Buy-and-hold investing. The adult marshmallow test.

10 years ago, I was a member of The Green Lantern Investment Club. The club met once a month, put in real money (monthly minimum of $25/person), and attempted to learn how to beat the S&P 500 through superior buy-and-hold stock picking. Unfortunately, due to changing personal lives, lack of patience, and the general hassles of bookkeeping and taxes for a legal partnership, we wound down the club near the end of 2006, 4 or 5 years after starting it.

The other night I was on my way home from home reminiscing about the club and wondering how we would have done if we’d stuck it out.

I came home and looked up our portfolio from the last meeting. I then looked at what buying and holding would have liked look vs. SPY.

When I looked at our group’s total allocation and projected things out, our gain with the stocks we held in 2006 were 100.21% vs 52.96% of SPY, so we clearly would have beaten our goal! I did not calculate what these would have been with dividends, but I suspect it would have been further in our favor. So score a clear win for the Green Lantern Investment Club!

We also looked at two other stocks, which we did not purchase — one of which would have improved our results and one which could have changed the game. We kicked the tires on both IMAX and AAPL. Based on the prices at the time of the group presentation we would have been sitting on a 260% gain in IMAX and a 1,171% gain on AAPL! Taking our normal starting position size and adding it to the mix above, we could have easily seen a result of 230%!

Woulda coulda shoulda.

So that’s all well and good, but the real reason I wanted to commit this to paper was to get a level deeper on the takeaways.

#1: Swing fewer times. Obviously, our group was fairly concentrated. While I wouldn’t want to restrict myself to 8 holdings, you probably don’t want 100 either. Wait for your fat pitches and get to know your companies, their initiatives, and the people who run them… really well. You’ll be in a better position to call bullshit when you have to.

I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches — representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really think carefully about what you did, and you’d be forced to load up on what you’d really thought about. So you’d do so much better.
— Warren Buffett

#2: Patience grasshopper. While HD, NVS, MMM and BRK.B didn’t feel like they were “winning” for us month in and month out after we picked them, they clearly had the stuff we thought they did and they’re all still great companies.

#3: Don’t sandbag your winners. Most of us trim from our winners to feed our other ideas that aren’t working out as well. We have an innate desire to see our losers scratch back to positive when we are nearly always better off letting the hot-hand keep going. We liked DPMLF a lot, but I’m super happy we didn’t ever get to the point (since our group wasn’t around anyore) where we thought about pulling money out of HD to feed DPMLF.

#4: Only sell when your company thesis is busted (which should be very infrequent). The tables above show us taking a huge loss (-78.27%) on mining company DPMLF. I have no idea if our group would have picked up the warning signals and sold in time to cut some of these losses. It almost doesn’t really matter.

So, those are all things I think I knew before, things I learned from the Motley Fool early on in my investing career. Unfortunately, they are also all rules I have frequently violated because I thought I knew better. I was wrong. It’s time to get back to simple.

Your house is not an investment

So you own a house. Actually, to be technically accurate, you own a mortgage, maybe a couple mortgages, and are listed as a subordinate to the bank on the filed deed. Huzzah!

Still, if you can keep your head down, make your payments, maybe even kick in a little extra here and there when you get a raise, bonus, or stock vest from your company, the house will one day be yours, right?

Fast-forward a couple years:

  • How did I spend $250 on heating oil last month? Should I pay to improve my house’s insulation and sealing?
  • Oooh, still a bit drafty, should I replace the windows?
  • Are you serious? That stuff in the attic might be asbestos and I have to pay an extra $5k to get it taken away?
  • Where did this water on my basement floor get in from?
  • I have to demolish my basement to install that internal drain?
  • Should I be concerned that the house exterior might contain lead paint?
  • Boy, my kitchen could sure use some appliances and a facelift, and aren’t kitchen remodels one of the best investments I can make in my house?

And here, my friends, is where you will be tempted. You will say, “Well lookie here: Zillow tells me that my house has increased in value by $30k, $50k, $100k, maybe more — and interest rates are so historically low — perhaps I should just call my loan guy, get some cash out of this beast, and fix it up a bit?”

But you’re either strong-willed (knowing deep down that a refinance probably isn’t your best financial option) or incredibly lazy (as the pile of money may just not be enticing enough yet). Years go by. That equity pile grows larger, staring you in the face every month when Zillow sends you an email update. Your house really does need so much work.

And that’s how it happens. You somehow end up talking yourself into owning less of your house with a larger mortgage than ever before. Sure, there’s a gleaming pile of money as consolation prize, and you might call it an “investment,” but we all know that’s a lie.

You want to know how to spot an investment? An investment pays you. It’s pretty simple.

You’re not investing money when you put it into the house where you live; that’s just “nesting” in your money.

You just reset your amortization schedule and now your monthly payments have front-loaded your interest payments all over again. Scratching out new equity is going to take a while.

Do not let this be you.

I know far too many intelligent people that make this mistake (sometimes repeatedly) in their financial lives.

Buy a house you can afford indefinitely, that allows you to make improvements out of the cash you’ve earned without ever tapping the value of your home. It’s called “saving,” and paying for things out of what you earn (and living debt-free) is the single biggest quality of life improvement you will ever make. Once you live off what you earn and put your money away into savings, you’ll find yourself not quite so willing to part with it for things that are not absolutely essential.

You need a strong margin of error with any house purchase — I recommend you only consider purchasing a house if you are consumer-debt free, already putting at least 10% of your pre-tax money into a retirement account, and 10% of your take-home money into investments or savings. If you can do that for 6 months, still eat, go see movies, buy clothes, and have enough money for a mortgage payment, then go for it — you’re ready.

Buy your house. Live in it. Maintain it. Keep paying for it until you own it. This way lies freedom, my friends. Your house is where you live, not an investment.

Originally posted on medium

The "blue-collar" campaign of Bernie Sanders

We know now that government by organized money is just as dangerous as government by organized mob. Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.
— Roosevelt running for re-election, 1936

If it weren't for "unanimity of hate" in the quote above, it could very well have been spoken by Bernie Sanders. Right now, it's easier to be dismissive of Bernie than to address his message, tar him with an unelectable message and just use the word "socialist" a lot.

Say what you will about his economic beliefs, but Bernie is running a 100% "blue-collar" campaign, only taking money from the individuals he hopes to represent. The constraint of fund-raising from actual humans is something I'd love to see us force our politicians back in to. How would any of our other candidates fare if they weren't allowed to take money from corporations or special interests? How different would this election look if it were real people supporting these candidates?

Check out this great profile of Bernie Sanders on Bloomberg. 


Finding others who share your beliefs does not make those beliefs true. See Donald Trump, Ammon Bundy, and Ben Carson for sterling examples of misguided individuals leading others, yet spewing mountains of misinformation. Plenty of people believe these leaders speak the truth and hand-wave around obvious falsehoods and misstatements that they would be quick to call out on the opposition.

Do you really want a president who never admits when he's wrong? Just look at Trump's recent commercial - purporting to show the Mexican border as illegal immigrants stream across but actually footage of the Moroccan border as refugees flee. Do you prefer a president that believes he has special insights from God, and that just one of these insights is that Joseph built the Egyptian pyramids as grain silos? How about a rancher, Ammon Bundy, who occupies federal land at gunpoint in an misguided attempt to give it back to the people? I'm "the people" too and he certainly doesn't represent me... Is this a new type of democracy I don't know about?

What the followers of these people prove is that many people do not know how to tell the difference between fact, which is generally nuanced, has two sides, and consequences (and is unfortunately kind of boring and work to assess); and fiction, which, while it may align with a simple world view, almost always fails to deal with the complexity and consequences of reality. There are many leaders who paint the world as simple in order to attract simple people.

What to Expect in the iPhone 6S Camera — Austin Mann

I expect the camera to be the marquee feature on the new iPhone 6s and I wouldn't be surprised if Austin is right about most of these; his main predictions seem to be buttressed by lots of other reporting. The thing I hadn't considered was the use of force touch as a means of quick access to the camera, which would be great. The current swipe gesture has been really fiddly on both of the 6 Plus devices I've owned in the last year, with swipe working only 50% of the time or so. I've missed a number of "precious moments" with my son by not being able to get to the camera quickly enough.

I sold my 6 Plus this morning to be ready to pre-order the new one next week.

Signs of the apocalypse. Trump's candidacy.

We lack a well-informed (and well-reasoned) populace and this video is downright scary proof. 

Trump's platform is to boorishly make fun of politicians by calling them ugly and stupid and to play off voter skepticism of government. I'm not cynical enough to take him seriously and believe (hope?) that foot in mouth disease will eventually catch up to him, but it's difficult to understand how he has made it this far. He's smarter than he shows, but if this disgusting platform wins him office, it's time to move somewhere else (Iceland?).

I know that Trump is encouraging political fantasies. He is not preparing people for difficult choices, on, say, entitlements; he is assuring them that our problems could be easily solved if elites were not so corrupt. And he is wrong. Our problems are not easy.

And I know that the success of Trump would be the downfall of the GOP. Any party captured by rage and resentment will fail, and deserve it. Republicans should stand for responsible reform, not reckless populism.

News worth reading: Edward Snowden explains why Apple should continue to fight the government on encryption

I probably just got myself added to a watchlist but "The Intercept" is posting great material. 

No matter how good the reason, if the U.S. sets the precedent that Apple has to compromise the security of a customer in response to a piece of government paper, what can they do when the government is China and the customer is the Dalai Lama?
— Edward Snowden -

Uber phantoms

I love the Uber service but I've experienced this every time I book a car. The cars I was looking at (prior to my actual booking) all disappear and another car, invariably further away, gets tapped for my transit.

The app is simply showing there are partners on the road at the time,” the staffer wrote in an email. “This is not a representation of the exact numbers of drivers or their location. This is more of a visual effect letting people know that partners are searching for fares.

Damn Uber, you shady...