Wednesday, March 29, 2017

Warren Buffett's Schizophrenic View Of The Internet

Warren Buffett made big news recently what it came out his company, Berkshire Hathaway, sold almost its entire position of Wal-Mart stock in the last quarter of 2016. There had been news in the past that he was selling his Wal-Mart holdings, but the scope of just how much he sold has just been fully disclosed - he sold virtually all of it - almost 90%. I'm willing to bet we'll see the last bit has been sold when Berkshire files its Q1 2017 disclosures.

The articles written about his sales all point to the same reason - he says it's just too hard for traditional retailers to compete with internet companies like Amazon.

Personally, I agree. While I never shop at Wal-Mart because I disagree with the way they treat and pay their employees, I have noticed that I tend to buy more things at Amazon than I do at other traditional retailers. The internet makes it easy to shop for the lowest price (which isn't always at Amazon) and get things delivered straight to your door.

One Eye Open, One Eye Closed

But this is where Buffett's schizophrenia kicks in. He has acknowledged the internet is destroying traditional retailers, yet he can't see that it's doing the same thing to traditional news companies. He still holds large positions in, and is still buying newspaper companies.

Talk about a last century business model! I haven't subscribed to a newspaper in at least a decade and I can't think of anyone I know who currently does.

Granted, Buffett has acknowledged that he has an "unnatural love" for newspapers and he does seem to see the writing on the wall - that only those few newspapers with a viable internet model will survive. However, at what point will he reach the same conclusion about newspapers that he did with retail stores - that the internet will wipe out the vast majority of them? When will we be reading stories about his sale of newspaper companies?

Wednesday, March 22, 2017

I'm Interviewed At Rockstar Finance

The team over at Rockstar Finance did an article on the types of cars personal finance bloggers drive. I was pleased to be asked to participate. Sadly, when they asked for pictures, I was out of town, moving my wife to Washington, so that's not actually my car in the photo, but it looks pretty darn similar. My wife has a silver one and mine is blue.

And Jesse from You Need A Budget - I am soooo envious of your Tesla Model S!!!!

Wednesday, March 15, 2017

The Sneaky New Trick Banks And Credit Unions Are Using

As my family gets ready for a move to a new state, I've spent some time looking for a new bank or credit union to handle our finances in our new location. Currently, I use a local credit union for my day to day banking needs and, although it is possible to perform most transactions at out of state credit unions through a program called Shared Branching, I don't want to use this as a long term solution for my banking needs after I relocate. (One reason is that I wouldn't be able to get a mortgage on an out of state property.)

Deceptive Advertising?

So I've been researching various financial institutions, looking for one that provides the services that I need at rates that are competitive. During this process, I came across this advertisement for rates on checking and saving accounts:

Holy cow! Over 4% interest on checking and savings accounts! I haven't seen rates that high in over 15 years! My current vanilla savings account pays 0.05% and my checking pays nothing. Even online banks are only paying around 1%.

And then I noticed the fine print:

Clicking the link for more details, I found out that high interest rate only applies to the first $500 in your account. Any balances over $500 earn just 0.1%. (Although low, that is still double what my current credit union is paying me.)

(Click to see the whole image)

The Carrot Instead Of The Stick

Initially, I was upset with what seemed like a blatant bait-and-switch, but then I started thinking about it more and came to the conclusion that this is actually a positive for the consumer. This particular credit union has free accounts - really, truly free with no minimum balance requirements. The high interest rate on the first $500 appears to be an incentive for people to maintain a minimum balance. I much prefer this to what most institutions do - create a disincentive for people by charging a monthly fee for a low balance.

Kudos to this credit union for taking this approach! They just earned my business!

Wednesday, March 1, 2017

Goal Update: End of February 2017

At the end of each month, I post an update of my goals, including a brief discussion of any notable events that might have occurred during the month. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of February, 2017
Current value: $29,975
Change from last month: +$688
Percent of Goal:  27.56%

Note that the funds in this account are invested in stock, so there will be fluctuations in value that are outside my control. I never withdraw money from this account, so any dips are purely due to stock price changes.

Events Of Note Last Month:

In something of an unexpected event, I received $7.50 in advertising revenue from my old real estate blog. It's unexpected because I am not writing new posts there anymore and haven't for quite some time. I guess it's still got enough traffic to attract some advertisers. Net income from my online courses was $115.10. My hard money loan generated $133.33 in income. And lastly, I received $3.77 in eBook royalties.

I crossed another milestone in February - I have now earned more than $9,000 from my online courses! Not bad for a total investment of $149.

My hard money loan is due to be paid off any day. My plan is to roll those funds into a new loan and add in the funds I've saved up over the past year.  Those monies were invested in Realty Income stock, which has dropped in value over the past several months. I was worried I might have to sell at a loss to cash out. I put in a limit order several weeks ago at a price that would allow me to more or less break even. I didn't think it would trigger, but a few days ago, the stock price jumped briefly and I sold my shares for a net gain of about $25. Not much, but better than the loss I was expecting. And that figure is not taking into account the roughly $235 I received in dividend income throughout the past year.

Relocation Looms!

Major big news this month! We will be moving! My wife got a fantastic job offer from the University of Washington and it was too good to pass up, so we're leaving the Phoenix area and heading to the Seattle area. In fact, when this is published, we'll be on the road driving up there! After she's set up in an apartment, I'll return to Arizona for a bit with our daughter. We're going to have her finish the school year our here while I work on selling the house.

The housing market in Seattle is crazy. Single family home prices range from $450,000 to over one million. I'm having a hard time getting my head around that. Currently, we've got about $165,000 outstanding on our mortgage and we were on track to have it paid off in 15 years - which was perfect because that would be just about when we hit retirement age. Now we will be going to be back to a 30 year time frame with a much higher balance. The crazy smart folks over at Early Retirement Now are helping me get used to this idea with posts like this one (see item #4).

This is a major life change and the number of things that has to be done to move your entire family and life to another state is crazy, so posts here might be sparse for a while. I also am getting prepared for our net worth figures to bounce around wildly for a couple months. My wife's new employer is giving her a bonus to relocate and that will inflate our numbers one month, then they will decrease as we pay the moving bills when they come due. It will also take some time to adjust our budget as we get used to living in a place with a higher cost of living than Phoenix.

Net Worth Update

For February, our net worth rose by $17,140.

January 2017February 2017
Note: categorizes our HELOC as a credit card debt, not a loan, hence the apparently high credit card balance.

It's not as rosy as it seems. If you look at the numbers above, most of them took turns in the wrong direction by thousands of dollars: our cash dropped, our credit card debt rose, and our property value dropped. What offset all this was a big gain in our investments. Part of that was because I rolled over my pension from my prior employer into an IRA and invested that into an index fund, which saw some solid gains this month. The other part was that Realty Income stock made some significant gains, as I talked about above.

If you have any questions or suggestions for topics, please drop me a line in the comments section!