Financial Samurai

Slicing Through Money's Mysteries

Online Poker Crackdown Is Good News

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If you haven’t heard, our broke government wants to get its hands on the online poker industry’s potentially US$6 billion dollar annual revenue pie.  They’ve frozen bank accounts linked with Full Tilt Poker, Poker Stars, and Absolute Poker and have indicted 11 founding executives of the companies.  All totaled, the government wants US$3 billion in fines and restitution!

As you may know, I enjoy the game of poker.  I don’t think it’s gambling because you are playing against opponents, not the house.  This is the crux of the argument as to why the online poker industry should live or die.  The government thinks poker is gambling, but online poker executives obviously think otherwise.

If poker was gambling, why is it that we always see familiar faces win big tournaments.  Names such as Phil Hellmuth, Phil Ivey, Chris Ferguson and John Juwanda are everywhere!  You only win 49% of the time in gambling, but these guys win much more, that’s why they are so wealthy.  One interesting thing Phil Hellmuth told me at a charity event last year is that Full Tilt Poker player/shareholder Phil Ivey makes some US$2 million a month from his site!

DUMB PLAYERS ARE GAMBLERS


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Fixing The Airlines Industry

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I’ve come up with a great business idea in the worst sector in the world.  No sector has had more bankruptcies than the airlines industries.  That said, I’m undaunted because I know demand when I see it!

Introducing Samurai Airlines, where babies pay more and the person in the middle seat gets both armrests!

The inspiration for my new company comes from years of frustrated flying.  I somehow always win the lottery by getting the middle seat next to bathroom with a baby behind and two giants to my left and right.  Despite all my trips and “Premier Status” on a number of airlines, I’m still treated like donkey food.  As a result, I’d like to propose the following benefits of Samurai Air:


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The Samurai Fund Update & Highlights Posts

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Dear Shareholders,

We’re pleased to report that the The Samurai Fund (TSF) is up 8.5% year to date!  Unfortunately, the S&P 500 is up 9.9% thereby underperforming the broader markets by 140 basis points.  On the positive side, there has been 0 turnover in the fund since inception on January 1, 2010 which means no trading fees.  Furthermore, we have not had to hire employees to run the fund meaning that we are saving millions more a year in salary costs.

Our outlook for the stock market is rosy, thanks to Ben “Making It Rain” Bernanke and his desire to inflate all asset classes with QE2.  We believe in the American consumer’s ability to consume with greed again, and we are strategically positioned with names such as Samuel Adams (SAM, +76% YTD), Monster Worldwide (MWW, +14%), and Lenar Corp (LEN, +24% YTD).  Creating bubbles is a good thing, so long as we recognize we are in a bubble.  We at TSF hear you loud and clear Mr. Bernanke and will ride your donkey into the sunset!

Thank you shareholders for investing in our fund.  We will try and make up for our underperformance by continually doing absolutely nothing.  Please revisit our investment philosophy.

Regards,

The Samurai Fund Investment Team

HIGHLIGHT POSTS FROM AROUND THE SPHERE


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Should I Join An Exclusive Sports Club?

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I’m in a pickle and I need your help.  One of my friends who so happens to be a client, but who really is just a great friend who so happens to be a very large client, invited me to play tennis at his posh tennis club the other day.  After we hit around for an hour, he mentioned I should join and he could be my primary sponsor.  I told him I’d think about it over the weekend and let him know.

I did some digging with the Membership representative afterwards.  The first hint that told me I was in for a big dilemma was when she said there were no brochures as everything is “exclusive and private.”  “We don’t advertise our club Sam.” she said.  OK, great, how is that going to help me make an informed decision, I thought to myself.  Not wanting to piss her off or anything, I just asked her if she could tell me about how to join.  This is what she said:


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The Comfortable Lifestyle Business or The Big Payout?

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Contemplating the Lifestyle Business In HawaiiOver poker one night, we got to talking about what we always talk about: entrepreneurship.   Out of a table of 10, four work at start-ups, three are at Google, one is a high-tech lawyer, one works as a medical correspondent for CNN, and then there’s me, a hybrid.  I had just got done working on Yakezie.com for three hours after working an 11 hour day, and needless to say, I was a little bit tired.

I love going to Friday night poker mainly because I get to bounce ideas off of really smart and incredibly hard working people.  When I hear stories of one start-up player working from 7am to 3am every night for two weeks straight to launch a product offering, I get pumped.  When the Venture Capitalist player recounts his firm rejecting a pitch by Tim Westergren, Pandora’s founder in 2008, I wince, but daydream in amazement.

THE LIFE AND BUSINESS QUESTION


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Myths About Selling a Structured Settlement for Cash

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There’s a whole world out there of financial products I have very little understanding about.  Apparently, there’s a market for buying and selling “structured settlements” for cash after you win big money after a court case.  The following is a guest post by Jason from JG Wentworth which pays people cash now for settlements which are paid over time.  Interesting concept and something which is worth learning about.

When a plaintiff settles a court case and is awarded a large amount of money, it may be decided that the settlement will be paid over time in installments rather than a single lump sum payment.  This type of arrangement is called a “structured settlement”.

The advantage to having a structured settlement is that the money is tax-free if set up properly.  Structured settlements can also be beneficial because they provide a source of income for the recipient well into the future, where as lump sum payments will more likely be spent if the recipient does not manage their money responsibly.

Structured settlement payments can also be a disadvantage, trapping the recipient into periodic payments when they may want cash now.  Many settlement recipients choose to sell their settlement payments for a lump sum of cash to start a business, pay for college tuition, purchase a home or other various financial reasons.

Handling a large lump sum of cash can be exhilarating.  And it can be a little unsettling, too.  Money causes people to worry, and worry spins half-truths or unfounded myths about financial issues at hand. Selling your structured settlement into a lump-sum payment is an opportunity to increase your net worth — not limit it.  All it takes is a little guidance from a structured settlement buyer and a plan of action for your cash to breakthrough any doubts.

Apparently there must be some controversy about structured settlements and Jason is here to help clear the air.

MYTHS ABOUT SELLING A STRUCTURED SETTLEMENT FOR CASH


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Personal Finance Bloggers Cause US Retail Sales To Plunge!

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May retail sales drop 1.2% or the most in 8 months as more and more people turn to personal finance bloggers for frugality advice!  I’m pretty certain nobody has ever come up with this statement, but think about it for a little bit.  Why is it that the public should take personal finance advice from BusinessWeek, for example?  The articles are written by relatively well-paid writers who are on a mission to report the news.  They do a fine job at that, but perhaps not as fine a job making things visceral like the personal finance community.  What’s more personal than a real person like Jeff delivering pizzas to get out of debt?  Not much!

It’s very hard for the mass media to compete against a team of personal finance bloggers such as the Yakezie.  We’re real life people responding to comments and putting ourselves out there.  There’s a two-way street with us.  If I were Editor in Chief of any mass media publication, I’d go out and hire an bunch of influential personal finance bloggers and put them on my payroll.  $75,000 a year will do or perhaps $150,000 a year if you want us to write an article a month exclusively for you.  By doing so, the Editor will inject new life, new readers, and therefore a wealth of new advertising dollars to the publication.

As evidenced by May’s retail sales figures, we are creating the news with our frugal ways instead of just reporting the news.  There’s a movement underway, can you feel it?  Maybe we’ll band together and talk about how we should never buy new cars again, causing June’s new car sales to dip.  Or maybe we’ll discover how amazing one person’s unsung journey is to fight poverty in Uganda and direct millions of dollars their way.  That counts for something.  Let’s make a palatable difference with the words we write.  Someone is out there listening.

Passive Income X Factor – Starting Your Own Site

It’s been around six years since I started Financial Samurai and I’m actually earning a good passive income stream online. The top 1% of all posts on Financial Samurai generates 31% of all traffic. The average age of the top 1% posts is 2.3 years old. In other words, after putting in the hours to write some very meaty content over two years ago, 10 posts consistently generate a monthly recurring income stream that’s completely passive. The posts probably won’t continuously rank high in search for years due to tremendous competition, but that’s partly why I continue to write 3-4X a week.

I never thought I’d be able to quit my job in 2012 just three years after starting Financial Samurai. But by starting one financial crisis day in 2009, Financial Samurai actually makes more than my entire passive income total that took 15 years to build. If you enjoy writing, connecting with people online, and enjoying more freedom, see how you can set up a WordPress blog in 15 minutes with Bluehost. It’s cheap and easy to start.

If you’re looking to start a blog of your own, click the link as I put together a 3,000 word free tutorial on how to do so.

Updated on 3/25/2016 Let the bull market continue!

Charles Farrell of “Your Money Ratios” Speaks About Retirement And Investing,

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As I wrote in my review of “Your Money Ratios”, Charles’ book sings to me. Charles has the ability to simplify complicated financial topics for the average reader to understand. His book is seriously one of the best books I’ve read on personal finance in a long while.

One of the keys to progress is learning from experts in their various fields.  Charles is gracious enough to answer some follow up questions I’ve been burning to ask after reading his book.  This will be a two part post due to the 2,800 word length of the interview.  In part I, we discover Charles’ motivation for writing his book, strategies for early retirement, and his conservative and debatable 50%/50% investment split between stocks and bonds.  In part II, we discuss the much maligned 401K, personal income taxes, why Social Security will survive, and why the flat tax is the right way to go!  Please enjoy!

WRITING “YOUR MONEY RATIOS”

Question: Was there a particular lightning bolt reason why you decided to write this book? For aspiring authors, what suggestions do you have to get your worked published in this ultra competitive field of business?

Answer: I wanted to write a book that would help average readers understand the most fundamental and critical relationships among one’s income, capital and debt, and how those things must be managed throughout your working career to build financial independence. So I took what are often quite complicated topics and figured out a way to present them in a very simple format that anyone can follow. I would like more people to enjoy the benefits of financial independence, and I hope this book does that.

As far as writing, all I can say is write about what you believe in. Hopefully, if you believe in it strongly enough, you’ll develop some expertise and then seek out ways to spread your ideas. Try to develop some niche that is reflective of your expertise. So I developed the ratios and they came out of my background in tax, finance and also working with individuals.

Think about what you do that is a little different and try to focus on that unique nature of what you do. It is a tough slog because the field is very crowded and often the least valuable information gets the most press. But you have to accept that reality and still push ahead. And then you need a little luck. Your message has to somehow get into the hands of people who appreciate and understand it. And that is hard to predict, which means you need a little luck to get it out there. So if you are going to pursue that path, I think you need to accept those realities of the marketplace.

EARLY RETIREMENT


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The Katana: Help Haiti If You Can 1/17

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So far over $7 million has been raised to help Haiti by just texting the word “HAITI” to 90999.  You’ll get a confirm receipt from your mobile carrier once sent.  Please consider donating!

This week on Financial Samurai, we’ll share our thoughts on the latest government rhetoric, highlight a guest post by Flexo, introduce a new fun challenge, and perhaps discuss one of the key things to consider for job seekers.

THE SAMURAI FUND UPDATE: +3.85% vs. S&P 500 +1.88% as of Friday, Jan 15th. 203 basis points of outperform puts us in the Top Tier of all funds.

Stars: Lenar +25%, Toyota +8%, GE 9%, Harmon +7.4%,, Calgon +7%, Big Lots +7%.

Dog Poops: Lumber Liquidators -7%, Berkshire -1.6%, Steris -1.25%, ABM -1%, Monsanto -1%.

Looks like there’s some good demand from new entrants, and investors who want to give us several hundred million more to build new positions!  Contributors, please provide an update on your name in the TSF page above, especially if your name is sucking wind.  Will be making room for new names in February.

SAMURAI WEEK IN REVIEW

* People now realize that converting to a ROTH IRA is pretty ridiculous as Kevin M reminds us that the first $18,700 (equivalent to $470,000 in pre-tax funds at 4%) you withdraw from your retirement funds is tax free.  Meanwhile, JoeTaxPayer highlights that if you retire with $2.17 million in today’s dollars, you only have to pay 15% tax!  You’ll have to retire with more than $5 million dollars to average a 25% tax rate, based off a 4% income return.  $5 million is only 50X your $100,000 “average” income.  Always good to dream big for those of you who’ve justified your ROTH IRA contributions.  Joe, you made my day!

* Family seems to be the number one reason why people choose to freeze during the winter, and melt during the summer.  FYI, it is possible to make friends in paradise folks.  It’s also possible for your family to fly out and visit you on the beach.  If you’re miserable, don’t limit yourself!  Just think about how much easier it is to travel now vs. 300 years ago.

* The “Get Financially Naked” book giveaway ends on Saturday, January 23rd.  It’s a great little book for couples who feel they need some help in improving their communication as it relates to finance.  With all our book giveaways, we’d like to share them with those who’d like and need them the most.

* Americans really shouldn’t complain about our finances since we’re wealthier than 99% of the rest of the world.  That said, it’s all relative, and if everybody is wealthy, then it’s really hard to feel special.  The key seems to be to amass your wealth, and move elsewhere!

Keigu,

Sam Samurai – “Slicing Through Money’s Mysteries”

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Book Review & Giveaway: “Your Money Ratios”

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your-money-ratiosPublisher: The Penguin Group.  Hard cover. 257-pages. Price: $26.

Author: Charles Farrell, JD., LL.M., investment adviser with Northstar Investment Advisors, in Denver. He writes the “Retirement Roadmap” column for CBS Moneywatch.

Review: “Your Money Ratios” sings to me!  For someone who loves using ratios such as the 1/10th rule for car buying, and 30/30/3 rule for home buying, I absolutely adore this book. Charles’ writing style is very balanced and easy to understand. When it comes to math, many people, including myself fall asleep. But, if you can just do simple division and multiplcation, this book will keep you on the right path towards financial security.

Charles’ “Unifying Theory of Personal Finance” is his core philosophy that all decisions you make should help move you from being a laborer to being a capitalist. In other words, make money work for you, and not the other way around. It’s important that with every single monetary decision you make, you ask yourself will this help you become a capitalist or not.

Capital To Income Ratio


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