement accounts when they aren’t maxed out. That being said, we also hold some individual stocks. For those we use a low cost online broker. We originally wanted to keep this money at Vanguard as well, but they charged around $20 a trade, which is ridiculously uncompetitive. If Vanguard was anywhere close to what you can get from one of these low cost online brokers, our individual positions would have been with them as well. I think Vanguard is a great place to buy index funds and/or have an IRA, because they have amongst the lowest costs, and that’s what they do best. However, if you’re going to hold shares of individual companies, you might want to consider some of the following options. Like a baseball team, we’ll have a lineup of nine providers. In no particular order:
TD Ameritrade – Our leadoff hitter, TD Ameritrade, charges $9.99 per trade. If you sign up right now and fund your account with at least 25k, you get $100 and 30 days of free trades. I can’t speak as to their level of customer service. $9.99 per trade is a better deal than what I could have gotten if I had done all my trades at Vanguard.
Scottrade – Scottrade bats second in our lineup and starts the price war off by offering $7 trades. Unlike TD Ameritrade, they don’t seem to offer any special incentive to sign up for their service. I can’t speak to their level of customer service. Broker assisted trades cost $27.
E-trade – E-trade offers 100 commission free trades for signing up or a free Blackberry. Since their trades range from $7.99/trade to $9.99/trade, you’re getting a theoretical value of around $799-$999. Of course, if you read the fine print, you have to make the 100 trades in your first 30 days. If you have a value slant as an investor, I doubt you’ll be making 100 trades in your first 30 days of trading. Plus, they require you to pay for the trades up front and then reimburse you. To get the $7.99 rate they require that you make more than 150 trades per quarter (not me). To qualify for the $9.99 rate you need to have at least 50k in assets or make between 30-149 trades. Their standard rate per trade is $12.99/trade if you don’t meet the above criteria. I’m not sure why their pricing structure has to be this complicated. I really like the aesthetics of their site, but I wouldn’t even consider using them. Do you really want incentives that encourage you to trade more when you can undercut their best price somewhere else?
Sharebuilder – Sharebuilder allows you to set up an automatic investment plan to purchase stocks each month. They charge $9.95/month if you make real time trades, like you would with the services above. However, if you sign up for one of their investment plans, each month you pay just $4…but that’s $4 monthly (or weekly, or bi-monthly), per stock that you’re systematically investing in. See all of their prices here.
Zecco – You know all about Zecco. They used to have 10 free trades/month for anyone who had at least $2,500 worth of cash and securities in their account. They’ve upped the minimum to qualify for that deal to $25,000. All their trades above the ten, or all of their trades if you have less than 25k worth of assets, are $4.50/trade. The reason to go with Zecco was always their free trades. Their customer service has a less than stellar reputation. Still $4.50 per trade is very competitive.
Tradeking – Tradeking is what I personally use. Trades are $4.95 apiece. I’ve rarely needed customer service for anything, but my limited experience with them has been excellent. Very competitive price, too. There are lots of tools available here as well. I recommend them.
Wells Trade - Similar to Zecco’s offer, Wells Fargos trading arm offers 100 free trades if you have at least $25k in assets with them. One difference is you can count loan balances and deposits with Wells Fargo toward your $25k. Anything above and beyond the 100 trades per year will cost you $5.95 per trade.
Just2Trade – $2.50 per trade. I can’t find anything that gives a minimum to open an account and get that deal. I don’t know much about them, but I really like their site. Check them out if you’re looking for low cost. They market themselves as being for “serious” investors. If you’re a comedic investor, I guess they’d suggest you look elsewhere.
Sogotrade – $3 per trade. As an incentive to sign up, they offer 100 free trades for 30 days. After that it’s a very competitive $3 per day. Lots of these sites have a compare us to our competitors tab – but they’re very selective as to who they compare to. Obviously, no one compares to anyone with lower prices.
There are other online brokers that you can use, but these are some of the lowest cost options. It’s an industry that’s in a constant price war. Prices keep falling. I think eventually all of the broker’s will be comparable to those with the lowest prices. Competition is a great thing for the consumers, of course. If you know of other, better low-cost options, please let me know. Thanks for reading.
This Week in Review
Posted by: Todd Metheny in This Week in Review on April 17th, 2009
It’s been another crazy week. I got an extension on my appellate brief to consider some new case law that came out on Wednesday. At least, I hope they’re giving me the extension. I filed something requesting it on Wednesday and haven’t heard back yet. Baseball is in full swing. The Cardinals took the first game from the Cubs. I love those games – it’s a big, old rivalry and I love when St. Louis comes out on top. I love that it’s spring, and that I’m starting to see people outside doing things again. We’re headed out of town this weekend to look at places to potentially buy. We won’t be buying anything until our place sells – but hopefully that happens relatively soon. We’ve had some early interest and someone is coming to see it tomorrow. It’s doing okay considering it’s the first couple weeks. Anyway, here’s a bit of what caught my eye during the past week:
Frugality, Thrift and Saving @ Saving to Invest – This article is about the movement toward frugality that is sweeping America right now. People that grew up during the Great Depression lived that frugal lifestyle for the rest of their lives. I don’t know if the current recession is enough to create a sustainable change in the way Americans live. I know businesses may change going forward in that they may try to lessen their reliance on credit. Technology companies seem to carry less debt (or no debt) since the dot com crash. I don’t know if we’ve changed yet or not. It’s cool to be frugal now, though.
How to Dress Well for Less @ The Strump – This is a good article on how to look nice on a budget. I actually disagree to some extent with some of the things in the article. I think you can get exceptional deals on clothing at deal sites or eBay. I think expense should be commiserate with utility. I have some relatively expensive clothing (to me), but I try to shoot for things that are affordable. I have to wear suits to work, but I avoid specialty stores and try to hit the sales at Men’s Wearhouse. I buy my dress shirts at Kohl’s. Clearance ties. You get the point. I will spend more on something like a jacket, if it’s the kind of thing you can wear a lot. In any case, it’s a good article. Check it out.
Save $100 a Year With CFL Bulbs @ Another Money Blogger – We’ve talked about switching to CFLs here before. It’s a common sense way to make the world better and save a few dollars in the process. This post runs the numbers for us.
Pay it Forward and Treat Everyone Like a Good Friend @ Bargaineering – I’ve always loved the idea of paying it forward. I actually really love those commercials where they show all the people helping each other and it goes from one to one. I can’t even think of what it’s a commercial for. Insurance maybe. Jim posts a commercial, too. Anyway, do something nice for someone today.
84 year old Social Worker Saves $1.4 Million @ Get Rich Slowly – Here’s the perfect example of the millionaire next door…and she’s from St. Louis! Great story. She indulged herself when she really wanted something, but she basically made her money by living frugally.
Anyway, that’s all you get for now. I hope you have a great weekend. Thanks for reading.
