Seattle Real Estate Market Annual UPDATE 8/2014

We last visited the Seattle Real Estate for a single family home in 6/2013.  See below is as of 4/2014.  Not much has changed as we are continuing on track.  2015 will bring the transition from the Sellers Market Stage I to Stage II.

The paradigm of working to providing money for the family or time

In work you get paid more and given more responsibility based on your experience level/years of service.  With the average length of duty at any one company being much less than 10-15 years it certainly logical to agree with the saying "learn in your twenties and earn in your thirties".  There is a disparity and disconnect in this traditional career path.  In your twenties you are paid the least and in essence you put in the most effort.  (Related reading: The Crossover Point)  In your thirties you tend to get married/have kids and your level of effort dips at work.  I ask the question why is there a dis-correlation between pay and effort?

There is a paradigm shift where they must ask the question now that I have hit my stride in my career... do I pull pack and re-configure my efforts to providing more money for my family or provide more time with my family (less time at work). 

Perhaps because many people take the "path of more time with my family" that those who chose to take the career orientated route are rewarded with higher career paths due to less competition.

Money Flow Theory

Money is not distributed into the economy evenly, instead it is distributed in concentrated areas and distribues out from there.  A good pictoral of is is cones where money flow is injected at a point and them trails out from that point.  The key takeaway is to position yourself as close to these epicenters as possible.

It seems simple but it requires awareness and mobility if not luck.

For further reading check out:
http://www.chaostan.com/feddisaster.html

The Mom and Pop Investor Boom

Follow the money and you follow the trend...

1) Back in 2011-2013 hedge funds (google "Blackstone") took their money away from the stock market and started to invest in rentals (low hanging fruit).  A lot of the up tick in home prices in 2013-2014 have been caused by these hedge funds and international investors buying a buttload of homes with cash as evidence by non mortgaged properties statistics. 

2) 2008 recession happens and people lose 40% of their portfolio.  Baby boomers on the verge of retirement are forced to stick around at their jobs an extra 5 years to make up for their loss or let the market correct.  Investor vigor is damaged and an attitude of "anxious money" syndrome takes over where people are investing in less volatile investments or bonds.  Currently there are a lot of wealthy California's purchasing rentals in out of state locations.  Turn key rental companies work for these Cali investors to find properties, do the rehab, find tenants, and the do the property management.  Pretty slick operation and however there is a heavy cut that the turnkey company takes.

3) Fast forward to 2014 and we are seeing the first signs of the hedge funds moving out of buying properties (since they are over-valued) and into the lending world.  See article: http://theinvestorinsights.com/blackstone-landlord-lender/

The future prediction
- New wave of stock market refugees taking money from their 401k/ira/savings and buying rentals with  easier investor lending.
-higher property prices, lower rents, leading to the next bubble *2018-2020

Myths in Real Estate and Investing

I don't link to articles but this one is facinating.

http://www.biggerpockets.com/renewsblog/2014/03/27/strategies-for-managing-equity/

Let Me Reserve The Right to Change My Mind: Car Financing

It's a shame that we can backtrack on what we say but here is my attempt to...

Once upon a time I thought financing a car was out of question. I thought it was best (if you had the cash on hand) to pay cash especially for a depreciating asset such as a car.  However you need to look at the bigger picture and arbitrage interest rate... In other words what could you have done with that money and turned it at a higher rate than the car loan was.

1.99% car loan < 4-6% stocks < 10%+ alternative investments

A car loan is cheap free money... The take away is there is no clear cut answer.  It all depends on comparing the intrest rate and playing the arbitrage game.  WMD: This is not a free pass to buy an expensive car that you would have bought otherwise.

The Two Sides of Opportunity

The false form of opportunity...

In the corporate word opportunity is a buzz word that is the "carrot dangling on a stick" to get you become vested into your company.  Ask yourself "will the next job/promotion I desire be bestowed to me as an opportunity or as an result of simple arbitration due to someone leaving/fired/retire?". Compare it with the following...

The true form of opportunity is taking a risk or investment.

Luck = Preparation + Opportunity

Les Brown said...
"Its better to be prepared and not have an opportunity, than to have an opportunity and not be prepared." In terms of investing when you have cash, opportunity will find you.

Best Practice for Emergency Funds *Warning not for Dummies

*Warning not for WMDs = Weak Minded Dummies

Conventional advice would be to have at least 3-6 months of living expenses in case you lost your job or some emergency (car accident, car failure, medical emergency, etc).  The reason is so you don't turn to a high penalty form of quick cash such as a pay-day money loan or credit card (20+%).

The proposed best practice is to contribute to your annual maximum or as much as you can to your Roth IRA account ("oh my you should be doing this already")  and in case of an emergency you are able to withdraw all your CONTRIBUTIONS, penalty free with a turn around of a couple business days.  For 2013 the max contribution is $5,500 a year.  If need the cash you are able to call your broker and say you want to withdrawl that amount PLUS any other CONTRIBUTIONS.  So that means if you have been adding money for the past 4 years, you are able to withdraw $5,500x4=$22,000 penalty free.  Caviot say your investment has gone down you obviously won't be able to take it out and if your investment has gone up you will only be able to take out your CONTRIBUTIONS, $22,000 in this case.

Money sitting around waiting in a low interest bank account or CD/Money Market is the best way to ensure inflation and lost opportunity passes you by.  The experts say don't touch your retirement because of 1) tax penalties and 2) lost appreciation.  1) this strategy has no penalties as long as you are withdrawing CONTRIBUTIONS.  2) Your alternatives are taking a 20%+ loan or 8-12% in the RothIRA, it is a simple analysis of what interest arbitration.

Investing in Trinkets

"I sold my beanie baby for 200 dollars"

Searching through past ebay sales I found a rare beanie go for typically on the high end for 200 dollars.  I'm not going to debate the Present Value and Calculated interest rate.  However please consider the sunk costs of keeping it for that long, possibility of losing it, storage costs, high transaction costs to sell, inflation, and the fact that this is not typical only 1 out of 100 of your prized Beanie Babies sell at this price.

Silver coin - Around 1943 nickels were made out of silver.  Today (2013) a 1943 nickel can be had for 8 dollars.  See table below a nickel investment for 70 years yield an annual interest rate of 8%.  Please keep in mind inflation.

Magic of Compounding FV Calculator
Initial	APY	Years	Yearly Add	FV
$0.05	8%	70	$0	$8
Inflation PV (3%)
$1

In short, sell your crap and put it in a different investment vehicle.

Other wonderful reading: http://20somethingfinance.com/the-junk-wax-era-sports-card-investment-bubble-and-crash/

A Blueprint for Charity: Andrew Carnegie

"The wealth creator has an obligation to enrich the lives of others in anyway he can." Tom Butler-Bowdon

"It is a waste of money to give directly to those who have nothing since they will fritter it away on indulgences and excess.  Neither the individual nor the race improved by oms-giving.  Resources should only go to those who can help themselves and to worthwhile public project that the government does not have the funds to build." Andrew Carnegie

WEALTH

BY ANDREW CARNEGIE.
The problem of our age is the proper administration of wealth, so that the ties of brotherhood may still bind together the rich and poor in harmonious relationship. The conditions of human life have not only been changed, but revolutionized, within the past few hundred years. In former days there was little difference between the dwelling, dress, food, and environment of the chief and those of his retainers. The Indians are to-day where civilized man then was. When visiting the Sioux, I was led to the wigwam of the chief. It was just like the others in external appearance, and even within the difference was trifling between it and those of the poorest of his braves. The contrast between the palace of the millionaire and the cottage of the laborer with us to-day measures the change which has come with civilization.
This change, however, is not to be deplored, but welcomed as highly beneficial. It is well, nay, essential for the progress of the race, that the houses of some should be homes for all that is highest and best in literature and the arts, and for all the refinements of civilization, rather than that none should be so. Much better this great irregularity than universal squalor. Without wealth there can be no Mæcenas. The "good old times " were not good old times. Neither master nor servant was as well situated then as to-day. A relapse to old conditions would be disastrous to both--not the least so to him who serves--and would Sweep away civilization with it. But whether the change be for good or ill, it is upon us, beyond our power to alter, and there fore to be accepted and made the best of. It is a waste of time to criticise the inevitable.
It is easy to see how the change has come. One illustration will serve for almost every phase of the cause. In the manufacture of products we have the whole story. It applies to all combinations of human industry, as stimulated and enlarged by the inventions of this scientific age. Formerly articles Were manufactured at the domestic hearth or in small shops which formed part of the household. The master and his apprentices worked side by side, the latter living with the master, and therefore subject to the same conditions. When these apprentices rose to be masters, there was little or no change in their mode of life, and they, in turn, educated in the same routine succeeding apprentices. There was, substantially social equality, and even political equality, for those engaged in industrial pursuits had then little or no political voice in the State.
But the inevitable result of such a mode of manufacture was crude articles at high prices. To-day the world obtains commodities of excellent quality at prices which even the generation preceding this would have deemed incredible. In the commercial world similar causes have produced similar results, and the race is benefited thereby. The poor enjoy what the rich could not before afford. What were the luxuries have become the necessaries of life. The laborer has now more comforts than the landlord had a few generations ago. The farmer has more luxuries than the landlord had, and is more richly clad and better housed. The landlord has books and pictures rarer, and appointments more artistic, than the King could then obtain.
The price we pay for this salutary change is, no doubt, great. We assemble thousands of operatives in the factory, in the mine, and in the counting-house, of whom the employer can know little or nothing, and to whom the employer is little better than a myth. All intercourse between them is at an end. Rigid Castes are formed, and, as usual, mutual ignorance breeds mutual distrust. Each Caste is without sympathy for the other, and ready to credit anything disparaging in regard to it. Under the law of competition, the employer of thousands is forced into the strictest economies, among which the rates paid to labor figure prominently, and often there is friction between the employer and the employed, between capital and labor, between rich and poor. Human society loses homogeneity.
The price which society pays for the law of competition, like the price it pays for cheap comforts and luxuries, is also great;but the advantage of this law are also greater still, for it is to this law that we owe our wonderful material development, which brings improved conditions in its train. But, whether the law be benign or not, we must say of it, as we say of the change in the conditions of men to which we have referred : It is here; we cannot evade it; no substitutes for it have been found; and while the law may be sometimes hard for the individual, it is best for the race, because it insures the survival of the fittest in every department. We accept and welcome therefore, as conditions to which we must accommodate ourselves, great inequality of environment, the concentration of business, industrial and commercial, in the hands of a few, and the law of competition between these, as being not only beneficial, but essential for the future progress of the race. Having accepted these, it follows that there must be great scope for the exercise of special ability in the merchant and in the manufacturer who has to conduct affairs upon a great scale. That this talent for organization and management is rare among men is proved by the fact that it invariably secures for its possessor enormous rewards, no matter where or under what laws or conditions. The experienced in affairs always rate the MAN whose services can be obtained as a partner as not only the first consideration, but such as to render the question of his capital scarcely worth considering, for such men soon create capital; while, without the special talent required, capital soon takes wings. Such men become interested in firms or corporations using millions ; and estimating only simple interest to be made upon the capital invested, it is inevitable that their income must exceed their expenditures, and that they must accumulate wealth. Nor is there any middle ground which such men can occupy, because the great manufacturing or commercial concern which does not earn at least interest upon its capital soon becomes bankrupt. It, must either go forward or fall behind : to stand still is impossible. It is a condition essential for its successful operation that it should be thus far profitable, and even that, in addition to interest on capital, it should make profit. It is a law, as certain as any of the others named, that men possessed of this peculiar talent for affair, under the free play of economic forces, must, of necessity, soon be in receipt of more revenue than can be judiciously expended upon themselves; and this law is as beneficial for the race as the others.
Objections to the foundations upon which society is based are not in order, because the condition of the race is better with these than it has been with any others which have been tried. Of the effect of any new substitutes proposed we cannot be sure. The Socialist or Anarchist who seeks to overturn present conditions is to be regarded as attacking the foundation upon which civilization itself rests, for civilization took its start from the day that the capable, industrious workman said to his incompetent and lazy fellow, "If thou dost net sow, thou shalt net reap," and thus ended primitive Communism by separating the drones from the bees. One who studies this subject will soon be brought face to face with the conclusion that upon the sacredness of property civilization itself depends--the right of the laborer to his hundred dollars in the savings bank, and equally the legal right of the millionaire to his millions. To these who propose to substitute Communism for this intense Individualism the answer, therefore, is: The race has tried that. All progress from that barbarous day to the present time has resulted from its displacement. Not evil, but good, has come to the race from the accumulation of wealth by those who have the ability and energy that produce it. But even if we admit for a moment that it might be better for the race to discard its present foundation, Individualism,--that it is a nobler ideal that man should labor, not for himself alone, but in and for a brotherhood of his fellows, and share with them all in common, realizing Swedenborg's idea of Heaven, where, as he says, the angels derive their happiness, not from laboring for self, but for each other,--even admit all this, and a sufficient answer is, This is not evolution, but revolution. It necessitates the changing of human nature itself a work of oeons, even if it were good to change it, which we cannot know. It is not practicable in our day or in our age. Even if desirable theoretically, it belongs to another and long-succeeding sociological stratum. Our duty is with what is practicable now ; with the next step possible in our day and generation. It is criminal to waste our energies in endeavoring to uproot, when all we can profitably or possibly accomplish is to bend the universal tree of humanity a little in the direction most favorable to the production of good fruit under existing circumstances. We might as well urge the destruction of the highest existing type of man because he failed to reach our ideal as favor the destruction of Individualism, Private Property, the Law of Accumulation of Wealth, and the Law of Competition ; for these are the highest results of human experience, the soil in which society so far has produced the best fruit. Unequally or unjustly, perhaps, as these laws sometimes operate, and imperfect as they appear to the Idealist, they are, nevertheless, like the highest type of man, the best and most valuable of all that humanity has yet accomplished.
We start, then, with a condition of affairs under which the best interests of the race are promoted, but which inevitably gives wealth to the few. Thus far, accepting conditions as they exist, the situation can be surveyed and pronounced good. The question then arises, --and, if the foregoing be correct, it is the only question with which we have to deal, --What is the proper mode of administering wealth after the laws upon which civilization is founded have thrown it into the hands of the few ? And it is of this great question that I believe I offer the true solution. It will be understood that fortunes are here spoken of, not moderate sums saved by many years of effort, the returns on which are required for the comfortable maintenance and education of families. This is not wealth, but only competence which it should be the aim of all to acquire.
There are but three modes in which surplus wealth can be disposed of. It call be left to the families of the decedents; or it can be bequeathed for public purposes; or, finally, it can be administered during their lives by its possessors. Under the first and second modes most of the wealth of the world that has reached the few has hitherto been applied. Let us in turn consider each of these modes. The first is the most injudicious. In monarchical countries, the estates and the greatest portion of the wealth are left to the first son, that the vanity of the parent may be gratified by the thought that his name and title are to descend to succeeding generations unimpaired. The condition of this class in Europe to-day teaches the futility of such hopes or ambitions.The successors have become impoverished through their follies or from the fall in the value of land. Even in Great Britain the strict law of entail has been found inadequate to maintain the status of an hereditary class. Its soil is rapidly passing into the hands of the stranger. Under republican institutions the division of property among the children is much fairer, but the question which forces itself upon thoughtful men in all lands is: Why should men leave great fortunes to their children? If this is done from affection, is it not misguided affection? Observation teaches that, generally speaking, it is not well for the children that they should be so burdened. Neither is it well for the state. Beyond providing for the wife and daughters moderate sources of income, and very moderate allowances indeed, if any, for the sons, men may well hesitate, for it is no longer questionable that great suns bequeathed oftener work more for the injury than for the good of the recipients. Wise men will soon conclude that, for the best interests of the members of their families and of the state, such bequests are an improper use of their means.
It is not suggested that men who have failed to educate their sons to earn a livelihood shall cast them adrift in poverty. If any man has seen fit to rear his sons with a view to their living idle lives, or, what is highly commendable, has instilled in them the sentiment that they are in a position to labor for public ends without reference to pecuniary considerations, then, of course,the duty of the parent is to see that such are provided for ?fl moderation. There are instances of millionaires' sons unspoiled by wealth, who, being rich, still perform great services in the community. Such are the very salt of the earth, as valuable as, unfortunately, they are rare; still it is not the exception, but the rule, that men must regard, and, looking at the usual result of enormous sums conferred upon legatees, the thoughtful man must shortly say, "I would as soon leave to my son a curse as the almighty dollar," and admit to himself that it is not the welfare of the children, but family pride, which inspires these enormous legacies.
As to the second mode, that of leaving wealth at death for public uses, it may be said that this is only a means for the disposal of wealth, provided a man is content to wait until he is dead before it becomes of much good in the world. Knowledge of the results of legacies bequeathed is not calculated to inspire the brightest hopes of much posthumous good being accomplished. The cases are not few in which the real object sought by the testator is not attained, nor are they few in which his real wishes are thwarted. In many cases the bequests are so used as to become only monuments of his folly. It is well to remember that it requires the exercise of not less ability than that which acquired the wealth to use it so as to be really beneficial to the community. Besides this, it may fairly be said that no man is to be extolled for doing what he cannot help doing, nor is he to be thanked by the community to which he only leaves wealth at death. Men who leave vast sums in this way may fairly be thought men who would not have left it at all, had they been able to take it with them. The memories of such cannot be held in grateful remembrance, for there is no grace in their gifts. It is not to be wondered at that such bequests seem so generally to lack the blessing. -
The growing disposition to tax more and more heavily large estates left at death is a cheering indication of the growth of a salutary change in public opinion. The State of Pennsylvania now takes--subject to some exceptions--one-tenth of the property left by its citizens. The budget presented in the British Parliament the other day proposes to increase the death-duties ; and,most significant of all, the new tax is to be a graduated one. Of all forms of taxation, this seems the wisest. Men who continue hoarding great sums all their lives, the proper use of which for - public ends would work good to the community, should be made to feel that the community, in the form of the state, cannot thus be deprived of its proper share. By taxing estates heavily at death the state marks its condemnation of the selfish millionaire's unworthy life.
It is desirable ;that nations should go much further in this direction. Indeed, it is difficult to set bounds to the share of a rich man's estate which should go at his death to the public through the agency of the state, and by all means such taxes should be graduated, beginning at nothing upon moderate sums to dependents, and increasing rapidly as the amounts swell, until of the millionaire's hoard, as of Shylock's, at least
"_____ The other half
Comes to the privy coffer of the state."
This policy would work powerfully to induce the rich man to attend to the administration of wealth during his life, which is the end that society should always have in view, as being that by far most fruitful for the people. Nor need it be feared that this policy would sap the root of enterprise and render men less anxious to accumulate, for to the class whose ambition it is to leave great fortunes and be talked about after their death, it will at- tract even more attention, and, indeed, be a somewhat nobler ambition to have enormous sums paid over to the state from their fortunes.
There remains, then, only one mode of using great fortunes; but in this we have the true antidote for the temporary unequal distribution of wealth, the reconciliation of the rich and the poor--a reign of harmony--another ideal, differing, indeed, from that of the Communist in requiring only the further evolution of existing conditions, not the total overthrow of our civilization. It is founded upon the present most intense individualism, and the race is projected to put it in practice by degree whenever it pleases. Under its sway we shall have an ideal state, in which the surplus wealth of the few will become, in the best sense the property of the many, because administered for the common good, and this wealth, passing through the hands of the few, can be made a much more potent force for the elevation of our race than if it had been distributed in small sums to the people themselves. Even the poorest can be made to see this, and to agree that great sums gathered by some of their fellow-citizens and spent for public purposes, from which the masses reap the principal benefit, are more valuable to them than if scattered among them through the course of many years in trifling amounts.
If we consider what results flow from the Cooper Institute, for instance, to the best portion of the race in New York not possessed of means, and compare these with those which would have arisen for the good of the masses from an equal sum distributed by Mr. Cooper in his lifetime in the form of wages, which is the highest form of distribution, being for work done and not for charity, we can form some estimate of the possibilities for the improvement of the race which lie embedded in the present law of the accumulation of wealth. Much of this sum if distributed in small quantities among the people, would have been wasted in the indulgence of appetite, some of it in excess, and it may be doubted whether even the part put to the best use,that of adding to the comforts of the home, would have yielded results for the race, as a race, at all comparable to those which are flowing and are to flow from the Cooper Institute from generation to generation. Let the advocate of violent or radical change ponder well this thought.
We might even go so far as to take another instance, that of Mr. Tilden's bequest of five millions of dollars for a free library in the city of New York, but in referring to this one cannot help saying involuntarily, how much better if Mr. Tilden had devoted the last years of his own life to the proper administration of this immense sum; in which case neither legal contest nor any other cause of delay could have interfered with his aims. But let us assume that Mr. Tilden's millions finally become the means of giving to this city a noble public library, where the treasures of the world contained in books will be open to all forever, without money and without price. Considering the good of that part of the race which congregates in and around Manhattan Island, would its permanent benefit have been better promoted had these millions been allowed to circulate in small sums through the hands of the masses? Even the most strenuous advocate of Communism must entertain a doubt upon this subject. Most of those who think will probably entertain no doubt whatever.
Poor and restricted are our opportunities in this life; narrow our horizon; our best work most imperfect; but rich men should be thankful for one inestimable boon. They have it in their power during their lives to busy themselves in organizing benefactions from which the masses of their fellows will derive lasting advantage, and thus dignify their own lives. The highest life is probably to be reached, not by such imitation of the life of Christ as Count Tolstoi gives us, but, while animated by Christ's spirit, by recognizing the changed conditions of this age, and adopting modes of expressing this spirit suitable to the changed conditions under which we live ; still laboring for the good of our fellows,which was the essence of his life and teaching, but laboring in a different manner.
This, then, is held to be the duty of the man of Wealth: First, to set an example of modest, unostentatious living, shunning display or extravagance; to provide moderately for the legitimate wants of those dependent upon him; and after doing so to consider all surplus revenues which come to him simply as trust funds, which he is called upon to administer, and strictly bound as a matter of duty to administer in the manner which, in his judgment, is best calculated to produce the most beneficial results for the community--the man of wealth thus becoming the mere agent and trustee for his poorer brethren, bringing to their service his superior wisdom, experience and ability to administer, doing for them better than they would or could do for themselves.
We are met here with the difficulty of determining what are moderate sums to leave to members of the family; what is modest, unostentatious living; what is the test of extravagance. There must be different standards for different conditions. The answer is that it is as impossible to name exact amounts or actions as it is to define good manners, good taste, or the rules of propriety ; but, nevertheless, these are verities, well known although undefinable. Public sentiment is quick to know and to feel what offends these. So in the case of wealth. The rule in regard to good taste in the dress of men or women applies here. Whatever makes one conspicuous offends the canon. If any family be chiefly known for display, for extravagance in home, table, equipage, for enormous sums ostentatiously spent in any form upon itself, if these be its chief distinctions, we have no difficulty in estimating its nature or culture. So likewise in regard to the use or abuse of its surplus wealth, or to generous, freehanded cooperation in good public uses, or to unabated efforts to accumulate and hoard to the last, whether they administer or bequeath. The verdict rests with the best and most enlightened public sentiment. The community will surely judge and its judgments will not often be wrong.
The best uses to which surplus wealth can be put have already been indicated. These who,would administer wisely must, indeed, be wise, for one of the serious obstacles to the improvement of our race is indiscriminate charity. It were better for mankind that the millions of the rich were thrown in to the sea than so spent as to encourage the slothful, the drunken, the unworthy. Of every thousand dollars spent in so called charity to-day, it is probable that $950 is unwisely spent; so spent, indeed as to produce the very evils which it proposes to mitigate or cure. A well-known writer of philosophic books admitted the other day that he had given a quarter of a dollar to a man who approached him as he was coming to visit the house of his friend. He knew nothing of the habits of this beggar; knew not the use that would be made of this money, although he had every reason to suspect that it would be spent improperly. This man professed to be a disciple of Herbert Spencer; yet the quarter-dollar given that night will probably work more injury than all the money which its thoughtless donor will ever be able to give in true charity will do good. He only gratified his own feelings, saved him- self from annoyance,-- and this was probably one of the most selfish and very worst actions of his life, for in all respects he is most worthy.
In bestowing charity, the main consideration should be to help those who will help themselves; to provide part of the means by which those who desire to improve may do so; to give those who desire to use the aids by which they may rise; to assist, but rarely or never to do all. Neither the individual nor the race is improved by alms-giving. Those worthy of assistance, except in rare cases, seldom require assistance. The really valuable men of the race never do, except in cases of accident or sudden change. Every one has, of course, cases of individuals brought to his own knowledge where temporary assistance can do genuine good, and these he will not overlook. But the amount which can be wisely given by the individual for individuals is necessarily limited by his lack of knowledge of the circumstances connected with each. He is the only true reformer who is as careful and as anxious not to aid the unworthy as he is to aid the worthy, and, perhaps, even more so, for in alms-giving more injury is probably done by rewarding vice than by relieving virtue.
The rich man is thus almost restricted to following the examples of Peter Cooper, Enoch Pratt of Baltimore, Mr. Pratt of Brooklyn, Senator Stanford, and others, who know that the best means of benefiting the community is to place within its reach the ladders upon which the aspiring can rise--parks, and means of recreation, by which men are helped in body and mind; works of art, certain to give pleasure and improve the public taste, and public institutions of various kinds, which will improve the general condition of the people ;--in this manner returning their surplus wealth to the mass of their fellows in the forms best calculated to do them lasting good. -
Thus is the problem of Rich and Poor to be solved. The laws of accumulation will be left free ; the laws of distribution free. Individualism will continue, but the millionaire will be but a trustee for the poor; intrusted for a season with a great part of the increased wealth of the community, but administering it for the community far better than it could or would have done for itself. The best minds will thus have reached a stage in the development of the race iii which it is clearly seen that there is no mode of disposing of surplus wealth creditable to thoughtful and earnest men into whose hands it flows save by using it year by year for the general good. This day already dawns. But a little while, and although, without incurring the pity of their fellows, men may die sharers in great business enterprises from which their capital cannot be or has not been withdrawn, and is left chiefly at death for public uses, yet the man who dies leaving behind many millions of available wealth, which was his to administer during life, will pass away " unwept, unhonored, and unsung," no matter to what uses he leaves the dross which he cannot take with him. Of such as these the public verdict will then be : "The man who dies thus rich dies disgraced."
Such, in my opinion, is the true Gospel concerning Wealth, obedience to which is destined some day to solve the problem of the Rich and the Poor, and to bring ' Peace on earth, among men Good-Will."

Seattle Real Estate Modeled for 2013-2017

As of 6/2013:
2007Q2 - Top of Market
2010 - End of Buyers Market I (2nd best out of 4 times to buy)
2012Q1 - End of Buyers Market II, Bottom of Market (Best time to buy)
2014Q4 - End of Sellers Market I (now starts the worst time to buy)
2017-2018 - End of Sellers II Market, Meltdown = Baby boomers selling, no new buyers (due to student loans), etc...

Key indicators:
Days on inventory, interest rates, unemployment

Advice for the Masses

It is rare that advice should be given to the masses.  Mint.com a great site, came out with top 10 financial rules to live by.  Listed below with caveat.

1) Save at least 10% of your income - Makes no mention to how much you make surely a person with 20k/yr salary will have a different strategy than someone making 80k a year.
2) Have at least three months of living expenses in an emergency fund. - Do you have kids or single makes a difference plus *why not front load your Roth IRA contributions in the year so you can take out if you need if... wait they tell you not to every withdraw out of a retirement account.

3) Get a life insurance policy worth at least 6 times your household income. - See #2, there could be other vehicles of protecting those left behind than traditional life insurance.

4) Use the 20/4/10 rule when buying a vehicle. - Ok wTF came up with this the car sales people?

5) Save 20 times your gross income for a comfortable retirement. - How old are you 25 or 55? What if you spend your money now like a drunken sailor?

6) Put down 20% on a house and don’t borrow more than two times your income. - This one is not too bad but its the same as #4.

7) Subtract your age from 100 to determine what percentage of your portfolio should be in stocks. - What if I don't plan to retire when I'm 70 and what if my health sucks that I will die when I'm 65?

8) Pay off highest interest rate debt first. - Yes but what if the asset with that dept was making positive cash flow?

9) Max the match on your 401(k). - Its free money yes but its often comes with hidden fees and the crappiest investment options.
10) Don’t take out more in student loans than you expect to make your first year on the job. - If everyone followed this then no one would go to school.

Also some thoughts about the web app Mint.com.  

Mint is not for everyone. It can take too much time. It focuses on Accounting before and typically there is little energy to focus on behavior.

Excuse me: Dumping Money in my 401k

I heard some say that if you are working for a company for a while "they will start dumping money into your 401k" and that is incentive to say with that company. 

Assuming you are not on the level of a partnership of ownership at a law or accounting firm and you are just one of 50 or more employee company this phrase just means that you company is matching you paltry 3-6% of your salary at 50-100%.  For a 100k a year worker this is up to 6000 dollars of you saving and the company gives you 6000 dollars because you were a good boy and saved.  Now based on how a company did that year they can exceed those matches and give you more such as an additional 50% for example would mean an extra 3000. (I believe this is what people are referring to when they say dumping money into your 401k).

As great as this sounds and as appreciative as we should be its not anything out of this world.  1) An extra 3k or 1.5k (if you make 50k a year) hardly pays for a set of golf clubs. And 2) every comparable employer does the same thing (sorry if you thought you were special).

Credit Cards with increased floating periods

Forget % rebate Credit cards.  For the business owners sometimes a longer float period such as 2-3 months is not desirable.  This combined with a 0% introduction offer or a decreased APR on the first few months of the balance due is better option to finding a hard money loan through other means.

Why the real estate market will not come back: Part 1 - Jobs

The single most driver of home prices is if people have jobs and thus the unemployment rate is the best metric to monitor.  Please be aware that in the past few years due to the political elections the calculation of this unemployment rate is a optimistic view of unemployment based on people who are out of work.  Those who gave up are not counted in the statistic.  If you lost your job and pissed off would you want to talk to a US phone survey person? But in good faith to random sampling methods and all things being equal the current unemployment is about 8% and is improving to previous historical normals... Like a 13GB DJ Tiesto discography downloading at 0.5 KB/sec from a shotty Verizon 2G connection in Cutbank, Montana.

To achieve the historical 6% unemployment we need to lower the unemployment rate 2% which equates to 20 million jobs.  Assuming 100 epicenters of business (2 per state) you would need to create 200,000 jobs in your nearest city. Then let's define a practical timeline say 2 years... Then you would need to create 5-10 thousand jobs every single month to get there... In every city.... For two years straight.   A best case employment situation such as UPS in Memphis where it is probably one of the poster boys for post recession hiring and growth does not hire anywhere even a thousand jobs a month, month after month after month.  How we expect even to begin to hit a fraction of the 5-10 thousand NEW jobs every month.  And I think it safe to assume this kind of growth is not coming from the small business sector.

To think the unemployment rate will be anywhere near historical levels (without government data tweaking) is fundamentally flawed in their logic.

The Three Tiers of Consumers

The Suckers: These people are those who will pay whatever the sticker price is for anything. Big name brand companies charge top dollar on the lazy consumer.  Examples of this are ADT, Chase Bank/Bank of America, Chase Bank/Bank of America mortgages, State Farm insurance, your local Globo gym.  For companies such as these their business model works... They are usually owned by old wealthy individuals that employ manuscript reading sales people that is based off of shear traffic through front door due to brand recognition.  It is so unfortunate that large companies can cherry pick the easy consumer.  Please note that many times service rendered is great but at a high profit margin.

 

The 2nd tiers:  These are the people who you tell them that its 20% off they go crazy and buy for example the "Groupon" effect.  As explained in a previous post a 15 dollar coupon for 30 dollars is not a good deal when the meal costs 50 dollars, especially when the food is mediocre, and especially if you should have had a meal at home.  Another example of a vendor is Geiko...

"Geiko, saved me a bunch at my car insurance." Yes but that's because State Farm was taking a crazy about of profits.  If I was given a discount so easily then wasen’t the product or service was too expensive to begin with?

The savvy consumers: These people buy only after 1) an analysis if the product/service is even needed and 2) a methodical shopping process where alternatives are competitively bid and then negotiated on final price.  Their vendors are usually smaller, organically grown companies that still believe in the benevolent world.  These companies leans operations to provide optimal value consisting of exceptional product at reasonable price.  Examples of these companies are Simplisafe and boutique real estate service companies.

Its not how much we make but its also about how much we save.  Spending money is necessity without it the economy would not work.  But to give your hard earned dollar to a lazy company is not right.  It is easy to complain about these predator or parasitic companies but we need to vote with our dollars and give them to those to deserve them.

Passion Don't Follow It: Yes you heard that right!

I take it all back about dreams and passion... don't follow it.  Get good at something that has value: Steve jobs did not have  passion for computers but he was good at it. Don't make the jump until you have the skills to leverage.  Going after your dreams day one after graduation is like being a consultant from day one or being a total professions from day one... not going to f-ing happen and setting yourself up for failure.  The whole "follow your passions" has been out since the mid 1900s and every since then job satisfaction and happiness has been decreasing.

Please refer this video for additional information from Cal Newport, 40 minutes but totally worth it.

2013 a new year get out and don't follow you passion and get good at something.

Should I Get The AMEX BLUE Credit Card?

The American Express Blue card is a high rewards card for a unique shopping category of supermarkets. To the average consumer supermarkets is a non-discretionary expense and often the largest category of expenses (other than gasoline). 

The low down on the rewards scheme:

• 6% cash back on purchases at U.S. stand-alone supermarkets (up to $6,000 per year)
• 3% cash back on gasoline at U.S. stand-alone gas stations and select major department stores
• and 1% cash back on other purchases.

Assumptions:
75 dollars a year - Annual fee

Setting the best alternative at 3% at supermarkets which is very rare we try to solve for the crossover point.

If someone spends 50 dollars a week for a total of 3000 dollars a year on groceries the AMEX BLUE rebate would be (3000*.06)-75= 105.  The best alternatve would be 3000*.03=90.
Clearly if you spend 45-50 dollars a week on groceries you NEED to apply for this AMEX BLUE card.\

And buy gift cards which will be given the 6% off also.

BTW: $150 cash back in Reward Dollars when you spend $1,000 in the first three months of Cardmembership





WeakMindedDumbass Clause: If you do not pay your balance off every month.  Please do not get this or any card, or have children.

Average Baby Boomer Financial Status

What We Can Learn From the Death of the Premier NFL Running Back

Walking through home depot I saw a Weber grill set with spatula, tongs, and fork.  Weber grills are the premier brand in grilling. Now why would someone pay 20 bucks for something that can be bought for less than 5 bucks.  Yes its a night brushed steel set and its sure to get a second look at the BBQ but it worth 4 times much as a solid grill set?

VALUE=Utility/Price paid

I'm all for buying quality and something that will last a long time but in some cases it is best to buy the lower quality item knowing that you will just need to replace it. Other products to consider when considering value.

-99 cent 3 blade razors vs Gillette fusion razors
-Asian/usa made vs BMWs
-Airbake cooking sheets vs dollar cooking pans vs aluminum foil

This is probably why the era of the 30 carry a game running back is no more since NFL management have found that it is cheaper and effective to use a 2 or 3 headed running back approach.