- On 17 May 2013
in
The housing bears are rightfully frustrated,
SFace said:
I agree that a certain amount of "good" leverage is needed to expand any
business (unless you have unlimited access to cash/capital).personal finance is a business. There is no fundamental difference. You make money, spend money. You acquire assets, borrow money and build equity. You pay taxes and release the equity via paying yourself or leaving it behind your heirs. You buy your house and treat it like a headquarter like all business does. JCP is in business for 100 years and have a lifeline from disasterous years because of real estate.
If you are not aware what is happening to people surrouning you, you will end up Like Patrick and wonder why Menlo Park is selling for 1.5M and no amount of savings can keep up with others and falling behind. My mom, who has never made a several $ more than minumim wage in her lifetime can buy the 1.5M place based on personal business decisions made. Whether you are rich or poor has everything to do with being smart.
That being said, it's important to distinguish between good and bad leverage, not all of it is good. Just ask anyone who got a no money down home loan circa
2005-2007.Well didn't David Losh said debt is bad. Using debt to buy real estate as an investment is as good as a debt as there is, especially investments that generates FCF. Buying real estate to lock in your cost of housing as a the lessor of your own investment property is even better as you already have a known tenent.
- On 17 May 2013
in
The housing bears are rightfully frustrated,
SFace said:
So unless your assets are owned free, and clear, unless you are debt free,
you have no wealth to talk about. You're leveraged, and talking like that is a
smart move, it's not.nominated.
The most admired enterprise/investor in America, Berkshire/ Buffet has 63B in debt in the form of notes payable.
Wealth is powered by debt. Only an idiot like David Losh thinks cash leads to wealth. Everything valuable in America/in this world has a note outstanding attached. (Ala Moana mall, Ceasars Forum shoppe, Sears Tower)
- On 16 May 2013
in
Use Your IRA To Buy First Home?,
SFace said:
No penalty for the first $10K but you have to pick up 10K as income subject to tax. If you are high income, that may be a disaster. (So your 10K withdrawal is really about $6,500 net of tax).
It's not the best way to fund your DP. You absolutely should avoid penalty as that is just burning money away.
- On 15 May 2013
in
bmwman91's Buying Adventure Log,
SFace said:
Yes, different strokes for different folks. I also don't build speakers that are more expensive than cars.
- On 15 May 2013
in
bmwman91's Buying Adventure Log,
SFace said:
My advice on appliances, furniture, and whatnot is to buy used and cheap.
IMHO, most appliances today are effectively crap with different brand badges
stuck on. I actually went with the vintage appliance route and these are built
like tanks. Plus I didn't pay more than $100 for each which included a stove,
fridge, freezer, range hood, and so on. Furniture is the same. Most made in the
last 20+ years is made out of crap as well. Particle board with some sort of
veneer. All of my furniture is from the 20's-50's. All solid wood. None of the
pieces more than $50.I hate the idea of living life demanding so little. (which is essentially inheriting other peoples garbage) Good luck thinking a vintage appliance are better than the new ones, lol. Good value yes, but not my idea of how to rationalize things.
I am not saying you need viking or subzero, but come on a $500 fridge? Yep a $3500 hood and a 500 refrigerator makes sense. It's like buying a BMW to just use the radio.
- On 15 May 2013
in
bmwman91's Buying Adventure Log,
SFace said:
use Yelp.
- On 15 May 2013
in
bmwman91's Buying Adventure Log,
SFace said:
You can get two movers for about 2 hours. $200 - $300 plus tips. They bring their own truck.
Besides the measurement, you'll have to watch out for how the fridge open in the recessed area.
- On 14 May 2013
in
Warren wants to know why banks weren't prosecuted,
SFace said:
Prosecute for what?
- On 10 May 2013
in
Are the Benefits of Wheatgrass Shots for Real?,
SFace said:
I dunno. Food that comes from the earth, water and sun must be better than processed food and meat. The darker the color, the more vitamin packed it is per oz. Wheatgrass is as mean green as there is. Just like Beets, Red peppers, Carrots, Kale as staples with deep color. I eat Brocolli, Spinich and Gai Lan which tastes good if cooked property. Your kobe steak, mignon always comes with asparagus and delicous. wheatgrass as you can surmise is grass.
It sure doesn't taste good. It will help to add some grapes to change the flavors. This one probably had some light green like celery, Cucumber, grapes and Zuchinni. The dark green in the center is the nasty wheatgrass. Grapes are the sweetest fruit there is so 1oz sweetens the whole damn thing.
Benefits are hard to define. It will probably be easier to say drinking healthy helps more than it hurts so I don't lack vitamins to run the body and go 18 hours a day like I was 18.
- On 27 Apr 2013
in
Thoughts on JCPenny stock,
SFace said:
You know nothing about retail yet have an opinion. lol.
If you know nothing about retail, which is the most basic business in the world, it's hard to understand how anything money related works. lol
There's really jusy three prongs to it.
*Inventory, retail channel. JCP does not sell their own brand, they carry other brand in their department store. They work with branded retailer to stock inventory at JCP store. Levi's don't have the risk of rent, salepeople, overhead but they also don't get the benefit of the retail sale.
A $60 pair of Levi's jean sold at retail would cost JCP probably $25 to purchase from Levi's. Levi's make that pair of jean that cost $18. Levi's get the benefit of $7 and risk free, JCP get the benefit of $35 margin sold at $60 or full retail selling price. If they have to clear the inventory and sell for 40% off, that $60 sales become $36 and the margin went from $35 to $9. As you can see, selling at retail and manage inventory is key
The retailer gets all the benefit of selling inventory at the suggested retail price but the risk at discount. Slow moving inventory always get discounted. The old saying goes, your inventory is not worth more sitting there longer.
Inventory is a huge metric in the financial statements. More days on market (120 days) just means they will go on sale in the deep discount rack. Not only do they not make any money, they cannabilize your other sale. People want to see fresh inventory. Especially for fast fashion, but less so for basics.
This is where the creation of the outlet comes from. Sell slow moving inventory in a place that's not going to cannibalize the retail store, the outlet. JCP does not have that luxory, they have to manage inventory carefully. You're not going to sell the $100 toaster if there is one for sale for $40. But you also want that toaster to be sold as sitting in the shelf for one year is worst.
So JCP is not really a brand, it's just faciliating the brand of other retailers with service and a showroom. and with million of square feet in 1000 locations, there are too big to ignore. Obviously, they are not getting Michael Kors or Kate Spade but Arizona, Levi's St. John Bay and hundred's of non-premium brands. JCP just need to manage their inventory carefully and get the right product at the right inventory level at the right price for their core customers. It's actually a straighforward problem that is data driven by what sells well, what doesn't and what kind of wallet share they need to target. modern dat POS system should be pretty powerful at idenfying what works, they just need more talents to execute the planning of known information.
Ron Johnson thought JCP was as easy as selling Ipad's, stock them up and sell them all at the same price and never worry about inventory because everthing is sold at Apple. That's the Apple retail and works perfectly. Their competitors sell the inventory at full retail price to a core of shoppers that would buy at full retail price and disocunt when inventory needs to be cleared.
Floor traffic and wallet share. There's two prongs, you have to be in the right location to have foot traffic in the store and when they are in there, you have to convert them into sales. JCP has more than 1000 stores, half of them don't have floor traffic problem so all they need to do is close half the store and become instantly profitbable. The wallet share is the retail planning, inventory and selling them as described above. It has been a disaster recently but you put the right product at the right price and they will sell. Its hard not to notice JCP when a shopper goes to a mall it's just giving them a reason to come in and they will buy if you have the right inventory.
*Retail Occupancy. With a 100 year head start, JCP has great advantage of good long term lease with long term options and owning 400 something store themselves. They just need to rightsize some and manage their G&A.
*Cap-ex. It seems like JCP decided to not update their store for 100 years and decided to make up for lost ground. If it takes a $4M per store, $1 billion will get you 260 stores and work it up thereafter. A lot of their YOY decline is simply a function of major cap ex and taking away retail space for the short term for the benefit of their long term. They own their building and have long term leases, so cap-ex makes sense and they probably did it or will do it to their best 500 locations (own/lease, traffic, and sales)that will never close anyway. It will pay off in the future. The retained earning is embedded in the real estate so book value is there. They just secured several Billion $$ without diluting equity. Their borrowing cost is 6.5%. Apple can borrow for less than 2%.
So the way I see it, JCP will need to continue on their Capex program and secure financing to realize those plans. The retail planning needs to raise their game and go back to it's core shoppers and get the right inventory with the right brand partnership at the right price. They also need to rightsize G&A and close the truly non-performing stores with no hope to turn black.
JCP wil be guatanteed to be around in 5 years. It may be smaller but more profitable. JCP is more sensitive to the lower wage consumer which is suffering a lot more than Nordstrom's or even Macy's customer. It's not permanent, retail cycle will come back
The direct retail channel of more products of more brands via internet will hurt the department stores, but stores are not going away, it will just need to be rightsize into something smaller than current and JCP need to develope their own internet channel. The internal sales tax will also help JCP.
- On 26 Apr 2013
in
Thoughts on JCPenny stock,
SFace said:
Soros just bought 17.4 million shares. We think alike.
There is no way you should short shares owned by both Soros and Ackman. my opinion only.
- On 24 Apr 2013
in
Signs The Housing Market Is Starting To Head South,
SFace said:
Yes. I think there is a lot of greedy people trying to sell their homes
I don't really get stuff like this.
Seller's want to sell for highest price possible, buyer wants to buy at the lowest price possible. It's that simple, both seller and buyers are greedy. There's stupid and smart, but there is no such thing as greedy. It's an empty term.
Two years ago, when buyer's were putting low ball offers (very typical Patrick mindset where the advise of the day was just offer 10-50% less and let the seller accept or screw it), did you say I think buyers are greedy?
- On 24 Apr 2013
in
Is it better to buy or rent?,
SFace said:
It's all about "quality of life" and lifestyle in the end
the way I see it.
Everything in life is about "value" and the cost to attain that "value".
Value is in the eye of the beholder. It's easy to say I'm single, I can sleep in my car and cost nothing. A house has no value to me. It's another thing when you have a wife, 2 kids and other. The value is worth a lot more when there are more heads involved.
If you don't have a standard in how you want to live, you don't have a standard in life. Once you figure out your standard or goals, then you have an idea what it takes and how to get there and make the right plans.
- On 24 Apr 2013
in
Is it better to buy or rent?,
SFace said:
Well in that case it looks like a case of spend $6 to save $1.
Nope,
Based on your example, you have 23.5K in interest and 9K in property tax.
That 23.5K of interest will be deductable for both federal and CA state.
Fed AMT rate is 26-28%, There is no AMT for state. CA tax rate is around 10% before federal deduction. If you are on AMT, state deduction net of fed is still 10%
So 23.5K @ 36% = 8,460 in tax savings. You spend $4 to save more than $1 even on AMT.
In your example, you are probably missing the benefit of CA tax by about 2K. So your permanent cost is around 24K + insurance and maintenace +the downpayment.
- On 23 Apr 2013
in
15 year vs 30 year,
SFace said:
There was a reason why you chose 15 years in the first place. Find a low/no cost 15 year fixed with APR around 2.75%. You'll have slightly lower payment streching whatever left back to 15 years and an interest rate delta of 375 basis. It coincides with your retirement plan.
However, if you are not maximizing your tax deferred 401K because of your heavy 15 year burden, and that is the main reason. I would switch to 30 years and max out 401k instead or better yer, a ROTH if eligible.
If you are an investment god like rentforhalfthecost claims, take out a lump sum from the HELOC at 2.5%. lol
- On 23 Apr 2013
in
15 year vs 30 year,
SFace said:
A lower payment based on a function of stretching out more payments is a given and not a relevant fact.
what is your the current rate of interest?
What is the APR of the propspective mortgage? If you look at a 30 year fixed, it's probably good to look at 15 year and 7 IO Arm as well.
What is your age, how much investable assets you already have and plans for the money?
There are lot of ways to build investable assets beside streching into a 30 year fixed. If that is your goal, the 7/1 ARM will be much better. Or you can HELOC your home and get more one shot money at lower interest rate.
- On 22 Apr 2013
in
Previously Owned U.S. Home Sales Unexpectedly Fell in March,
SFace said:
*0.6% pace is essentially a rounding error. I would not categorize it as sales being stronger or softer. Pace means seasonable adjustments
* Your same article picked yoy up sales pace (4.53M vs. 4.92M) and definitely up sales price. 11+%
* are sales due to demand or supply? If year year supply went down 20%, then maintaining same sales is bullish.
* It is irresponsible to pull out and reference sales # without the context on what there is to buy.
So there is less to buy and more demand, just like 2012, 2013 will be more like 2012.
- On 19 Apr 2013
in
No relief as Nor. California prices continue to accelerate,
SFace said:
Fortress?
In 2009, when Patrick.net was looking for 50-70% drop and all theY got was 10-20%. That was, is, and will be your fortress. It's already proven spectacularly that these are last places people sell and first to buy.
Concord, with 50-70% drop is a straw house market.
- On 19 Apr 2013
in
No relief as Nor. California prices continue to accelerate,
SFace said:
Benecia is closer to Vallejo. lol. It has another bridge to cross which is another huge step down.
I don't like Dublin. It is mini Fremont mission. I rather buy the real thing. Tri-Valley including Dublin has wayyyyy too much flat land. For 500K yes, 800K hell no.
- On 19 Apr 2013
in
Big THANK YOU to my patrick.net friends!,
SFace said:
No doubt, interpersonal communication skills, which we've all been working on here together, helped with this achievement. So thanks to you all, the proliferate conversationalists who debate me with vigor, to the occasional poster.
Really congrats.
Communications is a fascinating thing. Here's what I learned so far, having the benefit of 25 years less experience at it than Rob
* No one likes a complainer. If everything that comes from you is always complaining about something or stirring problem, no one will talk to you seriously. You're a problem not a problem solver. Unless you bring a million dollar and history of success to the table then we all put up with it.
* communication always changes whether you are talking to the Board, your boss, your colleague or your workers or even anon board. Understand them from their perspective and adjust accordingly.
* the most dangerous kind of communication is when it is partially right, partially wrong, but the conclusion is 100% wrong. Wrong is wrong regardless of reasons. The difference between success and failure is the results, not reasons.
- On 19 Apr 2013
in
San Francisco's Housing-Bubble Keeps Going and Going and ...,
SFace said:
The average person in San Francisco is not a buyer. some 68% rent. Some 25% are long long term home-owner which will never sell.
Maybe 5-7K homes get transacted in one year in a household of 350K or 2% turnover. it doesn't give a shit about median income, never has and never will. half the countries jobs are the same, it is the other 25% that makes all the difference and separate opportunity with nothing. It correlates more with net worth (which is at an all time high) and the top 10% of household with much higher income growth. There are still an average of 40 bids and close in two weeks.
In other words, owner keep their homes forever and the bidders have more money than ever. Which is heightened by the fact that no new SFH has been built for 30 years nor will there be any ever. Prop 13 and step-up-basis makes San Francisco the most lucrative place to not sell, ever.
San Francisco already had a population of 680K in 1960. Over the course of 50 years, 4M migrated to the bay area but San Francisco accomondated 100K more people.
The recent interest rate dip heightens the problem. WFB will lend in San Francisco with the best terms but not in Sacramento. A 1M loan is cheaper than anythigng Fannie and Freddie/FHA can offer. the MID is the most lucrative in the country. San Francisco is also a gateway city to much of Asia, Russia and to a smaller extend Europe. To a lot of them, San Francisco to Austin is a huge-step down. It's also attracting top graduates from throughout the country, especially recently there has been a raid of people coming from the northeast.
Contrary to popular belief, San Francisco will be the last to fall and the first to rise.
- On 18 Apr 2013
in
Iphone 5 or samsung galazy s3,
SFace said:
I got the one and played with it all night.
Pros. Simply fast. Wifi or network. Network is just as fast. Turn on in about 8 seconds nothing lags. 4 sets of email, lots of them loads instantly. Everything loads fast and there are lots with blinkfeed and android features.
Beats is great. Listened to psy gentleman on both the pad and one. the one is More booming with the beats than normal. Love the beats of that damn song and it will hit every club in the world. Psy is amazing.
Camera Zoe is a great feature and addictive. Its going to be fun putting together something new with zoe. Don't know about ultra pixel.
Love the customization. I commingle work with personal so like to tweak widgets, calendar, apps the way I want it. One widget for work Calender and yet another for personal. You can opt out of blinkfeed home which is ok but definitely not home page.
It really feels perfect to hold. Really, cant be beat from a build quality, weight, thickness. I don't do cases. It makes Samsung look like silly toys and awful. iPhone is too small, cute like the vw beetle.
I use iPad for home and android for phone. Android has really improved a lot in every way, subtle and not so subtle. and all in all much better and useful than apple iOS. I can't believe google is giving away android for free. apple is great for my 5 year old kid and 60 yo mom but android is the now and the future. Hope the next big update key lime pie will be an update for htc. Android works less well on the pad. For pad, it's just playing video, apps and surfing the web which iOS does great.
Keyboard is not that good. Same mini USB so no need to buy new car charger or cable.
- On 18 Apr 2013
in
No relief as Nor. California prices continue to accelerate,
SFace said:
Although I think this system is complete horse-shit it doesn't seem that
unlikely to get your kids into your preferred neighborhood after reading
this:You can list as many schools as you want. If you list 20, chances are you'll hit one of them. That doesn't mean you will hit #1, which is really the preferred choice. #2 - #20 could be preferred but end up disappointing.
- On 18 Apr 2013
in
Big mortgage rates spike today (downward),
SFace said:
SO, when the interest rate resets in 7 years, are monthly payments based on
the remaining principal at the time, or based on the original principal at that
rate?No one lived long enough to tell. lol
Your interest expense is based on your effective rate and amount you owe. You probably get a letter that states the agreed to index (prime or libor) and margin and they will slap a payment schedule which will amortize with principle over 23 years based on your balance owe after month 84. The floating rate nature means the payments adjust every year or six months (depending on the term).
- On 18 Apr 2013
in
No relief as Nor. California prices continue to accelerate,
SFace said:
That's true, but I thought they adjusted the system somehow that the
neighborhood you live in gets more weight while it is stilla lotteryIt's bumped up by one weigh, basically from nothing to just ahead of nothing.
Zip code is behind
Siblings
social/economic
Preferred zip codeA school like Clarendon which has 44 spots, but really just 26 are open against 1000 applicants means you have no chance based on zip code. Buying next to Clarendon is meaningless, unless you think from 3% to 10% is a reason.