Today I went to an H&M Auction here in Atlanta, GA and had the opportunity to see investors making big moves on a rainy Saturday while most people were gearing up for the infamous Florida - Georgia game. I was able to experience how investors were able to acquire property in the form of condos, multi-family complexes, and single-family homes that were once valued at over $100,000 - being auctioned off for $35,000 to $80,000.
There was one condo located in Buckhead, an affluent area in Atlanta, that sold for $82,000.... this is an awesome deal considering that this condo would have easily sold for $300,000 in the midst of the 2007 credit era. I imagine that the smart investor that purchased this property will only have to wait about 3 - 4 years in which he can sell this condo for double of what he purchased it at. But I assume he won't sell at all - because it will be smarter to rent it out indefinitely and get paid approximately $1300 - $1400 a month since it is in such a central and convenient location within Atlanta...and rents in the Buckhead area typically go for this amount.
Although it wasn't me this time making moves, it was interesting to learn how others make moves. Sometimes we have to watch and learn how to play the game before we rush out on the field with the actual players. Some people spend $82,000 on cars that depreciate in value and don't put a cent back into our pocket... but when we acquire assets that DO put money into our pocket - now we're making moves.
BE FREE
October 25, 2009
Capital Gains/Dividends/The New Normal
While I'm mostly a fan of dividends - this week I've turned over to capital gains! Of course, there is some risks involved because when one is investing for capital gains, there is always the chance that you could get a capital loss! I usually love investing for dividends because there is not much chance for loss, and there is a monthly or quarterly check in the mail from a company that I've invested with. So one may ask - why turn to capital gains this week? Well, my reason is simple - MONEY! Or maybe a little greed.... I'll let you decide.
Stocks are still very low considering the downturn of the economy - so there are still undervalued companies out there that are ripe for the picking...and profiting. This week I've placed a small wager on Sprint/Nextel as they gear up to release their earnings this Thursday. I think this company has the potential to beat analyst's estimates....but we will find out if I'm wrong or not. If I am right, then there will be a nice reward....if not, then a penalty to pay. Which is why I normally do not invest for capital gains - but I consider myself a well rounded investor and if I'm wrong then it will be a lesson learned.
Everyone is waiting for the economy to return to "normal" because we are still not where we were when the economy was at its highest in 2007. Nevertheless, there are talks about the economy being in a "new normal" where it will be more difficult to predict where the market is heading and it will be more volatile. I think the economy is already where it needs to be given that the highs of the 2007 credit era was inflated due to excessive lending of loans with a lack of financial responsibility to verify the backgrounds of people applying for credit.
The Dow is above 10,000. The S&P is above 1,000. The recession is over and the American economy is doing OK, since 80% of companies have posted 3rd quarter profits already. When companies continue to post profits, it is an indication that consumers are beginning to spend - and this indicates that companies will eventually begin to hire some new talent to keep up with demand.
Our next horizon is the potential inflation ahead - the government has been the biggest spender during the recession, and has printed hundreds of billions of dollars to keep the economy "afloat"... So a potential area for investing will be commodities, because commodities increase as inflation increases... So investing in oil, coal, corn, wheat, etc. are good alternatives to make money during inflationary periods.
BE FREE
Stocks are still very low considering the downturn of the economy - so there are still undervalued companies out there that are ripe for the picking...and profiting. This week I've placed a small wager on Sprint/Nextel as they gear up to release their earnings this Thursday. I think this company has the potential to beat analyst's estimates....but we will find out if I'm wrong or not. If I am right, then there will be a nice reward....if not, then a penalty to pay. Which is why I normally do not invest for capital gains - but I consider myself a well rounded investor and if I'm wrong then it will be a lesson learned.
Everyone is waiting for the economy to return to "normal" because we are still not where we were when the economy was at its highest in 2007. Nevertheless, there are talks about the economy being in a "new normal" where it will be more difficult to predict where the market is heading and it will be more volatile. I think the economy is already where it needs to be given that the highs of the 2007 credit era was inflated due to excessive lending of loans with a lack of financial responsibility to verify the backgrounds of people applying for credit.
The Dow is above 10,000. The S&P is above 1,000. The recession is over and the American economy is doing OK, since 80% of companies have posted 3rd quarter profits already. When companies continue to post profits, it is an indication that consumers are beginning to spend - and this indicates that companies will eventually begin to hire some new talent to keep up with demand.
Our next horizon is the potential inflation ahead - the government has been the biggest spender during the recession, and has printed hundreds of billions of dollars to keep the economy "afloat"... So a potential area for investing will be commodities, because commodities increase as inflation increases... So investing in oil, coal, corn, wheat, etc. are good alternatives to make money during inflationary periods.
BE FREE
October 15, 2009
Salary Fixing = Employee fixing
Remember the term price fixing? Where a group of direct competitors within a certain radius would conspire together and decide on a price of a product/service, and offer that product/service at the same price to all their customers? For example, a group of gas companies such as Chevron, BP, and Exxon - all of them in Lakeland, Florida - would get together and "fix" their price for a gallon of unleaded gas at a determined price. So no matter which location a customer went - the price would be the same. Therefore the customer has to pay a premium at any gas station, and the gas station were the only ones benefitting from the price fix.
Nowadays, price fixing is illegal in almost every state and companies can't do this anymore - when it comes to their products that is. But what about when it comes to the jobs/careers that they offer to their employees? Well, salary fixing is not illegal at all! And most employers that are in direct competition come together and determine on what they will pay employees depending on the position. Ever wondered why there is a certain "range" of pay for a position? I remember going on several interviews and discussing pay - and in every interview the recruiter would say "the salary range for this position is blah blah". I sometimes ask myself, "Where did they get the range for this position?" "Why won't you just tell me what you're willing to pay me? And I'll say yea or nay."
The range comes from an agreed pay amount that is determined by every other company within that industry, for a specific position. Thus, salary fixing! This is why no matter what industry one may be in - he/she can't get a better pay from a competitor. For instance, if you're a supervisor at Geico and you want to become a supervisor at State Farm...well expect about the same level of pay. If you are a teller working at Bank of America, and you want to become a teller at Suntrust...expect about the same level of pay. The reason companies do this is to prevent 1 company from having all the human capital or the best talent just because that company is paying a higher salary for the same position. So to spread the talent around for all - most companies offer the same "range" of pay!
So is your salary fixed? Or did your employer "fix" you?? Salary fixing appears to be a very liberal thing to do - but does fixing promote competition amongst competitors? Or should we consider a conservative approach and allow salaries to run amuck? Would this then create monopolies? I suppose the answer may lie somewhere in history........
Nowadays, price fixing is illegal in almost every state and companies can't do this anymore - when it comes to their products that is. But what about when it comes to the jobs/careers that they offer to their employees? Well, salary fixing is not illegal at all! And most employers that are in direct competition come together and determine on what they will pay employees depending on the position. Ever wondered why there is a certain "range" of pay for a position? I remember going on several interviews and discussing pay - and in every interview the recruiter would say "the salary range for this position is blah blah". I sometimes ask myself, "Where did they get the range for this position?" "Why won't you just tell me what you're willing to pay me? And I'll say yea or nay."
The range comes from an agreed pay amount that is determined by every other company within that industry, for a specific position. Thus, salary fixing! This is why no matter what industry one may be in - he/she can't get a better pay from a competitor. For instance, if you're a supervisor at Geico and you want to become a supervisor at State Farm...well expect about the same level of pay. If you are a teller working at Bank of America, and you want to become a teller at Suntrust...expect about the same level of pay. The reason companies do this is to prevent 1 company from having all the human capital or the best talent just because that company is paying a higher salary for the same position. So to spread the talent around for all - most companies offer the same "range" of pay!
So is your salary fixed? Or did your employer "fix" you?? Salary fixing appears to be a very liberal thing to do - but does fixing promote competition amongst competitors? Or should we consider a conservative approach and allow salaries to run amuck? Would this then create monopolies? I suppose the answer may lie somewhere in history........
October 8, 2009
Time value of $1million dollars - 40 years from today
Ok folks – I know I was going focus most of my time on other projects for a little while, but how can I not post to my blog when I come across some financial articles that make me upset? Such as the one from Kiplinger.com that “teaches” how one can retire a milionaire. You might be thinking – “What’s wrong with that?” “Shouldn’t we all want $1 million dollars by retirement? Why is Barrington upset about this article?” Well I’m upset because this article (and several other “how to retire a millionaire” articles) is misleading.
It is misleading because it gives the illusion that we only need $1 million in retirement – when the average person will need much, much, more! It’s upsetting to listen to so-called “financial gurus”, who are broke themselves, teach others to become wealthy. However, we Americans should first lose our archaic admiration for the word “millionaire” because having just 1 million dollars has already begun to lose its luster and appeal when it comes to retirement. Let me set an example – if you’re 25 today and your goal is to have $1 million dollars in retirement 40 years from now – you will be the most unprepared person to retire by the time you’re 65, and thus you will likely have to keep working.
What underscores my argument is a simple term, it’s called the Time Value of Money, and the value of $1 million dollars 40 years from today has a value of $46,030.93 assuming you save $286/month in a account at an 10% interest rate. So thinking that you’re going to be safe with $1 million in the bank is misleading. And why I’m so upset. Who can live off of just $25,000 dollars in retirement? That’s not going to work even if you don’t have any debt! Money loses value over time and we need to have enough of it to last our “golden years” and to pass on to the next generation after we’re gone. Money losing value is also why the price of oil will probably hit $300/barrel 10 years from now… unless huge improvements in our energy structure and renewable energy eventually becomes widely available. But you have to count on politicians ignoring their egos for that to happen. Not to mention passing on the bribes they could receive from lobbyists of corporations that wants laws and bills to be voted in their favor - it is mentioned that even President Obama received $20 million from healthcare lobbyists...I wonder how much has he received from energy lobbyists? Auto lobbyists? Well, these are just my questions......
The smart financial gurus and investors are those that look to the future and can interpret it. Isn’t it obvious that all governments are becoming more interlinked and interdependent? One can see how as populations and economies grow together – so does the need for capital, energy, food, and water. Alternative sources of energy and water are becoming the next hot commodities…just think – only 3% of the world’s water supply is drinkable and the other 97% is salt water. Already there are water shortages in many countries and people need clean drinking water that isn’t infected with harmful bacteria.
These are good investments but I’m getting off the subject… There is only one proven and succesful way to retire and it is to obviously make more money than you can ever spend while in retirement. Out of the world’s wealthiest people, over 50% of them were entrepreneurs that worked hard to secure their wealth. This isn’t discouragement, but encouragement! Learn how to sell your ideas and talents, become a successful entrepreneur, and you’ll eventually make millions (plural)!
BE FREE
It is misleading because it gives the illusion that we only need $1 million in retirement – when the average person will need much, much, more! It’s upsetting to listen to so-called “financial gurus”, who are broke themselves, teach others to become wealthy. However, we Americans should first lose our archaic admiration for the word “millionaire” because having just 1 million dollars has already begun to lose its luster and appeal when it comes to retirement. Let me set an example – if you’re 25 today and your goal is to have $1 million dollars in retirement 40 years from now – you will be the most unprepared person to retire by the time you’re 65, and thus you will likely have to keep working.
What underscores my argument is a simple term, it’s called the Time Value of Money, and the value of $1 million dollars 40 years from today has a value of $46,030.93 assuming you save $286/month in a account at an 10% interest rate. So thinking that you’re going to be safe with $1 million in the bank is misleading. And why I’m so upset. Who can live off of just $25,000 dollars in retirement? That’s not going to work even if you don’t have any debt! Money loses value over time and we need to have enough of it to last our “golden years” and to pass on to the next generation after we’re gone. Money losing value is also why the price of oil will probably hit $300/barrel 10 years from now… unless huge improvements in our energy structure and renewable energy eventually becomes widely available. But you have to count on politicians ignoring their egos for that to happen. Not to mention passing on the bribes they could receive from lobbyists of corporations that wants laws and bills to be voted in their favor - it is mentioned that even President Obama received $20 million from healthcare lobbyists...I wonder how much has he received from energy lobbyists? Auto lobbyists? Well, these are just my questions......
The smart financial gurus and investors are those that look to the future and can interpret it. Isn’t it obvious that all governments are becoming more interlinked and interdependent? One can see how as populations and economies grow together – so does the need for capital, energy, food, and water. Alternative sources of energy and water are becoming the next hot commodities…just think – only 3% of the world’s water supply is drinkable and the other 97% is salt water. Already there are water shortages in many countries and people need clean drinking water that isn’t infected with harmful bacteria.
These are good investments but I’m getting off the subject… There is only one proven and succesful way to retire and it is to obviously make more money than you can ever spend while in retirement. Out of the world’s wealthiest people, over 50% of them were entrepreneurs that worked hard to secure their wealth. This isn’t discouragement, but encouragement! Learn how to sell your ideas and talents, become a successful entrepreneur, and you’ll eventually make millions (plural)!
BE FREE
October 4, 2009
Pay you? No. Pay me!
We Americans typically work 40 to 80 hr hard work weeks and take limited vacation and use barely any sick time so that we can be at the top of the list to receive any promotion, bonus, or salary increase so that we may use the extra money to pay off some debt. Once we get ourselves a little out of debt by paying off the credit cards or the car note, then what do we do? Instead of investing or saving our money - we simply look for another car to buy because our current one is too old or "doesn't look good anymore", or some form of jewelry, rims, etc. But if we can't buy it totally outright, we simply finance the rest. And again we're back in the same situation and working extra hard to get back out of debt again.... This is what we call the rat race. Because we never move ahead, we just move in circles going nowhere.
Broke people don't have any money because they give it away to rich people. Most of us work for rich people already, but unforutnately we take our hard earned money and give it right back to them when we buy our clothes, shoes, cars, jewelry, tv's, etc. So as of 2008, I began changing the way I make and spend my money.
Most broke Americans might agree that we only have one stream of income - our job and a meager 401k. But to really get ahead in life, we need multiple streams similar to our corporate colleagues. Corporations have multiple streams of income through the sale of bonds, issuance of stocks, and sales of products and services.
Therefore, my quest to build multiple streams of income is beginning, instead of paying Nike for a pair of shoes, I invest in Nike and they pay me a dividend so I can get a pair of shoes every quarter. Instead of paying a car company like Ford or Toyota for a new car, I invest in them so that they pay me a dividend and I can pay cash for a car (eventually after I save up my dividends). I actually want gas prices to rise - because that means my oil & gas companies will do better and pay me more in dividends so that I can fill my tank up whenever I want.
Now I am far from where I want to be and definitely don't have buckets of money running over, but I hope I'm on my way as I get older and wiser. I know the financial education we received in school has been incorrect and not sufficient in today's economy, so I'm working to improve on my situation day by day.
Why would I continuously work hard just to pay companies for their products? When they are so happy to pay me in dividends to use their products? Pay you? No. Pay me!
PS - folks, my blogs will be scarce at best in the upcoming months (unless something too tempting comes up). I am focusing on finishing my new book BE FREE that will be a simple guide to getting out of debt and making money for everyone. This book and a few new projects for 2010 will be my main focus for the remainder of the year!
However, I hope to at least put one post up every month to keep you informed of my thoughts and actions.
BE FREE
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