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Stock Tips from An Amateur

I am no where near an authority on stocks, or other financial securities for that matter.  However, I’ve read more books on the topic than 99% of people in the United States (I think “one” would get you into this category, but I could be wrong) and have definitely put some time into consideration of what to purchase.  Here are a few thoughts.

The great news is that with enough discretionary income available for investment to populate a 401k or Roth at modest amounts and invest wisely, you will retire a millionaire–that is barring some extreme event that renders the US economy (and thusly world economy) in complete shambles.  A millionaire ain’t what it used to be, but it’s plenty for a modest lifestyle to live on after 65.

Even better news, getting to that millionaire mark is extremely simple.  Invest in indexes and sit patiently year after year.  Buy and hold the indexes in tax shelters for the decades prior to retirement and slowly allocate higher percentages into guaranteed income securities (high value corporate bonds) as you get closer to retirement.  This will help to avoid typical market fluctuations that have an over sized impact on your nest egg when near to your golden years.  Basically you avoid bronze or nickel years by getting rid of risk.

An index is basically a weighted average of most stocks available.  Some are built by categories such as technology or (NASDAQ) or top performing companies (DOW), but they are built as a way to automate the selections of included stocks.  By automating the selection of stocks and weighted allocation, you take out the human biases–and the cost of paying someone to make decisions.  For that reason, it seems to me that purchasing indices makes the most sense for average investors like myself.

For those of you that feel purchasing individual stocks it the way to go, I only have one piece of advice.  In the limited amount of time I’ve been watching stocks and businesses, there have been a few things I’ve missed out on due to not having capital.  The stocks that I expected to do well that I never purchased were:  Chipotle, Amazon, Netflix, Facebook and a few other distressed stocks around the 2008 crash (Ford, Wells Fargo).  Those stocks all did incredibly well and will continue to do so.

Why did I expect they’d do well?  Because the product they offer was great!  It’s as simple as that.  They offer something that I personally thought was fantastic.  The fact that I personally saw a lot of value in their offering meant that there is a high likelihood lots of other folks do too.  When companies offer a great product at the right price, it will usually go well.

My advice is ultimately to invest in businesses you believe in.  The tough part about this is that regardless of how good a company’s offering is, their managerial practices and financials can lead to a business falling apart despite their awesome product.  This is why indexing is safer–but ultimately picking stocks with great products/services and solid fundamentals can lead to great outcomes too.  Some folks feel better going that route and that’s just fine.

There are a lot more things to talk about with financial matters, but in summary– index early to be safe.  If you want to invest in individual companies, pick those that you personally see the value in.

That is all.

It really is that easy.  It’s also the least expensive way to go in terms of transactional costs.  You buy once and hold.  You sell once and retire.

It’s also boring–which is difficult for people to deal with.  There is an urgency in humans to control things and see results.  It’s in our nature to assume if we change something we can figure out how it will affect outcomes, so we change things over and over again.  That behavior costs money in trading stocks as every time you do so you are charged a fee.

The nature of stocks and appreciation is very steady over the long term, but ridiculously fickle in the short term.  The stock market is driven by people making purchases.  All prices of stocks are driven by people selling or buying shares, at higher or lower prices than the last transaction.  When someone offers to buy a stock at a higher or lower price than current, the market can react accordingly.  Prices are only driven by the people making transactions–a function of supply and demand.  People are choosing to buy or sell based on their expectation of what will happen in the future.  But no one knows what will happen in the future, so often people make the decision based on what they can see–which is often what other people are doing!

The nature of the stock market can be self reinforcing.  Prices can be driven up or down because people see transactions and assume that it means something material.  So an otherwise incredibly healthy company (a piece of stock is a very small share of ownership in an actual company) can have it’s price driven down by crowd mentality.  Crowds of people can and do act irrationally quite often.

The irrationality of these crowds is why my first few paragraphs focused on purchasing indexes.  Indexes avoid the pitfalls of crowd behavior by diversifying your ownership across most stocks available in the market.

An index is basically a weighted average of most stocks available.  Some are built by categories such as technology or (NASDAQ) or top performing companies (DOW), but they are built as a way to automate the selections of included stocks.  By automating the selection of stocks and weighted allocation, you take out the human biases–and the cost of paying someone to make decisions.  For that reason, it seems to me that purchasing indices makes the most sense for average investors like myself.

For those of you that feel purchasing individual stocks it the way to go, I only have one piece of advice.  In the limited amount of time I’ve been watching stocks and businesses, there have been a few things I’ve missed out on due to not having capital.  The stocks that I expected to do well that I never purchased were:  Chipotle, Amazon, Netflix, Facebook and a few other distressed stocks around the 2008 crash (Ford, Wells Fargo).  Those stocks all did incredibly well and will continue to do so.

Why did I expect they’d do well?  Because the product they offer was great!  It’s as simple as that.  They offer something that I personally thought was fantastic.  The fact that I personally saw a lot of value in their offering meant that there is a high likelihood lots of other folks do too.  When companies offer a great product at the right price, it will usually go well.

My advice is ultimately to invest in businesses you believe in.  The tough part about this is that regardless of how good a company’s offering is, their managerial practices and financials can lead to a business falling apart despite their awesome product.  This is why indexing is safer–but ultimately picking stocks with great products/services and solid fundamentals can lead to great outcomes too.  Some folks feel better going that route and that’s just fine.

There are a lot more things to talk about with financial matters, but in summary– index early to be safe.  If you want to invest in individual companies, pick those that you personally see the value in.

Lucid Dreaming – And Other Phenomenon

The other night, I had a lucid dream, which is essentially a dream where you are aware of the fact that what is happening is just a dream.

This alone is somewhat odd, as I seldom remember dreams much less realize during the happening that my mind is conjuring up the scene.  It has happened before, but writing down what actually happens immediately is necessary to recall it.  Dreams are fleeting.  It’s as if they happen in an area of the brain where memory is not at full strength.

Anyhow, something very interesting happened in this particular dream.  To be quite honest, I don’t remember all that happened, but it was a suspenseful dream where someone was chasing another person inside a house, and there was danger.  My view of the situation was that of someone watching a person walking through a house as they chased another person, likely to do them harm.  Yet during the chase, a twist happened where another person helped the person being chased by jumping out from a hiding spot in the house to thwart the chasing person’s plan.

In all truth, I don’t know why it was happening or what it means, but the fact that your brain can create stories and surprise you alone is of significance.  Due to this being a lucid dream, the idea that my mind could plot out a story line that would still surprise me in the dream was VERY interesting–it means essentially that your mind can develop story lines and ideas without conscious consideration.

That may not seem all that interesting at first look, after all, we have dreams all the time where we are scared or elated or sad.  And something causes those emotions.  Yet this was very different in that it was a cohesive story with a surprise that was simply outside of my ability to comprehend until it happened.

If it’s possible for your mind to create stories and ideas while sleeping, it’s quite possible that whatever part of us that comes up with ideas by combining existing thoughts and happenings we’ve been witness to is as strong while sleeping, or more so, than when awake.  In fact, I think many would agree the ability of the mind to make ideas captivating is far more intense while asleep than awake due to the lack of a restraining physical reality.  Everything is fair game.

I’ll attempt to write more about dreams in the future–they are fascinating parts of our lives and worth further examination.

Siddhartha

Perhaps Herman Hesse’s most famous work, Siddhartha is a short, but intense story of one man’s life.

I’ve only read one other book by Hesse — Steppenwolf.  They are starkly different books.  Siddhartha is very much a confident and exuberant individual initially, and sees life as a book meant to be opened and interpreted freely.  He believes in knowledge and wisdom, seeking a deeper and deeper understanding wherever possible.  It drives him continually.

At a young age he leaves his father and mother in hopes of becoming more knowledgeable, to the disdain of his father.  But go he must, to renounce life with possession and focusing solely on being.  He fasts, he thinks deeply and considers life.  Eventually he departs from the group others he has wandered with, including his best friend Govinda, while they follow Buddha for his teachings.  He is certain that he can find other knowledge – though he does place high regard in their leader still.

Siddhartha later finds he is interested in a woman named Kamala.  She is not interested in men of little means and tells him so, after which he spends a great deal of time learning about business.  Initially he laughs at the idea of it all, and lives under pretense of it meaning something to him.  He wins over Kamala and spends time with her outside of his monetary pursuits.  However in time the life consumes him, he spends more and more time acquiring and gambling away money.  It all means everything, yet it means nothing.

In time, he realizes the faults in his ways and leaves the life behind him.  Little did he know that last night he left Kamala with their only child.  siddhartha_cover

Returning to a life of solemn consideration at the river he once passed, Siddhartha now only spends his days helping others to cross.  The river is now his ally, his teacher and friend.  In time, Kamala comes to him with his son, but she is bitten by a snake and passes.  At this point his son is hateful of him and despises the simplicity of his life.  He came from somewhere that had delicacy and high life.  Here he is living in a dirt floor shack with no real luxury.

His son eventually runs off only to cause him heartbreak — much like he had done to his father and mother previously.

Toward the latter part of his life, Govinda happens upon Siddhartha again at the river.  At their reunion, Siddhartha finds something he has been searching for his entire life.

I won’t explain the rest of the story, but it is a beautiful book that can make you rethink things in a positive life.  I recommend it much more than Steppenwolf, both in terms of rhythm and positivity.

Grendel

John Gardner created an antihero explanation of Beowulf most memorable villain in 1971.grendel

For those of you unfamiliar with Beowulf (I’ve never read it), it’s renowned as an incredibly important poem due to being the oldest known existing poem from English literature.  For an easy, and entertaining way to understand the story, you can watch the recent movie representation.  I watched that some years ago and it was actually very well done.

This work takes a nontraditional look at Grendel, who is the main antagonist of the normal story, by creating a first person perspective of his time on Earth.  He is an oafish monstrosity, but much more intelligent than what a person may consider of a “monster.”  His dialect of English makes him near impossible for humans to understand him — likely due to not having discussion with others.

Most of Grendel’s days are spent lamenting the boredom of his time.  He seems impervious to time itself, not aging or at least none so much to make time valuable.  He eats cattle, sheep and other animals.  He terrorizes the local gentry and finds fleeting humor in situations where he’s seen as the tyrant.

What’s interesting here is Grendel’s non-human humanity.  He is a simple creature, yet arrogant and amidst existential misunderstanding.  He seems to have no real purpose, even to himself.  For many, this book would serve little purpose, but if you enjoyed Beowulf or found Grendel to be an interesting creature in his own right, this is worth the few days it would take to get through.

Desktop Demise

At work, I use a laptop plugged into a dock connected to two screens.  At home, I run a 24″ iMac I’ve had for at least 6 years now.  It’s been a pretty nice machine overall, though it did crash two years ago, costing me a lot of time and effort to recover files.  Most of them I just let go though.

But getting to my iMac is now a pain.  Since purchasing an iPad, 90%+ of my computing experience is handled capable of being done on the couch.  Before that, I was still downstairs on the desktop, but it was annoying to Teresa that so much of my time was middling away downstairs and not hanging out with her; it was annoying to me too.  Future generations are going to laugh at having to sit in one place while using a computer.  In fact, I think the term computer will likely fall out of favor in time as so much of our communication will be dependent on computing and done so with a multitude of non desktop items; it will become a redundant phrase.

The only real issue, for me least, is the ability to write consistently with other types of devices.  It really doesn’t work.  And I’m someone who had already skipped the writing with a pen and pad genre.  Keyboards are necessary.   My desktop will likely be put out to pasture pretty soon.  It will still be around, but chances of it being used consistently is low. Chances are I’ll buy a laptop that I can write with on the couch, in bed, and on the go as necessary.

At work, we’re moving toward “iPad Pro” or “Surface Pro” type devices that have all the power needed to do most types of common Office work, but can be plugged into a dock OR taken with on a trip to Mumbai.  It’s a few years away due solely to the lack of investment initiative from larger organizations, the technology is pretty much here now.  My organization is particularly committed to Office suite and microsoft underlying technology, but even they are seeing Apple devices in widespread scenarios.

It’s funny how fast things move.  Buying an iPad totally changed how I do most computing, despite the fact that I still want a laptop.  Most people won’t even need that, outside of work.

Adios desktop, thanks for the good times.

Dry Spell

It has been very slow in terms of posts lately.  The main reason is that I don’t sit down at my computer downstairs much any more, and can’t really type on an iPad or other device in such a manner that makes writing posts time efficient.  I’m considering getting a personal laptop in the future, but it would be a long ways off.  Until then, I suppose this blog will continue to be slow.

For some brief updates:

I finished reading Walden again about a month back.  In reading it again, it seems likely that most folks wouldn’t enjoy it much.  It’s laborious to read through (not nearly as bad as something like Infinite Jest or even Portrait of the Artist as a Young Man) and does not offer much interms of a story.  It is an ongoing walk through Thoreau’s life in a time when things were very slow.

Yet you can see the joy he takes in knowing his surroundings and the time he spends in nature.  He loved life.  He poured over the intricacies of the forests and all his senses could take in.

His advice on living life to it’s fullest and walking your own path are something that has lit up my travels for many years and gives the courage to wander away from the herd.  He was a special person with a captivating outlook.

Times have changed greatly.  Sometimes I find myself wondering about the confluence of technology and our normal, every day lives.  Wondering about what’s really valuable and why we do the things we do.  We still have that special something that makes being alive such a tragically beautiful thing.

On another note, I started reading a book called “Grendel” which is a reversed perspective on the epic tale “Beowulf” and it has been a lot of fun.  Very interesting to see the evolution of the character.  It’s off the beaten path reading and worth while if you’re in the mood for something different.

This season in metro of MPLS has been unseasonably rainy.  The grass furiously rises daily and must be continually mowed to battle it’s unkempt nature, lest the neighbors deem your lot unworthy.

Home ownership continues to offer it’s trials, with all the rain comes water in the basement, seeping in through the cement or up through the tile.  Though it is a relatively small amount, we need to redo the gradient of the soil near the house in order to combat it, hopefully in the next few weeks.  Still a great deal more to do inside as well.

Should these small inlets continue to be intermittent, all the best to you and yours.

Life goes on, so it goes.

A Necessary Day Off

Today I’m at home, pretending to take a vacation day.  The dogs are wrestling around or outside chasing after one another.  Good music fills my living room and kitchen and a good cup of coffee sits near at all times.

It’s my first real day of vacation for 2014 and it’s sorely needed.  I say pretending because I’m too obsessive about work to let emails that can be taken care of go for very long.  It makes me think about what life was like a decade ago in my first job after college.

It was a great job really, I worked for the CEO of a smallish company in Minnetonka.  We were essentially a consultancy for promotional marketing and strangely my role was that of the person in charge of actual marketing the company.  It was small shop, about 12 sales people, an admin, a few graphic designers, two operations people (much of the work was importing from China), the CEO and myself.

Back then, email was how we communicated, but it wasn’t something you did out of work.  You cut off after 5 or 6pm and picked up again at 7 or 8am, depending on the time of year (Fall was busy season, 10-12 hours for everybody.)  So issues arising during the off hours just had to wait!

Things have changed drastically as smart phones have become pervasive.  This is the part where I go all “get off my lawn” and complain about how we work too much and life is too busy, etc., right?  Well, actually no.  Having access to urgent issues and being able to answer in real time is valuable for businesses and myself.

The ability to know what  to respond to and what to let alone is a very real skill set, one which I need to work on myself.  Not everything needs an answer.  There are many other socially contextual changes with email that have evolved too.  Should you use emoticons?  Do you send emails to direct reports after hours (family time and timeline expectations of answers)?   Can you use email as a way “talk” to others with frequent, rapid responses?  All contextual.

The interesting thing is that these “rules” aren’t actually rules.  They are guidelines different in different scenarios and they will change.  Teens today text and communicate very differently than we did, and to assume that they will adapt to the organizations they grow up to work for is backwards, the organizations will have to adapt to them.  It’s all moving forward, faster and faster.

When I think about  how fast everything has gone since graduating college, it boggles the mind.  And it’s only going forward, faster and faster.

Every year seems faster than the last.  So many relationships, so many friends and coworkers and new things to learn.  So many things to be thankful for.

One of them is the first vacation day of the year, where I get to reflect on all the wonderful things that have happened, while pretending to take the day off.

Elliptical + iPad = WIN!

In February of this year I decided enough was enough.  The circular nature of fitness and seasonal adjustment needed to ramp up exercise was already old.  Living in Minnesota means that six months of the year getting outside for exercise is a true chore.  You either brave the elements or go to a gym, the latter being a decent option but most people will tell you that even getting in a car to GET to they gym is harder during the cold months.

For a long time I’ve wanted to purchase an elliptical to workout during those tough winter months.  I tried an exercise bike donated from a good friend, but it just didn’t take.  Thankfully, tech has come far enough along that working out at home and watching video content simultaneously was possible.  Even better, computing is  now far enough along that tablets mean you can play games or keep up on social media, etc.

Long story short, living the dream!  We purchased an elliptical with a guaranteed service contract for five years, which means if it break we don’t have to worry about buying another.  And we sprung for iPads (birthdays) as well so now it’s easy to keep busy while getting in cardio.

It seems like it is more and more difficult to get in the amount of exercise necessary to be in good shape.  I don’t foresee it getting any easier either.  So figuring out ways to form habits and life hack exercise into a daily schedule will be more and more valuable as time goes on.

Bait and Switch: Tired and Frustrating

This weekend, my credit card company Capital One pulled the old bait and switch routine.  Essentially this is advertising something at what is perceived as a very good deal, then switching to something else that is less desirable for the buyer.

It’s a common tactic in retail and online selling.  ”iPads sold for only $10.77!”, “$39 for a trip to Mexico!” etc.  Sound familiar?  Should you have spent any of the last decade not living under a rock, you’re probably familiar with them.  Hopefully you’ve learned that most anything that looks too good to be true, is.

I realized the other day I had a $59 charge for a membership fee with Capital One.  This had never been present before, in roughly four years of using the card.  It is possible that this fee happened in prior years, but doubtful as I monitor my finances weekly and often more so.

The very reason I chose this card initially were the perks associated:  two travel miles for every dollar spent, no annual fee, as well as some additional things that weren’t high on my radar.  Those two were enough.  The idea is to use your card to pay for normal expenses and redeem accrued miles for vacation trips, etc.  It’s a nice bonus.

However the existence of a membership fee significantly discounts the value of the perks.  $59 in fee equates to 5,900 miles, which is slightly less than $3,000 spent on the card.  That is not a huge amount to spend on a credit card in a year, but that’s really not the point.  The point is that the card was advertised as no annual fee.

Large companies such as this will send you new terms of service in the mail and expect that you read through all of it.  My assumption is that 90%+ (including myself) do not bother with these kinds letters as they are cumbersome and often in legalese.  A lawyer would tell you that it’s the company right to change terms of service, and technically it is.

A marketer will tell you that this is abusing the relationship you’ve spent so much time to develop in the first place.  And that you’ll lose the customer for doing so.

Companies want profits.  They build their market offerings to reflect that need for profits.  Initially to capture a customer, they will build something like the credit card offer above, which is enticing.  At later dates, they may change the offer to optimize profit, e.g. new annual fee.

Credit card companies already make a good deal of money by me actually using them as a method of payment.  Every time I swipe the card, the place I buy from pays a small amount for the ability to use them.  They also make money on other partnerships, and large amounts on interest of employed capital.

I understand the ongoing need for growth.  Situations like this are based on asymmetricity between wanting financial gains and integrity between the relationship with a company and customer.  This is the bait and switch.

Long story short, Capital One refunded my fee as a one time courtesy.  They were actually quite kind on the phone, but acted as though the situation was one where I was confused.  This wasn’t a confusing situation, it was one where a large company change TOS to garner additional profits and sacrificed a relationship to do so.

At this point, I’m unsure whether to get a new card or not.  I have a year to decide if it’s worth the $3,000 per year spent or not. There are other options, probably better ones.  I will definitely evaluate them.

Net net: Capital One had a great customer relationship with me before this, but is now at risk of losing me due to the bait and switch.  That risk was avoidable.

What’s In A Name?

Many things.  Time, effort and importance.

The biggest reason to name something is so that people understand it has a name.

Naming something makes it worth discussing formally, which in turn takes time and effort.

Naming something well will define it as an idea.

Because naming something poorly means it will be forgotten or disregarded if not an inherently strong concept.

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