What Are You Scared of?

What Are You Scared of?

Because of what I do for a living (and because I’m a totally rad guy who’s THISMUCHFUN at parties), I spend a lot of time researching stocks. Normal people have fun hobbies. I do not.

I’m what the cool kids call a contrarian value investor, which is just fancy words that mean I look at stocks the rest of the market hates. A more apt description of what I do could be referred to as turd mining, really. I go on my hands and knees and sort through rivers of turds, trying to find the one stock that isn’t just poo.

Grossed out yet?

Most of these opportunities are eliminated pretty quickly, usually because of debt. It is the reason why at least 50% of stocks in the dumps are there. I start doing an analysis, realize the company is dead if earnings aren’t maintained, and quickly move on. Avoiding debt is very high on my investment checklist.

After looking at at least a thousand companies in my investing life, I’m proud to say I can get to the nuts and bolts of a stock pretty quickly. I know what’s important and what isn’t. And after spending an hour or so reading the annual report, I’m quite well informed. It helps to stick to smaller companies that are more easily analyzed.

Often, I’ll find an opportunity that looks good, is attractively valued, has a good balance sheet, and so on, but I don’t pull the trigger. Sometimes I’m waiting for a better price. Other times I might want to do more research or see what other investors think. And so on.

And you know what? Waiting costs me. Not always directly, although that happens a lot too. Waiting costs me because I don’t tend to turn up much additional information. In other words, my additional research isn’t yielding anything new. I’m just reiterating what I already know, which is a giant waste of time.

Don’t be afraid

Look, buying an individual stock can be scary. A small position for me these days is several thousand dollars. Unless your last name is Kardashian, that’s serious money.

I’ve had actual companies I own go to zero. Danier Leather went away. So did that stupid Chinese printing company I bought back in 2010.

But they’re the exception, not the rule. The fact is stocks tend to go up, and cheaper stocks tend to go up more than expensive stocks. I’ve based my whole investing philosophy on it, so it’s gotta be true.

I’ve missed out on some terrific gains because I liked a company. I just made excuses about why I shouldn’t buy the stock.

What’s the worst that can happen? That answer is simple. I lose all my money. I’ve gone through that before. I know it’s not that bad.

I looked at Freightcar America (NASDAQ:RAIL) right before the U.S. election at $11 per share. It’s $15.27 as I write this. Back in the day I looked at Coopers Park, which I passed on even though it was incredibly cheap. It was taken private at a huge premium a couple of weeks later.

I can think of more examples, but screw it. The point is that, usually, my stock picks work out. Sometimes they don’t, which is why I have a diverse portfolio.

Get to the point, Nelly

It comes down to this. It doesn’t matter what your afraid of. I guarantee it won’t be that bad.

My life hasn’t really been adversely affected because those two stocks I invested in went to zero. I don’t lose sleep over them. They haven’t impacted my ability to go on vacation or do other fun stuff.

Think about what you’re scared of. How bad can things really get?

Want to ask out that pretty girl? Go for it. The worst thing that can happen is she rejects you. I’ve been there before and it sucks. But you’ll get over it in a day or so.

Want to ask your boss for a raise? Be smart about it and rationally present why you should get more money. I do this all the time. At least half of the time I’m rejected. Oh well.

Humans hate losses. Studies have shown we’d rather avoid a small loss than post a big gain. This attitude is holding you back. It’s holding all of us back.

Here’s what I want you to do. I want you to just do the thing you’re thinking of doing, but just haven’t been able to quite have the balls to do it. Mine is investing in High Liner Foods, a stock I think is decently valued that I’d like to pay $17 per share for, not $19. By the time you read this, I’ll own a few hundred shares.

Post your results in the comment section. Conquer your fears. I want to hear about it.

Frugal Fail: My Batch Cooking Disaster

Frugal Fail: My Batch Cooking Disaster

It all started when I had a breakfast problem.

It went something like this. Every morning, I’d eat Vector, the most delicious cereal in the land. Kellogg’s has marketed it as fancy nutritional meal replacement, and I took the bait hook, line, and sinker. Sure, it was mostly carbs, but at least it had some protein to go with the other 17 useless nutrients it lists on the side of the box.

Niacin? NICE TRY, BIG PHARMA. You just made that up.

For the most part, Vector was great. It was fast, delicious, and since I bought it in bulk at Costco, pretty cheap too. Including milk, a bowl would cost well under a dollar.

The only problem was it wouldn’t fill me up the whole morning. I get up usually around 6:30, with the intent to eat breakfast at around 6:45 and be in the shower by 7. This allows me to get to work right around 7:30, which I think is the sweet spot. By 10, I was hungry enough to crack out my lunch early.

That wasn’t really doing it for me, so I decided to try something new. Whenever I’m out of milk, my back-up breakfast of choice has always been a breakfast sandwich. Oh man, I love those things. Every now and again my wife would make them at home and it would be fantastic.

So I decided to batch cook a bunch of my own breakfast sandwiches and freeze them. It didn’t go as well as planned.

The prep

Preparing for this was relatively easy. First stop, Costco, where I bought the following items:

  • Five dozen eggs
  • Four packs of bacon
  • Two packs of english muffins, 48 in total

The total cost of the eggs was $13.79 and the bacon was $17.99. The english muffins set me back $10.98.

But remember, I didn’t use all of my ingredients. I only used half of the bacon and 48 of the eggs. Thus, my cost was as follows:

  • Eggs (80% of $13.79) = $11.03
  • Bacon (50% of $17.99) = $9.00
  • English muffins = $10.98
  • Total = $31.06
  • Per sandwich cost = 64.7 cents

That’s probably a little cheaper on a per unit cost basis than Vector, which is probably closer to 70 or 80 cents per breakfast. Keep in mind I’m not including the cost of the aluminum foil to wrap the sandwiches because I already had it on hand, but I’d estimate that cost only being a nickel or so per sandwich. Not much.

Now let’s talk about the cooking process. I thought about it beforehand and came up with that I thought was a pretty efficient method. I’d cook the eggs in the oven inside of cupcake (muffin?) tins. I’d then spread out the bacon on cookie sheets. While they were cooking, I’d start cutting the english muffins apart.

It wasn’t a bad strategy, but it did produce a few unintended outcomes. It was hard to scramble the eggs once they ended up inside the muffin tins. The eggs didn’t stick to the pan at all, but the bacon did. And I only had 24 muffin tins, which slowed up the process.

Here are some pictures, because if Reddit has taught me anything, it’s that you can’t batch cook without a bunch of pictures:

breakfast-1

breakfast-2

breakfast-3

breakfast-4

Note the time I started on the first picture, which was 6:40 pm. I stacked a pyramid of breakfast sandwiches in front of the clock so you can’t see when I finished, so you’ll just have to take my word for it. It took two hours to prepare and wrap 48 breakfast sandwiches.

Chowing down

The whole point of this batch cooking exercise was to have a hot, delicious breakfast with only a minimal amount of work.

It did not deliver. Hoo boy. Not even close.

The first day I decided to heat up my sandwich in the microwave. It took 1:30 per side to heat everything up to a satisfactory internal temperature. Except the bun was soggier than the average Vancouver afternoon. And the thing was so damn hot I had to let it rest for a couple minutes before eating it.

After a little experimentation, I’ve figured out how to reheat each sandwich so they’re decent. First I microwave the whole thing for a minute thirty. Then I separate the egg and microwave it alone for another minute thirty. I put the rest of the sandwich in the toaster oven for a toasting cycle that takes longer than three minutes.

Total time prep: five minutes. Ugh. I can practically make a sandwich from scratch in five minutes.

I still have like forty of these things left. Anyone want to come over for breakfast?

Conclusion

I shouldn’t bash batch cooking that much. This was my first attempt at it, and the breakfast sandwiches are pretty good once I figured out how to prepare them right. It also didn’t really help my problem of getting hungry at 10, but I think that’s just a byproduct of when I’m eating breakfast.

I batch cook all the time, usually on Sunday nights I’ll prepare enough food so I have leftovers for lunch. I’ll continue doing that. But when it comes to breakfast, I’m switching back to cereal as soon as I can convince my wife frozen breakfast sandwiches are the bomb diggity.

We also haven’t touched on what I think is the most important variable — my time. By the time I’m done, this batch cooking experiment will cost me between three and four hours of my time. Even at just $10 per hour, the conclusion is obvious. Sorry kids, but batch cooking just isn’t doing it for me. Not unless I can just make more of whatever food I was going to make in the first place.

Frugality Sucks

Frugality Sucks

When somebody first starts to pay attention to their finances (which usually happens after they get into a large amount of debt), the default solution is always to cut back on spending.

There are a number of reasons why. It’s easier than making fun of my many shortcomings. Most people who aren’t the Early Retirement Extreme guy have plenty of excess fat to cut from their budgets. And it really feels like you’re sacrificing when you go without Starbucks or whatever your budget cut of choice is. That feeling is important to people, believe it or not. Go ahead, don’t believe it. See if I care.

This goes fine for a few months, then everyone gets the same realization. Frugality sucks. It sucks balls.

I’ve never been a big fan of frugality advice. Life advice that recommends people cut out things doesn’t usually work. Diets suck, which is why I’m going to eat a big bowl of trifle after I hit the gym tonight. Cutting the cord is all the rage, but the fact is I’d much rather have BNN and all the sports channels available to watch whenever I want. It sucks too.

Frugality sucks the most

It’s the whole reason why 99.92% of all budgets fail.

Money has a way of permeating into every aspect of our lives. We exchange it for fun things like buying Nelson his most treasured material item, a coffee mug with a kitten on it. Go ahead, mock me. I’LL FIGHT ANYONE I DON’T EVEN CARE. You can also use it to buy not so fun things, like new socks or your electric bill.

There aren’t many ways you can cut down on essentials short of sitting in the dark, goddammit it. IF THAT BILL GETS ANY HIGHER I SWEAR TO GOD AGNES, I’LL DO IT.

So we cut back on fun things. Meals out get substantially cut or eliminated. So do take-out coffees and new clothes and a million other things we like. It gets to the point where everything the least bit entertaining is eliminated.

Oh yeah. That sounds like a great way to live. And then we wonder why these things have a higher failure rate than Lamar Odom going to rehab (NOT THE LEAST BIT TOPICAL).

But at the same time, there needs to be a place for frugality in everyone’s lives. I don’t care how rich you are, you’ll eventually go broke if you insist on making it rain hundos at the club. Frugality sucks, but being broke sucks more. So we compromise. We only get coffee or do for dinner sometimes. Vacations are a treat, not a full-time lifestyle choice. We help out one World Vision kid rather than promising a whole third-grade class we’ll put them through college.

The secret to mastering frugality

Even though frugality sucks, it still needs a place in everyone’s life. At least until they start earning unlimited amounts of money.

I believe the difference between people who can successfully stay frugal even after they start amassing serious wealth is low expectations. They’ve trained themselves to get happiness over little things.

I’m like that. I like nothing more than hanging out with like-minded friends, watching a game or just talking about our lives. Other people might like hiking or reading or video games or some other hobby that doesn’t cost much. Cocaine and high-class hookers aren’t high on their list of priorities.

This comes naturally to many people. Many others will struggle with it for their entire lives.

The solution: making more money

It doesn’t matter if you’re naturally frugal or not. Making more money will help whether you’re cheap as balls or you’re a real spender.

Ultimately, personal finance comes down to two factors: income and expenses. Everything else is just noise.

If you can increase income, the expenses don’t really matter that much. And thanks to passive income, it’s really not that hard to convert savings into more dollars. Both can be going up, as long as one rises faster than the others it’s all good.

This is why I’ve never really sweated lifestyle inflation. It’s only natural to increase your standard of living if you’re making more money. What’s the point of hustling if you’re not going to get anything from it? As long as you don’t add $300 in monthly expenses when you make $200 extra, it’s all good.

Final thoughts 

We all need some sort of frugality in our lives. But there’s no reason to go nuts with it. Extreme frugality sucks, I don’t care who you are. Nobody is having fun washing Ziploc bags to use again.

Which is why 90% of my efforts are spent trying to earn more money, ideally passively. It’s a lot easier to scale up investing than it is frugality. Why spend time trying to save $10 when the same amount of time can be spent making $100?

How (and Why) To Start an Investment Club

How (and Why) To Start an Investment Club

The interwebz have made things a lot easier for those of us who really don’t like going outside.

Communities exist for just about everything, especially on Reddit. All sorts of FREAKS hang out there. Into having sex while dressed up like animals? That community exists, and no, I’m not linking to it. That’s gross.

There are also much more, uh, vanilla interests out there. Take investing, something I’m assuming all of us are interested in. There are hundreds of different websites for every kind of investing out there. Whether you’re into real estate investing or putting your money to work in blogs, there are websites where people can weigh in and discuss the basics.

Having internet friends is all fine and good, even if it is a little weird when you first meet them. I’ve met some of my best friends online. Hell, I met my wife online. But there are also reasons to get some offline friends too, especially local ones.

The easiest way to meet friends is to find a common interest. You bond over whatever it is you have in common, and then the relationship blossoms from there.

Say you’re like me and you want to meet real-life people who are into investing. What to you do? You can either go to all sorts of socials and mixers, hoping to somehow stumble upon somebody who has the same interests. Or you can streamline the process by just catering to folks who are already into investing.

I’d prefer to do the latter. Here’s how to start an investment club.

How to find investors

Most investment clubs are centered around real estate, and they’re usually started by real estate agents who are looking to pick up clients. It’s smart marketing, actually.

Stock market investment clubs exist too, which are usually started by an investment advisor looking for assets under management.

Beginning to see a trend here?

The first step is to find like-minded people. Most of the time this is easily done through the internet. A bunch of people with similar interests realize they’re close to each other, and make plans to meet in real life.

But what if you’re Nelson, and you live in a small town with only a potential pool of 100-200 people? That makes things a little tougher.

You’ll have to do the work of asking around. Start with business owners, real estate agents, mortgage brokers, and so on. Go to things like Chamber of Commerce meetings or various business meet-ups in your community.

Personally, I wouldn’t be interested in joining an investment club that was just a front to drum up business. So I’d make it clear that I was just a guy looking to discuss all different types of investing with other fellow nerds.

If you’re starting it, chances are you’ll be the de facto president. Rule with an iron fist. What’s the point of being president if you can’t? Hey, it’s working for Donald Trump! Hey-o!

The money question

Most investment clubs pool together their money and invest in stocks they all find interesting.

I personally wouldn’t want to be part of such a club. I’m a do-it-yourself guy. I want to invest my own money. I wouldn’t want any of my capital going in some dumb stock I think is overvalued.

But at the same time, people aren’t going to take it seriously if there isn’t some sort of financial commitment. I’d argue strongly that you at least need to charge a yearly membership fee. Even if you only make it enough to cover snacks and the cost of renting a room, that’s still enough for people to take it somewhat seriously.

And it’s always good to have a way to discuss stuff in between meetings. Facebook groups work good for that.

Running the meetings

Hey, it’s your club. Talk about whatever the hell you want.

If I was going to go to an investment club, I’d want to hear stuff about:

  • Stocks (but not the usual suspects)
  • Real estate (but from investors, not realtors)
  • Various private businesses
  • Good ol’ fashioned hard money lending
  • Merger arbitrage

Things I definitely wouldn’t pay to hear about:

  • ETFs
  • Anything pyramid scheme-y
  • Any managed product

As tempting as it would be to just hang around and talk stocks all night, there needs to be a meeting format. I’d suggest making at least one member pitch an idea each meeting, with the requirement of each member having to make at least one such presentation a year.

Snacks

If you invite me to your investment club, please have the following snacks:

  1. Jalapeño and Cheddar Doritos
  2. Beef jerky
  3. Movie theater popcorn
  4. Pizza
  5. Costco/7-11 hot dogs

The following snacks will result in my skipping your meeting for all of eternity:

  1. Oatmeal raisin cookies

Conclude that ish, yo

I would LURVE to start an investment club, but I fear my small town just doesn’t have enough serious investors in it. Besides, I don’t really want to be president of anything. I’m more of a junior vice president kind of guy.

As long as you can find yourself a decent group of people, an investment club will be an interesting opportunity to talk with like-minded people in real life, and will present the opportunity to look at investments you wouldn’t normally consider.

Scam Your Co-Workers and Make $100 Per Week

Scam Your Co-Workers and Make $100 Per Week

Oh, like you’re above scamming your co-workers. They’re all terrible and you know it. Old Bob brings the stinkiest egg salad sandwich every day and Louise won’t shut the hell up about anything. GODDAMN IT YOU OLD HAG I DON’T CARE.

Besides, we know you’re all about the passive income. That’s why you’re here. Well, that and you don’t know how to use the back button. You’re all only 14 useless tool bars away from being my grandma.

Anyhoo, that’s enough preamble. Let’s talk about how easy it is to scam your co-workers out of $100 per week.

“You could get lucky!”

Every wage slave dreams of leaving their screwy job, preferably giving the proverbial middle finger to their boss on the way out. Hey, even Homer Simpson did it.

bongo

Some of you try to do this by creating a huge savings rate, channeling every spare cent into investments while pitching a tent in your own living room and eating from your neighbor’s trash. “Hey, are you going to finish those coffee grounds, fat cat? Sucker.”

Yes, pitching a tent in your own living room rather than pay for heat is an actual suggestion from the Early Retirement Extreme book. Presumably made with a straight face, too.

Most people want nothing to do with saving aggressively, preferring to spend their cash on Meghan Trainor t-shirts and glue sticks. You know, the essentials. So they look to the lottery, dropping down tens of dollars on tickets to the big draw.

I’ve made fun of lottery players before, but I can actually see the other side of it. Where else can the average person turn $5 into many millions? You could even argue the fantasy aspect of it alone is worth the price of admission.

Here’s the correct answer to the question of what to do with a million dollars:

two-chicks

Many workplaces have group lottery funds, probably because these people can all sympathize just how much work sucks. So everybody chucks in $2 or $5 or whatever, and somebody is in charge of buying lottery tickets.

That person needs to be you. And then, instead of spending the cash on lottery tickets, you pocket it.

The logistics

This scam is ridiculously easy to pull off.

Step one is to find a bunch of patsies. This will be surprisingly easy. Regular people live for the lottery. It’s unbelievable.

Next, make them take their imaginary lottery potential seriously. Why bother with a dollar or two dollars? It’s five dollars to enter, dumbass. Look at how the odds are better at $5 per pop! It’s like we can’t lose!

Don’t worry about somebody calling you out on that bullshit, by the way. The average person can barely multiply double digits. They know odds about as well as I know the plot of the latest Nicholas Sparks book. Actually, everyone knows the plot of that garbage. I’ve seen at least one of the movies.

Once you have 20-25 people in your pool, it’s time to start actually doing the math. We’ll stick with the Lotto 6/49 for this post, which gives you six numbers out of the first 49 integers, as well as a bonus 10-digit number for a bonus draw. This costs $3 with an extra $1 for the bonus number, which is called the encore or extra, depending on what part of the country you’re in.

Don’t worry about the bonus number. It’s an all-or-nothing scenario. Like hell we’d ever pay that out.

The draw works like this. The lottery people pick six numbers and then a seventh bonus number. This is the bonus number you’ll have to worry about, at least a little.

Next, we have to figure out the odds of actually winning in the main draw. If you get two out of six numbers, you’ll win a free play (a $3 value). This happens about once every 8.3 times you play. The next prizes are 2/6 numbers and the bonus number, which happens about one out of every 81.2 times you play. That’s a prize of $5. The next level is matching three out of six numbers, which pays $10 and happens once every 56.7 times.

Because the group is playing so often, it’ll win at least something every week. $100 per week at $3 per play means we’re looking at 33.3 plays per week. So the group will win $10 once every 1.7 weeks and $5 once every 2.4 weeks. You’d also maybe have to pay out a bigger prize every 31 weeks when the group matches four numbers.

So to make it easy, I’d pay out $10 every two weeks and $5 once every three weeks, along with announcing free plays damn near every week. Naturally, convince the group to let the free plays ride while continuing to contribute their usual $100 per week.

I’ve condensed everything into a table for y’all.

Week Collected Paid Out Profit
1 $100 $0 $100
2 $100 (free play) $10 $90
3 $100 (free play! whoo! $5 $95
4 $100 $10 $90
5 $100 (two free plays this time!) $0 $100
6 $100 (more free plays) $15 $85
7 $100 (and so on) $10 $90
8 $100 (free play, bitches!) $0 $100
9 $100 (free! free! free!) $10 $90
10 $100 $5 $95
11 $100 (more free plays!) $10 $90
12 $100 (four this time!) $5 $95
Total $1,200 $80 $1,120

Say the once every 31 week payout works out to $100. That works out to a current value of $3.22 per week, decreasing your expected profit by $38.64 per twelve week period. So instead of pocketing $1,120 per twelve weeks, you’re looking at a profit closer to $1,080.

BONUS SCAM: Instead of paying out the $5 or $10 proceeds, volunteer to save them and spend them on snacks, beverages, etc. for the whole office. Free muffins, baby.

What happens if someone wants to see the tickets?

“Oh man! I forgot them at home/my desk/at that hooker’s house. I’ll let you see them tomorrow.” It’s up to you whether you then rush out to buy tickets or you just wait it out until nosy Louise loses interest.

And that’s about it. The hardest part of pulling off this scam is lying to your co-workers. If you can pull that off with regularity, the rest is easy.