It’s Fathers Day And My Family Says I Can Do What I Want

So I am writing a post for my blog.   🙂

Father’s Day is about dads, but it is also about family.

I could very easily call this post:   “History Repeats Itself!   Or why I invest in the stock market- revisited.”

In that previous post, I talked about the problems of owning a car or rather multiple cars and subsequently having to buy a new used one.  So today, Father’s Day, I am helping my second oldest son buy his first car while finding myself down a car because my wife’s Suburban is in the shop needing a new fuel pump and my current Honda lost the ability to open and close it’s electrical windows while at the same time having no AC!

The primary reason I invest is to gain added capital so I can easily handle life’s curve balls. It’s part of my over all financial and budgeting plan.

I have subsequently fixed the window issue myself by installing new switches.   I have yet to decide about the AC….  But back to the excitement of a new first car.

It is older than him!  It is a 1998 Acura Integra.  My last Acura lasted over 300K miles.  This one only has 125K.  So hopefully that part of history will repeat itself.

And yes, the AC works in this one.

Happy Father’s Day Everyone.

 

 

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Should You Sell Your House Every 15 Years?

This my third post regarding our experience helping my in-laws sell their house.  In previous posts, I talked about how my experience with the greatest generation seems to support the notion that they never throw anything away and that they keep everything forever.

Including homes.

Keeping a house for more than 15 years has its advantages.

  • In the case of my in-laws, they spent the last twenty years not making a single mortgage payment.
  • When then did sell the house they had 50 years of capital appreciation and a very nice addition to their retirement funds.

Keeping a house for more than 15 years has its disadvantages.

  • You do have expenses and repairs which will need to be done from your basic painting and staining to most major appliances, furnaces, hot water heaters, roof, etc, etc.
  • In the case of my in-laws, this required repair and maintenance basically was done when absolutely necessary and, especially as they got older, much less frequently.
  • This brings me to another point that at some point, you will not be physically able to maintain the house or willing or perhaps able to spend the money.

Interesting Note: At one point during closing, while we were waiting for the title company to get their act together, the conversation turned towards home ownership and specifically renovating homes which the real estate investors purchasing my in-law’s house were obviously doing. None of them owned the homes they and their families were living in. They all lived in condos or apartments which had management companies to take care of all that. They did not have to worry or be bothered with yard work, maintenance, repairs or anything associated with the burdens of home ownership. All thought it was the greatest thing in the world.

Selling your home every 15 years has advantages.

  • Forces you to edit belongings. People, especially Americans, tend to collect things and this can become an issue regarding space, the condition of your home and expenses – in the form of paying for extra storage.
  • After 15 years, things tend to break down or need replacing. If you plan on keeping your home for the long haul, you should also plan and budget for the care and feeding of your home. Trust me, not everyone does.

Selling your home every 15 years has disadvantages.

  • Selling, buying and moving can be expensive.
  • You most likely will have to pay commission, taxes and fees
    Plus moving expenses. The internet says the average cost of just moving, locally, in the U.S. is $2300; double that if you move to another state.
  • If you have kids, it can be disruptive.

The “sell your home every 15 years” is actually my wife’s idea mostly because it forces you to edit your belongings. It does not necessarily mean downsizing, but rather an approach to keeping the things which are truly important to you up to date and maintaining the house to get maximum value out of it.

Of course my counter argument to this is that one needs to be disciplined to budget for these “burdens” of home ownership. Obviously not everyone is; and as in the case of my in-laws, the older one gets, other life events will happen and this “required maintenance” is less likely to get done and impact the value of the home and your return on the investment.

Just in time.

This leads me to one alternative theory to the 15 year plan. It is actually a hybrid plan. Either one approaches home ownership as selling and moving every 15 years or one approaches home ownership, and plans for the cost, of performing the necessary repairs and maintenance every 10 – 15 years which will maintain your investment. Either way, the “maintenance” is done in time to recoup maximum value.

Self-analysis.

If I look back on our home ownership(s) we have owned three homes. Each time we moved it was because we had children and out grew our space.

The time of ownership is as follows: 4 years, 8 years and now 17 years.

So we are passing the 15 year threshold defined in this blog.

The reality is we are not selling but rather choosing to maintain. This year alone we have replaced the roof and water heater. We have, over the years also replace the AC and Furnace, finished the basement and renovated most rooms in the house. The goal here is to up keep our investment to get the most return for our money. To date, we have done reasonably well.

However, I can see the logic in my wife’s plan. There comes a point when one will have to start renovating and replacing things twice. Then the question becomes do you still get the same amount of return on your investment if you end up replacing a roof twice, renovating a kitchen twice, etc, etc.

So what do you think?
Should you sell and move within 15 years?

Alternatively, one also needs to consider other options such as financing. A 15 year mortgage could completely pay off the home within this time period. This would maximize your return and save on interest payments. However, this would also increase your monthly payment by nearly 50%. So there is a tradeoff.

#TrendingNow

So this is a bit of a divergence for me posting.  I am constantly awestruck by news I find on my newsfeeds, TV and Investment Newspapers.   Usually not in a good way.  Most of the time I do not find trending topics in the news to be “post worthy” but this week I found three which caught my attention.

  1. #Bailout #Millennials #StudentDebt

Survey Says: Nearly 25% (24% to be exact) of all working millennials receive help from their parents for paying bills.

Interestingly, nearly 80% of the working millennials receiving help do not live at home.  My first inclination is the parents are helping to pay for their millennial children’s student-loan debt.  But according to the survey, the breakdown was quite different.

  • 53% Cell phone
  • 31% Car Insurance
  • 30% Car Payments
  • 30% Utilities
  • 27% Rent or Mortgage

And yes, these totals add up to 171.  So parents, on average, are bailing out for more than one category.

The experts say that the primary reason for this is the sky-rocketing cost of a college education and the increasing reliance on financing this cost through student-loans.  The statistics seem to support this with over 17 million millennial borrowers (under the age of 30) with a total of $376 Billion in debt.  That translates into roughly $22,000 of student-loan debt per millennial.

That is a lot of money to owe when just starting out in the job market. Obviously, by looking at the categories, there is a lot of additional spending going on.

2. #Drunkshopping #Generation-x

Americans are spending billions of dollars shopping while drunk.

Note: I have nothing relatable to say about this.  Not that my wife and I don’t drink, we do, but I can’t say that we ever do anything other than socialize and watch movies when drinking and we don’t frequent bars.

From a Finder.com survey:

  • Nearly half of American adults (46%) who drink alcohol regularly admit to making a purchase while under the influence — this translates to an estimated 68 million people, drawn from our study of 2,000 American adults.
  • The trend seems to be rising.
  • Americans have spent an estimated $30.43 billion on these spontaneous drunk purchases, or about $447.57 per person in 2018. Compare this to just $206 spent on drunk purchases in 2017.

I wonder if this past election and results have any correlation to this?

By the numbers:

  • 60.27% of American adults — or an estimated 148 million of us — drink an average 7 alcoholic beverages weekly.
  • We spend $5.4 billion on alcoholic beverages a week — an average $36.56 per person.
  • The most popular alcoholic drink is beer, with 39.53% of American adults drinking an average 5 beers weekly.
  • Men are twice as likely as women to consume beer, with an estimated 53.4% of men enjoying a beer, compared with only 26.48% of women who pick up a can weekly.
  • Wine is a woman’s drink of choice, with 37.54% of women enjoying an average 2 glasses a week.
  • Millennials are twice as likely as Gen Xers and baby boomers combined to enjoy a glass of moonshine or other liquor.
  • Men are twice as likely as women to consume spirits, with an estimated 36.49% of men regularly boozing up on liquor compared with 18.43% of women.

Generational Breakdown:

  • Gen Xers spend the most on drunk purchases, averaging $738.87 per haul — more than triple the amount ($206.11) that millennials spent.
  • While Gen Xers spend more, millennials are more likely to spontaneously indulge on a spree their next night out, with 61.07% of millennials who drink regularly admitting to drunk shopping. Compared that to Gen Xers at 51.17% and baby boomers at 31.29%.
  • On an average week, a Gen Xer spends $36.91 on alcohol, compared with $59.28 a week for millennials. That’s a whopping $1,163.24 extra that millennials spend on booze each year!

Gender breakdown:

  • Men spend almost double that of women when under the influence, averaging a total $564.51 per spend, compared to women, who spend an average $282.65. Compounding this, men are also more likely to buy while boozed up, with 48.19% of men who drink regularly admitting to a drunken shop, compared with the 41.36% of women who do so.
  • On an average week, men spend an estimated $44.17 on alcohol — much higher than the average $26.77 women spend to drink. That’s an extra $904.80 that men spend on booze than women in a year!
  • Spirits and liquor appear more popular with men than women. Men are four times more likely (3.30%) to enjoy a sneaky moonshine than their female counterparts (0.68%). And it’s nearly twice as likely that men (8.45%) will consume cider than women (4.36%).

Marital Status Breakdown:

  • Married Americans spend twice as much on spontaneous drunk purchases than their divorced counterparts, with an average $327.62 spent in total compared to a divorcee’s $147.71.

Probably because alimony is so expensive . . .

  • However, singletons are the most likely to make a purchase while drunk: 55.78% of single people admitting to making a purchase while under the influence, compared with only 43.63% of married drinkers.

3.  #Bots #Hashtags #Fakenews

Bots are taking over social media and the online world.

  • Studies have found that companies are using bots to promote hashtags and trends on twitter and other social media.
  • Bots not only promote campaigns but they are also used for attracting and interacting with customers.
  • More and more companies are spending money on these bots and paying for promotion.  Often exceeding social media platforms policies.

Trending works by not only tracking the frequency of hashtags in posts but also by the speed or velocity of the hashtag topic appearing in posts.

Again, this is a topic that I cannot relate to.  Yes I am using hashtags, but I neither paid for nor got paid to use them.  They are provide for your entertainment free of charge.

On a related note:

I wonder how many companies use this tactic to attract drunk online shoppers?

 

Congratulations! I Found A Buyer!

This my second post regarding our experience helping my in-laws sell their house.

Selling a house from 300 miles away has its challenges.  Not the least of which is finding a good real estate agent.  My wife and I have bought and sold a few houses in our days, so we have met good and bad agents; and we have learned a few of their tricks.

In our search to find a real estate agent for selling my wife’s parents house we did our due diligence and shopped around.

We found the agent(s) who never called us back, and ones who called us back months later.  Yes, we even had one returns our very first call after we had closed on the house!

We found the agent(s) who spammed us with emails about everything we did and did not want to know about selling and buying a house plus how they were the “very best” at what they do and we were so fortunate to have found them.

And, we found the agent, who we ultimately went with, as a referral from a trusted neighbor.  We had actually met her months before any of the others on one of our three “moving” trips up to NY.  She gave us her card, wasn’t too pushy, and basically waited until we were ready to make a decision.  This is what ultimately made us choose her over all the others.

We could have signed the paperwork way back then and there to use her as our agent but we were not ready at that time – remember my mother in law saved everything and felt that she had to see and try to fit everything from her three story, 4 bedroom colonial into a 2 bedroom apartment.  Hence the multiple moving trips.

As you can probably tell, we never go with just one choice, one option, and we believe in comparison shopping – even with real estate agents and especially when selling a house.

Tip: Do your homework.

Just as we did with finding an agent, we researched the real estate market to get an idea of what the current market and neighborhood prices were like.

  • We found that many homes which had been upgraded were going for about $150K more than those which had not.  My wife’s parent’s house definitely fell into the latter category.
  • There were a couple less expensive “fixer upper” type listings, mostly foreclosures, which had been on the market at least a couple weeks.  These were our competition.
  • So we had a pretty good idea of what price points we were looking at for selling this house.

First the Pro’s and Con’s of the house we were trying to sell.

Pro:

  • It was on one of the best and largest lots in the neighborhood.
  • It was in a desirable neighborhood
  • There was only one listing from that neighborhood currently on the market
  • It was already a good size house with lots of “potential”

Cons:

  • It was definitely and fixer-upper and needed to be sold as is
  • There was a lot of “clean up” renovation work as well as a lot of required “code” work that needed to be done
  • Add to that the “nice to haves” of renovation like marble counter tops and real tile and hard wood floors and this fixer-upper suddenly can become quite expensive

Having done renovation work on previous properties before, we had a pretty good idea of what was needed to be done and a ball park idea of cost.

To come up with a target listing price we did the following:

  • Took the top end price point of the really nice homes
  • Subtracted what we estimated the renovation costs to be
  • Took out what we thought a reasonable profit margin a flipper or investor might want

The end result was a listing price about $200K less than the top price point and about 10-15% under the current foreclosure listings.

Yes, it was a bargain to be had.  But hopefully not at a price that would signal “too good to be true”.

So we signed the listing agreement with our agent and sat back and waited.

Fast and Furious  (No not the movie)

As it turned out, we did not have to wait long.  We got a call from our agent the next day.

Congratulations! I found a buyer!  And it is for asking price and an all cash offer!  Isn’t that Great!

I thought to myself – Yes, yes it was.

Wow!, that was quick.  Who was the buyer?

Agent:

Remember that investor I said I knew, well I showed him the property and he made an on the spot offer.

Me:

Great.  We will have to let my in-laws know.  When do we need to get back to the buyers?

Agent:

As soon as possible.

Well, needless to say, an all cash offer for asking price is really nice.  This was so quick that we did not even get a chance to see what the listing actually looked like on line.  As it turned out, there was no listing that we could find.

That was odd.  Maybe it took 24 hours to cycle up to the internet.

So we contacted my wife’s parents about the offer and waited over night to see if the listing showed up.

It didn’t.

So we called the agent and asked about the listing.

Oh, I didn’t list it.  Once I got the offer from my contact I didn’t think it was necessary.

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Remember we signed a listing agreement with the agent?  Something everyone who sells through an agent should do by the way.  Well the agreement clearly states:

Upon signing, the agent agrees to immediately list the property on the MLS.

To put it mildly, we were upset.

Why wouldn’t the agent live up to the letter of the listing contract?

Simple answer.

Money.

By going with her contact and getting a done deal for full price, she gets to collect 100% of her commission.

Otherwise, she risks having to share up to a third of her commission with another agent.

And, the same tactic would work on the back end too.

When her investor is done remodeling the property he or she would contact our agent to sell it.  Having advanced knowledge that the property would be going on the market and at what price, she could line up a buyer in advance and collect full commission on the back end.

Very tricky.

Part of me does not blame her for trying but really there is a legal obligation which needs to be upheld here AND we purposely priced the house low, but hopefully not too low, to attract attention.

It has been our experience that better properties in better neighborhoods get lots of attention and in decent markets tend to become a bidding war between buyers.

So we told her to list it.

We want to see if we get any other offers over the weekend.  If we don’t get any other offers, then we can go with your investors offer.

Of course she did not like that answer and tried to talk us out of it but her hands were tied.

To cut a long story short, we received 10 offers over the weekend and were up to 12 by Tuesday when we told everyone to give best and final by Thursday.  Our final offer was an all cash offer for $30k more than our asking price; and it was not her investor friend’s offer.

It was from a pair of foreign investors who were in the flipping business here in the states.

Even we were surprised how much traffic the listing got and our agent certainly had her hands full juggling so many different offers by so many different clients.

She certainly worked a lot harder for her money.

This experience reinforced what my wife and I have always known about real estate transactions and realtors.

  1. It pays to do your homework and know the market.
  2. Never make impulsive decisions.
  3. Comparison shopping and getting multiple offers is always a good thing.
  4. Everyone is looking out for #1, which is themselves. And you should too.  In this case, we were looking out for my in-laws best interests too.
  5. Expert advice is valuable and should always be sought out.  But as the ol’ Russian political proverb says, “trust but verify“.

Not Every Stock Is Crashing, However . . .

During a market correction, your number one priority is to protect capital.  So most investors should limit their exposer to this downward trend.

Some, cash out and wait.  This is perfectly acceptable.  Cash is king and it takes money to make money.

Some, play the inverse trend to “balance” their portfolio or “hedge” the market.

Some rely on stop loses to limit their losses to help “keep” their strongest stocks.  These, in theory are the stocks in their portfolio which hold up better than the rest and are worth keeping.

Some, also look for new stocks to watch.  These new stocks are ones most likely not in their current portfolio but are holding up well in this terrible market.  Often, according to IBD, stocks holding up well in a market in correction are first to break out once the market rebounds.

Going back more than three years and not including the current correction, the Nasdaq has had corrections of about 19%, 18%, 10% (rounded up) and 11%.

The deeper corrections lasted six to 10 weeks, while the shallower corrections ran four to six weeks.  Traditionally a correction is defined as a pullback of 10% or more, and a bear market 20% or more.  The current correction has burned through a lot of capital in just two weeks. The quick decline might suggest that the battle between the bears and the bulls has further to go. Volatility is likely to remain for a while.

Yet, the individual investor should not get locked into a prediction. Stay flexible and be ready to buy a stock if a follow-through day develops.

A follow-through day involves a big index gain in rising volume on the fourth day or later of an attempted rally.

Friday’s action constituted Day 1 of an attempted rally. The indexes have to stay above their intraday lows in order for the count to continue.

So I ran a screen looking for stocks which have fallen less than the three major indexes, have positive EPS and Sales ratios, and are finding support and or above the common trend lines (20, 50, 200 MDA).

And came up with this list of stocks.

Ticker Company Sector Industry Market Cap P/E Price
COLM Columbia Sportswear Company Consumer Goods Textile – Apparel Clothing 5.42B 27.5 76.7
CUDA Barracuda Networks, Inc. Technology Communication Equipment 1.48B 98.71 27.54
EL The Estee Lauder Companies Inc. Consumer Goods Personal Products 49.68B 36.43 134.75
EZPW EZCORP, Inc. Financial Credit Services 742.84M 18.87 13.15
FTNT Fortinet, Inc. Technology Application Software 8.26B 97.16 46.54
GFN General Finance Corporation Services Rental & Leasing Services 194.18M 7.4
INST Instructure, Inc. Technology Application Software 1.10B 36.75
INVA Innoviva, Inc. Technology Application Software 1.72B 19.51 15.43
KTEC Key Technology, Inc. Industrial Goods Diversified Machinery 172.63M 42.83 26.64
MBUU Malibu Boats, Inc. Consumer Goods Recreational Goods, Other 703.07M 20 33.4
MC Moelis & Company Financial Asset Management 2.83B 24.9 52.05
NEWR New Relic, Inc. Technology Business Software & Services 3.58B 64.38
PERY Perry Ellis International, Inc. Consumer Goods Textile – Apparel Clothing 417.00M 15.48 26.21
SKX Skechers U.S.A., Inc. Consumer Goods Textile – Apparel Footwear & Accessories 6.57B 25.41 41.06
TSG The Stars Group Inc. Services Gaming Activities 3.75B 19.9 25.45
WING Wingstop Inc. Services Restaurants 1.32B 62.62 45.15

These are not necessarily stocks to buy right now.  After all, the market is still in correction.  However, this correction will not last forever (watch for a confirmation follow-thru signal or for price trends to close above moving averages signaling a potential return to a bull market).  When the market does reverse back up, there will be bargains out there to purchase.  So it is prudent to build and maintain your watch lists to be ready for a recovery.