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Update on Gas Can Purchase
My tank was on Empty last night coming home from work and I was shocked to see gas prices were headed up. The cheapest price I could find was $2.99/gallon so I opted to drive home and use the "reserve" gas I purchased last week. Lets see how I made out: I originally purchased 4.276 gallons. Instead of paying $2.99 as I would have had to do, I purchased it at $2.59/gallon so I saved a net $0.40/gallon for a grand total of $1.71. An unimpressive number especially considering the $6.68 it cost me to buy the 2 gas tanks. Oh well, maybe next hurricane.
CF Results for Week 4, Picks for Week 5
Background on my bad habit. Recap of Week 4: Current Balance: $417.33 | Trans Date | Wager | To Win | Result | Description | | 9/22/05 | $10 | $7.69 | Won | VT(-10) over GT | | 9/24/05 | $5 | $4.35 | Won | UT(+7) over LSU | | 9/26/05 | $5 | $5.00 | Lost | Toledo (+14) over FSU |
Blew the week with the Toledo pick - Monday evening I realized I was perfect the past 2 weekends and felt like gambling so I threw $5 on Toledo and lost it ofcourse. Current Balance: $424.37 Net Deposit: $250, Current Profit: $174.37 (ROI 69%) Still looking like a great investment! Sadly, in another 2 weeks it will be about midway in the season - I would like to do a summary and some analysis of the financial numbers so far. Picks for Week 5: I like VT and Clemson this week. | Trans Date | Wager | To Win | Result | Description | | 9/28/05 | $10 | $8.33 | TBD | VT(-10) over GT | | 9/29/05 | $5 | $4.76 | TBD | Clemson(-7) over WFU |
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This blog reached another milestone today, it now has a new web address @ www.2millionblog.com. It will still redirect right to this site, but hopefully the new domain name will be easier to remember. I ended up registering the domain through Yahoo!Domains for 5 years which is offering a special promotion $2.99/yr for domain names (up to five years). I also looked at Godaddy.com who has domains for $8.95/yr which included a free email account with the domain but decided the email account was not worth the fees since I love my 2milllionblog@gmail.com free email account. My total cost was $14.95 for 5 years registering. I can't believe how times have changed - I used to pay $35/yr just a couple of years ago for a domain and this was a much simpler process.
Yahoo!Finance launched a new section last week for various Yahoo!Finance columnists. This list of names is impressive: David Bach, author of the Automatic Millionaire Ken Dychtwald, Ph.D., aging guru Robert Kiyosaki, author of Rich Dad, Poor Dad Suze Orman, that loud annoying talk show host on CNBC that does give sounds advice Daniel Pink, never heard of him Laura Rowley, never heard of her either Jeremy Siegel, Ph.D., author of Stocks for the Long Run Ben Stein, the legend Charles Wheelan, Ph. D., author of Naked Economics Anyway looks like it will become great weekly reading material, much better than the columns over at MSN Money at least. Check it out @ http://biz.yahoo.com/special/allbios.html
Never lose money - W Buffett
"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1." Warren BuffettThis quote is very powerful to me, here's why: Question:If you have $100000 and in successive years, you are +20% and -20%, your end result is: A. >$100K B. <$100K C. Even Same scenario, but -20% and then +20%: A. >$100K B. <$100K C. Even It's easy after you do the math, but some find it surprising that in both cases, you end up with $96,000. You lose money in either scenario. Its a scary thought given the up and down annual returns of the stock market.
Hedging Against Energy Prices, Part 3:An Improved Energy Hedging Strategy?
The first and second posts in this series look at my Exxon and Chevron investments and how well they have hedged against my increased monthly gas spend as a result of higher gas prices. This post details my proposed idea to make a investment hedging strategy that combines two ideas, the use of investment hedging against energy with the benefits of dollar cost averaging. OverviewAnyone today who uses personal finance software such as Quicken or MS Money can easily track their monthly gas spend. You can combine this very valuable information with the dollar cost investing technique to create an investment/energy hedge strategy I think offers some pretty neat benefits - lets take a look. The IdeaBudget a fix amount every month to spend on your household gas expenses and energy hedge investment. At the end of the month, any amount remaining that you haven't spent on gas invest in your energy hedge. Step by Step Step 1) Calculate your monthly gas spend for each month for the past 12 months. In my case the table below represents the last 12 months: Sep-04 | Oct-04 | Nov-04 | Dec-04 | Jan-05 | Feb-05 | $ 76.16 | $ 121.31 | $ 61.33 | $ 48.03 | $ 92.25 | $ 97.04 |
Mar-05 | Apr-05 | May-05 | Jun-05 | Jul-05 | Aug-05 | $ 254.88 | $ 214.95 | $ 189.76 | $ 185.00 | $ 239.63 | $ 80.06 |
Step 2) Calculate the amount you want to budget toward monthly gas spend + hedge investment. To keep it simple I decided to set this amount at roughly twice my current average monthly gas spend, however it could be any amount that is above your monthly gas spend. I decided on twice my average because I just moved in July and my move should reduce my monthly gas spend. If I hadn't moved I would have selected 3 times my average spend (see simulation below). Average Monthly Gas Spend = $138.37 Budgeted Energy Spend = Roughly 2 * Avg Monthly Gas Spend Budgeted Energy Spend = ~(2 * $138.37) Budgeted Energy Spend = ~($276.74) = $280.00 Step 3) Determine your energy investment. This series of posts has detailed ( Exxon and Chevron as possible choices) two energy investments that I currently have positions in. Based on the review of these stocks I would like to continue to add to my Exxon stock holdings because I feel it has performed very well as an energy hedge. Step 4) At the end of the month, deduct your monthly gas spend from your budget, and invest the remaining amount into your investment choice. For the month of September, I have spent $108.78 on gas. Assuming I don't spend anymore on gas for the month, I'm going to log into my DRIP account at Equiserve and request an electronic transfer to purchase $171.22 of Exxon stock. Historical Performance SimulationSince I haven't actually tried this strategy yet I thought I would look at some historical data to tell me hypothetically how well it would have performed in the past year. Lets assume I had been following this strategy for one year. Well first lets see what my Budgeted Energy Spend would have been: Sep-03 | Oct-03 | Nov-03 | Dec-03 | Jan-04 | Feb-04 | $ 85.42 | $ 79.74 | $ 95.95 | $ 50.28 | $ 59.69 | $ 105.22 |
Mar-04 | Apr-04 | May-04 | Jun-04 | Jul-04 | Aug-04 | $ 59.55 | $ 125.05 | $ 113.14 | $ 50.04 | $ 120.43 | $ 97.54 |
Average Monthly Gas Spend = $86.84 Budgeted Energy Spend = ~(3 * $86.84) Budgeted Energy Spend = $261 So with a Budgeted Energy Spend of $261/mo, the last 12 mos would have resulted in the following: Sept 2004-Aug 2005 Improved Energy Hedge Strategy
| Sep-04 | Oct-04 | Nov-04 | Dec-04 | Jan-05 | Feb-05 | Monthly Gas Spend | $ 76.16 | $ 121.31 | $ 61.33 | $ 48.03 | $ 92.25 | $ 97.04 | Remainder for Invest | $ 184.84 | $ 139.69 | $ 199.67 | $ 212.97 | $ 168.75 | $ 163.96 | Exxon Stock Price | $ 46.42 | $ 48.84 | $ 49.68 | $ 49.41 | $ 50.32 | $ 55.55 | Shares Added | 3.982 | 2.860 | 4.019 | 4.310 | 3.354 | 2.952 |
| Mar-05 | Apr-05 | May-05 | Jun-05 | Jul-05 | Aug-05 | Monthly Gas Spend | $ 254.88 | $ | $ 189.76 | $ 185.00 | $ 239.63 | $ 80.06 | Remainder for Invest | $ 6.12 | $ 46.05 | $ 71.24 | $ 76.00 | $ 21.37 | $ 180.94 | Exxon Stock Price | $ 60.44 | $ 55.63 | $ 53.44 | $ 58.10 | $ 59.11 | $ 61.05 | Shares Added | 0.101 | 0.828 | 1.333 | 1.308 | 0.362 | 2.964 |
Number of Shares Purchased: 28.372 Total Amount Invested: $1471.60 Avg Share Price: $51.87 Now lets compare these results to a hypothetical dollar cost averaging strategy for the past year. To keep the comparison fair, we'll assume the dollar cost averaging strategy will invest approximately the same total amount of $1470 or $122.50/mo. Sept 2004-Aug 2005 Dollar Cost Average Strategy Simulation
| Sep-04 | Oct-04 | Nov-04 | Dec-04 | Jan-05 | Feb-05 | Exxon Stock Price | $ 46.42 | $ 48.84 | $ 49.68 | $ 49.41 | $ 50.32 | $ 55.55 | Shares Added | 2.639 | 2.508 | 2.466 | 2.479 | 2.434 | 2.205 |
| Mar-05 | Apr-05 | May-05 | Jun-05 | Jul-05 | Aug-05 | Exxon Stock Price | $ 60.44 | $ 55.63 | $ 53.44 | $ 58.10 | $ 59.11 | $ 61.05 | Shares Added | 2.027 | 2.202 | 2.292 | 2.108 | 2.072 | 2.007 |
Number of Shares Purchased: 27.440 Total Amount Invested: $1470.00 Avg Share Price: $53.57 Results The net gain over the dollar cost averaging strategy was an extra 0.932 shares and the averaged share price was reduced from $53.57 to $51.87, an improvement of 3.28%. I'll take it - I like the potential here. Keep in mind this is the additional benefit from this strategy as compared to dollar cost averaging. I think in practice the difference between dollar cost averaging and this improved energy hedging strategy will actually be greater because in this simulation we already knew how much we would spend over the course of the year and used that amount in the dollar cost averaging strategy. Other Pros/Cons of this Improved Energy Hedging strategyPros-Combines 2 techniques to give you a more amplified hedge against energy prices -all the benefits of dollar cost averaging -makes budgeting for gas easier by smoothing the monthly spend on gas -hedges against energy prices increases -can all be done electronically by tracking gas spend in pf software and then making a monthly electronic purchase of stock using DRIP account Cons-Requires a little more work to do the monthly calculations I like some of the benefits this strategy could offer me to hedge against energy prices and improving my ability to budget my gas expenses. I plan to give it a try for the next year and see how I make out.
Hedging Against Energy Prices, Part 2:Chevron Stock Performance vs Gas Prices
Earlier I took a look at my Exxon investment as a hedge against the rise of energy prices. The result was a very compelling argument for an investment in Exxon (XOM) to hedge against energy prices. I have also made investments in Chevron (CVX) and I wanted to see how well it helped me hedge against the rise in energy prices. Just like with the Exxon stock, lets compare Chevron stock price to the change in the price of gas. I'll use my estimated historical gas prices from the charts at raleighgasprices.com to track gas performance. I also took historical stock prices from Yahoo!Finance to pull the closing price of Chevron stock on the 1st trading day of each month.  The first thing that jumped out to me was the ROI was significantly greater as of August 2005, Exxon 83.97% vs Chevron 101.71%. However keep in mind this comparison is in regard to stock price only, dividends were not included in this analysis. Also of note the Pearson Correlation in this analysis is 0.8745 which indicates there is a strong positive correlation in Chevron stock to local gas prices in this comparison (this is for illustrative purposes and doesn't necessarily indicate future correlation). This is compared to a Pearson Correlation of 0.8917 for Exxon stock for the same time period. Between the two stocks, Exxon appears to be slightly more correlated to local gas prices than Chevron, but not significantly. Now lets see how my Chevron Dividend Reinvestment Plan (DRIP) account faired: Chevron DRIP Account | Annual Investments |
| Based on 9/14/2005 Price | Year | Invested | Shares | Value | Profit | ROR | 2001 | $ 503.82 | 10.9888 | $ 687.35 | $ 183.53 | 9.11% | 2002 | $ 15.59 | 0.3952 | $ 24.72 | $ 9.13 | 19.52% | 2003 | $ 16.55 | 0.4542 | $ 28.41 | $ 11.86 | 35.83% | 2004 | $ 18.34 | 0.3778 | $ 23.63 | $ 5.29 | 28.85% | 2005 (YTD) | $ 16.01 | 0.27149 | $ 16.98 | $ 0.97 | 6.07% | Total | $ 570.31 | 12.48749 | $ 781.09 | $ 210.78 | 19.88% |
Notes: ROR=Rate of Return; ROR is calculated annually; *Averaged ROR; dividends reinvested are aggregated into yearly "Invested" column; actual ROR is higher because dividends paid are not calculated in ROR. Surprisingly enough this analysis shows that my Chevron stock didn't fair as well as my Exxon stock. This could be explained by investment timing, but is at least partially attributed to the small amount of Chevron stock I purchased compared to the fees which are included in the 'Invested' column to open the DRIP and buy stock ($10 to open, $1 each purchase) where my Exxon DRIP had no account opening or purchase fees. Based on this I believe my Exxon investment has had a better total return on investment. I think I will continue focus my future energy investments to Exxon stock. In my next post I will discuss an idea I have for improving my hedging strategy with a modified dollar cost averaging technique.
CF - Results for Week 3, Picks for Week 4
Background on my bad habit. Recap of Week 3: Account Balance: $331.29 Deposited 9/17/05: $50 + $10 bonus | Trans Date | Wager | To Win | Result | Description | | 9/16/05 | $10 | $9.10 | Won | VT(-34) over Ohio (VT 45, Ohio 0) | | 9/17/05 | $10 | $6.90 | Won | Pitt (+10) over Neb (Neb 7, Pitt 6) | | 9/17/05 | $25 | $10.04 | Won | UF over Tenn (UF 16, UT 7) |
Wow! 100% track record - I think this is the 1st time I have ever had a perfect pick weekend. Lets see if it will continue. Current Balance: $417.33 Net Deposit: $250, Current Profit: $167.33 (ROI 67%) Note: Wow this is currently looking like the best investment I have! Picks for Week 4: I like VT, Tenn(+7), and NCSU this week. I have only locked in on VT so far, the LSU vs Tenn game has been rescheduled for Monday. I am going to watch the NCSU line and might grab it if it gets back to NSCU (-10). | Trans Date | Wager | To Win | Result | Description | | 9/22/05 | $10 | $7.69 | TBD | VT(-10) over GT |
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Bought 2 small gas tanks last night at Walmart...
 Call me crazy but I was walking around the local Walmart last night after work and decided to purchase (2) gas tanks for $3.12 apiece + tax. The adjacent gas station still had gas posted at $2.59 a gallon which was suprisingly low for the area. So headed over to the gas station and filled them with 4.276 gallons of gas for $11.11. Crazy? Maybe. Bad decision from a personal finance perspective? Lets see. So my net cost for the gas tanks was 2 x ($3.12 + $0.22 [sales tax]) = $6.68 and my net cost for the gas was 4.276 gallons x $2.59/gallon = $11.11. I use about a tank of gas (about 11 gallons) every 5-7 days which means even if gas prices spike for 2 weeks after the hurricane I will need to refill during this period. Lets run 3 quick scenarios assuming everything else is equal: | Scenario | Value of Gas | Savings on Gas | Result | | $5/gallon for ~2 weeks | $21.38 | $10.27 | $3.59 | | up $1/gallon to $3.59 for ~2 weeks | $15.35 | $4.24 | ($2.44) | | gas prices stays the same | $11.11 | $0.00 | ($6.68) | Well the results are mixed on simply saving money by buying the tanks and filling them up. However, I think there are some big benefits not highlighted in these scenarios: 1) I can save the tanks till the next hurricane type event and they won't cost me a thing. 2) The hurricane completely disrupts our gas supply chain making gas unaccessible for weeks thereby making it one of the most precious commodities available and I have 4.276 gallons more than most people. I figure a sunk cost of $6.68 is maybe along the lines of the "Be Prepared" scout motto more than anything. Its worth it to me to reduce my exposure to the unknown event that maybe coming. I will follow up when I use this gas and see what the end result is. Hopefully I'll be able to report that it was a complete lost of $6.68.
Just Earned an Easy Amex $10 Gift Card
Found this link on slickdeals.net this afternoon. Watch the 5 min tutorial, answer a few question in the Amex Open Network survey and they claim they will send you a $10 Amex gift card within 6-8 weeks. I love freebies like this - easy money.
Emigrant Direct now at 4.0% APY
Just got an email that Emigrant Direct is raising their rate to 4.0% APY guaranteed till year-end. This is great news - another extra couple $$ in interest this year. I find it interesting that this increase happened in lock step to the federal fund rate hike today. I take that as good news as it will make it much easier to benchmark a low risk, cash ready investment if it continues to move in concert to federal fund rate changes. Also of note the email mentioned Emigrant Direct was going to introduce a "no-fee credit card from EmigrantDirect offering the highest cash back rebate in the country on all your purchases". Since they currently have the largest APY on a savings account I can find, I expect this credit card might also be worthy of a look. Update: I ended up moving the remaining $4k I had in ING into my Emigrant account since it is clear I would recoup any lost interest since they are paying .7% more.
Signed up for the HSBC Online Savings Account
I received a flyer in the mail yesterday from HSBC for an offer to sign up for their Online Savings Account currently yielding 3.75% APY that included a $25 bonus. Since it is .25% higher than Emigrant-Direct (my main savings account) I decided to give it a try. Highlights from the offer: -Offer expires October 31, 2005 (Note: If I remember correctly I saw on the web site that the offer expires September 30, 2005, not sure which is true) -No monthly fees, no minimum term -Open an account with as little as $1 -Free transfers -Free HSBC ATM card (these seemed handy to me, no need to transfer money to my checking account before I can get to cash) -$25 will be deposited in account within 45 days of account opening Link to offer http://us.hsbc.com/ratesI signed up last night for my account. I was able to do everything online and link it to my Emigrant-Direct account for my initial deposit. I was a bit disappointed because the web site looked like it did pull my credit file as it asked my questions about other accounts I have, not sure why a savings account needs a credit check. This will be my 3rd online savings account. I also have accounts with Emigrant-Direct (3.50%) and ING Direct (3.30%). I'll post a follow up when I confirm I received my bonus money from HSBC.
Reducing Dining Expenses
I spend a fair amount every month on dining out expenses. I go out to eat lunch everyday with a group at work and my girlfriend and I usually go out 1-3 nights a week and I typically pick up the bill. So far I have really only done a couple things to reduce these expenses: 1) Signed up for a Bank One credit card that offers 3% rebate on restaurants. 2) All of my cards are on a free dining rewards account so I can earn airline miles if I go to a participating restaurant automatically. 3) Use restaurant coupons received in mailings such as ValPak. 4) Coupon Books - I also bought "Enjoy the City" ($10) and Entertainment ($15) coupon books this year. These books are very useful and I have saved significant money with them since I am usually buying for 2 anyway. My original plan this year was to just buy the "Enjoy the City" book at the beginning of the year, however I ended up buying the Entertainment book in May when the price fell to $10 + $5 shipping. It ended up working out very well, I was able to use most of the good coupons from the "Enjoy the City" book early in the year, then I was able to get the Entertainment book for essentially 1/2 price (normally $30) and maximize my return on investment.
Hedging Against Energy Prices, Part 1:Exxon Stock Performance vs Gas Prices
A review of my current hedging strategy on energy prices. When I started my job in 2001 one of the strategies I planned with my savings was a hedge on rising energy prices. I ended up investing a modest amount in Exxon and Chevron thinking that if energy prices went up significantly both of these companies would benefit. With my recent attention on gas prices, I thought it would be a good time to review this strategy. First lets take a look at the price change of Exxon's stock compared to the change in the price of gas. I'll use my estimated historical gas prices from the charts at raleighgasprices.com to track gas performance. I also took historical stock prices from Yahoo!Finance to pull the closing price of Exxon stock on the 1st trading day of each month. 
Interesting side note: A quick look at some statistics with this data - I calculate the Pearson Product Moment Correlation Coefficient for this data set as 0.89 (a strong positive correlation). This also suggests that 79% of the stock price change is correlated with the price of gas. Keep in mind the gas prices are estimated and this was done for illustrative purposes only.
This data shows even a better correlation than I expected between Exxon stock and average gas prices in Raleigh. This information could be useful for future planning.
Now lets take a look at my Exxon stock holdings in my DRIP:
Exxon DRIP Account | Investments |
| Based on 9/14/2005 Stock Price | Year | Invested | Shares | Value | Profit | ROR | 2001 | $ 602.83 | 15.049 | $ 940.11 | $ 337.28 | 11.75% | 2002 | $ 520.43 | 13.733 | $ 857.90 | $ 337.47 | 18.13% | 2003 | $ 588.10 | 16.494 | $1,030.38 | $ 442.28 | 32.36% | 2004 | $ 99.74 | 2.313 | $ 144.49 | $ 44.75 | 44.87% | 2005 | $ 40.64 | 0.672 | $ 41.98 | $ 1.34 | 3.30% | Total | $1,851.74 | 48.261 | $3,014.86 | $1,163.12 | 22.08%* |
Notes: ROR=Rate of Return; ROR is calculated annually; *Averaged ROR; dividends reinvested are aggregated into yearly "Invested" column; actual ROR is higher because dividends paid are not calculated in ROR.
On the surface I have been averaging a ~22% rate of return (on stock price only) for money invested in Exxon stock, a fantastic return for a blue chip stock. I have obviously benefited well from the Exxon stock price, but how has this helped me to hedge against rising gas price? First lets see what has happened to my average monthly gas spend since 2001. Since November 2001, my 3 month rolling average has increased $88.75/month, or if things level off, an estimated $1065/year.  My net profit from the Exxon investment (excluding selling costs and taxes) is currently $1,163.12. While my estimated annual gas spend has increased $1065, my net worth has increase more than enough to offset this while still earning a 1.9% dividend. However, this hasn't really helped me hedge against the long term impact of rising gas prices, I have only been able to offset a year's worth of additional gas spend. If gas prices remain the same, I have essentially hedged against paying a year's worth of the gas increases, but nothing more. In future posts, I'll review my Chevron stock to see if it has performed as well, and I will discuss an idea I have for improving my hedging strategy.
August 2005 Net Worth Update (+$2,050)
Ok here is my 1st net worth statement. This is my second worst month of the year for me so far. Balance Sheet:
| Jul-05 | Aug-05 | Change | % Change | Cash & Equivalent | $ 4,347.87 | $ 5,317.73 | $ 969.86 | 22.31% | Saving | $ 17,473.35 | $ 36,034.15 | $ 18,560.80 | 106.22% | Brokerage / DRIPs | $ 38,885.49 | $ 39,242.72 | $ 357.23 | 0.92% | Roth IRA | $ 19,106.70 | $ 19,182.86 | $ 76.16 | 0.40% | 401(k) | $ 61,737.40 | $ 62,923.82 | $ 1,186.42 | 1.92% | Stock Option | $ - | $ - | $ - |
| ESPP | $ 26,526.85 | $ 25,853.03 | $ (673.82) | -2.54% | Home Equity | $ 39,776.61 | $ 39,953.80 | $ 177.19 | 0.45% | Other Assets | $ - | $ - | $ - |
| Receivable (Payable) | $ - | $ - | $ - |
| Reserve Funds | $ - | $ - | $ - |
| Loans | $ (25,566.84) | $ (44,169.73) | $ (18,602.89) | 72.76% | Tax Liability | $ - | $ - | $ - |
| Total | $ 182,287.43 | $ 184,338.38 | $ 2,050.95 | 1.13% |
Note: All credit card debt is in the form of 0% balance transfers or is current month spending which will be paid off in next billing cycle. Significant Events for August 2005: -business trip with almost 3 weeks of expenses on credit card, in process of being reimbursed -took advantage of an additional 0% BT offer from Citibank resulting in a $17500 loan that was moved into a savings account I have decided to present my monthly net worth in the above format. I think this is perfect because it will be very easy to benchmark with other bloggers and will accurately capture any changes to an accrual based method in the future.
CF - Results for Week 2, Picks for Week 3
Background on my bad habit. Recap of Week 2: Account Balance: $255 Deposited 9/8/05: $50 + $10 bonus | Trans Date | Wager | To Win | Result | Description | | 9/7/05 | $25 | $21.74 | Won | VT(-20.5) over Duke (VT 45, Duke 0) | | 9/9/05 | $10 | $3.57 | Lost | UM over ND(ND 17, UM 10) | | 9/9/05 | $5 | $4.55 | Won | LSU over ASU(LSU 35, ASU 31) |
Current Balance: $331.29 Net Deposit: $200, Current Profit: $131.29 Picks for Week 3: I am not finding any lines that I think are out of sync. This means I should probably not make any wagers this week, but I know I will, hopefully I will just try and keep them to a minimum. I was leaning towards putting $5 each on VT (-34), and UF (-6.5), however I decided I will just put $5 for now on VT and see if I can get a moneyline for UF 1st. I think UF will win, I just don't know by how much. | Trans Date | Wager | To Win | Result | Description | | 9/16/05 | $5 | $4.55 | TBD | VT(-34) over Ohio |
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Back in the beginning of August I read this post over at mymoneyblog.com about a scheme to get a free $50 investment from  ShareBuilder. Sounded perfect to me, but there was one problem, I wasn't a member of Costco. However a quick search on fatwallet.com turned up a similar offer for First National Bank of Omaha (there are several offers available). I am not a member of this bank either, but apparently anyone can use the offer. So I signed up, deposited $50 into my account, bought some Microsoft stock (had the same problem that JP had with only buying $42 worth of stock). However, the good news is I got my $50 bonus this morning so I can withdraw that and let my $42 worth of MSFT turn me into a millionaire, eventually. I think I will for now go ahead and pull out all $54 so I can say I already made a $4 profit on this endeavor. Heres the email: Thank you for participating in our promotion. We have just credited your First National Bank Omaha ShareBuilder Account.
You can invest the extra money in your Money Market Cash Balance by modifying your ShareBuilder Plan. Under the "How do you want to fund your plan?" section, select the "Money Market Cash Balance" option. Be sure that the total investment amount is not more than the available cash balance in your account.
To invest with your ShareBuilder Plan, visit the Manage Your Account tab and choose Manage ShareBuilder Plan.
If you have any questions, please contact Customer Care.
Thank you for selecting First National Bank Omaha ShareBuilder !
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Inspiration for the day
I saw this quote on Motley Fool the other day and I love it - I need to tuck this one away for when I am thinking about a value investment decision. "Be fearful when others are greedy. Be greedy when others are fearful" - Warren Buffett
Making Room, Making Money
Since I recently moved out of my house, I have come to realize I have a lot more stuff than I thought. I have been trying to get rid of it and generate some extra cash. I have a large collection of books, mostly from school. For some reason I love to buy the book I am reading - perhaps because I will always have it to reference. So I have been going through and picking out a few that I can't imagine needing in the future and putting them on half.com. I really like to sell and buy on half.com because it lumps all of the same items together and lets you see different price points for the condition of the item. I have posted a couple odds and ends on eBay. I never liked eBay all that much because it always seems like a lot of work to list something and you end up getting nickeled and dimed. The one site I think that has more potential is craigslist. The best way I think to describe it is a classified ad web site. Its great because its free to post things and organized by cities. I used it with amazing success when I rented out my house a couple of months ago. However, I haven't tried selling any of my stuff on craigslist, I imagine big things that are not easily shippable such as tvs are better sold on it. So far I have cashed in on $95.78. Now if I could find away to multiply this by at least x100, I might be on to something. Whats interesting is all of these sites are at least partially owned by the same company........
This Blog's Disclaimer
Ok before I continue, I thought I ought to post a disclaimer for the blog. 2million.blogspot.com's Disclaimer:The information provided on this site is not financial advice and I am not a financial professional. This is a journal that details my investments, strategy, and analysis for personal use. Feel free to read at your own risk. Also, all views on this site are my own and don’t necessarily represent IBM’s positions, strategies or opinions. Whew! Now that we got that out of the way we can continue......
Housekeeping Items
Some housekeeping for the blog I have been working on: -offically picked a title "2million - My Journey to Financial Freedom" -modified the template to get rid of some of the icons that I wasn't crazy about -reduced the footer -signed up for Feedburner.com for an RSS feed -added a blog roll from Bloglines-submitted the site to Google and Yahoo search engines -registered the site at Technorati a blog search engine -signed up for Blog Explosion to increase site traffic -added a site counter
The upside to high gas prices
I like most people get angry and fustrated everytime I have to put gas in my car. We are all at the mercy of oil prices and oil prices haven't been kind to us recently. Even Bill Gates and Warren Buffet have to pay more at the pump (although they may have someone else at the pump for them).  The only thing that seems to bring me any comfort when I see gas prices continue to climb is this - these prices will force innovation and change among us for the better. I get excited because I know these higher gas prices will bring change to the American car buyer that will ultimately lead to new innovation in transportaion in America. Plug-in hybrids that may allow us to use no gas on short commuter trips seems to me to be the next big step. I calculate I probably spend $6 on gas/day on my commute to/from work. To be able to plug in the car at night and go to work for < $1/day seems like a good return on a moderate investment, including the relief of high dependence on oil prices. It may be that the higher gas prices we pay now will help prevent us from paying even higher gas prices in the future.
Free Books!
Just found this link on slickdeals.net this morning: Free Book ProjectI have not downloaded any books but I plan too - I have been looking for some audio books to listen to on the way to work and the local library here doesn't offer any. They have ebooks and some audio books too. Can't beat free.
CF - Wagers for Week 2
Background on my bad habitOk I have 2 picks so far for week 2 - VA Tech (-20.5) and Michigan to win. You may notice I have been moving more and more money into my account. This allows me more flexibility and I get to maximize the bonus money. My intent is to still only risk up to $100 (+ winnings) for the season. Account Balance: $255 Deposited 9/8/05: $50 + $10 bonus | Trans Date | Wager | To Win | Result | Description | | 9/7/05 | $25 | $21.74 | TBD | VT(-20.5) over Duke | | 9/9/05 | $10 | $3.57 | TBD | UM over ND |
Current Balance: $280 Sign up for Bodog Sportsbook! and use my referral number P78BAC Full Disclosure: I may receive a commission for people who join Bodog.
Comparing Gas Spend to Gas Prices
I found raleighgasprices.com which had the best information I could find on local gas prices (turns out lots of cities have these sites as well). It didn't have avg historical prices, but it did have a 3 yr chart with avg raleigh gas prices so I was able to estimate a monthly avg from the chart for the past 3 yrs, not great, but good enough to compare to my gas spend. FYI: I drive a 1998 Nissan Sentra GXE with a EPA Fuel Economy rating of 27 city, 36 hwy.  If nothing else this helps identify months where I had used significantly more gas (such as 06/2003 and the earlier part of 2005). However, I definitely see why I feel like I am spending alot more on gas. Back in 2001 I had set my gas budget to $75 a month, my 3 month rolling avg gas spend has gone from ~$71/mo at the end of 2001 to ~$168/mo in 8/2005 - that is more than a 136% increase! Not fun. My income has roughly only risen ~31% in the same time frame (which I thought was pretty good).
Gas Spending
 I was complaining the other day about the amount I was spending on gas to some co-workers so I thought I would pull out my gas spending from MS Money. I am not sure whether some of the avg increase since early 2005 is attributed to gas prices or increasing travel. I'd like to see if I can correlate this chart to avg gas prices and see what relationship there is - it may help explain which month's expenses were due to more driving.
List of DRIPs I participate in
Here is a quick list of DRIPs I currently participate in: | DRIP | Est. Value | % | | Bellsouth | $3800 | 6.73% | | CMS Energy | $900 | 1.59% | | ChevronTexaco | $700 | 1.24% | | Duke Energy | $2100 | 3.72% | | Edison International | $500 | 0.88% | | ExxonMobil | $2800 | 4.96% | | General Electric | $2800 | 4.96% | | IBM | $25700 | 45.49% | | Lowes | $900 | 1.59% | | Medco | $100 | 0.17% | | Merck | $3700 | 6.55% | | Medtronic | $3600 | 6.37% | | Pepco Energy | $400 | 0.71% | | Pfizer | $10800 | 19.12% | | Proctor & Gamble | $1600 | 2.83% | | Total | $56500 | |
I will slowly add posts to give some rational for each of these investments. All of them reinvest their dividends except Bellsouth & IBM (ESPP).
Tracking My Progress
I am trying to determine the best/easiest way to report my monthly progress. I would like to report a easy to create net worth chart with assests & liabilities, etc. I would also like to have it similar to other blogger's monthly reports for easy benchmarking. I mainly follow 2 personal finance blogs that I benchmark myself with: - PFBlog - Example Monthly ReportAdvantages:-Captures monthly highlights -Great snapshot, contains alot of info, very concise -Lots of similarities between myself and MM (both work for tech companies, same age, etc) so I think closer benchmarking to him would be more benefical Disadvantages:-MM accounting methods differ somewhat from mine -he uses more of an accrual accounting method - I like to take the path of least resistance for now (more cash method) so benchmarking isn't may not be apples to apples (but it should be pretty close). -Monthly report looks like it will be a much bigger hassle to put together thus more prone to not reporting in a timely manner, etc. - MyMoneyBlog - Example Monthly ReportAdvantages:-Simpler reporting Disadvantages:-Reporting may be too simple and not give enough detail for me I will have to think about this......
Why 2 million?
I could try to give a long insightful breakdown of why I think $2 million is the amount I need to be financially free, but I won't. I'll give you a quick breakdown instead. If I assume a conservative rate of return of 5%, $2 million in cash & assets (excluding my home) should provide about $100,000 in passive income per year. What about inflation you ask? Well I think this goal assumes inflation will be pretty tame for the next 20 yrs - and that $100,000 will still provide for an upper middle class lifestyle (albeit maybe not as great as it would today). If inflation becomes significant and I don't take advantage of it accordingly, I admit I may need to restate this goal. I think this is a very simple goal. I certainly hope I will be able to get a better rate of return than 5% and I hope my net worth will continue to grow past $2 million, but I feel this is the perfect high level goal that will enable me to lead an upper middle class life without meaningful financial worries and free to pursue my life's passions and opportunities.
I am currently homeless....
As I posted earlier I bought a 3 bedroom house in July 2002. I had been working for about 1 year and I realized that decided that the next big step in my strategy for reaching my goal of a net worth of $2 million + the value of my home was to buy a house. I am single, I knew I would live there for a certain amount of time, but I knew I would probably move out in 3-7 yrs for whatever reason so I wanted to make sure I could turn this into a profitable investment. I thought I could use this to my advantage. So here was the strategy I took. I bought a 3-bedroom house with excellent rental potential - the only issue was the numbers didn't work out to be a very profitable investment. I figured I would buy it at current market conditions as best I could. Then I would live in it until the rental income numbers work out to a profitable investment. I purchased this house for $160,000 and the going rate for this type of property at the time was roughly $1000/mo. However I needed it to be roughly $1200/mo till it made economic sense to rent it out. Something that was beneficial that I didn't really anticipate was an additional drop in interest rates - I was able to refinance with no additional costs to reduce the required rental income for breakeven to $1150/mo. So within the last 2 months it finally happened! I was able to rent my house out mid-july for $1200/mo. I just moved all my stuff at the end of July into a friend's house in which I a renting a room and am currently basically homeless but am loving it! I am so happy with the results of this plan I feel like I should try and do it again. Unfortunately housing prices have gone up so much I am not sure its a good idea......
Results - Wager for Week 1
Wow! What a game. It was closer than I hoped but it is a great start to the football season. With this 1st wager I have effectively made a 100% return and the season has just started. The smart thing to do would be to declare victory and take my money out, but there is still a long season ahead. Starting Amount on 8/30/05: $100 + $20 bonus Depoisted $50 on 9/4/05: $50 + $10 bonus | Trans Date | Wager | To Win | Result | Description | | 8/30/05 | $100 | $80 | Win | VT(-3) over NCSU (Final:VT 20, NCSU 16)
| | 9/4/05 | $50 | $46 | Push | VT(-4) over NCSU (Final:VT 20, NCSU 16) |
| 9/5/05 | $5 | $2.94 | Lost | UM over FSU (Final:UM 7, FSU 10) |
Current Balance: $255 Sign up for Bodog Sportsbook! and use my referral number P78BAC Full Disclosure: I may receive a commission for people who join Bodog.
My DRIP Strategy
My DRIP strategy is pretty simple, not necessarily smart. I take savings monthly and simply direct them to DRIPs that usually meet 2 criteria: 1) are "under water" and 2) still look like reasonably attractive investments I don't always do this but as a rule of thumb that is my approach. Currently the DRIP that I have focused on for the last couple years has been my Pfizer DRIP. I started investing in Pfizer shortly after 9/11. I have continued to invest in additional Pfizer stock as often as I can as the stock has continued to go down. Kind of a modified dollar cost averaging down approach.
A Bit of My Personal Finance History
Here is a chart of my net worth reported via the "Net Worth Over Time" report in MS Money:  The months of 7/02 , 7/03, 9/03 are inaccurate because I purchased a 3 bedroom home in 7/02, refinanced the 1st mortgage in 7/03, then refinanced the 2nd mortgage in 9/03 and for some reason I have not gotten around to figuring out how to prevent those transactions from throwing those months out of whack. I like this chart because overall it shows a very consistent grow with increases in net worth just about every month since I started working in 8/2001. My net worth has grown tenfold over the past 4 years to roughly $180k as of 8/2005. However it is pretty linear - I of course had hoped grow would be more exponential :-).
Just sent a check in to my Merck DRIP
After last week's news of the Vioxx award in Texas I decided it was a good opportunity to add to my Merck stock position. At roughly ~$28 a share, Merck is now sporting a dividend yield of ~5.4.%. Forget everything that is going on right now with the Vioxx headlines - getting a 5.4% yield on a drug stock is incredible. In 10 yrs Vioxx will be over and the company will be back on track. Until then I am getting handsome yield of 5.4%. I think this is an easy decision. I mailed a check in for $1005.00 to my Merck DRIP ($5 purchase fee, $1000 for stock purchase). I will keep my eye on this stock and may continue to add to my DRIP. | Update to Purchase: | | Optional Investment Fee: | $5.00 |
| Optional Purchase of 35.54 shares @ $28.13 | $1000.00 |
| Total: | $1005.00 |
In terms of ROR for $1005.00 I am getting a yield of $54.02 per year. My plan - collect $54.02 for 5-15yrs then sell after the stock doubles ;-). I am so excited about this I am already disappointed I didn't send more money in. If the stocks dips back down into the $27s I'll probably send some additional money in.
My Personal Finance Goal
As I mentioned earlier my primary goal is to reach a net worth of $2 million excluding my home. I have been steadily working towards this goal since I starting working in 8/2001. One of my goals for this blog is to help me fine tune my strategy for achieving this goal. I have been working toward this goal for 4 yrs and have many ideas on how to reach it but I don't have a clear strategy for getting there. If I had to articulate my current strategy it would be to save as much as possible and invest my savings in investment vehicles that appear to offer the best rate of return for me. In the past 4 years these investment vehicles have primarily included buying stocks mostly in a variety of DRIPs (dividend reinvestment plans) and buying a 3 bedroom house in 7/2002.
Frequent Flyer Miles/Hotel Points Results for August Business Trip
My nearly 4 week trip resulted in a nice inflow of points and miles.
| Program | Amount Earned | Bonus Earned | Total | Description | | Skymiles | 7142 | 7142 | 14284 | all airline flights on delta for trip | | AAdvantage | 900 | 0 | 900 | reward for 2 budget car rentals | | United | 1000 | 0 | 1000 | 2 stays at Hilton hotels @ 500 per stay | | HHonors | 5764 | 5161 | 10925 | 2 stays at Hilton hotels |
| Priority Club | 11180 | 15617 | 26797 | 12 nights at Holiday Inn hotels |
Overall not a bad trip. I earned a little over 1/2 a domestic flight and enough hotel points for about 1 1/2 free nights. While I would take cash any day over miles/points I can't complain - these will come in handy next time we want to take a vacation. Referral link to sign up for Free HHonors rewards program and my account number is 823780035. Full Disclosure: I will earn bonus points if you sign up for this program.
I just made a $25 donation to hurricane relief via the Red Cross. I have been glued to the news media for the past couple of days and shocked at the disaster. I am half tempted to drive down to New Orleans with my car and start driving people out of the city. Instead I decided a monetary donation would probably be more appropriate.
College Football Opening Weekend - Wager for Week 1
The season begins! I recently decided to keep track of my collge football wagering to see how it benefits or hinders my progress to reach my personal finance goals. On Monday I funded my Bodog sportsbook account with $100 of fun money for the season. I use Bodog primarily because I have been using them for years and I know I am not going to get ripped off using the site. I actually received a 20% bonus of $20 so my actual account balance is $120. I will be tracking my results weekly. Current Balance: $120 | Trans Date | Wager | To Win | Result | Description | | 8/30/05 | $100 | $80 | TBD | VT(-3) over NCSU |
Rational: I have placed a $100 wager on VT (-3) to win $80. My plan here is to take a big risk upfront. I normally only make wagers $5-$25 so as you can see this already breaks my strategy of small wagers. I am actually pretty confident - if there is a time of the year when the point spread is not accurate its the 1st game of the season. However I keep close watch of the team during the offseason, track their progress and feel pretty confident that the team will make a statement. Sign up for Bodog Sportbook! and use my referral number P78BAC Full Disclosure: I will receive a commission for people who join Bodog.
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