Expense Report – Fuel Costs

Watch my frugal friends wince. I drive a truck. I drive a good old ‘Merican pickup truck with a cap on the back, 4WD, and a tow kit. Surprise. It turns out to be quite frugal. Not as frugal as my friends who bicycle almost everywhere, but I can confidently state that my fuel mileage is better than most Americans. My truck’s fuel mileage isn’t very good. But mine is. Frugal can mean many things. Seemingly unfrugal choices can still fit into a frugal lifestyle.

dsc_7168My truck is a 2000 Chevy Silverado. My Dad passed it along to me. Before that I had Jeep (not Grand) Cherokees since 1987. Drive them right and I’d get 28 mpg. (Set it into 4WD on some particularly gnarly roads to trailheads and watch the instantaneous fuel mileage drop to 1 mpg. That was a bit spooky when I had less than a quarter tank left and miles of ruts and gravel to travel. See my hiking books for more stories.) The Silverado weighs more, is larger, is equipped for a contractor, and unsurprisingly gets much worse mileage. Unfortunately, I’ve been so busy that I hadn’t taken the time to work through the exact numbers – until now.

Let’s skip the suspense and dive into useful data.

dsc_7180After looking at a year of data, I now know that the truck gets 15.6 mpg. I suspect that’s more like 18 mpg on the highway, but that’s not much consolation. Flip that number into something more useful for frugal folk and it works out to $0.18 per mile. The local theater is ten miles away, so going out to a movie costs $3.60. Good thing the local theater only charges $7 for the movie and $1 for the small popcorn. It’s good to live in a small town. Beware of spoilers from your friends in the big city. The cost of gas is one reason I turn down lunches. “Meet me for lunch. I’ll pay.” Sounds great, but I’m still trying to pay previous taxes, haven’t found enough to save for this year’s taxes, and know I can make lunch at home for less than the cost of gas. Even the time spent in travel costs because it isn’t billable, as even the least profitable of my jobs are.

Sounds like a good reason to ride the bicycle, which I do whenever I have the time, don’t have to also carry my computer, and can arrive a bit perspired. (Looking forward to a coworks where I can store a computer and a change of clothes. It could happen, again.)

With those numbers and that situation, it doesn’t look good for the truck.

The truck isn’t very frugal (though it is very useful.)

Let’s take those same numbers and look at them a different way.

Miles driven in a year = 3,922. Gallons of gas burned and turned into work, heat, and pollution = 289. Total cost of fuel in a year = $783.
Or
Miles driven per month = 327. I know people who drive that in two or three days.
Gallons of gas per month = 24. That’s less that one tankful, but then, this truck has a big tank. At least I only have to go to the pump about once per month.
Cost per month = $64. That’s still about $2 per day, but that’s less than some people spend on one meal.

I’m more frugal than the truck.

I’m not trying to fly a banner, sound the trumpets, or build a pedestal. I have several friends who ride farther and get much more done on their bicycles, have to remember to trickle charge their hybrids because they’re driven so rarely, and have mastered mass transit. They’re the ones that deserve the accolades.

My fuel costs are low without being extreme. I don’t drive much, but I wouldn’t drive much more if my finances were much better, except for more frequent trips into the mountains. My situation has encouraged greater frugality, but I present it here as an example of another approach to frugality. I doubt that I could trade the truck for something more reliable and just as capable, even another truck. The truck isn’t the issue. How the truck is used, is.

Frugality isn’t about using less. Frugality is about making the best use of the resources available. Make your things fit your lifestyle. Live your life, not the lifestyle of your things.

That’s a generalization, of course. Sorry to dilute the message there, but reality is important. Part of the reason I live the way I do is because of my house, my computers, my clothes, and of course my truck. We aren’t totally independent. It is more important for me to realize that, while my truck isn’t frugal, I can be.

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Popular Posts 2016

Writing is an interesting exercise. Writing about personal finance is particularly interesting to me because I treat finance as something personal, emotions included. And yet, deciding what to write is always a guess. What will people care about? I tend to write about what I think fits the purpose of this blog, but readers decide which topics are most important to readers. I am a fan of data, so here they are, the posts you decided were the most popular in 2016. Apologies to December posts that don’t get the advantage of January’s head start; but it all works out in the end because the most popular posts draw traffic for years.

  1. MicroVision Before And After
  2. Will Zillow Make Me Move
  3. One Confused Obamacare Applicant
  4. Spreading News – MVIS And CES2016
  5. MicroVision Today The World Someday
  6. Sad MVIS Shareholders
  7. Lowered Expectations For MVIS
  8. Transition For Writers On Whidbey
  9. Upscaling Whidbey
  10. Corporations Meet Owners MVIS 2016

See a trend? Of the top 10, 6 are about MicroVision and its stock, MVIS. This is for a company that has fewer shareholders and employees than any of the zip codes on Whidbey Island. Housing, healthcare, and two posts about Whidbey are the remainder – all topics that I’ve written about other times.

Writers, take note. This is one of the powers of blogging, actual measurements about what your audience responds to. The next seven posts were all about stocks, mostly MVIS. That’s surprising considering the price is so low that it won’t buy a cup of tea at my local non-profit coffeeshop.

My emphasis for this blog has been to create a chronicle of the realities of personal finance, not just the math, but the emotions, implications, consequences, and imperfections that are inevitable in something as personal as financing a life.

I’m not done, and see no reason to stop. I won’t be so mercenary as to only write about what the readers want because I’m telling a longer story here of which MVIS, housing, health, and writing are simply temporary story arcs.

Tell me what you are interested in because I may be overlooking something we both care about. You may notice that I don’t get into politics (though I can’t ignore my perspective). For some “news for people who are eager and anxious about the future” on a planetary scale, check out my other main blog: PretendingNotToPanic.com (which even has its own merchandise.)

In the meantime, stay tuned; and thanks for reading.

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Semi Annual Exercise EOY 2016

Why rewrite an intro that is as true now as it was six months ago, which implies a lack of progress. So it goes. So it went.

If it’s in italics, it’s a copy and paste from June 30th, and maybe prior to that. Stagnation on the surface while great actions take place in the chaos below.

Welcome to my semi-annual portfolio review, a bit of due diligence that is easier when the portfolio is growing, and an exercise in openly assessing the situation when the stocks are sinking. Personal finance is easy when everything works. The last few years have been the test of the personal side of personal finance; looking at an unpleasant situation, but looking at it objectively. Just like it is easy to ignore the fundamentals when stocks are rising, it’s important to pay attention to the fundamentals when stocks are sinking. Fundamentally, the majority of the companies I am invested in are improving. Quantitatively, their stocks aren’t. Trusting fundamentals isn’t easy when there’s a large gap between cause and effect; but, that’s why long term buy and hold emphasizes the holding for a long term.

AMSC

Superconductors are cool. Pun somewhat intended. Increasing the efficiency of our existing electrical power infrastructure would seem like an enormous market. The company might – might – be about to become profitable, but they have yet to breakthrough with a significant success. Too many remember the fiasco with the customer/competitor in China. So, the stock is down about 11%, there was no news except for one $5M order; but certainly profitability will make a difference. Right?

AST (Asterias)

They haven’t enabled a paralyzed person to walk again, but one patient did make the news by regaining upper body functionality. One good video clip can be more powerful than reams of data, which may be why the stock almost doubled in six months. The questions are, will it happen to more than one patient, and will the FDA make the approval process easier out of compassion or harder out of conservatism.

GERN (Geron)

By now Geron should have a success. They’ve been working on innovative biotech for years, but have had to sell off technologies because nothing has succeeded (until it departs the company, see AST). If they succeed at controlling cell death they can fight cancer and auto-immune diseases with the same technology. That’s powerful. But they haven’t. That’s why they’re down 20%.

GIG (GigPeak)

Imagine that, a tiny company that helps enable the high speed internet, video streaming, and cloud services is becoming profitable. They’re “only” up 28% in six months. Depending on the competition (as is true of every company), they could excel. Re-retirement would be nice.

MVIS (MicroVision)

Really, this time is different. Within the next 6 to 9 months, MicroVision will finally breakout and become a public success story. (Did your sarcasm monitor detect something there?) Really, this is different. Insiders are buying stock. Management has released (very loose but very positive) revenue guidance. Products are being sold. And yet, the lack of confidence and credibility means dilution and a stock price that’s down 29% in six months. Ah, but regular readers know, if MVIS succeeds, you’ll be able to read about it here (assuming I haven’t had to sell or something weird happens.)

RGSE (Real Goods Solar)

Proof that great ideas in great markets can manage to somehow crater. Real Goods Solar somehow has managed to go down 94% in 6 months. I’m sure my research will finally uncover why now that it is too late. I’d sell if the stock was outside my IRA because there would be benefits from the tax losses. Inside my IRA, they’re just losses.

TOTAL

All it all up and my decreasingly diverse portfolio is only down 10%, while the market hits records. Sigh, and yet, that’s why diversification is important. The ups can counter the downs; and while the downs are limited to only going down 100%, the ups can no such limit. The consequence of the last six months of investing are similar to the previous reports. I continue to work seven days a week and haven’t found a stable way to pay all of my bills. Ah, but 2017 will be different, so I’ve been led to understand.

 

Sadly, the following conclusion is a also copy and paste from the previous semi-annual exercise, and has echoes of the same from the last few years. Ah, but persistence pays. Right? Right?
The likelihood of my portfolio doing well has improved. My positions haven’t changed much, and my portfolio continues to hold enough potential to allow me to re-retire, or at least to begin transitioning to something less than a seven day a week work schedule. That’s been the case for years. Patience and a Long Term Buy and Hold strategy remain that classic conundrum of doing the same thing and expecting something different (a delusion) or proving the value of perseverance. Some time between now and the next semi-annual portfolio review, I should know better. In any case, stay tuned as the story continues.
And, the story continues, and continues, and – well – patience is inherent in long term investing, though patience can be quite inconvenient when paying bills is involved.

For the details of my investments, I post the semi-annual review of each of my stocks on various discussion boards. I could post the entire collection here, but 1) it would be very long, 2) the more public the conversation the more valuable it becomes, and 3) reading my posts on those boards introduces you to individuals who have different perspectives, strategies, and experiences. Collectively, those communities are more powerful than large financial institutions because the motivations and incentives are those of similar individual investors rather than that of profit-minded corporations.

Here are the links to the discussion boards I use. Feel free to comment here or there, and to pass along links to others. The bigger the discussion, the better the chance of valuable insights (as long as the trolls and flamers are moderated appropriately.)

Investor Village
AMSC
AST
GERN
GIG
MVIS
RGSE

The Motley Fool
AMSC
GERN
MVIS
RGSE
Economy and Markets

Silicon Investor
AMSC
GERN
GIG
MVIS

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Frugal Christmas 2016

I hope one of my island friends doesn’t mind me passing along their moment of holiday glory. All their presents are made; and now it’s time to wrap and deliver! Subtle and significant shifts happen with one word. ‘All their presents were made’, not ‘All their presents were bought’. Whether by choice or necessity, it is fun knowing people who make rather than buy. Christmas really can be a surprise, that way. Yet, that’s not the only way for Christmas to be sincere.

That simple comment popped a revelation into my brain. I can’t recall the last time I visited a mall. Decades ago, I hung out at malls. Weren’t we all supposed to? I didn’t buy much, shopped a lot, people watched even more. Around Christmas, though, I’d wade in with my lists and shipping deadlines. Local friends, family on the opposite coast, a few things for me, the shopping marathon went on for weeks. When my career was doing well and there was plenty of discretionary income, I could easily spend over a thousand dollars on gifts that were best guesses. I suspected they’d fall short, but after a while I realized that the acts of making the list and buying the gifts were an exercise in empathy. At least once a year, I’d concentrate on what I knew about their lives, needs, and desires and try to buy something they’d enjoy. I probably got more out of it than they did, and they never knew.

As kids got older, families dispersed, and friends accumulated more than enough, my trips to the mall became exercises in investing. I’d shop and buy; but I was more likely to notice which and how many bags were being carried, which stores were visited too quickly, and where people hung out when they needed a break. Trips like that were one of the reasons I was happy to own Starbucks stock, even though I am a tea drinker. (For more on that story, check out my book, Dream Invest Live coverDream. Invest. Live.) Pixar was another benefit, before they were bought by Disney. At home, I started making my Mom’s Christmas cookies, partly for nostalgia, eventually as gifts to family as she could do less.

After I moved to the island the mall lost its appeal. Driving to the mall meant about twenty dollars spent on the ferry fee and gas, just for the privilege of jockeying for parking and diving back into ‘Merika, a different culture that I once was a part of. Instead, I shopped in Langley, a tourist town that would almost fit in Alderwood Mall. Art galleries, boutique shops, and some thrifty stores were more fun and a lot less crowded. In the time it could take to find parking on the mainland I could drive to Clinton or Freeland for less touristy establishments. And, I always made sure I dropped in on the galleries, wine, and cheese shop at Greenbank Farm. Hang out with friends, watch money go directly to good and appreciative artists – why go anywhere else?

I’m not as good as my artistic friends at making things, unless it’s food. Some years, the ingredients would cost over two hundred dollars; but it was fun – as long as there was enough time. Part of the cost of making something is spending the time to make it. Cookies and fruitcake (on demand, believe it or not) were baked and delivered. As I started writing books and selling photos, it seemed odd to include those, as if I was turning the gift into a marketing gimmick; but a few folks were sincerely interested and I was happy to provide.

dsc_7149The passage of the last of my parents plus the financial constraints I live within mean I don’t even make it into the shops of Langley, unless I’m buying lunch or tea. The season can be just as busy with cards, decorations, some socializing, and a bit of baking. My tree shopping has been replaced with helping people with vacant lots get rid of weed trees that just happen to be the right type and shape. I do get some interesting looks from the neighbors, though. My every prolific rosemary hedge gets whacked back to reveal my driveway yet again, and the trimmings become trimmings: wreaths and garland. I did visit one store, Dandelion Botanical, but did that online. Foodies do appreciate good herbs and spices. And I do finally feel more comfortable giving away my art, usually as cards from my photo galleries.

With all of this emphasis on making, I still enjoy whatever gifts I’m offered. I have thoughtful friends and family and whether it was made or bought isn’t as important as the thought. (The nostalgic deli package from Pittsburgh will probably be opened before Christmas morning, though.)

I regularly write about mansions for Curbed.com. They’re filled with fine art, exquisite furniture, huge closets and pantries, and of course are incredibly decorated for the season – if their agent allows them. I wonder about the sellers, though. They could gift budgets hundreds of times greater than my most expensive Christmas, which would be amazing to witness. A brand new car in the driveway would certainly amaze me, but I wonder if in the midst of such opulence whether they’d be derided for only giving a few things they made: a bottle of vanilla for a cook, a story about one chapter in their life, an ornament made from a found object that was then personalized.

People I know who have less to give, can give with a sincerity that may be unavailable to people living lives of ever increasing expectations.

A neighbor brought me a bottle of wine, and thanks for being a good neighbor. (Wow! I just checked. It’s a bottle of champagne. Nice.) A friend found some storage bottles in a thrift shop and a dusty decanter, which will make it easier to store some of my culinary creations. They are like the gifts I remember the most, nothing extravagant, but something sincere. Imagine what it would be like if, instead of a price tag, each gift was tagged with how much it would be appreciated.

Whatever holiday you celebrate (and congratulations to those who’ve figured out how to celebrate everyone’s holidays), I hope you give and get those sincere moments whether the gifts were bought, made, or were simply shared compliments.

(Great, writing this makes me wonder about making a chipped ham sandwich with BBQ sauce late on Christmas Eve Eve. Great stuff, and you’d be amazed at the shipping logistics required. Wow!)

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Health Insurance Confusion 2016

photo-on-2016-12-20-at-18-53A toast, to paying for something I don’t quite understand yet is in my second highest expense category: health insurance. Yet again, I’m enrolled. It only took hours and days of effort to pay for something I haven’t been able to use for years, and only rarely before that.

A bit of repetition: I have health insurance. That does not mean I afford conventional health care.

I’ve always had health insurance, first through my parents, then through college, then from Boeing and spousal coverage, then from monthly premiums that seemed reasonable at the time. Until my Triple Whammy, my perfect storm of bad luck, I enjoyed, yes enjoyed, going to the doctor because I appreciated the value of good health and the efficiency of preventive care. Since my bad luck hit I haven’t been in a “western” doctor’s office, have even developed an anxiety reaction to the concept, and have relied on “unconventional” medicine, and my best attempt at healthy eating, exercise, and general lifestyle. Working seven days a week has made me miss my goals, but I suspect the lapse is temporary. So I keep telling myself.

If you’re having trouble sorting out health insurance options, you aren’t alone. I’ll skip the suspense. I have health insurance. It’s probably similar to what I had before (One Confused ObamaCare Applicant), except more expensive. No surprise there, and the lack of surprise is a sad statement. What I can chronicle is the time and effort required to keep what I had, health insurance that has helped society by contributing my share, but that hasn’t and possibly can’t help me – at least until I am richer.

Over the last few months the emails and letters have arrived telling me to make sure I sign up. About a month ago, my financial situation was looking dire enough that I realized I might not be able to afford health insurance. Finding enough money for insurance, taxes, and other bills was more important than any particular package. My life is evidently remarkably frugal because many people have remarked on how frugal my life is. All of my other non-insurance bills provided some direct benefit: housing, food, heat, water, etc. Insurance is an expense greater than everything except housing and taxes.

Without insurance on the house, I’d probably lose the house. Without insurance on the car, I couldn’t legally drive making work difficult at least. Without health insurance, I’d, well, I’d, well, I wasn’t going to the doctor anyway, so what difference would it make? From what I understand, with Obamacare visiting the doctor is far more affordable. As long as I was healthy and only had to pay for the visit, the visit would be affordable. If I wasn’t healthy, then the insurance would kick in – after the deductible, and if they approved the expenses. The last time I relied on doctors, the diagnostic tests alone totaled over $7,000. Treatment for whatever would be additional. For a while, that was enough to bankrupt me if the insurer decided not to cover the tests.

Walking Thinking Drinking Across ScotlandThe story of how I reacted became a walk across Scotland and yet another book, Walking Thinking Drinking Across Scotland. It looked like most of my symptoms were stress-related. Walking, thinking, and drinking my way across Scotland cost half of the potential diagnostics bill. I’m glad I did it. Since then, however, the stress level in life has gone up.

Several bits of good news have hinted at making 2017 a much nicer year, so I decided to at least continue my insurance. Maybe I’d actually make enough to do more than pay the premiums.

I sifted through the various communiques, found a few that suggested contacting my insurer, and decided to give them a call. But first, more mail arrived. It was a bill for the old amount and mentioned 2017. Great! The same old plan, continued into a new year, and maybe I could skip the paperwork and online maze that I feared. I paid the bill and relaxed.

Why not give them a call, just to make sure? With a day to go before the deadline, I placed the call that should be a quick confirmation. One hour of being on hold was bad. Every thirty seconds they’d spend about ten seconds telling me that my call was important. Those thirty seconds were thirty seconds of the same harpsichord music repeated – forty seconds of both repeated for an hour. So much for my mental health.

I live tweeted my frustration. Surprise! I got a response. They offered to have someone call me directly. Such service! It was already late because I work from about 8am to 8pm, which meant it was almost 10pm. I suggested they call after 4:30pm the next day.

The next afternoon, maneuver my schedule so I can be somewhere convenient for the call. Wait. Wait. Wait. Over an hour later I had to leave, let some folks close their shop, while I headed for a dinner engagement. The call finally came in at 5:45pm, while I was outside in mid-twenty degree weather. They got points for calling back, but lost a few for timing. The good news, the deadline was extended to December 23rd. I tried calling later that evening, but again couldn’t get past Hold.

Work until after 8pm several more evenings.

Oops. I went to try again, this time in the middle of the day. Before the call I sorted through those months of mailings and found that I’d missed a payment. Now I had two things to resolve, or was it three, or more? After yet another hour of Hold, begin to wonder if the Customer Service number was really out of service. At least the harpsichord music was gone.

The next day, pick up the mail and find my New Card! as if nothing was wrong. Maybe I did something right and didn’t know it. Hey, it happens. Try to call again, this time before dinner. Only thirty minutes on Hold and I’m caught by surprise. Someone answered. It took me a minute or so to remember my string of questions.

It turns out that they thought everything was fine and all I had to do was pay my new premium (~15% increase) by the end of December. Evidently, I paid the bill at the old rate so early in December that they took it as the November payment. No fines. No fees. While I had Customer Service providing a service, I asked about cheaper coverage options, but nothing made much of a difference. All I had to do was go to my online bill pay system and pay the bill. Which I did, and I hope I did it right, or did it wrong in a good way – which seems to happen.

The cost of trying to figure out how to give my health insurance company money for benefits I may never be able to comfortably use was three and a half hours on hold, and one week of calendar time as the holidays approach – time that could’ve been used for making the money to pay the bill, finding better employment, or maybe even baking for the holidays.

At this point, I have lost track of my deductible, restrictions, and possible benefits because the only number that is important is the premium I pay.

At this point, I also realize that the people I should talk to aren’t Customer Service, or Washington Health Planfinder, or doctors in their network, but the people in my network of friends.

Many of my friends have lived through expensive medical conditions. The vagaries of descriptions of health care options aren’t as valuable as the real life experiences of people who have had to rely on health insurance to access health care. So I ask you, if you’ve experienced relying on health insurance while barely being able to afford it, what did you learn about which plan to sign up for? Between the people with more than enough and those with no insurance are the people who face bankruptcy to pay for staying alive. What do you differently now? What do you wish you’d done then?  You’re the experts I want to hear from. Help clear the health insurance and health care confusion.

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Litany Of Optimism

Tonight there’s a full moon. Lately, every day has felt like a full moon, unexpected, uncertain, uncomfortable times as a world redefines itself. That’s what’s been happening in my life for the last several years. I’m getting very practiced at reciting my Litany of Optimism. It helps, but if I used a real rosary, the beads would be worn to grains of sand by now. A litany of ideas doesn’t wear out. My litany works for me. Perhaps one can work for you. Perhaps one can work for all of us.

The world’s been weird enough for the last month that the news media are confused. That  little revolution can be a good thing. I listed some of my optimisms for the world in my Thanksgiving post. I’m making so few assumptions about what’s happening politically and socially that I’ll leave those topics aside for now. I have enough to think about.

Without going into details, some of which are necessarily discreet, three of my largest clients are redefining their projects. The best scenario is an expansion that includes expanding my pay. The most likely scenario is that things don’t change. The worst scenario is that the work moves on. Each of the three has three scenarios. Trying to understand all of the implications and permutations kicks off moments of ease and moments of anxiety. When the anxiety arises, the litany gets recited.

Employment
I’m glad to hear that various aspects of my work is being recognized. Several independent sources have commented on my program management skills, publications, and consultations. Compliments are encouraging. Proper compensation would greatly ease issues. It can all improve with one phone call or email.

Housing
According to Zillow and Redfin, the market value of my house is rising about 12% per year, and is now building equity. Rising real estate creates a buffer than is difficult to use, but 12% applied to hundreds of thousands of dollars is powerful arithmetic; and I have reason to believe it is only just beginning on the island.

Community
Whidbey Island isn’t one community. Neither is South Whidbey. Neither is the southern tip of South Whidbey; but, I’m pleased to see the community building safety nets. In some cases, people fell before the nets were built, and now have to get lifted back above the net, but the trend is encouraging. People are caring about people. I volunteer, and am amazed at the efforts of others. Housing, healthcare, food, and havens are being provided. This is a good place to be.

Stocks
The value of my stocks is flat, but the value of the companies are increasing. Aside from my investment in solar energy (Real Goods, RGSE), each of the companies is making progress. That progress isn’t be recognized by the investment community; but when it is, the recovery can be swift. I’ve seen it in individual stocks before. This is the first time I’ve witnessed so many deflated positions with such potential. There are good reasons for me to look forward to 2017. (I’ll dive into details with my end of year report at the end of the year.)

Health
I got my teeth cleaned today, and they didn’t need to fix anything else. (Thank me for not including a close-up photo of my teeth.) I’m old enough that I always have health concerns (the major one being trying to afford health insurance, and eventually health care). I’ve gained weight because I’ve been working more than working out; but I also feel stronger. (A bit of arithmetic explains it. Adding ten pounds may be bad, but at 30% body fat, that’s still seven pounds of added muscle and bone. Looking forward to bicycling again, but that’s another story.)

Networking
This is a catch-all that includes employment and community, but I must admit that I’m happy to be included in so many conversations about disparate initiatives, projects, new businesses, and various ideas. Land projects, dances, coworks, art projects, welcoming new residents, interviewing old residents – the list continues. To get quantitative about it, my Klout score hangs around 59, and my Facebook connections are about as broad at the CEO’s even though I have far fewer Facebook friends. The ones I have are evidently very well connected. Glad to be part of their networks.

I could dive into minutia, and I do, but that happens inside my head as I walk. My details aren’t as important as yours.

Too many of us are having tough times, whether financially, emotionally, or existentially. The worries can overwhelm. Worries can especially overwhelm if they attract all of the attention. So, deny them. Pay attention to optimism, not just pessimism. The solutions are positive, not negative. Recognize the negative, and then look to the positive to negate the negative.

Feeling dumped on?

Feeling dumped on?

I can’t say that my litany has solved anything, except that it has. Realizing the near reality of optimism is one of the most powerful tools and exercises I have available. We can each build such a tool and use it ourselves.

It’s a full moon tonight. That means a low tide in the dark. It’s cold (freezing, actualy), clear, and relatively calm out there. After I publish this post I intend to walk the tide flats in the dark (and in my boots.) Ironically, in the darkness is when I am most likely to be looking for the brightest thoughts.

A previous full moon. Can't you tell?

A previous full moon. Can’t you tell?

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Frugal Resilience

Have you ever skied over a forest? This is the time for cards with the requisite snow-draped branches, winter scenes as tradition as if everyone lived in the same climate. Let me check. Jerusalem’s forecast is for about 60F/15C. Not exactly winter wonderland. In the mountains around Seattle the storms are arriving and adding up their snow totals. The record for yearly snowfall was set on a spot I can see from Whidbey. Mt. Baker had 95 feet (29 meters) one year. The previous record? That was on another mountain I can see from the island, Mt. Rainier. It snows here. And yet, the forests survive. Their resilience is echoed in my frugal friends’ lives. It is amazing what can be accomplished with persistence and resilience, something frugal folk are very aware of.

Winter Resilience - from Twelve Months at Lake Valhalla
My cards arrived this week. The inspiration for this post is actually from the Christmas cards I had printed from one of my photos: Resilience. The photo comes from my book, valhalla coverTwelve Months at Lake Valhalla, the second in the Twelve Month series set on the border of Washington’s wilderness. For twelve months I visited a lake that sits along the Pacific Crest Trail, or at least I tried to visit. Some months there was just too much snow. Not a surprise considering the lake sits on the ridge that runs between Baker and Rainier. Summer hikes were done in lightweight boots. Winter trips were sometimes a mix of snowshoeing and skiing, each carried on my back while the more appropriate of the two carried me through the woods. Much sweating was involved. I didn’t look elegant.

I never dug down to the tree tops to prove my point, but in that area, some slopes won’t allow an avalanche in the early and late season. Tall conifers lock everything in place. Deep enough into the season though, bushes, then weed trees, then young pines are covered creating unbroken runs for snow slides. The route changed throughout the season as the trail was covered, then as the slide hazard increased, then as the valley snow created questionable and sometimes serviceable avenues. Skip the image of graceful turns and effortless downhill runs. I’m not that good. Bump, flip, crash, repeat. My favorite was the time I was snowshoeing down a snow-covered ravine that was too steep, tight, and bumpy to ski (not an impressive route-finding day), I tripped, flipped, and ended up standing, or at least wobbling, upright. No one was within miles so don’t expect a video.

Spring has its own meaning and timing in the mountains. Elevation means as much as the month. The year I was there, the lake was still frozen in June. The fish spent more time under an ice cap than under blue skies. As the temperature warmed, the depth of the snow became evident. As I skied or snowshoed along, the tops of trees would be revealed. I’m sure that what I traveled across were tall saplings, not ancient residents. Even 95 feet of snow compacts to something less than the tallest trees – maybe only a dozen feet or so. And yet, I was impressed at the seemingly undamaged treetops that were just at boot level. Without drama, as the snows melted, the trees would begin to straighten. As the snowpack accumulated, rather than fight it by standing tall (and catching the strong winds and chilling conditions), they bent, not surrendering, but not fighting either. They turned the snow from a threat into a benefit. Wrapped in white, they were insulated from the worst cold and safe from the winds. As their burial melted, they slowly unfolded.

The strategy may seem bizarre, but every tree in the forest was small enough at one time to necessarily take that approach. And the forest survives and grows.

It is natural to see challenging conditions and challenge them in return. To fight foes. To demonstrate self-worth and pride.

Karate taught me lessons similar to that of the forest, which is interesting to me because Okinawa is not known for its ski resorts. (Though coincidentally, my style’s name roughly translates as Small Pine Forest Karatedo.) Whoever attacks makes themself vulnerable.  Do not move unless it is to your advantage. When you can, rather than fight or flight, be still and breath.

2016 has been a weird year and there’s little reason to believe 2017 will be saner. There is always plenty that we can do. With economic and financial issues, it is easy to amplify the work ethic, exercise every lever in our control, and get out that bloody grindstone. In some cases, that will work, bloody nose and all.

This week has delivered a load of weirdness to my situation. No need to go into details. Some of it requires discretion. Some of it is moot. My emotions have been struggling on deciding whether fight or flight is the better response. It’s Friday. I work seven days a week, so the next two days don’t make much of a difference in my work tasks, but the old work habits of thinking of Friday night as a time to unhook remain. I look silly when I replay my reactions to the week’s news. Uncertainty heightened anxiety. The issues are large and significant, but my best response may be much simpler and smaller. I’ve seen that in my frugal friends’ responses to their situations, as well. Recognize the issue, wait for the right time to respond, and resolving an issue can be as simple as flipping a switch.

Persistence and resilience may be my best tools for working on my current situation. Bend, don’t break. Accept a simple hardship, and wait for spring. Notice that entire forests are created from a few seeds that found a way to simply survive otherwise hostile situations.

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Expense Report – Emergency Funds

Fortunately, I’m not the one that needs the emergency funds. The topic has been in the news, and it’s been in personal conversations. Various analyses revealed that the majority of Americans can’t afford to pay for a $1,000 emergency without going into debt or selling assets. The economy may be improving, but many personal safety nets haven’t been mended – yet. Being able to survive a simple household repair, trip to the doctor, or computer failure may be one of the new signs of wealth.

The world is getting weird. Have you noticed? Maybe it was the election. Maybe it was the Supermoon. Maybe it is the fact that so many aspects of society are having to shift to new norms that foundations don’t feel as solid as they were. Politics is weird, at least for some, probably the majority – and that’s true in many countries. Economies are looking healthy, until you check the fundamentals of commodity supplies, negative interest rates, governmental debt, and currency devaluations. Climate change is passing from an era of subtle changes to ones that are significant enough for the US Department of Defense to include in their near term projections.

In the last two weeks, I’ve heard too many stories of individual lives running into weird misfortunes. The following list comes from only a few friends.

  1. truck repair
  2. hot water tank fail (that required a custom repair)
  3. furnace failure (which remains unresolved as parts of Seattle sit below freezing)
  4. deaths in the family
  5. flooded business from municipal systems
  6. flood at home from natural causes
  7. car accidents
  8. business losing its existing license
  9. unexpected doctor appointments
  10. unexpected dentist appointments

… and more, with each person having to deal with at least three of those issues.

Got that extra $1,000? Try multiples of that. Each upset also upsets income because so few people have sick leave.

Fortunately, my friends are resourceful, resilient, have senses of humor, and aren’t the sort that will complain about their latte not having the right density of sprinkles.

Ideally, everyone has an emergency fund. A common guideline is to have six month’s living expenses set aside for the emergency that is a job loss. Evidently, if the majority of Americans (an ostensibly rich society) can’t accommodate a $1,000 upset, then the guideline is not in active use. From what I see and hear, the failure is of necessity, not of choice.

Relative to what my friends are going through, I feel better off. My friends flipped that when I said so. From what they know about my income, and a recent series of cutbacks, they feel better off, at least in some ways. Several friends have said that they’re amazed that my good luck hasn’t arrived yet. It looks to be overdue. Sooner is better than later, and now is best. (I’ll check those lottery tickets in a while; in the meantime, call me if you know of a good job for someone who enjoys program planning and management.)

As my fortunes turn positive, I look forward to re-establishing that buffer, one that isn’t just using up more space on the credit card.

I say re-establishing that buffer because at one time I had a buffer that was measured in decades. Conventional wisdom encourages people to build emergency funds. Unfortunately, it then treats an emergency fund as if it was abstract, as if it will never really be used. The reason to have an emergency fund is because emergencies are real. Get a big enough emergency and the fund serves its purpose; but may leave nothing behind. There’s very little advice about the reality of recovery; especially when measured against the criticisms that come from having bad luck.

My portfolio has barely recovered. It is the remnants of my IRA that was drawn down after my non-IRA was almost eliminated. The recovery, therefore, isn’t just refilling an emergency fund, but also refilling a retirement plan, and a conventional set of investments.

There is some good news for homeowners in the Seattle area; housing prices are up. According to Zillow, houses in my neighborhood are appreciating at 12.9%, which for my house is about $3,000 a month or $100 a day. That $1,000 emergency can seem relatively small. Emergencies don’t constrain themselves.

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The bad news for homeowners who have to sell is that they have to sell. Selling a house in such a rising market may mean not being about to buy back in. If I had to sell, I’d have to move out of the area. I’m not the only one. If you want to move, well then, don’t wait for an emergency to pick your timing for you.

 

My experience is actually proof of the usefulness of an emergency fund. My current situation is also proof of how difficult it is to maintain one, sustain one, and regain one. I’m not surprised that the majority of Americans don’t have an emergency fund. Most lives encounter more than one emergency. With the impact of foreclosures, the price of medical care, and the cost of accidents, it isn’t a surprise that the longer people live the more likely they are to have used up their financial reserves. That doesn’t mean ignore the emergency fund, it does mean don’t be surprised if you have to build one, then rebuild it, then rebuild it, and repeat. The longer you live, the more opportunities for both kinds of luck to arrive.

A good approach, of course, is to have a lot more to start with, live frugally, and hope. If you have a few million, you’re probably okay. You’re definitely in a much better situation than people who have a few hundred thousand, and they are better than the majority who are living with less than car replacement cash.

The world is weird. We may run into new types of emergencies. We (with our communities) may have to build our own safety nets. But, don’t let the prospect of emergencies absorb all your attention. Those folks I mentioned above? They are some of the most creative, fun, and lively people I know. Their lesson – Live, regardless.

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Small Cap Price To Earnings Reality

This topic has come up often enough that I guess folks aren’t reading my book (Dream. Invest. Live.) Dream Invest Live coverActually aside from the sales pitch, there’s a particular aspect of one seemingly simple measure of a company that repeatedly enters conversations; how to make sense of earnings. In particular, what are “good” values of the Price to Earnings ration (P/E, or PE)? It may sound like a dull number, but there is drama in there. And with many folks who like drama, there are times to pay attention to the drama, and times to know it is temporary. There is no one answer, but here’s at least an afternoon’s consideration of PE for small companies.

First, let me make a simple clarification. Earnings are not revenues. A company spends money to make something, they sell it, they get paid, and that’s business. But. It costs money to make something. That term is simple enough, it’s expenses, something we’re all familiar with. The price is effectively the company’s sales and revenues. The difference between the sales and the expenses is the profit (Very Generally – as almost every accountant, bookkeeper, and business owner knows, but hey, this post if for folks who are new to this.) Earnings are effectively profits (again listen to the groans from the professionals, I know, I know.) A company can have great revenues and have even greater expenses. Oops. And yet, that’s the way many companies start. Revenues are positive; but earnings and profits aren’t until the revenues exceed expenses. In an ideal company (which doesn’t exist), expenses happen on the first day, eventually revenues come in after goods or services or sold, hopefully the revenues eventually exceed the expenses and earnings become positive.
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Got that? If not, reread or rummage around through the Internet for a different explanation.

So, what’s the company worth? Whatever logic is out there, a company’s worth is like anything else on the market, the value is determined by whatever the market will bear. It would be nice to have some arithmetic to justify buying or selling, so some people value a company by looking at its earnings and comparing it to the price of a share of stock. Simply, if a company cost $1, and it had profits (earnings) of $1 in a year, then buying the company for $1 would make you back your money in one year, and be profit after that. It doesn’t work that way because investors buy shares, very small fractions of a company, but the analogy is why a company with a stock trading at a Price/Earnings of 1.0 is attractive. That’s much better than putting $1 in a savings account at 1% and waiting 72 years to double your money. If PE=1 is attractive, how about PE=2? How about higher? How about a PE of 72? Why would anyone buy a stock that has a PE that reflects nothing more than a savings account? Keep in mind that stocks aren’t insured.

The reason is growth. As earnings grow they can grow faster than expenses, so today’s stock that has a PE=100 would have a PE=50 if the earnings doubled but the stock price stayed the same. A company growing quickly enough can have ridiculously high PEs just as it turns profitable because the earnings are near zero and dividing by zero produces numbers approaching infinity. In that case, how much is too much?

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What’s too much is up to each investor. Many investors stick to boring companies with low PEs. The companies aren’t growing quickly, but that may be because they are more stable, less risky. New companies that have great new, unproven ideas frequently also have high expenses to get started, a long time before they make sales, and a longer time before they make a profit. The hope is that when they make a profit, they have high profit margins, phenomenal growth, and become household names. Hello, Apple.

I’m not going to say what’s a good PE or not. But, I found a way to possibly illustrate the realities in the market. The companies with high PEs tend to be small (but not always). Thanks to some web surfing and asking sites the right questions, I was able to create a histogram of PEs for Small Cap companies (market capitalization of less then $2B, for reference, Apple’s market cap is over $580B.)

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Of the 5,712 stocks I was able to query (thank you automation), 2,364 are small caps. Of the 2,364 small caps, only 1,407 are profitable. That means 41% of small cap companies aren’t making any money. I know too many of them. Only 230 of them have PEs less than 10. The greatest clustering of them is between PE of 12 and 50. Simplistically (and I’ll keep emphasizing the lack of rigor here), that means investors are willing to wait 12 to 50 years to make their money back. Of course, it doesn’t work that way which is why they buy. Growth adjusts the PE, if it happens. Other investors may want to buy the stock enough to encourage someone to sell. Get too expensive though, and demand drops off quickly. Fewer than 100 companies have PEs over 100. Very small E or very high growth can make that happen, and growth quickly increases E and decreases PE, so the effect doesn’t last long.

Of all of my stocks, only one (GIG) has a positive PE, and its PE = 224. It is just turning profitable, E is very small, growth is high, so I am not surprised. Analysts are expecting sales growth of over 19% for next year after 45% growth this year. Today’s PE is good for valuing the company and the stock today, not for next year. E will change, and if it is pleasantly positive, then investors will change P, the price of the stock. Supply and demand will determine the balance.

Because earnings and profits can be adjusted by accounting procedures and intangibles, and because that pesky near-zero period confuses the math, I tend to concentrate on Price to Sales. Sales aren’t as prone to accounting techniques, happen earlier in a company’s development, and can be easier to understand. I may devote a similar post to PS some day.

In the meantime, can a company have a PE> 100? Yes, but very few do, and those that do don’t do so for long. And, if it happens to one or more of my stocks, well, that’s fine by me. First GIG, then AMSC?, AST?, MVIS?

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One Planet Many Worlds

We all live on one planet. We live within many worlds. Ads and news show things that make me realize that isn’t my world. Good. Sad. Reality.

I haven’t sung so much since last Christmas. I like Christmas carols, particularly the ones about friends, feasts, and fun. The snow parts are good, too. One of my many holiday traditions is to play George Winston’s December album on Thanksgiving Day. Pardon me as I stop typing long enough to get it playing the in background. … (I wonder what takes longer, starting the music by aligning the needle on an LP, dropping a CD into a player and working through the menus, or convincing iTunes that I want to play only a certain set of songs. But, I digress.) The only other time I’ll sing a lot is on a sunny summer day while doing chores when I launch into my internal Jimmy Buffet collection. Very therapeutic. George Winston’s music is simple piano, but I use it as prelude to carols that are easy to sing. On some of my evening walks I’ll conduct a solo caroling session that no one else hears except the other walkers.

The songs describe a different world, but do so sweetly. The ads describe a different world, but are loud, pushy, and make grand assumptions while delivering a dose of guilt.

Buying a tree. I’m more likely to ask a neighbor if I can cut down a Charlie Brown tree that they consider a conical weed. We both benefit, and I get a tree that is far fresher than one from a parking lot.

Buying presents. The average American will spend about $750 on gifts. Years ago I spent above average because I had the money, missed home and family, and everyone was younger. Toys are fun; but as we get older, gifts become more practical, then more consumable, then an obligation rather than a celebration. For people who are downsizing, more stuff is not more goodness – though the thought is appreciated.

Decorations. The hardware stores’ shelves of lights and ornaments are pretty and amazing. I enjoy putting up a few, as I have time. My favorite outdoor tree to decorate was a living tree that I transplanted. It lasted years, but finally died during one of our droughts. Becoming a scratching post for the deer didn’t help. Maybe I’ll do something with the lilacs instead. The rosemary gets trimmed this time of year. Some of the branches are six feet tall. I can’t use all of that in the kitchen so I wait until after Thanksgiving, whack it back, and turn the cuttings into garland and a wreath. My Dad’s big, old, inefficient but colorful outdoor lights get strung around. They’re pretty, probably keep some critters warm, and are a reminder of the family home. I’m one of those people who remember each ornament’s story as it goes from box to branch. It’s a long session of reminiscing.

Total it all and get to over a thousand dollars easily. For many like me, a thousand dollars isn’t so easy.

As my frugality has shifted from choice to necessity, I find my holiday celebrations shifting. A few visits with friends, as work schedules allow. Very few community events, because they tend to be relatively expensive, especially if they are potlucks or require gifting. Almost no shopping, except for food and a few small items. When possible, I bake or make gifts, and am more likely now to find that people are happy enough with what they have and have no desire to have more.

I enjoy seeing the pictures of kids opening presents, photos of grand feasts that someone else has to cook and clean and work off. I enjoy the generally more friendly way people treat each other, almost as if they still care about whether Santa is watching. In addition to the music, I enjoy watching a string of holiday movies. The list changes a bit each year: White Christmas, Muppet Christmas Carol, Love Actually, Scrooged, Aardman’s Robbie the Reindeer and Creature Comforts, and the Hogfather.

As with most people, most of the time is spent working, fitting in some of the traditions (got to get to those cards, including ordering some from my Whidbey series), and somehow keeping up with life maintenance.

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The ads are in such contrast to my situation that they are jarring rather than jolly. Their attempts to get me to spend come across as lacking compassion, definitely a contrast in this season. The world they display rarely exists regardless of the season, but the urgency now is so severe that it pushes me away rather than draws me in. Their assumptions don’t match my reality. For years, I saw myself as the fault. Now I look around and see I’m not alone, that many in my community and network are redefining the holidays for themselves. Rather than a flaw, my personalization is closer to a proper celebration.

Displays of new cars, multi-million dollar houses, phenomenal vacations, sophisticated gadgetry aren’t confined to the season, but the assumption that everyone wants them becomes more jarring when combined with the other dissonances. As of 2015, 32% of American adults didn’t have smartphones. Don’t assume everyone can “just get the app.” Regardless of poverty measures, 20% of Americans have a negative net worth, which means any holiday purchases make things worse. As many as 15% don’t have Internet access while institutions increasingly are going paperless.

There’s a tendency to assume each of us is a representative of some group, some demographic, some ideology. I think the thing that was uncovered in the recent election is that society’s demarkations are archaic. Beyond the holidays, people are becoming less constrained in the ways they are defining themselves by choice and necessity. Some will retreat to old models. It would be highly improbable if everyone abandoned every existing institution. The political parties missed the shift in the electorate. I suspect retailers may do something similar, though it may take longer for traditions to abate. What will they do when there’s no place at the North Pole for Santa’s workshop?

There’s a freedom and a value in frugality and individuality. Even while being part of a community, understanding what you want and need means wasting less time, money, and energy on other people’s expectations. As more people do so, they can be in a better mood and have more to share. If we live with more respect for each other’s worlds and don’t assume they don’t exist, we may find more lessons that work with the reality that the world is changing, our worlds are changing, even while we’re all on the same planet.

More joy, more happy, more merry. Gifts I can hope for.

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