Author: Darwin

While the mainstream media never passes an opportunity to peddle the most vapid stupidity capable of snagging a click, this one takes that cake. CNBC had on their front page an article touting why you would have been better off investing in Apple stock compared to buying a home 10 years ago. Aside from the sheer stupidity of the idea of even analyzing this, let’s consider the gaps in this logic realistically speaking:

• Bad Assumptions: One of the dumbest parts of this story, aside from the idea itself, is that this dopey author uses $228,000 as the starting investment since that was the “typical American home cost” in 2002. Well, that’s a dumb analysis because virtually nobody was buying homes in cash back then. Realistically, people were putting either 0% down, 5% down or maybe 10% down. So, really, the investment is a full order of magnitude smaller than stated for a “typical American” since that’s the brilliant benchmark being batted about.  People bought homes with leverage whereas this assessment assumes Apple shares were bought with the full home amount.  So, to take it to another absurd degree, why not assume Apple stock was purchased with leverage?  Or perhaps even stock options – LEAPS.  Sure, rather than buying a home, people went out and bought perfectly placed out of the money call options on Apple stock.  And they lived in a tent knowing they’d become rich.

• Survivorship Bias: I’ve written about survivorship bias before in the lionization of winning mutual fund managers or successful CEOs in that you ONLY hear about the winners and don’t consider the losers. i.e. Gates, Jobs and Zuckerberg are all college dropouts, therefore, by dropping out of college, you’ll be a billionaire, right? Duh. Well, same here.

Continue Reading More on the Apple Stock Instead of a House

When I was in middle school, I had the choice of learning French, Spanish or Latin. I didn’t have a particular interest in learning a foreign language, and had never left the country or had any international exposure to speak of. In my rather naive and simple estimation of my options, I understood that the benefit of learning French was that it was an “elegant” and sophisticated sounding language that chicks liked, learning Latin was good if you wanted to become a doctor since so much of the anatomy is based on Latin roots, and learning Spanish was good because Mexicans were over-running our borders. That was how I understood it. As it turns out, none of those are legitimate reasons for learning those languages and as I’ve progressed through my career and seen the careers of my schoolmates and the hundreds of people I know in my personal life, I’ve realized that learning a foreign language as an American usually has absolutely no utility whatsoever professionally.

Before you flay me for being “close-minded” or a knuckle-dragging engineer, just consider the points below. I’m just tellin’ it like it is:

…Continue Reading 6 Reasons Learning a Foreign Language is Completely Useless

I’ve known we’ve been turning into a welfare state ever since I started digesting, well, anything other than the mainstream media outlets.  But the latest report out of the Heritage Foundation shows just how staggering the situation has become.  It’s not just the current state that is alarming – but where we’re headed.

Half Of America Pays No Federal Income Taxes

This one always gets under the skin of liberals who claim, “well, they DO pay state/local taxes, payroll taxes, etc”.  Sure, but those are completely different programs funding, well, things they get back in some way – related to STATE and LOCAL spending.  So, state/local taxes are used for their local schools, roads, state welfare programs, etc. and payroll taxes go into the Social Security fund of which they will someday be a recipient (what’s left of it).  However, fully half the country doesn’t pay a dime in Federal Income taxes (of which all Americans derive benefit as well) yet they are the loudest proponents of increasing taxes on the rich.  How can one possibly complain about the tax rate of wealthy Americans when they don’t pay a dime themselves?  This is lunacy…

Continue Reading More Data and Charts on Welfare States of America

 

Let’s imagine the easiest way to make a bunch of money for providing virtually no actual value, having very little accountability, and having the capability to scale your scam as much as you could ever imagine.  Here are a few common “business ventures” that come to mind:

a) Virtually any of the top selling affiliate programs and ebooks you see on numerous blogs. You know, the “make money online” genre, “natural” remedies and cures, diet solutions and workout programs.  Why would so many blogs promote the virtues of ebooks and programs that are worthless?  Well, that’s what affiliate marketing is all about!  The crappier the program, the more they charge for it and then give an ever-increasing cut to bloggers for each sale!  Often upwards of 50%.  Many bloggers don’t really think twice about promoting horribly useless and often, harmful advice for lucrative payouts like that!  Why do you think those reviews are so convincing?!

b) Multi-level marketing of pretty much any sort. MLM is one of the most vile “business” ventures in existence.  You basically convince other suckers in your downline to be scammed into the same useless system you were just scammed into so you can leach off their exploits as well.  At the end of the day, the goods and services sold through MLMs are invariably overpriced, useless and misleading and a few people at the top get rich.  Within months, the vast majority of all the “suckers” realize they’ve been suckered, they’ve run out of other suckers to recruit, and they quit with loads of time wasted and dollars spent.  Usually, they don’t talk about their lousy experience because they feel so ashamed for enthusiastically promoting something within their social circles and family members only to bail after such a short period.

c) Investment newsletters. Really?

Continue Reading Why Investment Newsletters are Scammy Rippoffs…

Today I’m highlighting the capital to income ratio, which I’d heard about before, but hat tip to White Coat Investor (good new finance blog I found which you should check out) for making me rethink it and share again here.  Basically, this is one of the many ratios that Charles Farrell focuses on in his book Your Money Ratios.  The capital to income ratio is a basic measure of your retirement savings divided by your current income.  Why does this ratio matter?  Because it gives a good measure as you progress through your life where you should be.  Too many Americans coast through life enjoying life in the moment without regard for “saving for a rainy day” (retirement).  Some of the drawbacks of the measure, as I see it, include the following:

One-size-fits-all approaches are usually flawed.  This is the case when…

Continue Reading Capital to Income Ratio

Every few months, I’ve been repeating the same pattern of shorting out of the money leveraged ETFs on US Treasuries and keeping the premiums when the options expire.  It’s been a nice way to supplement largely flat market returns with recurring income, and in my view, without taking on an inordinate amount of risk.  Since that was a mouthful, I’ll explain.  In my latest post on the matter, I laid out the case and specific trade for shorting treasuries in September.  The key facets of that particular trade were the following:

Continue Reading: Shorting Treasury Options

A few months back, I’d shared the details on a real estate investment I made with a partner where the overall deal seemed quite favorable.  The cash on cash return was estimated at ~15-20% conservatively, we had a good property manager staying on from the prior seller, the prospects in the area looked good for continued capital appreciation and low vacancy, and there didn’t appear to be any imminent repairs/upkeep required outside of routine maintenance.  The first month and a half was fine and we were cruising right along.  The property manager hadn’t flaked out, the college kids hadn’t destroyed the properties entirely (they do have this thing about kicking in doors which is annoying, but if they want to piss away their security deposits, more power to them), and no major repairs crept up.  Then came the email last week.

Blindsided

The email came from a completely unexpected source and wasn’t something we’d even contemplated when purchasing the property – but perhaps you can learn from this story about how to avoid a similar outcome.

Continue Reading How My ROI Just Shit the Bed

A few months back, I wrote an article that didn’t go over too well.  It was titled, “A Question for all you Communications Majors“.  The article was initially meant to focus on how kids are going to college, taking on massive debt and graduating with majors that leave them unable to pay it down given their prospects upon graduation.  And for whatever reason, I went off on a tangent about Communications degrees, renamed the article as such and well, that’s history.  I wrote it, I own it now.  So, after being toasted all over the web for that one (primarily by bloggers who majored in Communications), here’s the actual data that matters.  This comprehensive report from the Wall Street Journal shows what the unemployment rate is by major based on 2010 Census data.  While I picked on Communications majors for whatever reason, there are several degrees that fare much worse (Communications actually fared relatively well compared to my preconceived notions).  Rather than make you sift through the 10 page slide decks at HuffPo and other outlets that picked up this story, here are the screen shots of the data that I thought were interesting – sorted by Highest Unemployment Rate by Major and Highest Salary by Major with a focus on the 75th percentile.

Continue Reading to See the Data and Analysis for Unemployment by Major

You might think I’m a hypocrite for what I’m about to admit (since I blog about personal finance), but this is reality.  In the past, I’ve made some wildly erroneous assumptions about our future ranging from how much we’d be making and spending each year to how our investments would perform.  Many of these misconceptions are still somewhat ingrained in my thinking because I took them for granted and it was “conventional wisdom” pounded into our heads for years, and I need to constantly reinforce that THEY ARE NOT TRUE – at least not anymore.  It’s a new world that many Americans haven’t yet accepted but after reading some Thomas Friedman economic reality books you will.  We’ve based our lives and major spending decisions like homes, cars and lifestyle on faulty assumptions.  On the plus side, we always spend less than we make and I’ve been putting away money for the kids’ college accounts for years, retirement, and we enjoy plenty of great life experiences.  However, many people with more discipline than us would have amassed a small fortune by now, while we let a lot of money slip away on questionable spending.  Here are some critical mistakes in financial assumptions I’ve made over the years and I’d interested in hearing about whether you find yourself in the same boat:

1. My Salary/Compensation Assumptions Were Shit …

Continue Reading: 6 Critical Financial Miscalculations I’ve Made – That You May Be Making as Well

There’s an old rule of thumb that if you can refinance at an interest rate 1% or more below your current rate, it’s a good deal.  That advice is too broad and may not be true in many circumstances.  It doesn’t take into account so many factors like how far into the current loan you are, what the transactions costs are (they vary widely by state and financing outfit), what your future plans are for moving.  Taking this a step further though, with record low mortgage rates, many people are jumping from 30 year loans into 15 year loans.  This begs the question as to what the right interest rate spread is if jumping from a 30 down to a 15 and my assessment is that the spread must be MUCH wider than 1% to make sense – or in many cases, it doesn’t make sense at any interest rate!  While it’s admirable to seek to pay down your loan quickly, it’s a move that may not provide any benefit while adding risk to your financial situation.  Here’s Why:

Continue Reading: Even at 3.25%, Refinancing Makes NO SENSE! Here’s Why

I bumped into an old co-worker at the gym.  We used to be shift supervisors together back in the day.  Our professional paths meandered in different directions over the years but we’ve always kept in touch.  It turns out, he was just let go and after expressing my concern, he actually joked, “I’m better off actually. You’d never believe it but the difference between me working and being on unemployment for the next 2 years is like $100 a month.  Why should I bother?”  He was pretty candid and admitted, “I never thought I’d be ‘that guy‘ taking advantage of the system, but seriously, who the hell’s going to work 40 hours a week for 25 bucks?”

Continue Reading Why This Guy… and Many More…. Are Better Off NOT Working

It’s very rare that you hear the phrase “risk-free return” these days without it being tied to an FDIC-insured CD yielding south of 3%.  Heck, even US Treasuries are no longer considered risk-free by S&P following the recent credit downgrade and there are only 4 AAA companies left in the S&P500.  So, you’re probably thinking there’s some sort of gimmick here, but the reality is, I really DID earn close to a 9% return in a single month in a risk-free investment.  Here’s how!

Continue Reading 9% Risk-Free Return in 1 Month: See How I Did It