Llama Money

As Haggai 2:8 says:  ‘The silver is Mine and the gold is Mine,’ declares the LORD of hosts.

I’m a proud man.  I work hard to earn a living.  I have a dayjob that is demanding and pays well, and in the evenings I work on building my small business.  I am proud of the fact that I work hard and am able to earn a good living.  However, I must constantly remind myself to remain humble.  After all, without the Lord’s blessing, I would not have the skills, intelligence, and drive to do the things I do. 

The money that I earn and have, whether silver and gold coin, or dollar bills, doesn’t really belong to me at all.  Perhaps I should give more care to how I spend it, after all.  Just some thoughts for the evening.

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I’ve decided to stop the monthly electric bill overviews.  While I still thing energy usage and its cost is important, it doesn’t really warrant a monthly look in my eyes.  I’m looking to switch to either quarterly or semiannual overviews instead.  Seeing the bigger picture is better overall anyway, rather than stressing over monthly fluctuations.  What say you?

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Today the market was extremely turbulent - stocks were down, while metals skyrocketed.  Last month I made a seemingly risky purchase of DGP - a Gold price based derivative.  The goal of this ETN is to double the daily movement of gold.  Up until today, DGP had been a drag on my already struggling llamafolio.  However, today’s amazing gold performance translated into a whopping 24% jump for DGP.  While I still feel that gold is headed northward, I took this opportunity to get out of DGP.  I sold my DGP shares for $19.23.  That’s a $0.11 gain per share, if you’re keeping track. 

After a stellar performance like that, I’d be Gold will give up a bit of its gains tomorrow.  If that pans out, this move will look smart.  However, if Gold duplicates today’s performance, it will look awfully crummy.  No worries though, I didn’t lose a dime on the trade. 

What to do with the cash?

Invest, of course!  I used the proceeds from the DGP sale to purchase 16 more shares of TELOZ - an oil trust - at $16.07 per share.  I think oil is greatly underpriced right now ( drastically, even ), and is TELOZ poised for some killer earnings.  Trading gold for oil - who would’ve thought?

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It’s been said time and time again, but it bears saying again.  Do not own any significant quantity of your own company’s stock.  The fact that you work at said company means you depend on them for income - don’t leave your investments in their hands too.  Unless *perhaps* you’re in extremely upper management, and know all the ins and out of the business, don’t take the risk.

Just ask employees of Lehman Brothers.  Reportedly, 25% of the company’s stock is held by employees.  You know, that same stock that took a nosedive off a high cliff due to that whole bankruptcy thing.  Not only will these folks probably lose their jobs - but their company stock is all but worthless.  That’s a double wammy that’s going to be really tough to recover from.

If you want to own a bit of company stock, that’s fine.  But keep it under, say, 5% of your TOTAL portfolio.  That means company stock in a regular purchase plan, and retirement accounts.  Keep your position small, because you don’t want to count on one company for too many things.

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If you’re not a LEH stockholder, you might think that Lehman Brother’s emergency sunday bankruptcy will have no effect on you.  In that case, you might be very very wrong.  For those unfamiliar with Lehman Brothers, they are ( or were, I should say ) the fourth largest investment bank in the United States.  The fallout from their bankruptcy could cause quite a bit of turbulence in the financial sector. In other words, if you own any bank stocks - you’ll probably see some volatility. 

No investment is a sure bet

Let me paint you a picture.  On February 1st, 2008, LEH stock traded for $66 per share.  Right now, that same share is worth $.20 ,if you can find a buyer.  If you had invested $10,000 in LEH back in February, your stock would now be worth about $30.  Even if you had been a more shrewd investor, and purchased LEH last week at a much more reasonable $12.77 per share, you would still be down to $156.  Why do I show you this?  So you can see that just because a stock seems cheap, it isn’t automatically a good deal.  In the case of LEH, it’s a terrible deal at any price.

What went wrong with LEH?

Let’s just say the root of the trouble was overexuberance on real estate.  We all know what happened to high dollar real estate values and the subprime mortgage mess.  Lehman Brothers bet big time on these types of loans, and they took a massive beating.

Why didn’t the Federal Reserve save the day?

When Bear Stearns died, the Federal Reserve engineered a JPMorgan Chase buyout.  In other words, the Fed decided that Bear Sterns failing was unacceptable - so they used taxpayer guaranteed money to finance a bailout.  The criticism they took from this move was huge - and so no bailout this time.  After all, why should the US Government and its people bail out any company?  What that amounts to is the private companies and shareholders get any profit the company makes, while the risk, debt, and losses are pushed off onto the taxpayer.  I think it’s safe to say the average taxpayer doesn’t think that’s a fair deal.

Who’s next?

Lehman Brothers is huge.  Sure, they’re only in Chapter 11 bankruptcy, which means there’s a chance they will survive in a smaller, more streamlined form.  But if they can fall, and the US government doesn’t step in, who’s next?  Is any bank immune from this financial mess that we’ve created?  I don’t know for sure.  I will be keeping a close eye on the news to find out though.  And I’m sure glad I don’t own any LEH stock.

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Welcome to the September 10, 2008 edition of the carnival of net worth.  This is a short edition, because I had to weed out many, many unrelated submissions.  The Carnival of Net Worth is flexibile - any post even slightly related to net worth can be included - I’m not a hardass about it.  But there needs to be some relation.  So when you’re submitting next time, please make sure your post is related.

Livingalmostlarge presents Is $250k/year Rich? posted at LivingAlmostLarge, saying, “Is $250k/year rich?”

Greg Swann presents Introduction to “A consumer’s guide to the divorced real estate commission” - the eBook posted at BloodhoundBlog, saying, “By far the most significant “secret” issue in residential real estate is the way that buyer’s agent’s are compensated. The current system virtually assures the betrayal of both the buyer’s and the seller’s interests, with this fate being avoided only by accident.”

Dave presents August Stock Performance posted at Cheapo Groovo.

Tracy Coenen presents United First Financial scam: You’re using the bank’s money to pay down your mortgage » Sequence Inc. Fraud Files by Tracy Coenen posted at FRAUDfiles.

That concludes this edition. Submit your blog article to the next edition of the carnival of net worth using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: the carnival of net worth, blog carnival.

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Many developed countries around the world have socialized medicine - also known as universal healthcare.  Rather than paying for health insurance, the government is in charge of all the hospitals.  Everyone can get the healthcare that they need, whether they have money or not.  Our Canadians neighbors, and British friends are two well-known examples of countries that use this model.  Sound perfect, right?  Maybe, maybe not.  Let’s see some of the pros:

• Access to healthcare isn’t dependent on employment
• Everyone has access to healthcare
• No one is denied medical services due to inability to pay

Now, some of the downsides

• Hospitals and clincs could experience tremendous overbookage - it’s already a royal pain to get an appointment.  Imagine how it would be when everyone has access to a doctor without regard to cost
• Huge tax increase - healthcare isn’t free.  If we aren’t paying insurance premiums, we’re going to pay for it in taxes.  Big time.

I don’t like the idea of health care depending on your employment - why should my job dictate how good my healthcare is?  Some jobs just offer terrible insurance plans, so premiums and coverage are absurd.  Those who are between jobs or unemployed are even worse off.  I shouldn’t have to choose between taking my child to the doctor or paying the electric bill - it just doesn’t seem right.

Taxes - the big problem

If we do move to socialized medicine, it must be paid for somehow.  How would you feel about paying significantly more each year in taxes?  As awful as this sounds, consider this.  The people who stand to benefit most from socialized medicine are those in the lower tax brackets.  An increase in taxes likely won’t hit them as hard.  Folks in the middle class won’t gain *much* tangible benefit, since most already have health insurance.  However, they will be hit with a huge tax burden as a result.  The rich will be hit even harder ( though I have trouble feeling too sorry for them ). 

What to do?

I don’t think socialized medicine is really a good route for this country to go down.  At the same time, I recognize that our healthcare system is broken.  Perhaps we need national standards for employer sponsored healthcare programs…. or more consistent state standards.  Individual policies need to be more accessible as well.  What do you guys think - go socialized or not?  Why?

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That’s how things look in the Llamafolio world.  BAC - Way down ( 18% since my purchase ).  COP down 12%.  Coke and Pfizer down 12% each.  The only bright spot left is VDSI, which is hanging on to a 14% gain.

I did receive two dividend payments, though.  $3.29 from COP, and a healthy $6.40 from PFE.  Finally, something good from PFE!  That stock has been a skunk since I purchased it.  A little over nine bucks in dividends doesn’t make up for those big losses across the board, but they help a bit at least.  Plus, losses are only paper, until I sell.  Looking over my portfolio, there’s nothing that I’m willing to sell at a loss.  A few more months and I’ll be able to unload a couple stocks, and streamline my holdings.  But, as Warren Buffet so eloquently put it, the first rule of investing is don’t lose money.  I don’t intend to.

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Welcome to the September 3, 2008 edition of the carnival of net worth.  I know it’s been awhile since the last edition.  I’ll try to keep things on a regular once per week schedule again.  Here are this editions best submissions:

John Crickett presents Sell To Rent posted at Find Financial Freedom, saying, “A critique of the sell the rent strategy.”

Raymond presents Do Credit Cards and Stocks Make Up Your Emergency Fund Savings? posted at Money Blue Book.

Aussie Investor presents Investing In The Stock Market To Grow Your Wealth posted at Money Management Personal Finance Blog, saying, “One of the best ways to build your personal wealth is by investing in the stock market (just look at Warren Buffett). This post contains some tips on how to get started with your stock investing endeavors.”

Ken Clark, CFP presents The Basics of Student Loan Forgiveness and Repayment Programs posted at Saving for College - About.com, saying, “A guide to finding an employer who’ll pay off your student loans.”

KCLau presents Do you have the assets to pay for your liabilities? posted at KCLau’s Money Tips, saying, “Article on whether one has the assets to pay off liabilities and how to obtain assets”

Investing Angel presents The 2008 Election And The Stock Market » Free Stock Market Investing Tips posted at Stock Tips, saying, “Your investment decisions right now may largely depend on who you think will win the 2008 election.”

Jose DeJesus MD presents Drawing on Your Retirement Funds posted at Physician Entrepreneur.

Tammy Powell presents Real Estate Investment in Times of Crises posted at Enlightened Wealth Institute student Tammy Powell.

Livingalmostlarge presents Book Review: Net Worth Workout posted at LivingAlmostLarge, saying, “While you can’t win the book, if you want to improve your net worth read this book.”

That concludes this edition. Submit your blog article to the next edition of the carnival of net worth using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: the carnival of net worth, blog carnival.

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Another month passes, and it’s time to update my net worth progress.  August was a tough month to be sure, but had some great positives.  For one, my wife and I have decided that she will stop working full-time in the near future, and eventually return to school.  Financially ( short term ) that’s an awful thing, but it will bring about a much simpler life.  I have no doubt we’ll adapt, and grow to find new ways to save.  For another thing, I paid off my Best Buy card ( 0% interest purchase ).  My only credit card debt left is my PenFed Visa.  That’s the card I use for things like cell phone bill, water bill, etc.  It gets paid off monthly in full.

After tallying up the numbers, I came away a bit surprised.  My net worth increased a stunning 12% over last month - wow!  That’s a full $3665 improvement in a single month.  Let’s dig to see what happened.

Liquid Assets

A six percent jump in my liquid assets is strong.  What’s the breakdown?  I paid off the Best Buy card.  My Zecco account did fairly well for the month.  The dollar value of my precious metals investment dropped ( though I still have the same number of ounces as before ), and my accounts receivable balance dropped by $500.  And no, for the record, I didn’t actually receive that money.  It was a $500 loan to a family member - made over 2 years ago.  I’ll never see that money again, so there’s not much sense hoping.  I think it’s safe to say that said family member won’t be seeing any more money from this Llama.

My Cars

My wife’s car took a nosedive in book value this month, but it was countered by a stellar rise in my own car’s value.  $3k increase, to be exact.  That little “hybrid” badge goes a long way in the days of $3.50-$4 gasoline.  I’m not officially “right side up” on my Civic.  Neato.

My House

1% equity increase. Slow but steady.

Retirement

A 5% jump puts my retirement accounts back over the $11k mark.  At $11,445 that’s the highest it’s even been.  There’s a long road ahead to be sure, but who can complain that they have more money than they’ve ever had before?

Overall

Twelve percent in a month?  Please sir, may I have another?  This month I officially surpassed the $45k net worth goal I set at the beginning of the year.  I have three more months to pummel that goal, and I have every intention of doing just that.

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