AskDong

I was featured in the recent Carnival of Personal Finance #122. I didn’t make the editor’s choice, but that’s ok. I thought I would feature some other articles that I liked that but weren’t picked for the A team.

• Mrs. Micah tells us how we can find find freelance jobs in our free time. I personally don’t have time currently to do any freelancing, but it’s certainly something I want to keep in mind as a option
• The Dividend Guy informs us how we can track dividend hikes. Rising dividends are usually a good stock indicator, and who doesn’t like to get paid on a regular basis?
• Eden at Our Family Village gives tips on eating healthy without breaking the bank. I agree but tell that the people shopping at Whole Foods!
• Curtis at Real World Finance debunks the myth that a flat tax would benefit the poor. That’s certainly a myth I haven’t heard.  I’ve always been a opponent of the flat tax because it would be too complicated to make the tax fair for the lower income families and individuals.
• Penny Nickel offers a guide to socially conscious gas consumption. I’m a big believer of socially conscious consumption, but generally pooh pooh socially conscience investing. Not sure I agree with Penny about Citgo and Venezuela.
• Plonkee debunks the common excuses for not giving to charity. I agree.  Give early and give often.  I know I could personally do better in my own giving.

Some of us write posts about the simple life, and some play the simple life on tv, but few of us actually do it. This past weekend I spent a good amount time chatting with my brother about an old friend of his from college with whom he had just met up with for lunch. His friend and his wife whom I’ll Joe and Susan both went to the same college with my brother, a top liberals art college in the northeast.  Joe graduated with a degree in Geology, and Susan a degree in Biology. Today they are primarily farmers in New England, and have been so since the day they graduated well over a decade ago. They have taken the road less traveled while many of their classmates went on to become lawyers, doctors and bankers.

They slaughter their own chicken, pigs, and cows. They sell bales of hay, chop cords of wood, make and bottle maple syrup. With three children, ranging in age between 7 years and 6 months, they are tired but happy. Financially, however, they could be in better shape. Joe has a part time job with UPS, mostly for the insurance coverage, and Susan is considering waitressing to earn a little extra money once the children are older.

As much as Joe and Susan love the type of life they lead, the simple life for them is also fraught with risk. For example this year they’ve been able to sell 10,000 bales of hay to the drought stricken southeast. 10,000 bales sounds like a lot, but given that these small bales of hay sells for about $2.45 in the midwest, 10,000 bales does not generate all that much income given the amount of work that goes into each bale. Hay has to be grown, harvested, and dried. While Joe has a tractor attachment that does much of this work, such machinery is not free. A 20 year old bottom of the line baler still costs close to $7,000. While this year they have been fortunate that the demand has been high for hay, they could have just easily been the victim of bad weather.

In addition to the risk of drought, Joe constantly faces physical dangers that I can hardly imagine sitting at my desk job. Apparently last year while he was cutting some trees down, he ended up getting pinned to the ground by two fallen trees. He was alone in the forest that is his backyard, and was only saved when Susan found him after he didn’t come home.  I worry about paper cuts.  Joe worries about trees falling on him.  I don’t know how much life or disability insurance Joe has, but whatever he does have he’s paying out of his own pocket given that he’s mostly self-employed.

Both Joe and Susan wake before the crack of down. Joe logs a couple hours at UPS warehouse and comes home to work the farm. Susan milks the cows, feeds the chickens, and gets the children ready for school. They effectively work from 4 in the morning to 6 at night. That’s a long day in the “office.” It’s not like he and Susan can take time off either. Farming doesn’t lend itself to long vacations even if they could afford it. They have not gotten in a plane in over 10 years. I probably don’t go 10 weeks without stepping onto a plane.

I admire the alternate life style that Joe and Susan have chosen for themselves. They did not subccumb to the many temptations for things and status that so many others do They have chosen a simple existence and one that is very much in touch with nature that I think many of us think about wanting. However their life is also representative of how even living the “simple life” is not as simple as we might think.  It can be fraught with risk and stress.  While Joe and Susan certainly practice a frugality forced upon them by their lifestyle where they grow and raise their own food, the rest of their financial life is under constant assault.  Because they have chosen to eschew more lucrative careers, saving for retirement is difficult. The biggest challenge for them is properly guarding against risks via insurance or a sizeable emergency fund. In their case, the emergency fund is not just personal but one for their farm. Can they survive one bad year? Can they survive a broken tractor? We should all be so lucky to be able to choose the “simple life”, but the choice is also one that requires immense financial preparation and hard work.

As I’m sure some people have surmised I’m back from the wonderful islands of Hawaii. I came back on a redeye on Thanksgiving. I was lucky enough to avoid any delays despite traveling on the busiest travel days of the year. I will be in the next week posting a thorough recap/guide of my time in Hawaii (mostly Kauai), along with a review of the Hotel I stayed at in Kauai, the Hanalei Bay Resorts.

While I was able to keep up with my posts while away, I realize it’s not the easiest thing to do.  For one thing, everything I wanted to write while I was on vacation was often travel related.  Also because I was on vacation, I was generally out of touch of current events and other blogs. So much of my writing on this blog is dependent not only on current events, but idea generation that often comes from different blog posts and discussions on those posts.  I think next time I go on Vacation, I’m going to solicit for guest writers in addition to having a larger set of pre-written posts ready to publish.  I think it’ll make me a little more relaxed on vacation and it’ll definitely make my girlfriend happier – she thinks I’m a bit obsessed about blogging.

While I didn’t think it would happen so quickly, the S&P 500 is down for the year (though at the close of today it’s likely to be back up).  It’s not down by much, a little more than a tenth of a percent, but down it is.  Today on what is likely one of the slower trading days of the year, and busiest shopping day of the year, I thought I’d recap my portfolio performance as we near the home stretch.  While I have been detailing the exact performance of my IRA, I don’t do this with my other accounts which are two taxable brokerage accounts, and one 401k account.

My OptionsXpress is my “play” account in which I separate my speculation from my investing as Benjamin Graham advises to do in his book the Intelligent Investor.

I’ve been fortunate in that, while this recent market downturn has definitely put a sizeable dent in my portfolio, I have not been as hard hit as the market as a whole.  On the flip side when the market was up higher, I wasn’t doing as well either. Going forward, I hardly believe all the downside risk has been priced in.  Some journalists like to speak of subprime as one of the greatest financial disasters of this century.  I think journalists often like to sensationalize.  I believe the economy and our institutions well come out fine in the long run. Yet, in the short run, we are still months/years away from seeing the full effect on the economy.  I wouldn’t be suprised if a large financial institution failed. The effects of foreclosures and lower consumer spending all loom ahead.  The chances of an economic recession in the next year or two I believe are very good.

While I’m not the type of investor to move everything into cash, or into just defensive sectors like Defense and Healthcare, I also think that certain amount prudence should always in order.  In my 401k, I shifted 15% of my assets into TIPS which in the current interest rate environment has worked well.  In my primary brokerage account(E*Traede), I purchased puts on the Nasdaq 100 (QQQ) to hedge my exposure in that sector.  That too has worked well, even though I purchased the puts early before the top we saw in October.

Despite personally making some active investment moves, I’m still primarily a steady passive index fund investor and believer in good asset allocation.  I’m comfortable making active moves based on my own risk tolerance and interest in the economy, but I would probably advise most people against trying to “time the market.”

As we give thanks for our blessings, I thought I would look at it what it costs to do Thanksgiving.  Entertaining and feeding guest can be expensive, but being anti-social is personally costlier in the long run.

In many regards the traditional Turkey dinner is one of the more affordable dinners to put together for large group of people.  I’ve put together the prices from peapod.com (Stop and Shop’s Home delivery arm).  I’ve always been a guest at Thanksgiving and have no real life experience with a turkey dinner so if this estimate doesn’t meet the muster of a real host, I apologize.  Turkey on a per lbs basis is very affordable.  The real investment is in time spent of preparation.  By my estimates a healthy sized turkey dinner is about $5.43 per person which includes plenty of leftovers for all.

One of the great things about the holiday season is the opportunity it affords all of us to share our good fortune with those who might be away from family and friends.  I hope everyone is doing this and having a great Thanksgiving.