Personal Finance

Gift Card Drainer Tip

by

Over the holidays my daughter went to London on a trip with her band and marched in the New Years Day parade. As Christmas presents, her grandparents wanted to send her over with some spending money. I didn’t trust her with cash and didn’t want her to incur the expense and hassle of currency exchange, so we bought her prepaid VISA gift cards. When they got spent down, there was a couple bucks left on each. What do to.

It is difficult to transfer the funds to a bank account without incurring expenses. I found out that Amazon will allow you to purchase a “gift card” for yourself in any amount. We just did that for all of the gift cards and it worked very quickly and to perfection so we were able to drain the cards and can now cut them up and use the funds.

Feminists – Doing It Wrong

by

I have to say this about the sh*tstorm over what is being irreverently termed shirtgate – it’s the final and ultimate straw in moving me away from ever calling myself a feminist again … at least, not in mixed company. Ah, well – a pity that the term has been so debased in the last few decades. Much as the memory of very real repression and denial of rights in the persons-of-color/African-American/Black community has been diminished, overlaid, generally abused and waved like a bloody shirt by cynical operators (to the detriment of the real-life community of color/African-American/Black-whatever they wish to be called this decade), so has the very real struggle for substantive legal, economic, economic and social rights for women also been debased and trivialized. Just as the current so-called champions of civil rights seem to use the concept as an all-purpose cover for deflecting any useful discussion of the impact of welfare, the trivialization of marriage, and glorification of the thug-life-style in the persons-of-color/African-American/Black community, the professional and very loud capital F-feminists seem to prefer a theatrical gesture over any substantial discussion of the real needs and concerns – and even the careers of ordinary women. Women whom it must be said, are usually capable, confident, tough, and love the men in their lives – fathers, brothers, husbands and sons.

Read more

Archive Post – Military Rites, Practices & Legends: BX & Commissary Privileges

by

(An archive post from [gasp] 2004, wherein I attempted to explain and demystify certain military practices and establishments to a strictly civilian readership. I was reminded of this series, as one of the chief effects of the fed-gov shut-down is that just about all of the military commissaries at stateside bases will be closed from about midday today. The resulting effect on the retiree and active duty population at stateside bases probably will be rather minor, especially for those bases in or near larger cities, since Walmart, Target, Costco, Sam’s Club and local grocery chains provide alternative sources.)

The main attraction of these privileges – access to the military base Commissary and Exchange – lies mostly in the fact that such access is forbidden to the usual run of civilians, and so they tend to think of them as vast Aladdin’s caves of riches and materiel things, to which they do not have the magic key! Alas, while I am fairly sure that the gold-plated bases in the military pantheon probably are pretty well stocked with the luxury goods, and may very well resemble Aladdin’s cave, at the ordinary level they are as Cpl. Blondie observed “full of stuff you don’t need.”
When I was giving the school-kiddy tours at Mather AFB, to kids who had never been on a military base before, I would have the school-bus driver take a circuitous loop around the base, and point out the various establishments: “A base is just like a city or a town– this is the Headquarters building, it’s like the Mayor’s office and the City Hall, over there is the housing area, where everyone lives with their families. There is even an elementary school for the kids. That is our grocery store, only we call it the commissary. We even have our own gas station… this is the Exchange, it is just like a small department store, with a little bit of everything…”

Read more

“Career Resilience”

by

David Foster’s post included a link to this column about career risk. The author argues that it’s risky to bind yourself for the long run to an apparently-secure institutional job, because institutions can fail and leave you hanging. You are better off to keep trying new things and accepting failures and short-term uncertainty, in exchange for greater long-term adaptability. I think he’s half right about this.

He’s right that it’s a good idea to accept opportunities and take calculated risks, but he’s a bit off in his framing of the overall issue. What distinguishes the resilient from non-resilient career paths in his examples isn’t risk-taking per se, it’s diversification. Instead of investing all of your career effort in a relationship with one big company that is the sole buyer of your services, you should diversify among multiple, smaller customers, none of which is big enough to put you out of action if they fire you.

This is basic risk management. It is difficult to assess long-term risk going into a venture, no matter how smart or experienced you are. There are too many things that can change over time. The big-company job or big institutional customer may appear to offer security but that’s an illusion. They can be belly-up in a few years for reasons no one can anticipate. The rational strategy is therefore to diversify your income among multiple sources as smart people have always understood. Just as independent professionals know to keep a large enough number of clients that a loss of business from any one client won’t hurt them much, prudent people with institutional jobs may use their income streams to finance investments in real estate or other alternative revenue sources. There is no one career path that works for everyone. As America transitions from its 2.0 institutional model to a more decentralized and individualistic system, people increasingly will need to take account of risk and diversification in managing their careers. That’s probably better for everyone in the long run.

Dividend Paying Stocks and Survivorship Bias

by

Survivorship Bias

One of the most important concepts in all of investing is “survivorship bias”.  Per wikipedia:

In finance, survivorship bias is the tendency for failed companies to be excluded from performance studies because they no longer exist. It often causes the results of studies to skew higher because only companies which were successful enough to survive until the end of the period are included.

You should view any sort of “theory” on stock selection such as value, small-cap, growth, or dividend payers (generally part of the “value” spectrum) as a “sales pitch”.  When someone tries to sell you on something, they will use whatever data that is available to support their pitch.

The data that is generally available is in the stock market “raw” data.  You can see the price changes, the dividends, and compare these against your selected group or theory in a variety of ways.

Valuing Dividends

In general, it is more difficult to determine total stock returns (i.e. how successful your proposed theory is) when you include dividends.  It is easy to look at the “price” of a stock from 10 years ago and the price of that same stock today and said it “went up 25%” or “went down 25%”.  Or, if you owned that stock and are looking for it, that the stock doesn’t exist in the index any more (it went bankrupt, merged with someone else, or went private).  Even large and sophisticated investors sometimes forget to include dividends in their calculations.

Dividends are harder because they are payouts to shareholders and then you need to determine what happened with those dividends.  For my trust funds, for example, the dividends are received in cash.  Then we take the cash and re-invest it periodically, in our case annually.  Thus you don’t earn a “return” on that money, other than interest (which used to be significant, but now can essentially be modeled at zero since interest rates are so low) during that time.

For most models used by analysts, dividends paid are assumed to be re-invested in shares.  Thus if you receive a dividend of 2%, you essentially now own 2% more in shares, and you also earn dividends on those shares going forward, as well.  To make it a bit more complicated, there are taxes that you have to pay when you receive those dividends, so you may want to reduce the effective value of those dividends by 15% (the current taxable rate) or closer to 30% if that exclusion is taken away when the tax laws are changed in 2013.  Here is a wikipedia article that reviews the taxation of dividends for individuals.

Dividends are important.  Per the “dividends aristocrats” methodology used by the S&P 500 and found  here,

Since 1926, dividends have contributed nearly a third of total equity return while capital gains have contributed two-thirds. Sustainable dividend income and capital appreciation potential are both important in determining total return expectations.

For our own portfolios, dividends have brought in a substantial portion of total return.  The impact is largest on our biggest funds, portfolio 1 and 2, since they have more stocks and a longer time frame to accumulate dividends.

Read more