Party Like It’s 1999! 10 Takeaways From This Recession

In the past 10 years we’ve come full circle and finally rerebreached Dow 10,000 yesterday!  Bust out the party hats and call up your favorite car dealer, because money is now raining from the sky!  I fully admit that being defensive so far this October has been wrong.  Instead, I should have taken the illusory $400,000 in home equity increase Zillow told me, dumped it in my E-trade brokerage account, levered it up to $1.2 million and bought 35,000 shares of DDM (Ultra Dow30 ProShares ETF)!  Too bad, I’m too conservative and not smart enough to realize the world has changed.

This year’s rally has been outstanding, and the more I get to know the personal finance community, the more I realize that A LOT of you are making a lot of money.  From one PF blogger who writes his site helped lead him to a job earning  50% more, to another’s proclamation of a 10% net worth jump in September, it’s clear that a lot of people are doing very well in this recovery.  I’m watching all of you, especially those who provide such transparent net worth updates!

I rarely hear negative anecdotes about job losses and foreclosures anymore.  Instead, there are a bunch of you who are buying new homes (congrats and good timing), steadfastly paying off debt, and finding new wealth.  The bus is like a can of sardines every morning, and I can no longer walk into my favorite restaurants without a reservation.  If that’s not the best indicator of a bull market, I don’t know what is.

10 TAKEAWAYS FROM THIS RECESSION

Zillow Says I’m $400,000 Wealthier! Why Net Worth Is Rubbish

Primary Residence Zestimate

Primary Residence Zestimate

To prove our point regarding “Your Net Worth Is An Illusion” I took a look at Zillow’s latest zestimates of my primary residence and rental property.  Apparently, in a span of 3 months, my primary residence gained a whopping $300,000! I’m popping open a bottle of  Crystal, buying a rose gold Patek Philippe Calatrava at Tiffany’s, and ordering the Audi R8 on as we speak.  Just kidding, especially since September is frugality month. Besides, Zillow isn’t writing me a check for $300,000!

The dollar sign shows the purchase price after a 4 month escrow that began in late 2004.  In other words, the purchase price was $250,000 below what the zestimate measured as fair value in the middle of winter.  You’d think that after 4+ years of existence, Zillow’s price algorithms would be more refined.  Perhaps the data is legit, but I’m not buying it. Since net worth calculations don’t include one’s primary residence, let’s strike this example and look at a rental property.

Your Net Worth Is An Illusion, Sorry To Spoil Your Delusion!

Net Worth IllusionUnless your house is fully paid for, and unless you can access your retirement accounts today, your net worth is an illusion.  Although we’ve recovered quite a long way over the past 18 months, I don’t think we can really count on property, stocks, and private equity investments to be there when we need them.  The recent market volatility reminds us to get realistic!

The only thing we can really count on is cold, hard cash.  I find it very misleading, as well as a little disingenuous that some say they are millionaires, when 70% of their net worth is tied up in an illiquid asset called “home equity.” Your home is only worth as much as someone is willing to pay for it.  Even your 401K and IRA are suspect because those accounts can easily collapse.

A TYPICAL ASSET SIDE OF A NET WORTH CALCULATION:

Get Rich In September & Buy Nothing!

Valuations Gone Wild

Valuations Gone Wild

I declare September frugality month  If I’ve learned anything from my 20+ years working, it’s that September and October are generally dicey months for people’s fortunes. 9/11 wasn’t good, neither was last September 15th when Lehman declared bankruptcy.  Since 1928, studies show that September is by far the worst month in the calendar year for performance at minus 0.7%.  Sentiment turns on a dime, and when markets rally 50%+ into the months of September and October, our risks are greater than our rewards.

The stock markets are close to record highs in 2015, and volatility is back.

Even if the markets continue to rally and we aren’t fully invested, we still win because the labor market tightens, wages go up, and job security increases.  That said, I plan to spend money on nothing except for food and shelter this September.  No clothes, no new gizmos, no unnecessary strolls to the mall.  September is austerity month, and I’m going to bank all disposable income away!  Who’s with me?

RECOMMENDATION

Be Your Own Fund Manager: For your after tax investments, Motif Investing allows you to build a basket of 30 stocks for only $9.95, instead of spending the normal $7.95 for each position ($230+ commissions). There’s no need to pay expensive and ongoing active management fees for mutual funds again. Once you build your own portfolio, or purchase one of the 150+ professionally created motifs, you can simple dollar cost average with one click of the button every time you have money to invest. You can even buy retirement Horizon motifs, that act like target date funds, except you don’t have to pay the 1% management fee either. Finally, you get up to $150 in free trading credit when you start trading with Motif Investing. Motif Investing is truly the low-cost, efficient, and most innovative way to invest today.

Updated on 2/8/2015. Let the bull market continue!

The Most Overrated Businesses – Restaurant Is #1

Here are some of the most overrated businesses to start according to Kelly Spors and Kevin Salwen from the Yahoo Small Businesses page:

  1. Restaurant
  2. Direct Sales From Home
  3. On-line Retail
  4. High-End Retail
  5. Independent Consulting
  6. Franchise Ownership
  7. Traffic-Driven Websites i.e. Financial Samurai, but also Facebook!

Almost 7 million have lost their jobs since this recession began, and the stock market doesn’t care about you. I do, and I’m worried that if 7 million new people can’t find steady income, and unemployment hits 11%, we will derail.  You derail, we derail and our plans for becoming independently wealthy early goes down the drain.

Does Bernie Madoff Win In The End?

There are press reports that Bernie Madoff has cancer and doesn’t have many years left to live.  If this is the case, does Bernie win in the end?  For decades, Bernie has been pilfering his clients for millions, and living far beyond his wildest dreams.

Let’s say that through an honest living, he could have made $50 million over the past 30 years of work.  However, through his devious ways, he makes $450 million more.  Even though he’s in jail now, and spends 5 years before he dies at age 76, doesn’t he come out ahead despite getting the book thrown at him?

Everybody’s A Financial Genius!

Over at one of my favorite blogs, “Get Rich Slowly”, site owner JD writes how he successfully invested more money in the stock market earlier this year.  He wasn’t bragging, he was just stating a fact.  JD is very influential, especially given he has 68,000 subscribers!

What’s interesting to note is the commentary that follows his entry.  There are about 125 posts so far on the topic today alone.  Not bad, considering the 75% commentary range is between 60-90.  After reading every single comment here at home, it surprises me that over 80% of the readers have outperformed the S&P drastically and have made a lot of money.  80% compares favorably to studies which show that only 6% of active fund managers outperformed the S&P 500 over the last five years!

In one of the greatest stock market turmoils in our lifetimes, apparently the majority at GRS didn’t lose much money, didn’t capitulate at the bottom, and made some timely investments earlier this year to ride the rocket ship!