Monday, January 28, 2008

Safe Havens

By popular request a thread in which to discuss financial strategies be they preservation or acquisition. Arrrg.
Noticing this morning that Countrywide now offers 3mo CDs at 5.1% versus 5.45% a few weeks ago. The Bernanke Put is in place.
On place people might look is carefully screened tax free munis. With insurance so expensive they are offering higher rates direct to consumers and because they no longer carry the highest ratings some big players automatically pass them by making them even better returning instruments.
Stocks, maybe 1500 more points to go but how we get there I have not even a guess. One exception, Apple. You see I just bought an iPhone yesterday. I near cried at the price and the plan but it is a work of artistic genius. If they can get a tighwad like me to justify the tool then they have a bright future.
Assets. Well for one I suspect high demand vehicles will be going up in price and holding value. A Civic or Japanese hybrid or some European cars if you are looking anyway might be better to buy sooner than later. We are looking at the BMW X3. All the 2004 models are flooding the aftermarket at the $22-24k price point and 42k miles. A price break might convince us.
Strange stuff. Clip coupons. Just be careful to not change diet to match sales items. Home improvement in slow times. If it needs done eventually enjoy the new bathroom rather than be forced to replace it just before you sell. Get rid of old tech. If you have a Win XP computer more than 3 yrs old reconsider. If you still have CRT screens the electricty ROI is like 18 months. 12 months if you are air conditioned. On that note, insulate. The batting is likely to see some substantial price increases.
But I ramble. I want to hear what the smart guys think.

43 comments:

wagga said...

Does Dawg still have first dollar he ever earned?

Jean ValJean said...

First Furst & Murst!

BTW, thanks for the topic, Rob.

I'm anxious to find out what the smart people that congregrate here think about this topic.

Jean ValJean said...

crap.

That's what I get for crafting a full reply.

Rob Dawg said...

Does Dawg still have first dollar he ever earned?
It's on loan to a friend. It'll come back someday. ;-)

Jean ValJean said...

You didn't loan it to someone "to launch a comeback", did you?

Jean ValJean said...

BTW, my WAMU savings account still shows a 4.75% APR. They might be slow downgrading after the Bernake rate slice, I don't know. I do know that early last year it was at 5%, so I figure I'll see some drop in the not too distant future. Any better vehicles? I'm looking for "acquisition" rather than "preservation" of wealth, and I have a couple of grand that I can safely risk (is that an oxymoron?).

Rob Dawg said...

Jean,
If you had bought some of the homebuilders last Tuesday you'd be up about 50% now. 2500% per year sounds pretty good. Seriously, a few grand would open a Schawb or Fidelity or whatever account on the cheap where you could be like Buffett and buy what you understand. Nevermind for a moment the truth that Buffett is not the simple plodding long term investor type he shows to the public. That way you can learn the hardest lessons so that they stick; good stocks are not the same as good companies for but one example.

Val said...

How about going into debt? If you're already thinking about doing it, now's the time. I'm not talking CC debt, of course.

And what exactly are the upcoming tax breaks for businesses? I'm wondering if it's a good time to start certain types of small business.

Jean ValJean said...

That's another thought of mine: Going into fixed-interest debt.

My theory: with the weakening of the Dollar, more dollars will buy less assets. Conversely, the same asses will be worth more dollars in the future.
So, buy a fixed asset (house? car? any others?) with credit at a (currently) low fixed interest rate, and keep paying it with increasingly "cheaper" dollars in the future.

Jean ValJean said...

did I really type "asses" instead of "assets"?

That's a Freudian slip for you.

wagga said...

@JVJ

You should wait until the APR drops to 2.4601%

Rob Dawg said...

Nothing wrong with debt. I have a big balance on one at 0.9% APR.

Autos however could be problematical. A really good deal and low rate might be smarter than holding onto a sh¡tbox and living with problems and repair costs.
Asset investment has two rules; you make all the money on the front end with the deal and beware carrying costs/depreciation. The nice ranch for $2m. Your $2m could be double tax free $80,000 per year or you could buy the ranch and shell out $30,000 per year in taxes and upkeep. End of 5 years $2.5m in the bank or a property that needs to be worth $2.7m to be a comparable investment. I find the latter to be unlikely.

sm_landlord said...

The business tax breaks are not a done deal yet, but it sounds like an opportunity to invest in plant and equipment up to $250K and expense the investment immediately. Also there may be accelerated depreciation beyond that limit. So if you have or create a business that you can grow quickly with capital investment, it's potentially a good deal. You just have to remember that potential competitors are getting the same breaks that you are, so you need a niche.

I expect RE loans to get cheaper in the near future, so no hurry on that.

I haven't seen any good deals on automobiles yet, the dealers are still managing to hold up the resale prices on many high-quality autos with their "certified pre-owned" programs. It does seem reasonable that they will get swamped with inventory as more FBs go BK, so prices on "pre-owned" cars should start falling.

As you say, Rob, you make the money on the front end. But depreciation can be your friend if you have your income structured properly. Carrying costs, of course, are never your friend.

Rob Dawg said...

sm_l,
Agree to all. Especially the depreciation can be your friend. I was keep things simple so as to not confuse people.

Both real estate prices and transaction costs have to came way down. No hurry.

Autos. go to cars dot com and search used X#s within 2 miles of 93010. I imagine you could do the same for 90403. Tell me what you see. An absolute flood of 48/36/2 month leases handed back to the dealers? Won't be long.

Jean ValJean said...

Ok, I'm getting everything except the "depreciation can be your friend" aspect. How so?

---and what about puts? any ones you see out there that might be good candidates? Insurance companies? Credit Card companies?

driftwood said...

The X3 is crap. If you want a Chelsea tractor then spring for the X5. Else spend the money on a decently specced five series sedan.

Rob Dawg said...

OT
Slightly nicer spread down the street from the ranch in the previous post.

The X3 is not crap. It was wickedly overpriced. That can be fixed.

Lou Minatti said...

WaMu is running big ads in the local papers touting 6%+ interest (yes, over six percent) on savings accounts. They make you jump through hoops and it's only good for one year. They must be desperate for cash.

Bill said...

If you're going to go BMW/Mercedes, pick a diesel pusher, get better mileage.

Grab a home heating oil tank and fill it with on-road diesel as insurance against uncertain times.

Like when Katrina hit and some local stations here would only fuel emergency vehicles.

Bill said...

And another Countrywide article for your enjoyment:

http://www.lewrockwell.com/englund/englund43.html

Rob Dawg said...

Right now Diesel is running $3.40 and I gassed up today for $2.839. Currently no price advantage per mile for the inconvenience and higher initial vehicle purchase price.

The diesel tank bit is fine. Better still recall I am surrounded by aquaintances who own ranches. They all have diesel bunkers already.

Special thanks for the link. I was preparing an Angelo roasting of my own but that is far superior.

chickenlittle said...

I've been buying diesel in CA for 4 years now and it has been under the price of regular a few times but never for very long. This is not neccessary true in other states.

Santa Flipper Clause said...

Ho Ho Ho - It's Santa Flipper Clause

OK, A little out of place, but check this web site out:

www.youwalkaway.com

Very Caseyesq.

Santa F. Clause

sk said...

Rob - That IPhone of yours - you planning on unlocking it ? As per this story, a 1/4 of the IPhones out there have been unlocked -
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aWmgi08ZjbpM

If you do so, since I enjoy understanding and doing hacks I'd love to hear of your experiences at it.

-K

Akubi said...

@Santa Flipper Clause,
That is unbelievable. I'm speechless.

Rob Dawg said...

sk,
Half hacked. I get unlimited data and voice and 200 SMC text msgs for $29.99/mo with the honest contract, I'm okay. No leaving the family for me. Still I will be building/contracting three apps that I hope will allow me to buy one of those ranches we've been looking at.

The iPhone is a device that puts magic to shame. The iPhone does everything magic does but doesn't need faith in the occult.

Hacks to come:

Billing. Clients auto print specific emails containing their invoice.

WTFAW (where the fck r we?) for mileage.

Not mine. DVDpedia so we can buy DVDs without duplicates.

Santa Flipper Clause said...

Ho Ho Ho - It's Santa Flipper Clause

@akubi
I figured the housing mess could get worse.
I did not think it could get any weirder.

Santa F. Clause

Akubi said...

Everything keeps getting weirder. I think we may have truly entered The Twilight Zone.
Given various references to 19th century French lit in this thread and our current "president" who has thankfully finished his BS speech I have to quote Flaubert:
To be stupid, and selfish, and to have good health are the three requirements for happiness; though if stupidity is lacking, the others are useless.

w said...

Alright I'll try and give my naive two cents on investing right now. I am not a gambler. There are a lot of smart people and their computers that know all the rules and have all the information. I will not deceive myself into thinking I can out guess them. Even being right you can get played when investing. So I am trying to preserve my savings in this bear market. And remember, just because the market goes up doesn't mean it has gone up if it is valued in paper.

I have split my savings into:

Gold - Maybe 15% as a hedge. If it goes to the moon I will be selling the whole way. It is already way up So I can just hold it as insurance. If the paper world evaporates I can shrug it off and start over with more than most people.

Silver - A little. Note that I avoid metal mining stocks for the most part because in a financial disaster it will be common to see nationalization of mines. Also, it seems that even with the price of metals going up companies don't always turn the profits you would expect. Especially as labor and energy go up.

Foreign government bonds - PIMCO has a good unhedged fund. You get a good dividend and currency exposure. Last time I checked they were heavy in German and Japanese bonds. I figure let the smart guys manage it. They have a lot of fannie/freddie crap in there too but I figure they can manage the risk. Besides its guarranteed right :)

Foreign currency - I like funds, majority Merk.

short stock fund - Let an expert try and manage the risks. Don't let them have too great a percentage of your money because they could blow up if they have a bad week.

Japanese stocks - buy low sell high right? If there is another modern economy with great innovative companies that has performed so poorly please let me know. This helps with currency diversification too.

Dollars - Treasuries or FDIC insured accounts

As you can see I am just trying to play what I think are imbalances throughout the world. These are long term themes that should not require daily management. If I get one or two wrong others will compensate. Personally, I would love to be in energy and minerals but I think that has played out for the next few years. I hope to see better buying opportunities on these as the world economy slows. They should lead the next boom (more so than real estate will).

When it comes to shorting and sector rotation and other types of gambling that is for play money.

Funny Circus Bears said...

I hear SocGen is launching a new credit card offering interest-free credit on balance transfers of up to $70B

sm_landlord said...

"Note that I avoid metal mining stocks for the most part because in a financial disaster it will be common to see nationalization of mines."

In a few places maybe. Nationalization of resources like mines and oil almost always result in greatly reduced output, so the value of the commodity will usually rise due to reduced supply. If you're going to own miners, you need geographic diversification with an emphasis on politically stable democracies. The market already discounts political risk to some extent in mining companies.

"Also, it seems that even with the price of metals going up companies don't always turn the profits you would expect. Especially as labor and energy go up."

Modern mining is largely mechanized outside of South Africa. Most mines these days don't dig tunnels, they just remove the mountain, take the minerals, then fill in the hole.

Energy is definitely an issue for miners, but not as much as you would think. The thing about mining is that the return is very sensitive to the price of the extracted metal. Mines that can operate profitably at today's energy prices should be doing OK even if energy prices rise, as long as the price of the metal rises along with energy. Which is pretty likely, as energy demand and metal demand are both driven by related economic activity. The real risk is a major loss of energy supply, like someone nuking the Saudi oil fields or something.

spooq said...

Unsafe havens - arbitrage opportunities exist in situations like the TROLL.OL shares I mentioned earlier. They are currently at 15.6NOK, and Nokia have made a solid offer at 16NOK. Take the risk that something could happen to that offer between now and then, and you can make a sweet profit. I did a back-of-the-envelope calcuation that came out to around 10% annualised return. You'll lose about 50% of your capital if it goes bad.

spooq said...

Natwest in the UK are offering bonds at well over 6% interest. Not sure what the customer requirements are, apparently I meet them. I bought the smallest possible amount for 3 months, more as an experiment than anything else.

Jean ValJean said...

@w: I like the PIMCO idea. Aren't their fees kind of high, though?

spooq said...

> There are a lot of smart people and their computers that know all the rules and have all the information.

I help the smart people with their computers. The programs are only as good as the weaker of their creator and their user.

spooq said...

Anyone have any good resources for ruby or emerald pricing?

wagga said...

Most mines these days don't dig tunnels, they just remove the mountain, take the minerals, then fill in the hole.

Well, 2 out of 3 ain't half-bad.

wagga said...

@spooq:

Blood rubies

spooq said...

Thanks wagga, I'm going to look at an emerald tomorrow, and maybe a ruby at some point soon, and I want to know what the hell I'm talking about :)

spooq said...

I know I am becoming increasingly random, but if you think China is on the up, then perhaps top-shelf jade is worth looking at? I have considered in the past Russian antiques as well. Irish antiques increased in value drastically as the locals made their money in property, then looked for something to spend it on. I don't see why the BRICanese would be any different.

H Simpson said...

re. www.youwalkaway.com

WOW! Only advantage missing that it can also enlarge your junk...

Look at the photos of the people.
All smiles.
Happy times for sure.

Hey, you are not moving in, you are being evicted!!

Need to send this link to that lawyer that tracks mortgage fraud, along with the FHA.

h.

Bill said...

Just a quick followup.

Be sure to compare the price of diesel to premium, not regular fuel.

Since high performance vehicles like BMW/Mercedes require premium, not regular.

spooq said...

We run our CLK on regular and it's quite happy.