What more American Dream than a white picket fence in the suburbs?

I guess a bucket of debt is.

From a small-scale investor’s point of view, buying a house is huge. Most of us will never take on so much debt again in our lives. We might buy cars or education’s, but look at your loan docs some time, and check out that big repay number. The first time I signed a loan, I looked at the number and thought, “That’s really what I’m going to repay?” Turns out, I didn’t even come close to repaying that amount, but that’s a different story.

Is it worth it? For the most part, yes. With the mortgage interest deduction, you’ve got a great tax deduction. It’s going to offset the cost of housing, and in some areas will make it cheaper month to month versus a rental. Of course the initial cost complicates the math, fees and downpayment and all. But, you’ve gotta have somewhere to live. Home ownership gives a lot of benefits that aren’t easily quantifiable in financial terms.

But, back to the first question, what could go wrong?

Well, the market could drop out from underneath you, and your home value could plummet.

…more to come

The Consumer Financial Protection Bureau is looking for ways to find discriminatory or predatory lending.

http://finance.yahoo.com/news/u-consumer-officials-seek-input-improving-mortgage-data-052418495–sector.html

It’s nice to see data being used in a regulatory fashion, and maybe exposing more data to the light of review.

This type of behavior is potentially huge in the world of finance. One of the limiting factors for a small investor is knowledge. Markets are supposedly in equilibrium due to all information being understood and acted upon. The reality for me is that I don’t know everything. How can I understand the actuarial tables from all of the lenders for my Small business loan, and know whether I’m getting the best rate. How do I know that my area hasn’t been unfairly targeted for an unfair redlining?

If regulatory agencies take over this type of data collection, and dissemination, it creates a force in the market to have all actors behave in a way that they want their customers to be happy with. You might have the ability to sneak one over on me, but if I know that you have I’m not going to be too happy with you, and I just might not do business with you in the future.

A lot of digital ink has been spilled since the failure of Lehman Brothers over whether major financial institutions were at least partially responsible for the financial meltdown and subsequent deep recession.

Are the people manning the desks at JP Morgan and other big banks bad people?

For me the answer is yes and no.

Yes, some people in banking are bad people. They do bad things for bad reasons. They lie, steal and cheat to personally enrich themselves. The reality is that if we look at a standard distribution of morality, half of them are going to be below average. Even if we quantified “bad” as a standard deviation or two off the mean, then that means there’s a whole mess o’ bad people in the world. When you look at jobs like investment banking, it’s hard to fault the logic that high monetary rewards draw people who are motivated by monetary rewards. They care about their money, not yours. Well, they do care about your money, but only to the extent that they want it for themselves.

And some people are good people. They’re dedicated at working with their clients, both business and individual, to help them achieve financial success.

How do you tell who is who? The best way is by what they talk about. If they want to tell you what to do, beware. If they listen to you, and ask you what you want to do, then they might be trustworthy.

Of course, it’s not so easy as a single thing, but I bet if you got to know your banker or financial adviser, then you’d have a better idea if they’re a good person or not.

What’s the best investment to make?

Don’t we all want a silver bullet answer for that? I know I do. It’s like a cheat code for financial prosperity. If only I could go back in time, I’d buy Priceline when it was a penny stock, and get friggin rich!

But, shit, man, if that’s what you’d do if you could go back in time, then you need some bigger dreams. And that’s me I’m talking to.

So, what do I do? How do I take a little bit of money, and turn it into a bunch more? The math on it isn’t difficult. Find the best return on investment while considering risk. The trick is looking at your whole life. You need to think about possible investments, maybe a house, maybe equities, but you also need to think about what you owe.

If you have debt, you need to consider what that debt costs, and if paying that down makes more sense than putting money into your 401k.

For instance, if you have credit card debt at 20%, then you better be doing all you can to pay that debt down. Because you’re certainly not going to get a predictable ROI of more than that, not long-term anyway. If you can get that kind of ORI all the time, drop me a line, we’ll publish your strategy on this blog and all retire to Key West.

I know that sometimes credit card debt is what you have to do. I knew a dude who finished his undergrad degree because he took a bunch of it on. It worked out for the best for him to do that, so that might be you. Or you did it for an illness or another crisis. The key for those situations is to suck it up, and get to paying. You’ll get out of it.

The other group, though, is the one who gets into credit card back because they buy too much stuff. In order to even get your life to a place where you could consider the best possible investment, you must not be one of these people.

Some people can make conspicuous consumerism work for them. Mostly, we call those people trust-funders. Or super motivated and talented folks who don’t need to listen to idiots like me. Sucks to be you, I guess.

Not really, I’m sure it’s very nice to be you.

The stock market dropped 2% today. Is it time to panic? Probably, but other than panicking, what do you think you can do? Go ahead and sell all your equities. What you’ll pay in fees getting out, and then back into them when a cooler head prevails, will be far higher than any loss you think you’re offsetting.

The first question is, what do you own that you would sell? Let’s say you’ve been stock picking, and you’re going to “take profit” because that’s what you’ve heard the stuffed shirts on TV say people are doing.

“The market was down today, as profit takers engaged in a wide selloff.”

– Every dude in a jacket and tie, every day the market is down

The reality, from a wide view, is that you and I shouldn’t be regularly buying and selling equities.

http://www.ifa.com/12steps/step3/

Read that, and repeat after me, “Playing craps is way more fun than throwing darts at stocks, and probably more lucrative.”

If our best investing behavior is to not try to buy and sell stocks like a billionaire playing with other people’s money, then why look at the index on any particular day? It’s become a pastime, like movie gross is for all of the people who don’t like movies, but do like gossip magazines and really beautiful people.

Whether the stock index goes up or down tomorrow should be pretty irrelevant to you. The best money bet is to be in index funds, and ride them. Put into them what is reasonable for you, and stay away from watching the ticker every day. You’ll live a better life for it.

Do I stock pick, you ask?

Heck yeah, I’m smarter than everyone, plus, I’ve got a fool-proof system.

In a world glutted with blogs and commentary, why launch a new one? I mean, is this 1998 again, and I think this blog thing might really catch on?

Truth is, I do see a need for this blog. I’m just a regular guy who likes to watch the news and keep on top of things. As things go nowadays, even regular guys need to invest, but where can I go to get information? Sure, there’s a lot of investing advice out there, but most of it is tied to services. Either the blogger is fronting for a financial services company or they’re a consultant. I just want some straight-up news about what’s happening in the world of investing that I should care about.

Now, what I care about is that the investments I make are sound.

So, that said, in the course of this blog we’re going to talk about a lot of things; current events, earnings, 401k, real estate, and whatever interests me. We’ll talk about general things like Random Walk Theory and stock picking, what kind of indicators I should pay attention to, is everyone in the financial world full of crap. We’ll also go into specifics, are 401k’s the best place for our money, does buying a house make sense, what’s going to happen to the bond market when interest rates rise.

I have one thing really going against me as a blogger, I’m pretty even keeled and mostly willing to look at both sides of an argument. I’ll try to keep it from being Land of the Happy People, though, and keep it as spicy as I can.