AskDong

I think many of us who blog about personal finances take it for granted that our readers may have read many of the same books that we’ve read. The question is what books have we all read? I think there are a few books that belong in everyone’s library. Many these books I imagine are also owned by other bloggers.

The Millionaire Next Door, Thomas J. Stanley and William D. Danko

I believe every single personal finance blogger has read the Millionaire Next Door. I would say most bloggers are disciples of this book. It’s a good book, and well worth reading, but probably could be summarized by two statements. “Spend less than you earn. Don’t compete with the Joneses.” Those are certainly two principles I agree with. Personally my biggest gripe about the book is that it’s both overly simplistic, and academically sloppy. The latter I wouldn’t have a problem with except the writers present as if it were an academic study. It’s not. The book is anecdotal rather than data driven despite citing plenty of simple statistics. The book is simplistic because it approaches the process of wealth creation from a one size fits all approach. While there’s no question in my mind the first step to sustained prosperity is spending less than you earn, that simple statement has two complicated parts, earning more and spending less. The Millionaire Next Door will not teach you how to earn more, and really the only lesson it gives on spending less is, buy a used car and a small house. Still this book is a must read. Read it and you’ll understand most personal finance bloggers, as we all like to fashion ourselves the would be “Millionaire Next Door.”

A Random Walk Down Wall Street, Burton Malkiel

This is probably most definitive book about the act of investing rather than how to invest. As the title suggests it tends to believe that equity performance cannot be predicted, hence the random walk. While the theme of the book is to basically invest in index books, there are few books that match it in explaing the general nature of stocks.

The Intelligent Investor, Benjamin Graham

Benjamin Graham was Warren Buffett’s mentor and this is his definitive book on value investing. It’s must read for any aspiring value investor. That said, it’s dated on many topics, and both a lengthy and muddled read. There are also many people who believe that Benjamin Graham to be far too conservative in his investment approach. Warren Buffett is widely accepted as having improved on Graham. However, you can’t talk about value investing without talking about Benjamin Graham and the Intelligent Investor.

Rich Dad, Poor Dad, Robert Kiyosaki

This last book I suggest not because I think it’s a particularly well written or informed book, and hesitate to even recommend it any fashion. However it’s an influential book, and one illustrates an alternative line of thinking.  The book can be illuminating for individuals who have never really thought about money.  I’m not sure who the best benefits by reading this book. Regardless, there’s no question the influence this book has had. For many people this book has changed how they think about money.  Reading provides insight into how other people think even if ideally you take no hard money lessons from the book.   The book given that it’s authored by an “expert” who is on the seminar circuit is all about pitching a path to riches rather than concrete steps to take.

As attentive readers know, I went on vacation to St. John in the U.S. Virgin Islands about a month and half ago. Great vacation. You can read some of reviews on the accommodations here and here. I also rented a SUV while I was there to explore the island on our own. To make the car reservation I had to put down a $100 deposit before I arrived. I put this on my credit card. A week later, I picked up the car. Drove the car for a week, and returned it. If I were doing it again, I’d probably only rent a Jeep for 3 days. When I returned the car, I paid my bill, and didn’t think much of it until I was back home on the mainland.

When I return home from vacation, I review all my bills, and tally up how much I really spent. I did this,and realized I double payed. I paid the entire amount when I returned the car instead of subtracting the initial deposit that I made. The sun had clearly gotten to me. I called St. John Car Rental who were unware of the problem but very friendly about the matter. They asked me to fax my credit card statement which I did. Then I proceeded not to think about the matter for the next couple weeks. I only recently checked my statement and found a credit from St. John Car Rental for $100. It was credited a few weeks ago.  I realize on the surface I might have complaints about being overcharged initially, but that was as much my own fault as the car rental’s as it’s unclear if all customers have to make deposits.  However given the favorable service I received while I was on the island, the quick solution to my complaint, I harbour only the warmest feelings towards St. John Car Rental.  Besides I’m always happy to support local family businesses, though it’s not like the major car rental agencies can be found on St. John.  If you ever go to St. John, I would definitely consider St. John Car Rental.  They are conveniently located near the ferry, and downtown.   Location is especially important if you plan on going downtown and need parking.  The car rental agencies allow you to park at their lots while you’re in town.

I’ll be the first to admit that I’m not an adept bond investor. I’ve limited my purchases to treasuries and one municipal bond. Generally speaking I think for most individuals, they are better off investing in a bond fund rather individually crafting a portfolio of bonds. This is true for a number of reasons:

• Bonds trade in larger denominations (Thousands), making it harder to diversify a smaller amount of money
• Researching Bonds can be more difficult
• Trading costs associated with bonds are both higher and less transparent (Brokerages in the past have embedded the cost of the trade in the price of the bond making it less clear what you were actually paying just to buy or sell a bond)

Charles Schwab is making a little easier for its clients at least on the last point. According to a Wall Street Journal Article yesterday, Schwab will only be charging $1 per Bond. They already don’t charge for treasury securities brought at auction making them competitive with the Government’s own service, TreasuryDirect. The lower bond fees follows a tactic that Fidelity embarked upon in 2004 of charging between .50 cents and 2.50 per bond.   Fidelity and Schwab are slugging it out for the same set of customers - customers who want a few more bell and whistle than the Zeccos (who offers free trades) of the world can offer. Of course there is still a minimum transaction cost $10 making it wasteful to trade anything less than 10 bonds. In the past I never considered bringing my business to Charles Schwab. As far as online discount brokerages, they were lapped in terms of cost by the other brokerages. However in the recent years, Schwab has aggressively cut prices making them competitive. This is especially true if you have invest-able assets over $1 million with them.

Lower trading costs are always a good thing. The question still remains does individual bond investing makes sense for most people? While I still think not, for some they might. On reason to invest in Bonds is they are often  are a superior investment in comparison to other time deposits such as CDs. If you’re investing in CDs, there’s no reason not to invest in at least U.S. Government treasuries. Municipal bonds also offer a very attractive alternative to CDs for tax reasons especially if you can’t find an appropriate municipal bond fund for your particular state. The nice thing about investments such as CDs and Bonds is that they allow you match a maturity with known liquidity needs. For instance if I know I will have to pay off a loan in exactly two years, it makes a ton of sense to buy a bond that matures in two years. In this way I can lock in the potentially higher rate of a two year maturity, and not worry about how interest rates might move between now and then.

Alternatively bond investments offer another opportunity to speculate. As the last week and this week has shown, interest rates can move quite a bit, taking bond prices with them. As interest rates move up, bond prices move down, and vice versa. A speculative investor can take advantage (or be taken advantage) by these movements to buy and sell bonds for capital gains instead of just the interest payments.

I’ve already reviewed the Maho Bay Camp. Now for something completely different. The Caneel Bay resort is about as far removed an experience from Maho Bay as you can get, despite being less than 3 miles apart.

Caneel Bay was originally founded by Laurence Rockefeller (son of John D. Rockefeller, Jr.; brother of Nelson Rockefeller). The entire island of St John, in many regards, is a product of Laurence Rockefeller’s vision. He donated the land to the U.S. Government that is now the U.S. Virgin Islands National Park. The Caneel Bay Resort is within the park boundaries, and was a member of the RockResort family between the 50’s and early 80s. After exchanging hands a few times, Caneel has been in the capable hands of Rosewood Hotels & Resorts, a company based in Texas since 1993.

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Staying on St. John can be very expensive. There are only two hotels/resorts on the island, Caneel Bay and the Westin. The lack of resorts is also what gives St. John its charm. The island is not developed, and has preserved on the most part its natural beauty. One of the better ways to get back to nature is a stay at the Maho Bay camps above the beaches of Maho Bay. I stayed 4 nights at Maho during my vacation, and was generally pleased with both my “Eco-Tent”, and the overall facility.

The Maho Bay camp was established in the 1970’s by Stanley Senegult, a pioneer of Eco-tourism, on privately “owned in holding” land within the U.S. Virgin Island national Park. The land is currently leased through 2012, and there is much speculation that the lease will not be renewed. Stanley Senegult has also established a sister site on the other side island called Estate Concordia. Personally I’m not sure what to make of Stanely. Is he an environmentalist or businessman? He says’s businessman first. Of course he could easily be both. The only thing that sort of bothers me is that Maho Bay tries to hide behind the veneer of being some kind of non-profit do good organization, hence the maho.org web address. Hopefully my questions regarding the nature of the organization hasn’t affected my review of the camp.

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