My Car Dilemma
Posted by Sonny in Personal Finance on June 18th, 2009
My boss is looking to get a new 2009 Mercedes Benz and, besides being insanely jealous, it got me thinking about my car. I have a car that I have owned since 1999 and, according to the Kelley Blue Book value, is worth about $1500. I had a problem with my ignition last month and it cost me about $350 to fix; that’s 23% of the total value of my car! The auto-repair place “recommended” about $2000 in additional repairs to get the car in tip-top shape. I don’t even need to go through to the numbers to know the repairs will cost more than my car is actually worth, which brings me to my dilemma: Should I buy a new car or keep my current car until it goes kaput?
First of all, I need to evaluate my financial condition currently. Things don’t look so hot in this category. The end of 2008 took a toll on my investments, even though I fared much better overall than the S&P 500. (I think I’ll post my returns on another post.) My net worth also took a hit due to my investment losses and from paying tuition for school. I started my MBA program in 2008 and, as luck would have it, right as this financial crash happened, I brilliantly decided to go back to school. My portfolio goes down and the school takes the rest of my money!
Another thing weighing on my mind is saving for a house. A lot of these future decisions rest on graduating with my MBA. At this point, I am not sure where I am going to live since it depends on where, and if, I take a new job. I would love to leave and make more money elsewhere but in this economy the new maxim is “any job is a good job”. Hopefully this will change very quickly but I’m realistic and expect a bad job market for a while. Although getting a house is definitely on my list of goals in the next couple of years, it wouldn’t be practical to buy a house here only to move six months later. Finally, my finances are being stretched to the point that I’m considering a student loan. Consumerism Commentary had a good post a few days ago about the new lower rates on student loans starting in July which was a vote in my mind to take out a student loan. I hate debt and getting into debt for the first time in a while would be an unhappy day for me to say the least!
Back to the car dilemma: I am looking to get a 2005 Honda accord. I saw the kbb.com value to be about $8,000. I could buy the car outright with my savings but that would completely wipe me out. I could consider financing the car but as I mentioned, I don’t really want to go into debt. Another option is just getting a new car considering there are a lot of 0% offers on new cars right now but I would still be paying more than I want to for a car right now. I might be able to qualify because I have good credit but I don’t think I really want to due to the high price tags of new cars (although it would be nice).
After weighing all of my options, I’m leaning more towards keeping my car and just shelling out the $2000 to keep it in good shape. My car got me through high school and college and although it has its issues, I’d be a little sad to see it go. There are a lot other factors up in the air right now like where I’ll be living in a year and whether or not I’ll stay at my current company. I think it just doesn’t make sense to buy a car right now, unless I have to. I’m just keeping my fingers crossed that my car will hold out until everything settles and then I can reevaluate buying a new car.
photo: Plutor
The Coming Wheat Crisis?
Posted by Sonny in Economy, Trading/Investing on June 15th, 2009
Growing up I knew medicine wasn’t in my future, but occasionally I like to read up on interesting issues/ideas in Biology. However there is a topic no one is talking about and maybe they should be: the Ug99 fungus or Stem Rust fungus. What is it? I don’t know fully but it’s a fungus that is killing wheat plants and according to this L.A. Times article, it could destroy up to 80% of the world’s wheat crops. It started in Africa but has already spread closer to Pakistan and will eventually get to the United States. Scientists are in a race to come up with a resistant plant crop, but as of right now, nothing is close to being immune to the fungus. The problem is that the fungus can spread by air so it’s going to get worse before quickly unless a cure is found. This is not new to the World; it has just been a few decades before the stem rust mutated again. This is such a huge problem that the Gate’s Foundation gave $26.8 million in 2008 to Cornell University for research on the situation.
Think this doesn’t have anything to do personal finance? Clearly, if 80% of the world’s wheat crop is gone, this is going to have huge ramifications on our daily food consumption and costs. Remember back about a year ago when everyone was complaining about food and gas prices going up? Well, if these predictions are true, wheat prices could be going up more dramatically than most of us have ever seen in our lifetime. We need to protect ourselves by hedging if this fungus is as dangerous as it sounds. While buying wheat futures contracts might be an option for some, it’s not reasonable for most and I would rather go ETF/ETN route. This might be a little bit easier as you can trade this like a stock and don’t have to set up an account trading futures. Here are several good candidates: DBA, JJA, RJA, JJG, & GRU. I like GRU since, as far as my research shows it is holding about 50% Wheat while the others are more diversified in their holdings. Also, I looked hard for a pure wheat ETF but, as of right now, I don’t think there is one. I will modify the post if I turn out to be wrong. Please note, GRU’s volume is very low so if you are looking just for a hedge this might be right but it’s not as liquid as other stocks/ETFs.
Now I don’t know if this fungus will stop in India when scientists cure it and that’s the end of the whole thing. But one sign that I may be on to something comes from the fact that GRU was only down about 1% while the others are down closer to about 4% today. It could be a number of reasons like lack of volume or just dumb luck. At the present moment, this Stem Rust fungus doesn’t look to be clearing anytime soon. It is important that we spread the word and also look to protect (hedge) ourselves if the fungus does spread as quickly and radically as expected.
photo: usda.gov
Is My Girlfriend A Better Investor Than Me? Final Results
Posted by Sonny in Trading/Investing on June 12th, 2009
Overall Results
Four weeks ago I read an article about if women are better investors than men, so I decided to play a week investment game with my girlfriend. The game turned out to be more about the fact that I had some investment knowledge and my girlfriend didn’t. However, the results were shocking to me. My girlfriend officially won the game with an overall return of +9.05%. My return was a good +7.77% but not good enough. The stock that sealed the victory was her pick of Coach (COH) the luxury goods maker which gave her a +35% gain in 3 weeks. I was incredibly surprised at this pick especially when the economy is in such bad shape. I didn’t think a luxury bag company could be going up but shows how much I know. The two stocks that helped me at least stay in the game were OIH (+14.5%) and ATI (+7.19%). Unfortunately, Oil is running back up and at least I saw this was going to happen to profit from it. Sadly I filled up last night and gas prices went up 4 cents in about 5 days. Allegany Tech was up 7% in one week which helped narrow my girlfriend lead along with her losing 3% in Target.
Final Thoughts
I think some key elements really played a role in the overall success of the game that should be investigated:
1. Prior experience was no guarantee of success – Just because I have traded stocks for years really did not give me a clear advantage over my girlfriend who has never purchased a stock in her life. My paradigm for investing said there was no way Coach could perform well in this economy and that made me miss out a fantastic opportunity. My girlfriend had no preconceived notions about investing and gave her more freedom (and ultimately, the win). So have an open mind when investing for yourself!
2. Importance of understanding the overall market trend - Had we played this game in Oct of 2008 instead of May-June 2009, both of us would have been down probably in the double digits. It must be understood that since the March 9th low, the market has been in an upward trend and during our investment game the S&P 500 was up about 6%. That means I could have invested in the SPY (S&P 500 Index ETF) and been up about the same as what I did with all of this investment maneuvering. It would have been less work and less agony with about all of the upside. So if the market (or even real estate) is in an uptrend, it’s easy to make money, when it isn’t that is when you have a real challenge. If you don’t believe me ask all the people in 1999 who quit their jobs to become full-time day traders.
3. This wasn’t an Investment Game - This was a trading game, pure and simple. We took a short time frame and played a game for fun. Trading off of what you like as an investment theory is a dangerous idea in my opinion. For a real investing period of like 20-40 years, I think diversifying in equities with Index funds, no-load mutual funds and few stocks picks is the right way to go. I will talk about my investment strategy in another post but just understand my girlfriend and I were both flat out lucky!
Please note: there is no recommendation to buy or sell here and ModernMoneyBlog.com will not be held responsible for any action on your part. This is for informational purposes only.
Eating at Home Progress Report: Two Weeks Later
Posted by Sonny in Personal Finance on June 11th, 2009
Two weeks ago I made the painful decision to stop eating out. After months of spending at least $400 a month on fast food and restaurant meals, I realized I couldn’t afford to keep doing it. I decided to go cold turkey and eat exclusively at home. At first, my only goal was to save money but I’ve been pleasantly surprised with a few other benefits. Likewise, there have also been a few drawbacks that I didn’t consider when I made the decision initially. Both positive and negative considered, I’m feeling pretty good about my progress. I must confess my girlfriend and I ate out over the weekend. We were at the mall and got a slice of pizza. We spent about $10 and it was a actually a fun change of pace, so I don’t feel too bad for it.
One benefit of eating at home is that I feel healthier. My clothes fit a little better and I just don’t feel so weighed down and tired anymore. Now I opt for a piece of fruit instead of fries. That’s not to say I’m becoming a health freak but I am eating healthier now. Another benefit has been learning to enjoy going out and doing other things with my girlfriend. This weekend we had a great time just hanging out at the mall. The most important benefit has been the money I’ve saved eating at home. I’ve estimated I was spending $5 per person (my girlfriend and me), per day on eating out. After 11 days of eating at home, I’ve saved about $100.
A few drawbacks: meal planning, more money for groceries, cooking, and cleaning. Now that my girlfriend and I eat at home, we plan our meals out to save money and time. Personally, I find menu-planning a little boring but it only takes us about an hour to decide what were having for the week. It definitely makes grocery shopping easier. Even though I’m spending more on groceries now, it is still cheaper than eating out. When it comes to the cooking, I used to prefer the convenience of modern technology (i.e. the microwave or toaster oven) to breaking out the old pots and pans. Luckily, my girlfriend enjoys cooking so we developed a system we both appreciate: she cooks, I do the dishes. On occasion I’ll help with the chopping or slicing of something but usually there are other things I would rather be doing. Again, not something I would say is a positive but I don’t completely hate it either like I expected I would.
Overall, eating at home has improved my life, and bank account, in more ways than expected. I’m confident that it was a great decision and am looking forward to the new adventures it brings.
Ever heard of the Ing Direct Café?
Posted by Sonny in Personal Finance on June 9th, 2009
Move over Starbucks, the financial-savvy place to have a cup of coffee is the Ing Direct Café. If you think I’m joking I am not. I am an Ing Direct member and I never have heard about the cafes but it is true. Apparently in 2001, Ing Direct started cafes in 6 cities (LA, NY, Philly, Chicago, St. Paul, and Wilmington). In fact, there is even one that opened in 2008 in Honolulu, Hawaii. The purpose of the cafe is to have a physical place to go to bank and talk about how to “Save you money” (how the website puts it). They really did a great job to not make it feel like a normal bank. You can get a latte, surf the internet, and even listen to financial seminar. The prices of the drinks are more affordable than Starbucks as well but the coffee quality does not suffer with the lower price. The locations seem fun, warm and inviting. I checked around some reviews online and most are extremely complementary. My local bank has a really bad cup of coffee and I try to avoid going inside whenever possible but if I had an Ing Direct Café, I would probably switch from Starbucks to Ing Direct Cafe. Also to try to get the word out, they have a coupon for a free cup of coffee for your first visit. If you have one in your city, please check it out and let me know what you think!
