This week's tip comes
courtesy of a personal
family experience.
I hope you will all
learn from it if and
when something happens
to you when you are
flying somewhere.
You may have heard
about American Airlines
Flight 31 from Los
Angeles to Honolulu
which had to do an
emergency landing
back at Los Angeles
International (LAX)
on Tuesday, August
5th.
My entire family
was on that flight;
both my sons and my
wife, Allyson. The
takeoff was uneventful
though Allyson smelled
something funny in
the cabin. When she
asked the cabin attendant
about it, she was
told it was nothing.
That turned out to
be incorrect as the
cabin became hazy
and quiet smelly within
another 15 minutes.
We were 30 minutes
out when the oxygen
masks dropped for
our protection and
care. At forty minutes
out, we were on our
way back to LAX for
what turned out to
be an emergency landing.
Here are a few tips
of you to keep in
mind should you ever
be in this situation:
1. Not all our oxygen
masks dropped from
the ceiling. If yours
doesn't release, get
something like a knife
or metal pen and pry
the box open. Once
it's open, you'll
need to yank harder
than you'd imagine
to get the oxygen
flowing. Those films
aren't kidding when
they tell you to do
that. You would think
all you had to do
was put the mask to
your face and you're
set - not so.
2. Not all airplanes
are equipped to dump
fuel. Ours was a Boeing
757. It was not able
to dump fuel over
the Pacific as we
came back. So, we
landed with nearly
a full load of fuel,
people, and luggage.
The airplane's landing
was very heavy and
more dangerous as
a result. In fact,
it was taken out of
service to make sure
it didn't have any
stress fractures as
a result of the heavy
landing.
3. If they tell you
that you'll be exiting
via the slides and
you are on the tarmac
or solid ground, be
careful. The slides
feel like they are
covered in Teflon
and are very fast!
I mean very fast.
If you are older,
make sure someone
is at the bottom of
the slide to stop
you. If no one is
there, you will literally
be flying off the
end of the thing onto
solid ground. This
happened to us. I
had to get my feet
under me and run when
I hit the ground.
If I was unable to
do that, I could have
easily broken something
or worse. The slides
are dangerous! Be
prepared for this
as you get on them.
4. If you are strong
and end up at the
bottom of a slide
where no one is helping
people off, stay there
and be a helper. You
could literally save
someone's life in
doing so.
5. Make sure to leave
everything on the
airplane when you
exit. The exception
should be any medicine
you take. I also suggest
you pack the medicine(s)
in a plastic bag in
case you are leaving
the airplane and entering
the water or rainy
conditions.
Our cabin attendants
did their best to
help. But, ultimately
you need to keep a
cool head. The attendants
are trained but most
have never been in
a situation like this
and some will lose
their composure. Some
of that happened on
our airplane.
I should note that
American Airlines
did a good job. We
were well taken care
of after the flight
landed. And, they
made sure we were
safe during the episode.
I hope no one has
to go through a situation
like this. Most never
will. If you do, I
hope the things we
experienced three
weeks ago will help
you handle it a little
better. The few seconds
you may save could
be invaluable
Apprvd.BBDP
Selling Your Home in
a Weak Market, Pt. 3 of 3 - August 20, 2008
Nothing
down
"Creative financing"
was born of dire necessity
in the late 1970s
and early 1980s, when
interest rates were
pushed to all-time
highs by the Federal
Reserve Board trying
to stifle raging inflation.
When mortgage rates
hit 18 percent interest,
only people who weren't
borrowing as much
in relation to their
incomes could qualify
for conventional financing.
Ordinary mortals
glued deals together
by assuming the existing,
lower-interest-rate
loans on property
and using seller financing
to bridge any gap
between their down
payment plus assumed
loan amount and the
purchase price.
If you make a nothing-down
deal with unscrupulous,
deadbeat "buyers,"
they may live in your
house rent-free for
months while thumbing
their noses at you
as you go through
the expensive, time-consuming
foreclosure process.
If well-intentioned,
but overextended nothing-down
buyers fail to make
their loan payments
or pay the property
taxes, you'll also
be forced to foreclose.
Buyers who have no
financial stake in
a property can walk
away from it whenever
they please and stick
you with the mess.
Nothing-down deals
don't have an upside;
they're financial
suicide for sellers.
Do not, under any
circumstances, get
into a nothing-down
deal!
You might consider
helping to finance
the sale of your property.
But get a decent down
payment from the buyers,
in addition to checking
them out thoroughly.
This
week's tip is an excerpt
from "House Selling
for Dummies"
by Eric Tyson and
Ray Brown, reprinted
by kind permission
of Ray Brown. In addition
to being a frequent
guest and contributor
to our show, Ray has
authored many books
and is a syndicated
real estate columnist
for the San Francisco
Examiner, and has
hosted the weekly
radio program, "Ray
Brown on Real Estate,"
on KNBR in San Francisco
for many years.
Apprvd.BBDP
Selling Your Home in
a Weak Market, Pt. 2 of 3 - August 15, 2008
Considering
other offers usually
made in weak markets
When mortgage money
is cheap and plentiful,
deals are straightforward
and simple. Buyers
make cash down payments
and get loans for
the balance of the
purchase price. Sellers
use the proceeds from
their sales to buy
new homes.
However, when mortgage
interest rates soared
over 18 percent in
the early 1980s, home
sales fell to levels
unseen in the United
States since the Great
Depression. Buyers
and sellers did some
pretty unconventional
maneuvering in order
to transfer property.
Desperate times sire
desperate measures.
Lease-options
A lease-option
is exactly what the
name implies: a rental
agreement to lease
your house, but with
an option to
buy the house in the
future. Lease-option
offers are triggered
by high mortgage rates
or are made by folks
who have good incomes
but haven't managed
to save enough cash
yet to make a down
payment.
Sometimes, however,
a lease-option is
the smart way to go.
For example, suppose
that high mortgage
rates or a sluggish
local real estate
market make selling
your house tough.
If you don't need
to sell right away
and you must move
soon, doing a lease-option
helps you cover the
house's monthly ownership
expenses until mortgage
rates or the local
market improves enough
for you to sell.
Next week: How
Lease-options Work
This
week's tip is an excerpt
from "House Selling
for Dummies"
by Eric Tyson and
Ray Brown, reprinted
by kind permission
of Ray Brown. In addition
to being a frequent
guest and contributor
to our show, Ray has
authored many books
and is a syndicated
real estate columnist
for the San Francisco
Examiner, and has
hosted the weekly
radio program, "Ray
Brown on Real Estate,"
on KNBR in San Francisco
for many years.
Apprvd.BBDP
Selling Your Home in
a Weak Market, Pt.1 of 3 - August 6, 2008
Considering
other offers usually
made in weak markets
When mortgage money
is cheap and plentiful,
deals are straightforward
and simple. Buyers
make cash down payments
and get loans for
the balance of the
purchase price. Sellers
use the proceeds from
their sales to buy
new homes.
However, when mortgage
interest rates soared
over 18 percent in
the early 1980s, home
sales fell to levels
unseen in the United
States since the Great
Depression. Buyers
and sellers did some
pretty unconventional
maneuvering in order
to transfer property.
Desperate times sire
desperate measures.
Lease-options
A lease-option
is exactly what the
name implies: a rental
agreement to lease
your house, but with
an option to
buy the house in the
future. Lease-option
offers are triggered
by high mortgage rates
or are made by folks
who have good incomes
but haven't managed
to save enough cash
yet to make a down
payment.
Sometimes, however,
a lease-option is
the smart way to go.
For example, suppose
that high mortgage
rates or a sluggish
local real estate
market make selling
your house tough.
If you don't need
to sell right away
and you must move
soon, doing a lease-option
helps you cover the
house's monthly ownership
expenses until mortgage
rates or the local
market improves enough
for you to sell.
Next week: How
Lease-options Work
This
week's tip is an excerpt
from "House Selling
for Dummies"
by Eric Tyson and
Ray Brown, reprinted
by kind permission
of Ray Brown. In addition
to being a frequent
guest and contributor
to our show, Ray has
authored many books
and is a syndicated
real estate columnist
for the San Francisco
Examiner, and has
hosted the weekly
radio program, "Ray
Brown on Real Estate,"
on KNBR in San Francisco
for many years.
Apprvd.BBDP
It's the Season - July
30, 2008
Every quarter, we
get economic results
that come in several
forms; we get the
government results
on how the economy
is doing, results
of how manufacturers
are doing, the consumer
sentiment reports,
unemployment numbers,
and many more.
Reports that are
widely-watched are
those of individual
corporations. These
are statements of
each corporation's
earnings. There is
a "regular earnings
season and the "pre-earnings"
season. Pre-earnings
season starts prior
to the regular corporate
reports. (This might
be a more-than-obvious
statement.) Pre-earnings
season reports tell
us which companies
are not going to meet
the estimates they
had made earlier telling
people what they thought
they'd earn. These
reports can either
state that a company
has under-performed
their estimates. Sometimes
they will tell us
that they actually
outperformed their
estimated earnings.
Regular earnings
season, which also
happens quarterly,
tells you which companies
have met their earnings
estimates.
During both pre-earnings
and regular earnings
seasons, companies
will guide themselves
for the future. Typically,
their guidance tells
of how they expect
to perform going forward.
This guidance can
be "neutral,"
"positive,"
or "negative."
All of these factors
can influence the
performance of an
individual company's
stock - or even the
performance of the
entire stock market.
We've been in the
middle of earning
season the past couple
weeks. Given the choppy
markets we've had
the past 11 months,
this earning season
has been more interesting
than most. If financial
markets are normal
and steady, earnings
reports can be relatively
benign events. If
we're in a tough market
where any news can
make people either
very happy or very
nervous, you find
earning season can
simply exaggerate
what the markets do
on any given day.
Keep in mind that
earning season happens
quarterly. This means
that every quarter
we get a new report.
If you're a long term
investor, you don't
think in terms of
quarters. Therefore,
I don't think it means
too much to the long
term investor. This
thinking can help
you keep your eye
of the ball - long
term success; not
tied to short term
movements.
Apprvd.
BBDP
Got $100,000 Plus? -
July 23, 2008
This week's tip is
a simple basic reminder
when it comes to banking
and the FDIC's magic
$100,000 guarantee.
We've all seen how
banks can occasionally
fail; certainly, you
don't have to think
too far back to remember
the savings and loan
crisis about 18 years
ago.
As a result of the
sub-prime problems being
worked out through our
financial systems, we
may see a few more banks
fail in the coming months
as they are hit with
losses.
Today's tip:
Make sure your bank
accounts are insured,
with each account having
a balance of no more
than $100,000. This
keeps you within the
FDIC insurance levels
of protection; anything
above that could be
at risk of loss, should
your bank go out of
business.
There are ways to have
more than one account
at a bank by using different
registrations which
could provide you with
additional protection,
as each account would
have the $100,000 guarantee.
Be sure to ask your
banker if you are doing
this correctly.
While I personally
think that the vast
majority of our banks
are fine, I don't think
it's a good idea to
be too careless about
how much money you keep
in any single bank account.
Just yesterday, I had
a call from a client
who had two accounts
with over $100,000 in
each; I told him that
it's time to get those
balances down.
The other note I would
add to today's tip is
that I think people
can have too much money
in "bank-type"
accounts. If the money
is long-term in nature,
I think it could be
better serving you if
it were invested in
long-term assets, as
bank accounts are not
typically considered
to be long-term investments.
If you have any questions
about how much you have
in the bank, don't hesitate
to call or write.
Apprvd.
BBDP
Emotions Running Your
Investment Decisions? - July 16, 2008
So often, people pay
little attention to their
investments, leaving them
to gently move through
the breezes of time and
life. If you have a long-term
portfolio of well managed
assets, this may not be
the worst thing in the
world to do; of course,
this is not to say that
one should neglect their
portfolio for years at
a time.
Many people watch the
financial news with an
eye towards how things
are going on a short-term
basis. They will invest
when they feel good about
the financial markets,
sometimes selling when
they don't feel too good;
they may even feel panicked
by them.
The problems that can
arise from this type of
investing are that, when
you feel good about your
investments, you are often
times buying near a market
top. When you feel bad
about your investments
and sell, you are oftentimes
doing so near a market
bottom.
Of course, what I've
just written is the
inverse of the old maxim
of "buying low and
selling high." I
have never met anyone
who has become financially
successful by buying high
and selling low; it is
pretty much a prescription
for investment failure.
If you find yourself
wanting to sell when markets
are tough (as they have
been of late), try reminding
yourself that this type
of thinking may be a result
of your emotions speaking
to you, not your common
sense. Remind yourself
that, sometimes it's best
not to watch too closely,
as it may feel frightening.
There is no investment
that I know of that won't
have its tough times;
knowing this, you may
want to simply recall
your original long-term
plan for the investment
and the money itself,
then stick to it. You
might also think of the
individual I wrote about
who never watches their
investments; their lack
of emotion and attention
can sometimes be an attribute
in markets like we're
seeing today.
Footnote: When
financial markets reach
bear market territory,
you can generally make
the assumption that the
amount of risk they carry
is less than when they
are at all-time highs.
Apprvd.
BBDP
Inflation is Indeed
a Work of Our Labor - July 9, 2008
Did you know that inflation
is driven by more than the
price of energy? In fact,
the primary component of
inflation is the cost of
labor.
In a mid-year radio interview
I did yesterday with Michael
Johnston, Executive Vice
President of The Capital
Group/American Funds, we
discussed many things, one
of which was oil and inflation.
He made an interesting point,
which I don't think is getting
enough press: simply put,
the cost of labor is 80%
of what drives inflation.
Energy is, indeed, another
factor; however, he noted
that (with the improvements
in energy efficiency and
a slower economy) the consumption
of energy is bound to go
down. This fact was confirmed
today in an interview with
the owner of a commodities
trading firm. He was in
the commodities trading
pits and stated that, indeed,
the use of oil in the United
States is declining with
the high price of oil.
Michael further pointed
out that out that we are
not in a recession. Our
economy is growing positively,
albeit slower than we've
seen in a while. In this
environment, employers are
not in full hiring mode;
rather, there have been
modest layoffs. This is
not typically a situation
where you'll see higher
wages, as there is nothing
to drive them higher; therefore,
we could conclude that,
while we have high oil prices
and the things that go along
with them, we are likely
not in a highly inflationary
environment like we saw
thirty-years ago.
While we won't know exactly
what is happening until
we can look back on it (after
all, hindsight is 20/20
in economics), this gives
you a perspective that we
have not heard very much,
what with all the noise
we're getting in the financial
press, day-in and day-out.
Program note: If you'd
like to hear the entire
interview with Michael Johnston,
it will be aired this Saturday,
July 12. My show airs every
Saturday on KYNS, 1340 AM,
at 2:05pm.
Tip Note: My Weekly Tip
will now be sent to you
on Wednesdays.
Apprvd.
BBDP
Celebrating Our Long
Term Focus - July 3, 2008
It has always struck me that
we are a nation of short-sighted
people; we're always looking
for the quick buck or opportunity.
In reality, real investors
(more often than not) think
long-term; they align their
perspective with that of their
investments.
In other words, if you're
investing in common stocks,
whether through mutual funds
or individual stocks, you
are investing in the companies
themselves. This means that
you are looking to make money
from the growth of their businesses,
which almost always takes
years and has its ups-and-downs
along the way.
As we celebrate our nation's
232nd birthday; we should
all take note of how long
it has taken to build our
country. There have been ups-and-downs
along the way; much like any
company or financial market
experiences; in the end, we've
learned from these challenges
and moved forward. There is
a reason that the rest of
the world is emulating the
United States' way of life
and economics: it works and
it is resilient.
Have some faith that we'll
get through the current challenges
the country is facing with
oil and the real estate markets.
I believe the future is bright,
if you are patient and think
long-term.
Stick to your plan. Think
about things over periods
of years, not over months
or in a year or so. Buy when
prices are lower. Buying low
and selling higher really
is a good way to make money.
Keeping a long-term perspective
is another way; lastly, investing
in solid money management
is the third.
Happy Fourth of July 2008!
Apprvd.
BBDP
A Great Line - June
27, 2008
"We Make Money In Bear
Markets."
It is a great line. One that
people should consider more
often.
It seems most people think
about making money in good times.
That's true in some respects.
However, the cliché is
buy low, sell high. If you think
about this adage, the best way
to actually benefit from it
is to buy in tough times - bear
markets would qualify.
Are we now in a bear market?
It's tough to say exactly. Are
we at a low? I think we may
have hit the low for the year
already. We may retest it a
time or two. Or, the markets
may yet go lower.
Either way, if your money
managers are buying during these
tough times, you should profit
from them when better times
return. And, with the growth
of the world economy, I can't
help but think we'll have better
times.
Buy low, sell high. So easy
to say, yet sometimes so tough
to do.
Apprvd.
BBDP
Putting Things Off?
- June 20, 2008
Are you wondering why you haven't
installed that air conditioning
unit, as you sit around today
in heat that's nothing less than
astounding for June?
While most of us, south of the
Cuesta Grade, have no real need
for air conditioning 98% of the
year, there are times when you
wish you had it.
The reason I write about this
(as I wonder why we put in an
attic fan and whole house fan
instead of air conditioning) is
what the question reminds me of
when working with my clients.
So often, people put off until
tomorrow what they can do today.
Here is a list of ten common financial
planning items I've seen in working
with my clients that are commonly
put off until tomorrow:
1) Estate planning
update (or the whole plan itself)
2) Inventory of your belongings
for insurance purposes
3) Tax planning
4) Medical insurance
5) Long-term care insurance
6) Proper liability coverage
7) Coming in for your annual financial
planning review
8) Doing your retirement planning
when you have the chance - putting
it off
9) Understanding how much money
you spent in a month or a year
10) Getting disability insurance
when you need it
If you're thinking about the
air conditioning unit that you
didn't get or an item on the list
above that you haven't tended
to, it's time to get to it. While
you may not truly need the air
conditioning, you may truly need
to spend a little more time each
year on your financial plan and
awareness of it.
Apprvd.
BBDP
Assets, Assets, and
More assets - June 13, 2008
When you open your mutual fund
statements or review your accounts,
it pays to focus on the total shares
you own, as opposed to your total
account value. Because the total
value can change a great deal from
quarter-to-quarter, the total value
can become a pretty meaningless
number over short periods of time
(such as a couple of quarters or
so). To illustrate this point; think
about how you felt during the period
between March 2000 and October 2002;
focusing on the short-term account
value could have been very difficult
to handle.
Successful long-term investors focus
on building asset bases. The old
adage that "Building wealth
is based on assets, assets and more
assets," refers to the accumulation
of positions of value which can
grow or appreciate in value over
long periods of time.
Most of us have benefited from buying
more shares at lower values (when
the financial markets are choppy
or down) through dividend and capital
gains reinvestment programs and
by adding to your accounts. If you
focus on how many more shares you
are accumulating, you'll see that
there is a great benefit to buying
low. Though down markets may not
feel good, this is what buying low
is like. The irony is that making
money means being able to buy low
now and sell higher in the long-term.
