Archives For June 2011

What a tough job…

Debt Collectors Ask to Be Paid a Little Respect

Remembering Zoe

June 9, 2011

Our family dog, Zoe, died yesterday afternoon. She had been acting different the last couple of days so I knew something was up. Anyway, she didn’t suffer long. This is my attempt at a tribute to her. Rest in peace, Zoe. You will be missed.

We brought Zoe home on September 11, 1999, the day before Brantley’s 4th birthday.

One day not too long after we got her, I was walking with her in the backyard. The leaves were falling off the trees (this was back when we STILL HAD TREES IN THE BACKYARD). I kicked a pile of leaves, which scared Zoe and she ran into her dog house.

A lightbulb went off inside my head. I coaxed Zoe back out of her doghouse. Then I said firmly, “Zoe, doghouse!” and then I kicked the leaves. Sure enough, she ran to her doghouse.

After several of these exercises, all I had to say was, “Zoe, doghouse!” and she would go get in her doghouse.

When she was younger, I was the one who fed her. She had this annoying habit of crowding out her dog bowl when I was trying to pour her food. So, I would say, “Zoe, doghouse!” and she’d run and sit in her doghouse until I said, “Okay, you can come eat now.” Eventually, the routine got to where all I had to say was, “Where are you supposed to be?” and she’d run and get in her doghouse.

If I was walking through the back yard and bent over to look at something and said, “Did you do this?” she would hang her head and go sit in the doghouse…lol. I loved how smart she was.

One evening we were going to cook out. I pulled out the gas grill. The ignitor wouldn’t work so I had to use a match. Well, something went wrong because when I threw the match in, there was an immediate WHOOOOOOSH! and a fireball. Zoe and I took off across the yard. Michelle said it was a pretty funny sight (from inside the house). Every time after that, whenever I would pull out the grill, Zoe would go take refuge in her doghouse…lol.

She loved the kids. If she was in teh backyard by herself when the meter reader came, she’d bark like crazy. Well one day the kids were out playing when the meter reader came to the backyard. Zoe went absolutely nuts! She had her fangs out and she made sure that she stayed between the kids and the evil intruder. It was awesome.

There are other stories too. But these ware a few that immediately came to mind.

Oh, and by the way, I was the only one Zoe really listened to….lol. Maybe that’s why I took it so hard when she died. Maybe she was my dog and I never really knew it…until yesterday.

Question: When will the housing bad news end?

I live in Southeast Texas. We have been pretty sheltered from the housing crisis. That said, housing in our area is moving slowly these days and prices are very soft. Our neighbors across the street put there house on the market in late January at a price of $209,000. They didn’t it leave it there long before they started dropping the price. They are now down to $158,000. This is disheartening to me because their house is a 5 bedroom and has been redone (though it’s still far from perfect) and our house is only a 3 bedroom. I pray we don’t have to sell any time soon.

I do think this couple put their house in a bad price range too quickly. Those searching for houses may not be looking at houses in the $150,000 price range. If their lowest threshold is $200,000, my neighbor’s house will be missed. So, my theory is that they put their house on the market at the wrong time of the year and they dropped the price too quickly.


I read this in today’s WSJ:

Almost 40% of homeowners who took out second mortgages—extracting cash from their residences to cover everything from vacations to medical bills—are underwater on their loans, more than twice the rate of owners who didn’t take out such loans.

That statistic compares to 18% of underwater homeowners who don’t have second mortgages.

Overall, roughly 10.9 million homeowners (if you can call them that) are now underwater. The good news is that that number is down from 11.1 million in the fourth quarter of last year. The bad news is that some of those homeowners lost their homes to foreclosure.

I can’t help but wonder that maybe all our efforts to keep people in their homes has gone a long way in extending the misery by not allowing things to clear out. Something tells me that housing is going to be a mess for several more years.

If you are looking for a couple of books to give to someone who is just starting out on their investing journey, consider Larry Swedroe’s Wise Investing Made Simple: Larry Swedroe’s Tales to Enrich Your Future (Focused Investor)* and Wise Investing Made Simpler (Second in a series) (The Focus Investor Series)*. I have had the latter on my night stand for awhile. I picked it up to read a little this morning and found Chapter 2 – Foolish Consistency to be interesting. Larry opens the chapter by telling a story of a 5-year old riding his tricycle in the basement. He keeps running into the wall while turning because he’s going to fast. Finally, after many mishaps, the little boy figures it out and has no more crashes.

Larry uses the story to illustrate what lots of people do when it comes to investing:

…One of the most strongly held beliefs among the investing public is that smart people working hard can somehow identify:

A. which stocks are going to outperform the market (and buy them) and which will underperform the market (and avoid them), and

B. when the bull will start a stampede (buy stocks) and when the bear will emerge from its hibernation (sell stocks).

The first is called the art of stock selection. The second is called the art of market timing. Collectively they make up the art of active management. In order to identify these hardworking market gurus, investors rely on another strongly held belief—that the past performance of active managers is a reliable predictor of future performance.

Based on these two strongly held beliefs, investors adopt one of the following strategies: They either study the performance of actively managed mutual funds and identify the ones that have had the best performance, or they rely on others to perform that due diligence for them. For example, many investors rely on Morningstar’s rating system to identify future winners. Others rely on publications such as Money, Smart Money or Business Week. Still others hire financial advisers to perform that role. And some financial advisers hire other firms (e.g., Frank Ruessell, SEI) to help them identify the great managers. Having identified the manager with the best past performace, they hire them to manage their portfolios. While this strategy sounds logical, the historical evidence demonstrates that it is unliefly that investors will receive the results they expect.

He then goes on to state that only about one-third of actively managed funds outperform their benchmark in any given year (and 90% of actively managed funds underperform their benchmark (after taxes) over 10-year periods).

And yet…

When this underperformance occurs, investors regroup and look for the next manager who will outperform the benchmark (and consequently hit another wall).

I liked this analogy. Instead of doing the same thing over and over again, why not look for a different approach like indexing?

*Affiliate Link


June 2, 2011

I have been busy this week with kid-related stuff. Things should slow down next week.

That said…

Last night I was reading the WSJ while my daughter took swimming lessons. I want to share with you this snippet from an article I read about how banks were facing foreclosure hurdles. I thought this was ridiculous (emphasis mine):

Last month, the Maine Supreme Court reversed the foreclosure of Dana and Robin Murphy of Auburn, Me., after concluding that the mortgage company, a unit of HSBC Holdings PLC, filed “inherently untrustworthy” documents. An HSBC spokesman declined to comment.

The case began in 2008 when HSBC filed to foreclose on the Murphys, who hadn’t made a mortgage payment in two years. A trial judge initially rejected HSBC’s foreclosure because the bank couldn’t show it owned the promissory note—in effect, the borrower’s IOU. The court later granted the foreclosure after HSBC submitted new paperwork.

However, the Murphys found discrepancies and alleged that the documents were backdated. The court voided the foreclosure and sent the case back to the lower court to determine potential penalties.

So these people hadn’t made a mortgage payment in TWO YEARS and they are still in their house due to “discrepancies.” Wow. No, we don’t know all the details from the case. AND…I’m not siding with the banks. I’m just stunned that someone has the gull to live in a house for two years without making a payment. IT’S TIME TO MOVE.

I’ll write more on this later. The underlying issue is pretty interesting. Right now I have to get ready for 8th Grade Day.

Here are the May 2011 total returns for the S&P 500, S&P Midcap 400, S&P Smallcap 600, Barclay’s Aggregate Bond Index, MSCI EAFE, MSCI All World ex-US, Oil, and Gold (click on the graphic to download the PDF).

May 2010 was also a negative month for the S&P 500. Out of my 86 years of monthly data, this was the 34th May to have a negative return (that’s 39.53% of the time).