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Monthly Archives: October 2007

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The Mad Genius of Mutual Funds

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Once in a while you come across someone truly extraordinary. When you do, its often remarkable the impression they leave on you. While I’m not a genius when it comes to mutual funds, there is someone who might be considered a contender for the title. His name is Ken Heebner and he’s been called “The Wizard of Wall Street” and the “Mad Genius of Mutual Funds”.

Heeber is one of the streets best kept secrets. His two funds, CMGFX and CGMRX have both handily beaten the S&P 500 over the past 5 years. Working largely under the radar, Heebner has a background that is well suited for wall street. He’s been employed with smaller investment shops since 1965, and is reputed to be utterly unmoved by the opinions of others. Since investing is inherently a risky proposition, being able to think independently is a key attribute.




Heebner’s downside is that he’s inconsistent. While his funds have performed well on average, he has a penchant for rapidly moving his concentrated holdings and retains stocks an average of only 4 months. This seems due to his constant search for new opportunities for market inefficiencies. As a result his rate of turnover is something like 223%. The skinny on Heebner is here, here and here.

My advice: keep an eye on this guy. Most stock market types are pretty mediocre. When you find someone who is good at making money and creating wealth, it would seem sensible to follow their career. Try getting a google news alert for his name or for his mutual fund ticker symbols. That way you’ll know when something comes up.

Good luck investing!

p.s Thanks and acknowledgments to our fellow blogger 1stMillionat33 for letting me know about this guy.

Battle of the Credit Cards

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We DINKs have had our fair share of the great credit card debate. Feel free to check out our multiple post that bring us to this battle line. GREAT CREDIT CARD DEBATE

The short story is that James & I, along with our readers, have been debating this issue over the past six months. In fact, the blogging community came out of the wood work just to comment on how committed they were to using credit cards for miles or how they would rather get their hands on some crack before laying a finger on valid credit card.

James has come up hard in the later category. I in the former. Just for the record, most of our readers came in on my side as well. (Though I’ll admit that many of our readers have either come by financial discipline naturally or have likely learned their lessons and now know how to handle credit cards responsibly.)

Now the big news: James has at last admitted the error of his ways!

Yes, you heard it, James admitted that maybe there is something to earning miles.

This conveniently came after my booking his fourth $5 ticket on United this year. Since I priced out all of these tickets to make sure they were worth the miles, I’d say this would have cost him $1,200 to have bought these tickets for himself. Plus I had another ticket for myself during that time period.

Now in the end, can you really debate that if using a credit card responsibly, even taking into account the occasional mistake, that you would come near to that much in charges? I don’t think so.

Now, my next mission is to get James to use my United card for his regular expenses back in DC. See, the thing is, that since I’ve been in Afghanistan my visa card likely wonders if I’ve dropped off the edge of the planet. If I hadn’t of notified them of my trip they would have likely called me in as a missing person by now.

While I’ll still make occasional use of it on R&Rs or travel for work, but my card won’t be getting quite the consistent work out that it did back in DC. Now that I’m getting double miles for gold status it sure would be nice to have James expenses count towards our next R&R.

Wish me luck with that one!

Thanks to all of our readers for their great contributions to this debate!

Miel

Bullet Proof Couture

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I thought I’d follow up on our post from a couple of months ago as I was preparing to head to Afghanistan. We were having a family discussion about whether or not to buy me a bullet-proof vest. After being here for a month it feels like a kevlar vest would be about as practical as wearing one on my nights walking the streets of DC. Kabul feels much safer than I would have imagined before heading out here.

Aside from letting folks know the safety conditions of Kabul, I wanted to share an article from the BBC about a tailor in Colombia that has made the best out of living in danger places of the world. Miguel Caballero recognized a demand for well couture protection. He even won the 2006 Innovation Award.

I find Mr. Caballero’s story to be a silver lining found in a place that has had to endure a great deal of violence over the past decade. A true entrepreneur, well done!

Miel

America Saves

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Good Morning Folks,

Today’s posting is about something rather old-fashioned, saving money. While I’m not a fan of a lot of traditional advice about saving money, I did want to make our readers aware of a new and innovative program called America Saves.

The reason why America Saves is so awesome is because of dismal state of financial literacy in the USA. A lot of Americans have only a poorly developed sense of the importance of things like interest rate or the importance of managing debt. America Saves is a coalition of activist groups, think tanks, banks and local governments who’s aim is to promote healthy money saving habits among American families.

Its worth looking into. If you’re interested in starting a savings program, but really have no money at all, they can help. If you want tips on saving money, they’ve got em. If you’re interested in helping American become a better place, I’m sure they’d welcome the input from anyone who wants to assist in getting a program set up locally.

Check it out. America Saves.

Best,

James

How To Get Rich

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This post is a bit different than your average book review. I picked up a copy of Donald Trump‘s How to Get Rich to consider what I would have to say about it before ever reading the book. I’ll share my ideas on his jacket cover insights and then follow up with another post after I’ve read the book.

Invest Wisely
My first thought is that investing wisely is quite important, I think that saving wisely is probably the first step at any stage. I do think that research can go a long ways when it comes to choosing stocks. This can be difficult for most folks who are either intimidated by all of it or just can’t be bothered with it all.

Impress the Boss and Get a Raise
I think this is essential to building wealth. The only way to get ahead in this world, financially speaking, is to save more than you spend. The larger your paycheck the easier this can be. I also think that you gain a tremendous amount in simply having a good work ethic. While certainly there are folks who make their millions sitting on their bum, I believe that most people work very hard to get rich.

Manage a Business Efficiently
I think this stands true for both business and pleasure. Paying attention to the details and running a tight ship goes a long way in making money. It’s hard to expect great gains if you can’t deal with the basics.

Hire, Motivate, and Fire Employees
I can see his point here. Working with a couple of new assistants here in Afghanistan has been challenging to balance mentoring and getting things done. My family’s business recently had to deal with this as well. They agreed that there was some dead wood standing around and holding up walls. They gave them all notice that business as usual was a thing of the past and if they weren’t willing to put in an extra effort to improve business that they should look elsewhere. Not always as easy as it seems for Trump but I think it is important.

Negotiate Anything
If you are regular DINKs reader you know that we are huge on this one. I love the art of negotiation. I think that is the most frustrating thing for me thus far in Afghanistan where folks aren’t willing to negotiate as much as in other countries.

Maintain the Quality of your Brand
From a work perspective I certainly see this as important. Knowing what your values are as a business or organization are and sticking to them is important. That, and consistent quality.

Think Big and Live Large
This I fully area with. I’m not one for being hugely lavish, as James and I are pretty frugal when it comes down to it. At the same time I think that if you don’t dream big you’re not likely to get anywhere. I’m only in the economic bracket that I am because I was willing to think big.

I’ll keep you posted on what Trump has to say in a bit. In the mean time I’d love to hear your thoughts on these tips.

Cheers,

Miel

When To Sell Your Stocks

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Hello People,

Today’s posting takes a break from my rantings about America’s currency situation to address a more fundamental personal finance question – when to sell your stocks. Relatively speaking, there is lots of literature available on what kinds of stocks to buy, but less on when to sell your stocks. This is a shame because properly selling your stocks is just as tricky as properly picking what securities to buy.

So, here are some criteria you might use to decide to sell your stock.

1) Deterioration in Fundamentals: By this I mean the negative changes in the economic conditions which contribute to your company’s profitability. To illustrate this with a example, lets say that you own shares in the Toll Brothers housing construction company (TOL). You might evaluate the current credit crunch and increasing foreclosure rates as evidence that the demand for single family homes has fundamentally shifted. You might then have a look at Toll Brothers accounting, perhaps check a couple of market reports and inform your selling decision accordingly.

2) Management Changes: Sometimes the success of extraordinary business is built on the capabilities of exceptional individuals. A great example of this is Charles Schwab, the CEO of Schwab Inc. Charles built his company from a newsletter operation with two partners in 1963. But back in 2001, Charles stepped down to retire, leaving the company’s management in the hands of one of his lieutenants, David Pottruck. Pottruck unfortunately made some very bad decisions, resulting in a decline in the company’s stock by 60%. Schwab himself ultimately had to come out of retirement to return the company to profitability(clicky). So, the main point here is that adverse management changes can be a reason for selling your stock.

3) Declining Profitability: When the company starts to show declining profits or increasing losses, you might consider selling. The reason for this is that the best indicator of stock market prices is earnings. This bears repeating: the best indicator of stock prices is earnings. When good earnings come out, share prices are usually increased. If earnings decline, the price tends to fall. So, declining profitability is an additional reason you might consider selling.

Just to wrap this up, when you’re making the sell decision is important to exercise due diligence. Look at the company’s books, see what investor sentiment is, and poke around a bit to get a sense of the firm’s market. Above all, your decisions should be informed and rational!

Best,

James

More Trouble for the Dollar

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Hi All,

Since I’m a rumor monger who loves dramatic doom and gloom news, I’m pleased to make you aware about some more bad news for the greenback. Yes, ladies and gentlemen, that’s right, the dollar is starting to be like a pot of overcooked green beans at a picnic, nobody wants any. According to the IMF, the dollar is overvalued. Also the Daily Telegraph over in the United Kingdom is saying that China and Japan are starting to dump the dollar to the tune of 52 billion.

Yipes!

My advice for dealing with all of this: buy canroys!

Best,

James

Cost of Living Abroad

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People tend to think about money in very fixed terms. It costs X amount of money for something. As if that really means anything at all.

The more I travel, the more I’ve come to the conclusion that currency and numbers are simply irrelevant. Think about it: Does $10 USD really have any true value at all?

If it buys you a cab ride in DC, a cocktail in Honolulu, a Happy Meal in Stockholm, a diner meal for two in Kansas, and food for a week in Africa, then how can it really have the same value? Keep that money in your pocket and it will be worth even less tomorrow.

I’ve come to thinking about how you might create a new financial system that actually gave you a gauge of what your money would buy you. Mind you, this system isn’t likely to show up any time soon, but just bear with me a while. With the click of a button you could figure out where you money would take you the furthest, and where you might just want to stay home.

I know that cost of living calculators exist within the states, but it would be very cool to have a better sense of where your money could really take you. The interesting thing to consider, is that I wonder if you might have more Americans traveling abroad.

Back in college while I was living in Fiji my sister came to visit me for a month. She lived in a tent at the resort with three meals a day for $15 a day. If more people realized that they could live in paradise for less than $500 a month, would they travel more?

I won’t speculate about Americans abroad, as there are far too few of them out there, but I would enjoy such a calculator for our upcoming R&Rs!

Cheers,

Miel

Emergency Suckers

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One of the great parts about our couples blog is that we don’t always agree on everything related to finances. Our readers then get to hear us hash out both sides of the issues. In response to James’ posting yesterday, I would have to say that I both agree and disagree.

I would agree with putting most of your emergency funds in a higher yield mechanism such as the stock market. Liquid enough, but also still making money.

I would, however, disagree that all of your money should be put there. I do see the merit in having some cash set aside for those true times of emergency. Otherwise you are simply putting too much faith in the system and aren’t taking in to account the realities that are likely to occur in times of an emergency, i.e. atms not working, etc.

I do admit that all of this is easier said than done. I’ve felt this way for the past number of years, but if you look in my money market account you won’t be seeing extra cash piled up there. It’s not always as easy as it sounds to follow your own advice.

Currently though I have my emergency cash in just that, cash. Being here in Afghanistan it is simply more practical to keep some extra in cash. At home I would normally try to keep an extra twenty tucked in my purse or desk at home and at the office for this times when you just might need it.

If push comes to shove I also have credit cards that I could use in an emergency and then pay off with stocks sold. James doesn’t currently have a credit card, so he could be in a bit of a bind, depending on the situation.

I think the issue here is to take a close look at what you would do in the case of a true emergency, or in times of sickness or layoffs. Stocking away all of your extra money in 401(k)s may make sense in some ways, but you have very little flexibility. Considering that much of my life has been spent traveling, I consider it in terms of how I would get out of dodge of the $*%! hit the fan. This isn’t a bad way of thinking of it no matter where you live.

I’d love to hear from our readers on what their approach is to emergency funds, and how those are maintained.

Cheers,

Miel
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