Dual Income No Kids

WaMu Settles Lawsuit for $4,000,000

2008-08-20T01:15:00.005-05:00

Hello All,

A couple of weeks ago, we received a solitation in the mail from the US district court in Eastern New York. Evidently Washington Mutual has agreed to pay over $4,000,000 to settle two class action lawsuits related to overcharging for flood certification fees. WaMu denies it, but is willing to cough up the money to make the problem go away.

Here is a quick snapshot of the court solicitation.

While I'm not making any direct allegations, its common knowledge that flood certification fees are junk - that is they are often tacked on by lenders to pad the bottom line. That said, you can draw your own conclusions.

Best,

James

DINKS Buy Umpqua Bank

2008-08-19T13:56:00.001-05:00

Hello All,

When we DINKs make a new stock purchase, we like to blog about it. Well, just today we've take a position in Umpqua Bank (UMPQ). Over the past couple of days, I've been kicking the tires by checking out their financials, listening to their conference calls and poking around on-line.

Here are my thoughts on the company:

What is Umpqua? Umpqua bank is a regional commercial bank located in the pacific northwest. Its got approximately 147 branches and 1,744 staff. The company is classified as a "small cap", which means that its a junior member of the banking community relative to bigger outfits like Wachovia or Citibank. The bank makes money primarily from lending to businesses, selling checking accounts and managing investments for rich people.

Why did we make the investment decision?

1) Healthy financials. Relative to its peers in the banking industry, UMPQ is making money. Earnings for 2008 are down relative to 2007, but the .59 cents the company earned in the first quarter are far better than $1.02 loss at Citigroup or .39 cent loss at Wachovia. The company also has a 5.59% dividend, which appears sustainable.

To be entirely fair, the Umpqua's financial situation has weakened over the past year. For example, its year over year cash situation declined from 335 million to about 192 million in the the second quarter. Also, Schwab investment research projects that next years earnings will be soft and the effects of the recession and subprime crisis mean that banking stocks are out of favor.

However, Umpqua has no exposure to the subprime market and most of its lending has been to businesses, rather than to individual homeowners. Its also recently shown some organic growth in the number of checking accounts its signed up, 5% more in the second quarter. So the soft earnings are balanced by the fact that its business is primarily in sectors that haven't been hit as hard by the subprime crisis.

2) Management: The current management has done an excellent job growing the company from a single branch with 8 employees in 1953 to the 147 branches it has today. It has recently acquired a couple of smaller regional banks in Oregon and California. Plus, the company has been the subject of several case studies examining its innovative interior design and branch layout. UMPQ was recently ranked 13th by Fortune Magazine's survey of the best American companies to work for. - All of this suggests that management is on top of core businesses fundamentals like growth and user friendliness.

3) Investor Sentiment: Umpqua is primarily owned by big investors, with fully 61% of its outstanding shares being owned by mutual funds or other institutional players. This indicates that "smart money" likes the company. Also, if threads on google finance are any account, small investors feel optimistic about the company as well.

Its true that bank stocks are out of favor at the moment, its also true that the nation is experiencing a recession, but - that said - at our buy price of $13.03 UMPQ looks to be a promising long term investment.

Our trade executed this morning, so we'll see how it works out in the coming months.

Best,

James

Why I don't Reccomend SmithBarney

2008-08-18T00:52:00.001-05:00

Hi All,

So I logged onto my account at Smith Barney this evening and guess what I saw...

"Important Information regarding Citigroup Investment Research. This data is for informational purposes only and should not be used to make a decision to buy or sell a security or mutual fund.

As your agreement for the receipt and use of market data provides, the securities markets (1) reserve all rights to the market data that they make available; (2) do not guarantee that data; and (3) shall not be liable for any loss due either to their negligence or to any cause beyond their reasonable control."

I found it hilarious. If you can't use use company investing research for the purposes of buying and selling investments, what are you supposed to use it for? Wall decoration? Scrap paper?

In all fairness, they're saying this because Citigroup is farming out a lot of their research, but if they don't want to stand behind it, why even bother putting it on the webpage?

This statement is brought to you from the same people that back in 2001 were pumping tech stocks publicly when the privately they though they were junk (1). Yes, back in 2001 Citigroup was also in bed with corrupt companies like the now defunct WorldCom, where they took money in return for touting the company's stock (1), even when in the case of WorldCom the companies were in fact guilty of lying to investors to hide colossal losses.

Needless to say, I don't recommend SmithBarney for your investments.

Best,

James

Our August Net Worth: $352,000

2008-08-17T09:20:00.006-05:00

We knew it would be ugly, but yesterday we sat down and tallied up our net worth for July and August. The grand total was $352,000, a decline of nearly 55k since we last measured it in June. This is a drop of nearly 13% in the space of two months.

So, what happened?

Well, there were a number of things. First, the real estate market in DC has been softening, so we adjusted the value of our places accordingly. For our personal residence we adjusted it downwards by 25k, and for the investment property by 10k. We did this based on a review of the real estate listings locally and considered some statistics about state of the market in DC. Its a total downward adjustment of 35k.

Second, our stock portfolio has been beaten down over the past two months. In particular, we've been heavily invested in stocks that rely on commodity prices, especially the price of gasoline and natural gas. Since gasoline prices are declining, many of the stocks in Canadian energy companies we own are out of favor.

However the good news is our cash situation remains strong. So, we should be able to take advantage of today's lower asset prices. We're still following up on our plans to purchase a place in Portland, Oregon and are considering shares in Umpqua Bank (UMPQ). Also, the declines in our networth are largely due to macro-economic factors. e.g asset prices. We can't control real estate or oil prices, so it makes sense to stay focused on things we can control - like saving or buying high quality stocks, rather than stressing about month to month declines our net worth.

Here are the gritty details:

Hidden Costs in Taking a New Job Offer

2008-08-16T06:33:00.002-05:00

Today's post focuses on the hidden things that are essential to pay attention to when considering a new job, or a promotion. At the end of the day, an offer is much more than just a figure.

Here are a few things to keep in mind before accepting an offer:

Review your offer very carefully. Now is not the time to scan and sign. Make sure you understand everything in the offer, it includes everything you had negotiated for, and that you clear up any questions before signing.

Added expenses. Will you have to spend more on gas? Metro? Day care? Health care? Housing? Gym membership? Your job can often affect a great deal of expenses that you might not consider from on the onset. For example, if you have to live in a more expensive city or neighborhood this can make a considerable difference.

Benefits. Know what the health care, retirement, life insurance, parking, vacation, sick days, educational benefits, etc are established at. Think of the whole package rather than just the salary. That being said, salary is often most important to think of in terms of long term salary progression.

Raises. It is also good to get a sense of annual raises and promotions. If you have a great salary but are only getting 2% raise, you might be better off over the long term with a low starting salary and a 6% annual raise over time.

In Kind. Most jobs don't offer a great deal of in kind benefits, but for expats that is often the case. Consider things like food, housing, utilities, education, transportation, services such as cleaning and cooks, etc. Here in Kabul it makes a great deal of difference whether or not your office supports your generator costs and internet expenses, both of which are hefty.

Make sure you understand what the offer is. The calculation of salary often changes from business to business. Thus, make sure that you are comparing apples to apples, i.e. annual salary to annual salary or hourly/daily rate to the same. Companies have different ways of calculating these, so it is important to understand what you are accepting.

Here is my story on comparing salary offers and not being afraid to ask for more:

For example, I was close to making an error when taking on my first full time job in Washington. I had been working as an internal temporary employee, since I was replacing a woman who had been pregnant with twins and wasn't expected to return but hadn't given notice either. When I was first offered the job I had done the math and was okay with the salary but would have liked more. I negotiated with HR to have a salary review in the event that I went on full time in three months.

When it came time to meet with HR, they gave me a letter offer. I looked at the figure and was initially happy with the increase. The thing is, they had given the first offer in an hourly rate and the second offer as an annual figure. Thus, I thought I had been making less on an annual basis than I actually was.

I happened to be lucky when the HR officer began to talk and mentioned that it was the same salary I had been getting. Hearing this, I countered and said that I had accepted the position based on the condition that there would be a rate review at my official hire. In the end I got a ten percent salary increase that even but me slightly above the salary bracket that I was in.

Readers: If you've got any tips on things that you look at when accepting a new job, or interesting experiences you might have had in requesting more, please share.

Cheers,

Miel

Protect Your Savings From Inflation

2008-08-15T21:50:00.001-05:00

Hi All,

Here is another video from MoneyTalks news. This one is actually pretty good. Its on the topic if protecting your savings from inflation. The video's bottom line is that you are best off in CD's as money market funds and I bonds aren't compeditive in the current inflationary environment.

Best,

James

Reducing Your Everyday Expenses

2008-08-15T08:18:00.003-05:00

Hi All,

With inflation roaring ahead at 5%, you'll need to find ways to increase your purchasing power to keep up. A great way to do this is to reduce your household expenses. Here are some ways you might consider cutting back.

1) Cancel your landline: If you have long distance service on your cell phone, you certainly don't need it on your landline. Better yet, get rid of your landline service all together.

2) Be careful about using your ATM for cash withdrawals. ATM fees have gone up in recent years, and you could be charged up to 5 dollars to make a withdrawal, especially if you use an out of network machine. Consider making fewer larger withdrawals instead of several smaller withdrawals. For example, take out $100 once a week, rather than $50 twice a week. This way you'll avoid the ATM fees.

3) Reduce or Cancel your Cable: A while ago a para-legal friend of mine ordered 100 dollars worth of cable every month. He had like 600 channels - it was more programming then he could ever hope to watch. Trust me, you don't need 6 movie channels, the home shopping network, the Oxygen channel, the A&E network, etc. Cut back and save a few bucks, or better yet - cancel your cable all together and sell your television.

4) Avoid Buying Bottled Water: Filtered tap water is free. Bottled water costs nearly as much as gasoline.

5) Dump Your Magazine Subscriptions: Subscriptions are pretty cheap these days, but if you find the magazines are just piling up or you're throwing them out without reading them, then by all means pick up the telephone and cancel the subscription. A lot of magazine content is available on-line for free anyways, so canceling your subscriptions makes good sense.

Best,

James

Timothy Sykes: The Two Million Dollar Trader

2008-08-14T14:52:00.003-05:00

Hi All,

If you're up for something light, check out this video featuring Tim Sykes. Sykes took $12,000 in bar mitzvah money and turned it into a three million dollar hedge fund by the time he was a senior in college.

Is a clever, fast paced, irreverent video. Sykes gives his insight into the SEC, penny stock investing, and stock markets in general. Feel free to check it out if you're interested a quick distraction from your work day.

Best,

James

A House for A Dollar?

2008-08-13T16:28:00.001-05:00

Only in Detroit. Its kind of a sad tale really.

Check out the story here.

Its Official: Second Mortgage Is Paid Off

2008-08-13T15:12:00.004-05:00

Hi All,

We've written about our second mortgage before. Well, we got lien release from the DC government today. It was satisfying to receive because it provides confirmation of the fact that Washington Mutuals claim on our property is formally and officially disbursed. In other words our second mortgage is officially paid off.

Check out the paperwork below:

Preliminary Home Inspection

2008-08-13T07:12:00.002-05:00

Hi Folks,

A friend of my was looking for what things to look for on a preliminary inspection of a place you are interested in. Here is the best of what I found in my research. Also keep in mind to check exterior issues when buying a condo or coop, as you will be liable for part of these expenses as well.

Exterior
Work your way around the perimeter looking at structural integrity - roof, chimney, gutters, exterior wall (brick, aluminum, wood), windows & doors.

Look at railings, porches, and decks down to the foundations.

Examine any outdoor features such as flower beds, walkway's, interlocking brick, and driveways.

Repeat this for all sides of the house, both up close and from a distance.

Interior
Start with basement and work your way up in a systematic manner.

Examine walls, ceilings, and floors.

Check all appliances and fixtures.

Check the furnace, hot water heater, electrical panel, plumbing system, etc.

Examine the inside of windows, A/C units, heating, electrical outlets and switches, fireplaces, closets etc.

In bathroom or kitchen, notice the floor, walls and ceiling, then the plumbing fixtures.

Checking the Condition

While performing the inspection, whether at the exterior, the interior or one of the mechanical systems, note the system first, then its relative condition. For example, if you were inspecting a wall on the interior of the home you would first note that the wall is plaster, and then examine the wall for cracks and irregularities.

These tips are condensed from the American Home Inspection Directory, so you can check out their site for the full spelled out details.

Below are the best sections of the website, including what questions to ask and a checklist to take with you:

ROOF
Is the ridge (peak) showing a sag, or is it straight and level?
Is the roof sagging between the rafters or trusses?
Are there any signs of deterioration of asphalt shingles, such as curling, wasping, broken edges, rounded corners or key holes (slits) becoming wider that normal?
Any loose flashing's, at the chimney, roof-to-wall connection or elsewhere?
Does the wooden roof deck appear rotten or delaminate under the last row of shingles?
Are there any roof vents visible?

CHIMNEYS
Is the masonry cap cracked or broken?
Are any bricks flaking or missing? Mortar missing?
Is the chimney leaning?

SOFFIT'S AND FASCIA
Note whether the soffit and fascia are wood, aluminum or plastic
Any loose or missing sections?
If wood, are there any paint problems? Any visible rot?

GUTTERS AND DOWNSPOUT'S
Ensure gutters slope down toward downspout's
Any rust or peeling paint?
Apparent leaks or loose/sagging sections?
Are the downspout's extended away from the foundations?

WALL COVERINGS
Look for missing mortar
Are the bricks flaking or cracking?
Look for loose, missing or rotten siding, deteriorated paint.>
Does the siding appear new? Does it hide the foundation wall?
Exterior walls bowed, bulged or leaning?

WINDOWS AND DOORS
Look for problems with paint or caulking, and rotted wood components.
Are the windows new or older? Are they the original windows? How old are they?

PORCHES AND DECKS
Cracking or flaking masonry?
Check for paint problems, rotted wood, and wood-earth contact.
Note any settlement or separation from the house.
Inspect the underside, if accessible.

FOUNDATIONS
Check for cracks, flaking or damaged masonry.
Note any water markings and efflorescence (whitish, chalky substance)
Any bowing, bulging or other irregularities?
Soft mortar?

LOT AREA
Does the grade slope away from the house?
Any settled/low areas next to the foundation, or cracked walks/driveway?
Is the property lower than the street or neighboring properties?

BASEMENT
Note any evidence of water penetration (stains, mildew/odors, efflorescence, loose tiles etc.)

FLOORS
Check for deteriorated coverings or cracked ceramics.
Any water staining or other damage?
Sloping or sagging?

WALLS
Randomly sample to check that the windows and doors work.
Are the walls straight vertically and horizontally?
Look for cracked or loose plaster.
Look for stains, physical damage or previous repair evidence.
Any drywall seams or nails showing?

CEILINGS
Check for cracks in the plaster or loose, sagging plaster.
Look for stains, mechanical damage or evidence of previous repair.
Seams or nails showing?

BATHROOMS AND KITCHENS
Check that all fixtures are secure.
Are there any cracks in the fixtures?
Note the condition of the tiles and caulking in the tub/shower area.
Are the faucets working? Do they leak? Sufficient water pressure?
Look for staining and rot under the counter-tops
Randomly sample the operation of the cabinet doors and drawers.

ELECTRO-MECHANICAL CONSIDERATIONS
Type, style and age of heating & cooling systems. When were they last inspected or serviced?
Type of water supply piping and drains - any visible rust and corrosion?
Size and age of electrical service - are the outlets grounded? Visible wiring in good condition?
Have there been any upgrades?

THE HOME INSPECTION CHECKLIST

Address:___________________________________________________

Style__________ Construction__________ Reno?__________ #BR_____ #Bath _____

ITEM	NOTES	Good	Avg.	Suspect	Poor
ROOF
CHIMNEY
SOFFIT/FASCIA
GUTTERS
CLADDING	BRICK
	WOOD
	VINYL
WINDOWS	WOOD
	METAL
	PLASTIC
DOORS	WOOD
	METAL
DECKS
PORCHES
LOT AREA
HEATING	FAG FAO FAE AGE
AC/HEAT PUMP	Y N AGE
	WATER G O E
	EBB
PLUMBING	COPPER
	GALVANIZED
	LEAD
	HWT G O E AGE
ELECTRICAL	CO AL
	60 100 200
	PLUGS
	FIXTURES
FLOORS	CARPET
	HARDWOOD
	VINYL
	CERAMIC
WALLS	DRYWALL
	PLASTER
	WOOD/PANELING
CEILINGS	DRYWALL
	PLASTER
	WOOD/PANELING
BATHROOMS	FIXTURES
	TUB AREA
KITCHEN	FIXTURES
	APPLIANCES
	CABINETS
	COUNTERS
FIREPLACES
SKYLIGHTS
FOUNDATIONS
BASEMENT	FINISHED
	DAMPNESS
ATTIC
OTHER

Please keep in mind that these are good things to inspect before you hire an inspection, so you don't waste time and money on a place that doesn't warrant further looking in to.

Good luck house hunting!

Miel

Companies Not Paying Their Share?

2008-08-12T07:51:00.002-05:00

The latest news this morning is that up to two thirds of US corporations pay no income tax.

Naturally, the headline might lead one to conclude that corporations are gaming the system to get out of paying the tax man. Well, many probably are, but you should take this news with a couple of grains of salt:

1) Lots of small business have pass through taxation. This means that corporate profits are given to owners and where they are subject to individual income taxes. Also, most corporations in the US are small businesses. According to the Washington Post, of the 1.3 million corporations in the study, only 998 were classified as large (1).

2) The law permits many corporations to report tax losses, when in fact they many be profitable. Right, in order to encourage investment, congress has mandated through the IRS that tax credits and deductions be available for certain industries. For example, some small business own residential real estate. The IRS allows one to deduct interest and operating expenses related to owing investment properties. In many cases, this results in a 'tax' loss, when in fact the company may be marginally profitable. Right, so the fact that 2/3rds of companies are not paying taxes is partly an accident of federal law.

Best,

James

Looking for A Student Loan?

2008-08-11T13:49:00.004-05:00

Well, according to the Wall Street Journal, you may have some problems.

Why?

In a word: money.

Lenders take the student loans and turn them into bonds. But since most private loans are made to low income borrowers at for profit educational institutions, investors don't want to buy loans backed by this population. They reason - and rightly - that poor people with bad credit are less likely to make payments, which means the value of bonds based on these are questionable. Hence, the big lenders don't want to make the loans.

Check the story here.

Best,

James

Stand Up For Your Money

2008-08-11T08:25:00.004-05:00

It seems that in issues around money, people get soft in the knees. How many times have you seen someone pass up money that was rightfully theirs, just to not cause a fuss? How many times have you done it yourself?

There are times when diplomacy or letting it slide might be the thing to do. Often times though, you are in a better position by standing up for yourself. Some examples include:

Being Paid Back. People often get squeamish when asking people to pay them back. Think of it this way, whomever borrowed the money from you was not squeamish to ask in the first place. It's always best to get payback as soon as possible so it doesn't become an issue.

Being Overcharged. Pay attention to your bill and don't be afraid to point it out if the bill is wrong.

Paying for Work. I've seen lots of people just brush off expenses that they make on behalf of work and don't bother to request reimbursement. If it is a legitimate work expense then you should make sure that you get paid back.

Bartering. Different from getting charged wrong, many people won't bother to negotiate even when it is expected to do so.

Fighting Fees. This is also a big one. Whether it is credit cards, banks, utilities - you name it - pay attention and fight it if unwarranted fees are slapped on your account. These can add up significantly otherwise.

If you aren't used to standing up in cases like these, I'd suggest that you give it a try. Chances are, you'll feel better for having been paid your due.

Best wishes,

Miel

Sean Penn is Selling his House

2008-08-09T11:46:00.003-05:00

If you've got 15 million and want to live in Marin County, its yours!

Click here for the story in the San Francisco Sentinel.

Has Your House Value Declined?

2008-08-08T11:46:00.001-05:00

Yes! According to a recent survey by Zillow.com. Evidently 77% of houses in the US have lost value in the past year. But - here's the kicker - the survey says most people are in denial that their house price has declined. Fully 62% of those asked thought the value of their home had increased!

Click here for the story.

Click here to see if your house value has fallen.

Best,

James

More Loan Defaults On The Way?

2008-08-08T11:37:00.002-05:00

This one is for all of you investors looking at banking stocks...

The NY times reported earlier this week that investors are fearing another wave of mortgage defaults. Looks like the chop might not be over for a while.

Best,

James

The Virtues of Joint Accounts

2008-08-08T07:09:00.003-05:00

Hi All,

One theme you see batted around discussions of couples finance is the question of joint vs individual accounts. That is, should a couple have bank accounts that both can access or should they do their finances more separately?

Joint accounts have some virtues. The ones I like are:

1) Flexibility: For example, you can both access the account in a pinch. Also, very often one partner in a marriage may be more interested or have more responsibility for managing the couples money, but the other may want to have periodic access to pay bills or get cash out. Doing accounts jointly can meet the needs of both people.

2) Transparency: One reason why joint accounts make sense is because its harder for couples to hide income or expenses from each other. Sometimes conflict in a marriage gets worked out via money - e.g one partner resents the other and hordes money or overspends in retaliation for perceived wrongs. If you have joint accounts, its easier for both people to see whats going on and it helps to prevent financially acting out.

Best,

James

Another Year of Recession?

2008-08-07T23:34:00.001-05:00

This guy says its going to happen!

Diversification: What It Means For You

2008-08-07T07:44:00.006-05:00

Hello All,

Today's posting is on the topic of diversification. Diversification is one of those buzzwords that gets tossed around, but fewer people understand specifically what it means and how it should affect your wealth building processes.

What is diversification?

Basically, it means spreading your money over several types of investments. Its a risk management technique. The main idea is that the particular mix of investments you choose minimizes the total risk to your wealth, while simultaneously maximizing the return that your portfolio yields.

Where does it come from?

The idea that buying a bunch of stocks can reduce your risk and maximize your return dates to work done by nobel prize winning economist Harry Markowitz in the 1950s (clicky for more). Markowtiz came up with modern portfolio theory (MPT) which mathematically showed that you could make more money and reduce your risk if you diversified across types of stocks. The idea was the direct forerunner to the modern concept of "diversification" and has now become a core idea in personal finance.

What does it mean for you?

For most people, diversified investing is an excellent idea. Practically, it means several things:

1) Buying funds that hold a variety of investments. According to MPT you can't get adequate diversification unless you've got a lot of different kinds of investments. So, this means you should be purchasing funds that have a wide basis of investments. For example, you might consider a mutual fund that has stocks in the pharmaceutical industry and the energy sectors.

2) Buying more than just stocks. Most personal finance people talk about diversification in the context of stocks, but its a mistake to focus only on stocks. For example, you might want to be in commodities, real estate and bonds in addition. Why? MPT says that your return will increase if you don't have your eggs in one basket.

Here are a list of areas you might consider in addition to common stocks in the US.

1) International stocks
2) Different types of stocks
- large companies vs. small companies
- Income vs. growth
3) Bonds
4) Real estate
5) Commodities
6) Cash equivalents
- Money market funds
- Certificates of deposit

The main point here is if you are serious about wealth building, you should consider buying a wide variety of assets. MTP indicates that you'll make more money with less risk. This doesn't mean just stocks, it means you should think about buying real estate, either directly or indirectly and, possibly also starting your own business.

If all this seems like a lot of work, don't worry. There are several good mutual fund companies such as the Vanguard Group that sell products covering a wide variety of asset classes at a very low prices.

Are there any drawbacks to diversification?

Yes. One major problem with diversification is that you'll never achieve phenomenal returns. If your money is spread out into different asset classes, you'll likely never hit a home run on any one particular thing. While hitting the investing jackpot rarely occurs, it can and does happen. Some individuals such as Ken Heeber and Warren Buffet, seem remarkably good at picking winners.

Thanks,

James

Understanding Inflation

2008-08-06T08:19:00.004-05:00

Hi All,

This posting is a video from Milton Friedmans 1980's PBS Series "Free To Choose". Its an excellent explanation of the root causes of inflation, its effects on your income and what can be done to combat it. At 58 minutes, the video is somewhat lengthy. So you might want to play it in your background browser.

Regardless, if you're interested in understanding personal finance, you should probably develop at least a rudimentary understanding of how inflation works - so please do watch the video.

Best,

James

Price Increases in Kabul

2008-08-05T10:59:00.003-05:00

While only tangentially related to couples finance - as it affects our spending - I thought I'd get on my soapbox about the price increases in Kabul.

After six weeks out of the country, I'd have to say that it has gone a bit overboard. Prices in Kabul are outrageous.

Back in May, while I was in Vietnam, the price of bread rose 300% in two weeks. It got so bad that there was an attack in broad daylight of gunmen taking over a market to steal flour in Kandahar. Here is a posting on my personal website about the situation.

Well, that was only the beginning. The price of a round trip ticket to Kabul on the discount Afghan airline is now $750 - the UN flight is $1,000. This means that everything is hiked substantially.

Last night at a restaurant we were expecting the $8 well drink at happy hour - that is typical for Kabul. But with the $8 hummus, $10 garlic bread, $17 cheese board - just for the appetizer prices - we ended up skipping dinner altogether and came home hungry and sober after four hours at the bar (watching a documentary about Afghanistan as well).

Basically you can't go out to dinner in Kabul - even without drinks - for under $20.

While I can feel the sticker shock in my own wallet, I'm even more concerned with local Afghanistan. From what I've heard from locals, a family of nine that was previously doing fine on $300-$400 a month in living expenses is now having a hard time keeping their budget to $800.

Now you can imagine that in a stable and orderly place like the states, there would be mad chaos with that kind of price hikes - I know it is feeling like things are headed in that direction - but here in Kabul I don't know how much longer it will be before there is a backlash.

While there is discussion of increasing troop levels in Afghanistan there is the sinking feeling among Afghans - even those that once supported the US - that we've done enough damage already.

Curious where things will go from here. I'm not expecting any bargains around here though.

Best,

Miel

Dealing With Bad Economic Conditions

2008-08-05T08:45:00.008-05:00

Hi All,

So, I'm listening to the radio this morning, and there is yet another story about the countries poor economic conditions. This leads me to believe that many people are wondering how to cope with the current economic hard times.

We certainly are...for example our stocks have taken a huge hit over the past couple of months. Since June, the value of our stock have declined by 22.5%. Specifically we've gone from about $123,000 to $91,000 in the value our Schwab accounts. Not great. However, we've been blessed that things aren't as bad in DC as they are in other parts of the nation. For example, overall inflation in the DC/Baltimore area has been around 4.4%, when most of the nation has seen 5.5% (1).

So, in an era of declining stock prices and increasing inflation, what should one do to keep the bottom line healthy? Of course, we DINKs aren't experts, but there should be at least two things one could consider:

1) Stay Focused:

If you have goals, stay focused on them. Don't get distracted in thinking about poor macroeconomic conditions or high inflation rates. Unless you are a member of the federal reserve board of governor's there isn't much you can do about the big picture.

However, it does make sense to think critically about your goals in light of how the economy is changing. For example, if your goal is maintaning your emergency fund money, you might investing your funds in Treasury Inflation Protected Securities (TIPS). This would account for inflation and provide a healthy level of safety.

2) Continue To Use Proven Strategies:

The second thing to consider is relying on tried and true strategies for building wealth. These are

1) Owning your own home
2) Investing in stocks
3) Paying off high interest debt
4) Spending less than you earn

There are a number of reasons why these work. Mostly however America is built on western conceptualizations of property and profit, so this means that people who own real estate and shares in profitable companies tend to be better off. Conversely, if you owe someone an expensive debt or spend more than you earn, you're at a disadvantage legally and economically.

Ultimately, even if the economy is having some problems it make sense to stick to the basics: stay goal focused, and do what has been proven to build wealth over time.

Best,

James

Monday = No Money

2008-08-04T00:02:00.004-05:00

Well, it looks like its Monday and guess what! Thats right folks, James has no money!

The account with 187 bucks in is the reserve for our investment property, so we can't touch it. Otherwise, James' personal accounts are empty!

Great.

Too Much Debt...Kill Yourself

2008-08-03T15:40:00.000-05:00

Debt and suicide is the topic of Barbara Ehrenreich's latest commentary piece in The Nation magazine. Its a provocative and biting essay on suicide as a response to debt. Check it out if you've got a spare moment.

Best,

James