Blog Soup 1/26/2013

Welcome to the first Blog Soup of the new year!

  • I’m on shift 12 of 14 in a row at work. Don’t feel too bad for me, though. I did it to myself. We normally work six shifts in a row followed by a three-day or six-day break. I picked up a trade and a couple of overtime days last weekend, which is why I’m on such a long stretch. It also includes five shifts training a new guy. I am looking forward to some time off next week.
  • Next Thursday I’ll hit my nine-year anniversary in Dispatch. Before I know it, I’ll be having a retirement party and taking my grandchildren to Disney World.
  • I’ve been working on our spring season race calendar. Right now I only have two big events planned, but I might add some smaller events in between. First up is a return to the Cowtown half marathon on Feb 24. As you might recall, Cowtown was my first half marathon last February. I barely missed my goal of finishing under two hours. After a more leisurely and fun half at Disney World earlier this month, I am training hard to break 2:00 next month. I know my body is capable of it. The only question is whether everything will come together to make it happen that day.
  • Our other event is a 100K bike rally near our first house, the Cross Timbers Classic Bike Rally. It starts with a lap on the track at Texas Motor Speedway in north Fort Worth and does a loop through the surrounding area. Jenny and I both signed up for the 100K ride (62 miles). So far our longest ride was 50 miles at Hotter’N Hell back in August, so this one will be a new challenge.
  • I used some Amazon gift cards to get a cool new toy, an iHome rechargeable speaker dock for my iPhone. Why is that cool, you ask? It lets me carry the speaker to any room in the house and listen to my music or Pandora. I’ll mainly use it for listening during a soak in the bathtub (no outlets in the bathtub room) or in the kitchen while hanging out with the kids. It’s maybe a foot wide and has a built-in dock for my iPhone or iPad. For such a small unit, the sound is surprisingly good.
  • Aussie tennis star Samantha Stosur has better arms than I do.
  • I was thrilled by the deep run that young American Sloane Stephens enjoyed at this year’s Australian Open, especially her huge win over Serena Williams. Stephens is developing into a phenomenal player and also seems like a very warm and good-natured person. If she can stay healthy and handle all the pressure, she seems poised to take over as queen of American women’s tennis.
  • I don’t really understand the drama over gun control. The pro-gun people are all worked up because they think the government is trying to take all their guns, which is untrue. The anti-gun people think that tighter gun control laws will keep us safe, which is also untrue. Based on what little I’ve read, the measures being proposed would not have stopped most of the mass shootings from the last 10-20 years. Even if these new measures pass, I doubt they will have much impact. The only way to completely eliminate gun violence in America is to wave a magic wand and make all guns worldwide disappear. Even I don’t think that’s a good idea, even if it were possible.
  • An acquaintance of mine decided to take out $50,000 in student loans to get a master’s in film from a private school in California. Now she can’t find a job but owes nearly $700/month in student loan payments. She set up a crowdfunding site to raise money to pay her loan. Part of me wants to help, but the other part thinks she was unwise to borrow that kind of money to pursue a degree with such questionable marketability. Just thinking that makes me feel old.
  • Screw my man card. I wish I had Lady Gaga tickets for Tuesday.
  • Jonathan had his three-year-old checkup this week. He was very healthy as expected. He measured 90th percentile for both weight (37 lbs) and height (39.5 inches). His language and motor skills are normal. We’re working hard on potty training this weekend. It still amazes me to watch these two grow up.

Through with Lending

Neither a borrower nor a lender be. – William Shakespeare in Hamlet

In previous posts like this one, I told you about my experiences with Prosper, a website that allows individuals to loan money to each other at an agreed-upon interest rate for a three-year term. Follow the link if you want all the details. It seemed like an innovative concept at the time, both profitable and noble. People applied to borrow money with an eBay-style listing, explaining their situation and why they wanted a loan – small business investment, medical bills, home improvement, rebuilding their shoddy credit, etc. I liked the idea of helping people while also getting a good return on my investment.

However, as you might have predicted, it didn’t quite work out the way I’d planned.

Three years after initiating my final loan on Prosper, all 24 of my notes are wrapped up, and I am closing my account. My borrowers were a mix of low-, medium-, and high-risk individuals according to Prosper’s credit rating system. Of the 24 borrowers, 13 of them defaulted. Let that sink in for a minute. Over half of the people who borrowed money from me did not pay me back in full, either by declaring bankruptcy or simply failing to pay. A collection agency pursued some of them with no success. I lost a total of $123.49.

Who should receive the blame here? The economy? Remember, I initiated these loans in 2007 and 2008, shortly before the economy collapsed. The deadbeats themselves for not doing what it took to fulfill their financial obligations? Me for being naive or greedy enough to loan out the money?

I’ll go with all of the above.

Learning experiences can be painful but are usually worthwhile, and that’s certainly the case here. Learn from my failure: unsecured loans to individuals over the Internet are generally a bad idea.

Can I Retire?

Too many Americans have their heads in the sand in the face of obvious savings deficits. Barring a miracle, a winning lottery ticket or a big inheritance, they’re going to be forced to dramatically cut back their lifestyles after retirement. – Laurie Nordquist, director of Wells Fargo Institutional Retirement Trust

This interesting but scary article discusses a recent survey about retirement planning among middle-class Americans. The gist of the article is simple: many middle-class Americans have no clue how much they really need to retire like they want, and they have saved only a small fraction of that amount. As a result, many won’t be able to actually stop working.

The reasons for the retirement shortfall are numerous. For some, it’s hard to save for retirement because it requires cutting back on their lifestyle now. Maybe there aren’t any good places to cut back. Some choose to stay home because their spouse earns enough to support them right now, even though working would go a long way toward closing their savings gap. But according to the survey, financial ignorance is one of the main problems. Many people simply haven’t done the math to figure out how much they’ll need to retire and how much to set aside each month to get there.

Need help? CNN has a nice retirement planning calculator that can give you a rough idea of where you’ll be with your current savings plan. Obviously, it would be more helpful to meet with an actual financial planner, especially if you aren’t comfortable with financial matters. But the online calculators are a place to start.

I don’t plan to retire from Southwest for a few more decades, but I believe in retirement planning and started saving for retirement the minute I started working full-time. Southwest helps tremendously with a generous 401k match and profitsharing that functions as a second retirement account. But we still have to make the difficult choice to sock away lots of money each month, money that we could use for any number of short-term needs like groceries, gas, medical bills, or house repairs and improvements. I avoid the temptation by funding my 401k automatically. The money goes straight from Southwest to my retirement account so I never see it. If we continue this approach throughout my career, and God doesn’t throw us any surprises that derail our plans, I am confident we’ll have enough to retire comfortably. Like about 80 percent of people my age, I have no confidence that Social Security will be available for us and don’t even consider it in my planning. If it still exists, it will be gravy.

Buy and Ignore?

As some of you might remember, I got onto an investing kick shortly after I finished my MBA, hoping to put my new degree to work. In all I bought 7 different stocks over a couple of years. For a variety of reasons, partly my own and partly the economy’s, most of my investments haven’t done all that well, even when compared to the market overall.

It’s important to gauge your investments’ performance against the market, generally as measured by the S&P 500 index. Why? Because if your investments aren’t beating the market, you’d be better off putting that money into an index fund instead. Many analysts believe it’s impossible to beat the market in the long run. Warren Buffett disagrees, but I don’t have his financial savvy. Despite all my research, my stocks have underperformed. Apple and Honda are my exceptions.

I used a buy-and-hold philosophy as my foundation. I picked companies that looked promising, bought shares, and waited, planning to hold them for years. Unfortunately, my approach could be more accurately described as buy and ignore. Once the market began to crumble, I fearfully closed my eyes and tried not to panic as I waited out the storm. It wasn’t necessarily a bad approach due to my long-term outlook, but it wasn’t necessarily good, either. By mostly ignoring my companies, I missed the fact that some of them were underperforming the market, reporting bad news, and taking a nosedive in price that I didn’t have to absorb.

Sobered by the market’s turmoil and humbled by the disappointing performance of many of my own picks, I want to change my approach. Although some people succeed at it (Shipman, perhaps?), maybe I’m not smart enough to analyze financial data alone and predict the future. The only two companies whose stock has held its own during the storm, Apple and Honda, had two things in common: 1) strong financials, and 2) I actually used and loved their products and understood their place in the consumer world. My new plan includes the following:

  1. When buying stock, buy companies that I actually like and patronize rather than obscure ones that I’ve never heard of and don’t understand.
  2. Allocate part of my holdings into a market index fund at some point.
  3. Find a new broker. I’ve been using Fidelity, which I’ve enjoyed except for the $19.95 commission they charge on every trade. Since I don’t trade much, I was willing to accept it, but now there are many brokers that charge much less., for example, charges a flat rate of $2.95 per stock trade.

Enough about me – I’d love to hear from you. If you invest, what is your approach? Which broker do you use? Do you like them?

The Unsinkable Ship?

In the early 1900s, a British shipmaking company called White Star Line built a massive cruise ship called Titanic, claiming it was so large and so well-designed that it was practically unsinkable. As Cal Hockley put it in the movie, “God himself couldn’t sink this ship.” As we all know, this was not the case.

As the news rolls in from Washington and the financial world, I can’t help but think about the spectacular sinking sequence near the end of the movie. The bow is submerged, slowly raising the stern from the icy water. Deafening creaks of steel from the dying vessel almost drown out the panicked voices and frantic footsteps. Finally the strain on the ship breaks most of it in half at midship with a mighty crash. The forward half of the ship goes under, pulling the aft to vertical for a moment before finally dragging it to its grave at the bottom of the dark Atlantic.

Although I’m no financial expert, I must admit that I wonder if the United States and our economy are similar to that tragic ship. Even after its $10 drop on Monday, oil is still very expensive with an uncertain future. The stock market is plummeting after Congress failed to pass the bailout package. The housing market is still in shambles. Few of us fully understand what’s going on and what it will take to fix the economy, so many are afraid. Hear the steel creaking?

Am I overreacting? Probably. But not one of us knows for sure what lies ahead. I cling to one thing on this ship to keep me sane: not the indomitable spirit of man, for man is broken and flawed. Not the power and incomprehensible wealth of the United States, because there are no guarantees they will last and many examples from history that suggest another power will take our place as the world leader. Not my wonderful family, which makes hard times much easier but can’t make them go away. I cling to the simple but life-changing truth that God is in control and has a plan for every one of us. I will fight to keep myself and my family focused on Him whether we relax on Lido Deck, huddle on a liferaft, or tread water and wait for rescue.

Microloans You Can Provide

For a variety of reasons, including poor performance and disappointing changes in their policies, I decided to sell my eBay stock and give the money to someone who needed it more than eBay or I did. I debated what to do with the money for a while. Finally I gave most of it to fund microloans through WorldVision, one of my favorite organizations. Microloans, as the name implies, are small loans given to people in developing countries who run very small businesses or want to start new ones. Recipients of the loans generally are part of a group that shares ideas, supports its members, and cross-guarantees the loans. They also receive training in business management to help them use the loans most effectively. Due to their support, training, and strong desire to succeed, they repay the loans 96 percent of the time. I imagine that’s higher than a typical bank would get and certainly much higher than I got from my borrowers. Instead of returning to the original lender, the repaid loan stays in a fund and then goes out to another borrower, making microloan programs almost self-perpetutating. Microfinance is a fantastic idea that is changing lives all over the world. I encourage you to get involved! Skip one dinner out this month and use the money to help change someone’s life instead.