Blogging Wealthtrack 2/5/2012

This morning I watched WealthTrack with Matt Mclellan, who is now running several First Eagle funds, including the global funds which has some amazing records for the trailing periods.

He provided some new ideas that were very compelling for me...but the main idea that I like was this: The real risk is not investing because there are no real risk free assets. This, simply put, is that with the real inflation numbers taken into account, preservation of capital is impossible, Mclellan states, unless you invest.

Put simply, the challenge and fear for most individual investors is that there is entirely too much volatility in the markets. Looking at a good overall measure of volatility in the market, the VIX as a component of certain ETNs, you can look at this as an example: http://www.google.com/finance?q=NYSEARCA%3AVXX

In the end, McLellan argues, you must construct your portfolio from good individual businesses.

Blogging Wealthtrack 1/22/2012

This morning I tuned in to Consuelo Mack Wealthtrack. It is one of my favorite shows to listen to with respect to personal finance, but more tuned in on the investing side. I think that the subject matter is quite fascinating, although not as titillating as say the Suze Orman show (which I also happen to like).

On this week's show, Consuelo interviewed Phil DeMuth, author of the little book on alternative investments. I found that this was a very interesting author and he seemed like a down-to-earth kind of guy, which is a nice, refreshing change compared to many guests that appear on the show who sometimes seem like they are a little bit divorced from the plight of everyman.

Her other guest was John Hathaway, founder of the Tocqueville Gold Fund. During an interesting interchange, there was a comparison of a large sum of gold versus an equal amount of the assets of Warren Buffet's Berkshire Hathaway, and the preference seemed to be Berkshire for Phil. However, John Hathaway was quick to point out that gold had done much better in the trailing period.

Two common points about gold were countervailing points, however:
1. Gold has now earnings stream to buoy the price
2. In order for gold to see a similar run up that it has had percentage-wise, the world would have to be dramatically different than it is today.

Of course, alternative investments are good because they are alternatives to existing asset classes, something that many people are stuck with in traditional mutual funds that hold stocks and bonds. Phil recommended that your holdings in these alternative investments should be largely based on your experience and knowledge, indicating that perhaps you would start small around 5-6% and increase over time to 10-25% if you became really comfortable.

Personally, even if I really knew what I was doing, I think 10% would be my limit. For the same reason Gold can't run up, I don't want to bet against the market at that level. I have to believe that over the long term, things will continue to get better for everyone.

Go to WealthTrack.com to see the show/learn more. You'll be glad you did.


DFSAX

Timebanks and CSAs

In this, the great recession that we're slowly (arguably) coming out of, I have realized that there is quite a bit of opportunity for us to learn about ways to make better lives for ourselves by leveraging new movements and ideas (some of which are really just re-made ideas from the past).

Two ideas that are really worth considering, in my opinion, is the idea of "timebanking" and "CSA". Both of these ideas were covered as part of a documentary that aired on "Now On PBS" titled "Fixing The Future". While these were only two of the ideas covered, I think it is a good short documentary that gives some hope to the somewhat difficult mess that we're in as a society.

The first idea that might help us is the idea of "timebanking". Timebanking is a system whereby you donate your hours into a shared pool with lots of local members and then are able to get a comprable portion of time from someone else. This is sold as an item that builds community, recognizes that everyone has some skill, and even if you think that you have a more valuable skill, it is worth noting that these transactions are tax-free, so there can be a significant discount by using them. Learn more on this website: http://community.timebanks.org/

The second idea that was mentioned was the idea of a CSA. This is Community Sponsored Agriculture--essentially a local farm. The advantage here is that you learn and are aware of the origin of your food. And this provides some availablity/value for the produce that might not be available otherwise since the food would have to be shipped and cause pollution. In my area these seemed a bit expensive, but to be fair, there's an element of uniqueness and value in it that offsets the additional cost if you either have kids or enjoy the experience, in my opinion. These CSAs often take a yearly fee and then provide produce each week for your family that is grown locally. Learn more about them at this site to see if you're interested: http://www.localharvest.org/csa/

Personally, I am looking into both of these to see if there's a way that I can use these resources locally also.

Yes! You Should Keep Saving

Recently I was browsing an internet message board (Net Worth IQ) and I realized that for the rest of my life I will find personal finance fascinating because so many people have so many different outlooks and perspectives.

One person's recent question was essentially: Should I Keep Saving since it doesn't add much to my Net Worth as a percentage of the total?

My response is as follows:

I think that the real thing you're driving at is whether or not you've reached "critical mass". Bob Brinker uses this term to indicate the tipping point where your investment "dividends" are putting enough out in order to do two things:
1. Generate enough income for you to live your current lifestyle
2. Put out additional income on top of #1 such that the total principal grows enough to keep up with or ahead of inflation.

The main point here is that you should keep putting the 1k in each month -- not because you think it will up your net worth by 1, 10, or 50%, but because you want to get to critical mass. Critical mass enables you to be the boss and be literally 100% free with respect to your money from any kind of tragedy/job loss/etc.

I hope that helps! To that end, perhaps networthIQ should be tracking not just the growth in net worth, but also how much is from "income" vs "dividends" and what a persons' velocity of increase is.

Computer Virus Woes

So, this past weekend I was looking at funny pictures. I highly recommend the site PetsWhoWantToKillThemselves.Com. It had me giggling all day as I kept thinking about some of the photos on there.

At any rate, over the course of the day, I determined that there was some sort of virus, malware, or rootkit installed and my AVG Anti-Virus started going haywire. Wanting to take no chances, I quickly backed up my files and decided it was time to wipe out my computer.

Of course, it is always tempting to try to salvage it to avoid doing crazy reinstalls of everything, but I decided that in this case it would be better to just go for broke. Being an IT guy, I was able to do it myself, but it totally took the whole day, even though there was no real issue or crisis to it. It just takes a really long time. And one thing it made me realize is that I should get back into doing that more often because the money was decent compared to the amount of effort it took.