Tag Archives: money

Money, Money, Money

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The O’Jays > Abba, but I digress.

I dig this story, “Gift to help cover tuition for students in lab medicine” for a few reasons. Mostly because the donors wanted to remain anonymous. Such a refreshing choice in this “look at me” day and age. I also like how targeted and thought out the gift is. There will surely be positive ripple effects. And of course, the recipients’ gratitude is heartwarming.

Then there’s this. “Michael and Susan Dell donate $6.25 billion to encourage families to claim ‘Trump Accounts’”. Not anonymous, and a very unfortunate name, but a staggering amount that compensates for both of those things.

Both are interesting in the context of this The Nation pod, “Liberal Philanthropy and the Fight for Democracy“. Sentence-long summary, “As powerbrokers of the elite, liberal philanthropists are averse to challenging ‘the systems that spawned them.'” One does not have to be as far left as the typical The Nation reader/listener to conclude that we’re far too dependent on the capriciousness (and ego) of the oligarchy for the infrastructure and safety nets we desperately need. What we need is the the dependability of a more progressive tax structure.

Yours truly just sold some AAPL purchased in 2011. The initial investment was small, but the shares appreciated over 2,000% in the fourteen years, resulting in a large sum. Which I will now gift to several nonprofits.

In revealing that, I’ve violated my fave philanthropic move, remaining anonymous. And, I’ve also sidestepped considerable capital gain taxes.

I can live with those demerits because I do not aspire to be in any pantheon of modern-day philanthropists. My aim is simpler. It’s to honor the memory of those who’ve been generous with me and to transmute the incredible luck I’ve had as an investor into tangible contributions to the common good.

Do This Before Retiring

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I don’t care that my personal finance posts never resonate, I will continue to write about it when the spirit moves me. Deal with it.

Nick Maggiulli could teach me a lot about how to write about personal finance. His first book, Just Keep Buying, sold 400,000 copies. And his brand new book, The Wealth Ladder, is getting tons of attention on several of the pods I listen to.

The inspiration for this post is a friend, let’s call him, IE. IE is planning to retire in the spring of 2027. He appears to have his personal finance shit together. Good paying job. Lots of passive income. And he’s been riding equities up.

On the downside, he’s showing signs of irrational exuberance. He seems to think the stock market, near all-time highs, will continue its run. Or maybe he’s just trolling us in the group text?

His target retirement date was carefully determined based upon his normal “spend rate” combined with lots of planned post-retirement traveling.

I’m guessing he hasn’t modeled exactly what a market worst case scenario might do to his plan. Before retiring, model exactly what a market worst case scenario might do to your total net worth. Put differently, don’t tip-toe around “sequence of returns” risk, dive head-first into it.

How to do that? Calculate your net worth, excluding your residence(s)* because as the saying goes, you have to live somewhere. Adding in any home equity only makes sense if you plan to seriously downsize upon retiring.

Next, take the total amount of money you have invested in equities and divide it by two as if there was a 50% correction. So, in IE’s case, let’s make a wild ass guess and say he has a net worth of $3m, $2m in equities, $800k in fixed income, and $200k in cash.

IE would create a second spreadsheet showing his adjusted net worth after a 50% correction in the stock market. He’s “post-market correction” net worth would be $2m or one-third less than today. Print the “Bear Market spreadsheet” and let it sink in.

Only then can can IE determine 1) whether his asset allocation makes sense and 2) whether the spring 2027 timeline still makes sense.

Because he’s a friend, I will not be charging him for this advice. Some, no doubt will say, my advice is worth what I’m charging for it.

*plural if your DDTTM and have an extensive real estate portfolio

The ‘Can’t Miss’ Investment I Missed

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Dammit. I wish someone had pulled me aside at a dinner party when I was in my early 20’s.

And told me the two words that could’ve changed my life. Self-storage. Apart from AAPL, I double dog dare you to find a better investment.

From this week’s Wall Street Journal:

“Self-storage pulled ahead of other property types in the reopening trade as the real-estate business rebounded this year during the easing of pandemic restrictions.

The storage facilities around the country have brought the biggest returns to investors in public real-estate stocks this year. Many people moved, and for those who stayed put, a desire to have more space in their homes because of remote learning and working also spurred demand for self-storage.

As of June 30, total returns from self-storage real-estate investment trusts reached 36%. . . . Over the same period, the FTSE Nareit Equity REITs Index gained 22% and the S&P 500 climbed 15%.

People generally haven’t been able to tame their consumerism, increasing the need for storage space. The self-storage industry sees demand when people’s lives are disrupted, such as relocating for a new job, marriage, divorce and education.

‘Self-storage thrives when people experience change, and Covid disrupted norms across all generations,’ said Drew Dolan, principal at DXD Capital, a self-storage developer and investor. He added that many customers who needed self-storage in 2020 were first-time customers.

Operators moved quickly during the pandemic to offer customers more choices for reservation and move-ins, including online rental agreements and kiosks that limited contact with other people.

‘What used to be a 45-minute transaction can now be a six-minute experience,’ said Natalia N. Johnson, chief administrative officer of Public Storage, in a recent presentation to investors.” 

“People haven’t been able to tame their consumerism.” My vote for understatement of the year, decade, century. I should’ve bet big on American consumers not taming their consumerism years ago. I coulda, shoulda made bank on your neighbors’ conspicuous consumption.

No it’s not too late, but the crazy recent gains have to moderate, don’t they?

Mo’ Money, Less Effort

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People who think money is the only true motivator in the workplace have a lot of explaining to do when it comes to professional basketball player Blake Griffin.

Until yesterday, Griffin, 31, played for the Detroit Pistons on a 2 year/$75,553,024 contract for an annual average salary of $37,776,512.

What did the lowly Pistons get for that? 12 points and 5 rebounds a game. Griffin’s anemic productivity is partly the result of a previous injury that cost him some athleticism, but mostly, NBA analysts say, because he wasn’t motivated given the Pistons’ futility.

Imagine being the Pistons owner and having to deal with the fact that $37,776,512 wasn’t enough for Griffin to play hard. All the king’s ransom bought was consistent mediocrity.

No wonder the Pistons let him go to the Eastern Conference leading Brooklyn Nets. Now apparently, he’s motivated, and is going to try to be some sort of facsimile of his former All-Star self.

Sometimes, Often, when it comes to exorbitant compensation in professional sports and other fields, there’s a definite point of diminishing returns.

Paragraph To Ponder

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From Tara Westover’s gripping and sad New York Times best seller:

“I had a thousand dollars in my bank account. It felt strange just to think that, let alone say it. A thousand dollars. Extra. That I did not immediately need. It took weeks for me to come to terms with this fact, but as I did, I began to experience the most powerful advantage of money: the ability to think of things besides money.”

What I’m currently reading.

On the Commodification of Damn Near Everything

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From the great electronic encyclopedia in the sky:

“Commodification is the transformation of goods, services, ideas and people into commodities, or objects of trade. A commodity at its most basic, according to Arjun Appadurai, is “any thing intended for exchange,” or any object of economic value. People are commodified—turned into objects—when working, by selling their labour on the market to an employer.”

A year ago, a Seattle runner, training for a marathon, took a self-defense class. In the middle of a long training run, she hopped into a public bathroom on the Burke-Gilman trail, where she was attacked by a violent, deranged person inside her bathroom stall. Thought she was going to die. Then drew on her training, tapped her inner savage, and repelled her attacker.

Made the news. Clearly, a tough, resilient, inspiring woman. A few days ago, I listened to an update. She finished the Chicago Marathon and created a “NTMF” movement, Not Today Mother (something or other), which is intended to inspire women to learn self-defense. A good thing, but then the story took a sharp, predictable, commercial turn. T-shirts and coffee mugs now available for sale. Note too, she’s available for media inquiries and bookings.

A few months ago, pre-Weinstein, my favorite radio sports talk host, who I’ve enjoyed listening to for two decades, stopped by a Bellevue condo complex after a round of golf. Said it was for a massage. Turns out, he paid for sex. His radio station thanked him for his service.

After going dark for awhile, he turned to Twitter to revive his personal brand. He’s not selling t-shirts and coffee mugs, he’s selling himself. The vast majority of people responded positively, quick to forgive, hopeful he’ll get a new gig soon. He replied to darn near each person with a personal “thank you”. I’m sure they think he cares, that they have some sort of personal connection.

They’re all being played. How can he truly care about them, when he’s never met them? All he cares about is increasing his followers on Twitter. The higher that number, the better his odds of a second act.

Everyone is selling something. A friend tells me I’m no different. I’m selling ideas on the Humble Blog. Guilty as charged. But don’t underestimate my commercial chops. At last look, I had 61 Twitter followers.

 

The American Dream Quantified

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Screen Shot 2016-12-08 at 1.51.24 PM.png

From “The American Dream Quantified, At Last”

This graphic is worth several thousands of words. Among other things, it explains why parents are increasingly anxious about their children’s futures and why education policy makers are fixated on economic competitiveness often at the expense of “the whole child”.

For the record, my dad made about 10x more than me.

Trenchant Research on How Birth Order Affects the Way You Spend Money

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Thanks to Brown and Grable by way of Horkey for this description of how birth order affects the way we spend money.

Was blind, but now I see. By “trenchant” I mean amazingly facile.

First born. My oldest brother. The best editor I’ve ever had:

The oldest child in the family tends to be mature, confident and, more often than not, a perfectionist. As a result of the responsibilities and expectations placed on them by parents at an early age, older siblings are well organized and generally in control of their lives.

‘Firstborns handle money differently. I see a pattern in a lot of people that I know. They are viciously protective of making sure bills are paid on time and living within their means, which includes building savings and investments.’

Middle child(ren). My sissy and older brother. The best middle siblings I’ve ever had:

“While the oldest child is often given the lion’s share of attention from parents, and the youngest can typically do no wrong, the middle child might feel lost in the shuffle.

Middle children are resigned to the fact that someone is always both ahead of and behind them in terms of familial structure. As a result, they are often found to be naturally gifted problem solvers with excellent negotiation skills. And when it comes to financial habits, the middle child is a born saver, with nearly 65 percent of the group contributing money to their savings accounts each month.'”

The youngest. Myself. Such a perfect, little, Idaho potato that my parents immediately decided to procreate no more:

“More often than not, this person is. . . the life of the party.

While the youngest children might seem charming and fun to be around, they also tend to demonstrate bad spending habits and are typically the least financially responsible of their siblings. It doesn’t help that parents have often become more lenient about discipline by the time the second or third child is born.

Parents have a habit of overindulging and spoiling the youngest children in families. Ultimately, this desire to protect the baby of the family can backfire, causing the individual to spend rather than save for a rainy day.”

Thanks to these poignant insights, I’m going to start trying to save more money. All while remaining true to my life of the party, charming, fun to be around self.

 

Newsflash—Missy Franklin Forgoes $6m to Swim in College

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Seventeen year-old amateur swimming phenom Missy Franklin’s countercultural decision isn’t getting nearly as much ink as it deserves. I’ve lauded her parents’, coach, and her before. I’ll have to plead guilty if accused of putting a 17 year-old athlete on a pedestal.

If Franklin turned pro sports marketing experts agree she’d earn about $2m a year through product endorsements. Instead, she’s decided to swim at the University of California for a few years and then turn pro in 2015, one year before the Rio Summer Olympics.

Here’s the conventional wisdom on her decision:

While the opportunity to earn money from endorsement deals will not completely evaporate should Franklin delay becoming a pro-swimmer by competing at the NCAA-level, it will drastically impact the amount of money she will earn from endorsements. Not only will she miss out on a lot of money in some prime earning years for what are normally short Olympic careers, but she will likely also miss out on the chance to build her brand on a larger stage by way of the promotion and visibility that would come from advertisers using her in campaigns.

Another sports marketer adds, “I think it’s hard not to justify waving her amateurism.  If I was an objective advisor to her and her family, I would advise this way:  Her window to reap the rewards of her life’s work is relatively limited when you consider it over a traditional working career.  As such, her potential earnings in the next four years will be five-times greater than what she’ll be able to make in the subsequent 30 years.”

My brother, who I may have been a tad too hard on the last several months, weighed in more creatively, “Missy-stake! Shoulda took the money.”

She’s rolling the dice on avoiding injury, finishing third in 2016 Olympic Trial races, and having Michael Phelps pressure her into a bong hit.

All you have to do for an alternative perspective, is turn to Franklin herself:

“Someday, I would love more than anything to be a professional swimmer, but right now I just want to do it because I love it. Being part of a college team is something that’s so special. I went on my recruiting trip, and the team was so amazing. Just being with those girls, I really felt like I belonged there. The campus itself is gorgeous. Everything about it was just perfect.”

Borrowing from the linked article above, Franklin said the opportunity to compete with close friends to earn points toward a team total, rather than simply attending school with them, was an allure stronger than the potential millions of dollars she could earn in endorsements. She actually wanted to commit to a full four seasons of swimming for Cal, but her parents told her “that would probably be the biggest financial mistake” she “could ever make.” Franklin acknowledged, “This can pay for your future family. This can pay for your kids’ school, things that I really have to think about. So that’s been the hard part.”

The materially minded majority will lament, “She’s paying about $6m for the opportunity to ride on busses and stand in security lines in airports with her college teammates in order to score points in college meets.” The assumption being she’d be two and half times happier with $10m in 2016 than $4m. What’s lost in that calculus is the fact that her parents are professionals and she’s grown up economically secure. She’s comfortable, she’s a good student, and with her family’s resources and a Cal degree, odds are she’ll continue to be comfortable.

And if comfort was her primary goal, she’d cash in now. She’s saying you can’t put a price tag on some things like memories of close friendships strengthened through athletic competition. She’s wise beyond her years. She probably knows that multimillionaires tend to get caught on an ever speedier treadmill, and as a result, never pause long enough to ask, how much is enough? Franklin, who I suspect is extremely confident she can swim as fast or faster in Rio, is saying $4m is enough.

And what if somewhere in the world right now there’s a 12 year old girl who out touches Franklin in Rio?

I have no doubt she’ll handle it with grace and dignity. “Honestly anything can happen,” she recently reflected. “You can’t predict the future, so whatever God has in store for me I’ll just go along with it.”