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Monthly Archives: October 2007

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Saving is for Suckers

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Okay, I have a bone to pick with most of the blogging community on an issue that most of you are familiar with. Most personal finance books, and indeed most bloggers will say that you should be building up a savings or emergency fund equal to three to six months of your salary. Most people will also tell to this in a ‘safe’ accessible money market or savings account. Sounds like good advice right?

– WRONG. DEAD WRONG.

I have news for the blogging community and our readers. Don’t buy into this advice.

Instead, if you need emergency funds, you should be putting your cash straight into safe, boring high yielding stocks.

Let me illustrate for you: Let’s say you get $10,000. From an inheritance, a work bonus, a gift from your folks, whatever. Now, lets assume that you find a nice stock or mutual fund that’s paying you 9% annually. Now, 9% on %10,000 is $900 annually. Now, compare this to the standard “savings account”, at 2.2% or the prevailing rate of money market accounts at 3.3%. That’s $220 and $330 dollars respectively annual from the “safe” bet. You’ll make nearly three times as much from the stock/mutual fund option. Even accounting for transaction fees and some stock price fluctuations, you’d come out ahead with the stock option.

Now you might be thinking I’m taking crazy! What about the risk of losing all your money in the stock market? Yes, there is some risk in the stock market. But you need to balance this against the declining purchasing power of your dollar. If you don’t believe me, take a gut check. Are you paying more at the super market, for gas or for utilities than last year or a couple of years ago? I bet you are. Also, check the statistics. The dollar has been taking a beating for the past three years. Your greenbacks are worth less and less every year.

Finally consider this. America is a capitalist country. He or she who owns, is in control. Buying into the bad advice of building up an emergency saving account hampers your chances for real prosperity. The widespread belief in this falsity is what social reformers like Malcolm X mean when they say, “You’ve been had, You’ve been hoodwinked”. By socking your money into a low yield savings account you’ll be on the wrong end of both the declining dollar as well as the basic principle of capitalism, which is that owners are in control.

People, put your money into stable high yielding stocks. Forget about money market and checking accounts.

Best,

James

Cutting Your Grocery Bill

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So, since my wife left for Afghanistan, I find that I’m basically in charge of taking care of the household while she’s away. Last night, I became very aware of this when I was at the Supermarket. The bill for a basket full of groceries was $52.76. Ouch!

So, I’ve been thinking about how to save money shopping and wanted to share some tips with you.

1) Shop with a list and stick to it. People who do this tend to spend less. If you did this every time you went shopping, the annual savings could be hundreds of dollars. I saved 4.19 on my last trip to the grocery store. It wasn’t a lot, but it can add up.

2) Comparison Shop. There are a couple of ways to do this. Before you go shopping you can either sit down with the supermarket circulars and compare between stores. Or, you can compare prices between brands when you get to the store.

Because I’m don’t have a car, I usually do my comparisons at the store. If you’re comparing at the store be sure to check the products that aren’t at eye level (these are often cheaper) and check across brands. For example in the breakfast cereal isle at Safeway here in DC, the cheaper and and healthier cereals are often hidden away in the corners. Be sure to consider any available specials also.

3) Don’t shop on an empty stomach. The main idea here is that if you’re hungry you’ll buy more than you would normally. I do this all the time and often get junky snack food as a result. Take it from me – if you go shopping on an empty stomach you could end up paying more.

4) Buy generics. Stuff like flour and salt don’t vary that much. It makes zero sense to pay name brand prices for these types of products. We get generic salt and cheepie pasta.

5) Use coupons. My wife Miel is good at this. She uses lots of coupons when we go to the grocery store. I still haven’t got the hang of coupons yet, but I know that it can shave a bit off your grocery bill.

Happy Saving!

Best,

James

Getting back into HANS

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Hello All,

If you’re a long term reader of DINKs finance, you know that we’ve been investors in the Hansen’s Natural Corporation. We invested nearly $60,000 back in April of 06 and walked away with a 50% pretax profit. I’ve been keeping an eye on the stock ever since, and it looks like the company’s share price is picking up again after getting hammered back in August.

Hansens Natural is beverage company. They make and sell energy drinks, sodas, juice and tea. The principle players in Hansen’s management are Rodney Sacks, a South African attorney turned entrepreneur and Hilton H. Scholossberg, an English businessman. The company is based on Corona California and is known primarily for its Monster and Hansens Natural Soda products.

Now, why invest in Hansens? The company has some significant downsides. For example, the beverage industry is very competitive, with Coke, Pepsi and Cadbury Schweppes having large market shares. Also, most of Hansen’s profits are due to their energy drinks, so Hansens is a ‘one trick pony’. There has been some issues with options accounting in the past, primarily due to management helping themselves to profits a bit too aggressively. Finally, a raft of lawyers have recently been sniffing around Hansens looking for some profit because of the options scandal.

But, for an investor thinking about Hansens there are significant draws to investing. First, is profits. Sacks and Schlossberg have done a yeoman’s job of negotiating distribution deals with large partners like Anheuser Busch and Canada Pepsico. The result of this has been the seizure of 27% the energy drink market and growth in earnings per share from $.99 to $1.52 in 2007, despite a 4 way stock split. Hansens currently carries no long term debt.

The second draw is share price. The market has a schizophrenic relationship with the price of Hansen’s shares. Mostly however, the value of Hansens shares on the open market has increased from 3 dollars in 2003 to 64 dollars today. In other words, the value of the company increased by more than 2,100 percent since 2003. After a bit of a fall in the end of 2006, Hansen’s shares have started to pick up again. This suggests that the company’s profitability has increased and the buyers expectations of future profits are reflected in their willingness to acquire shares of the stocks. In other words, the market likes Hansens again.

Third, the smart money seems to like Hansen’s again also. Gregory Badishkanian, a Citigroup analyst who I think is clever guy, has recently revised his earning and price estimates upward. The most recent S&P report suggests that the 2008 outlook for the beverage industry is solid, despite higher sugar and aluminum prices. Also, while I’m not exactly “smart money”, I see that Hansen’s products are on the shelves in DC and at least appear modestly popular at the University of Maryland College Park.

In conclusion, I’m planning on taking a modest position in Hansens. There are still significant downside risks, but the company’s profitability and popularity appear to have returned.

Best,

James

Communal Living

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Here in Kabul I’m living in a group house. This means that I both live and work with ten other international staff. While we all have our own space in the house that seems to work out very well, there are a few aspects that are very communal in nature.

We have a system where you can buy into a meal plan for $30 a week. This will buy you a four to five dish meal at lunch, a desert left for the evening on most nights, fresh fruit, breads, and cereals, and leftovers available any time.

To me this feels like a bargain in comparison to what I normally shell out for groceries and lunches out in DC. At the same time I found it funny to hear people commenting on who eats more and so forth.

This was until I noticed discrepancies in eating out. After a couple of weeks here it seems pretty clear that no matter what you eat or drink, the bill is divided by whatever number of people and there you have it. The only difference is when some people have drank wine, then this is taken off of their bill. Otherwise it doesn’t matter if you had a beer or five.

As we all have experienced at one time or another, splitting the bill means that in most cases someone gets the shaft. For instance, last night a group of us went out to Chinese food together. I ordered a meal for $8 when most others ordered meals for $16 plus appetizers and drinks. I had a headache and opted out of the two bottles of wine that were shared among four of the six of us. In the end my bill was $30 when if paying for only my portion it would have been $20 with a hefty tip.

I’m not grumbling about an extra $10 for dinner, but I can certainly see how this could be an expensive lesson in communal living over the next couple of years.

This is definitely the case when it comes to alcohol. Back in DC I might have a drink or two a couple of times a year. Here my colleagues have been accustomed to the ex-pat lifestyle with a fair bit more drinking than that. I see this will have to be kept in note when wanting to keep an eye on expenses. Bottles of wine in restaurants are $30 a pop and my colleagues drink at least two to one.

Of course there are certainly times when I’ll want to indulge with my colleagues. Last week we shared wine and a group meal of Lebanese appetizers and I thought it was a fair deal all around, even with some drinking more.

I think in the end there isn’t a great deal to be done, as I enjoy going out with my colleagues and am certainly not going to stay in my room to save money. In the end I think my month bills for groceries and eating out will be about $300 a month. This is about what I paid for groceries for James & I without considering lunches and dinners out. I’ll keep folks posted as I know more of my monthly budget and so forth.

Cheers,

Miel

Check Out this Craigslists Golddigger

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Hi All, – feel free to check out this add on craigslist. Its making the rounds on the message boards and even has a Reuters story about it.

THIS APPEARED ON CRAIG’S LIST

What am I doing wrong?

Okay, I’m tired of beating around the bush. I’m a beautiful (spectacularly beautiful) 25 year old girl. I’m articulate and classy. I’m not from New York . I’m looking to get married to a guy who makes at least half a million a year. I know how that sounds, but keep in mind that a million a year is middle class in New York City, so I don’t think I’m overreaching at all.

Are there any guys who make 500K or more on this board? Any wives? Could you send me some tips? I dated a business man who makes average around 200 – 250. But that’s where I seem to hit a roadblock. 250,000 won’t get me to central park west. I know a woman in my yoga class who was married to an investment banker and lives in Tribeca, and she’s not as pretty as
I am, nor is she a great genius. So what is she doing right? How do I get to her level?

Here are my questions specifically:

– Where do you single rich men hang out? Give me specifics- bars, restaurants, gyms

-What are you looking for in a mate? Be honest guys, you won’t hurt my feelings

-Is there an age range I should be targeting (I’m 25)?

– Why are some of the women living lavish lifestyles on the upper east side so plain? I’ve seen really ‘plain jane’ boring types who have nothing to offer married to incredibly wealthy guys. I’ve seen drop dead gorgeous girls in singles bars in the east village. What’s the story there?

– Jobs I should look out for? Everyone knows – lawyer, investment banker, doctor. How much do those guys really make? And where do they hang out? Where do the hedge fund guys hang out?

– How you decide marriage vs. just a girlfriend? I am looking for MARRIAGE ONLY

Please hold your insults – I’m putting myself out there in an honest way. Most beautiful women are superficial; at least I’m being up front about it. I wouldn’t be searching for these kind of guys if I wasn’t able to match them – in looks, culture, sophistication, and keeping a nice home and hearth.

it’s NOT ok to contact this poster with services or other commercial interests
Craig’s List PostingID:

African Americans less Likely to Participate in 401ks

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Hi All,

I just wanted to get this out there before it gets buried. According to a new AP news report, relative to Whites, African-Americans are far less likely to be involved in corporate 401k plans. I won’t add much more to this, but this finding isn’t surprising given that African-Americans have a history of being abused by “the system” – hint: think slavery and the Tuskegee Syphilis experiment.

Best,

James

Buying XOM

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So, I haven’t written about stocks very much over the past couple of months. This is largely because I haven’t had big blocks of cash coming in recently, but also because I’ve switched my stock investing strategy to emphasize trading less and buying and holding more.

But, over the past couple of months I’ve been able to scrape up a couple of hundred bucks in my IRA. After looking at some stocks we’ve bought before, AAV, HANS and XOM. I eventually decided on XOM.

AAV and HANS are both interesting investment opportunities. Hansens Natural Soda has a been a big winner for us in the past. We made about $30,000 on it last year. Advantage Energy (AAV) has an unbeatable yield (14.3%) and trades at an inexpensive 12 dollars a share. Hansens’ (HANS) net earnings were up 40% this year, but we’ve been stung by the stocks volatility in the past. So, while HANS and AAV are looking attractive, XOM is the winner for this go around.

For those of you who don’t know about XOM. In a nutshell, the Exxon Mobil corporation is one of the sires of Rockefeller’s old Standard Oil trust. Its a global multinational corporation that is primarily engaged with the exploration, production and distribution of oil and natural gas. The company’s profits are vast – 10.2 billion in the last quarter.

I like Exxon for several reasons.
First, its multinational. The fact that only 20-25% of XOM’s earnings come from the US means that its relatively immune to changes in currency and local economic conditions. This is important especially now that the dollar is so weak. Second, XOM has been a consistent earner for 30 years. You don’t see the kind of hyper-growth that you’d find in a fast moving tech stock, but XOM slowly and reliably earns 5 to 6 percent every quarter. This earnings growth is reflected in a steadily increasing stock price. Third, the company’s finances are in good shape. As of October 2007, XOM had a cash balance of $34.6 billion relative to debt of about $8.8 billion. This bodes well for the possibility of future dividend increases or share buybacks.

So, I’ll be putting a couple of hundred into the company as soon as sharebuilder executes my buy order.

Best,

James

Clinton’s Retirement Plan

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The financial news that caught my eye today was Clinton’s proposed retirement plan. The basic gist is to provide matching funds for a 401(k) type plan for all middle income Americans (making under $60k). The feds would pay fifty cents on the dollar for those in between $60k & $100k (meaning you get a $500 bonus for your $1,000 contribution).

Clinton points out, “We’ve got a lot of workers — more than half in America right now — without any employer-based retirement system.” While us DINKs are certainly all for saving for retirement, I think the issue goes a bit deeper than simply providing matching funds.

I’ve looked for any mention of financial education tied to this program and haven’t been able to find anything. In my opinion you could do a lot of good by putting some of that money towards a solid financial education. That goes for not only the youth, but those of all ages.

Certainly matching funds are a nice incentive that parents with the ability to do so would offer to their children to promote savings. I would argue that unless that comes with a fair dose of education about financial basics that the money just won’t go as far.

I do agree with Clinton’s statement, “Through the discipline of good planning and the miracle of compound interest, you should be able to build wealth for yourself.” I would also add to that the importance about learning through that process.

Happy Savings!

Miel

You can get the full story and details from the New York Times.

Priceline Rules

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When I first heard about priceline, I wondered if it was too good to be true. Being a savvy traveler, I had to check it out myself. Now I’m officially hooked, and use priceline whenever I can. Here are a few tips for making out big time:

  • If you don’t know anything about priceline, the basics are that you give the price you’d like to pay for travel (car rental, hotels, flights, etc), and then if someone takes your bid, you pay that price. If you bid too low, you have to make some adjustment to your bid or wait 24hrs.
  • Start in advance if possible. Priceline makes you change your bid or wait, but if you bid early this works to your advantage. I’ve still found great last minute deals, it’s not a sure thing.
  • Know the market. Depending on what it is you are looking for, know what price you’d like to be paying.
  • Make sure to go to the Name Your Own Price section, otherwise you can be suckered into their standard offers.
  • Car rentals are the no brainer, since one brand is comparable to others. I’ve gotten as low as $14/day on week long rentals, and $50 for a weekend trip.
  • Hotels are a bit trickier. This is done by location and rating level. Depending on the city and how they break out the zones, this can work for or against you. For instance in say the Dupont Circle area of DC, it would be a safe bet to bid on a three or four star hotel and know you would come up with something fine, since you can look at the list and make sure there aren’t any sketchy options. However in Portland, Oregon they include the whole city in one zone. Bidding on a three stars wouldn’t be certain to get a sweet spot in downtown. Whereas bidding on a four star hotel it was guaranteed to be one of three hotels. We were able to get one of the best hotels in Portland, the Benson, for $100 and then we were upgraded for our honeymoon. My vote is to go for a better hotel and bid lower.
  • Flights, I haven’t tried these. My vote would be that it isn’t worth it unless you have the flexibility.

All and all it is a pretty good way to save money while traveling! Enjoy bidding!

Miel

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