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  • Basic Financial Advice: Avoid Debt, Be Stingy

    By Nick Hodge
    Wednesday, May 2nd, 2012

    I had a kink in my back from fishing all day, so I put myself on a Russian masseuse's table.

    Little did I know Yuliya would start revealing the secrets to financial prosperity, independence, and happiness...

    "First of all," she started, "buy a house. How can you ever be truly independent if you live in someone else's?"

    She had a point.

    Try convincing the person you pay rent to that owning isn't the way to go.

    Home ownership is at a 15-year low. Three-bedroom houses in some of Maryland's best school districts are going for less than $100,000.

    I've heard of condos on the water in Florida selling for less than $20,000. And if you have some know-how and patience, fixer-uppers in big cities are available for under $10,000.

    You can even get a rate below 3.75%. Mine is.

    "If you already have one," she went on, "buy another one."

    Now she had me thinking...

    After asking if the pressure was alright, she went on to tell me about the next step to financial freedom.

    Avoid Debt, Be Stingy

    "Don't buy anything you can't afford," she began, with further emphasis on the evils of credit cards.

    She was still working my shoulders as she told me to pay cash for everything - and to only get a credit card with a beneficial rewards program if I could pay off the balance in full every month to avoid paying any interest.

    "Don't buy stuff you don't need or that's trendy. Use coupons. Fix things that break. Don't hire people to do things you can do yourself."

    Yuliya explained that this was the Russian way. She's only partially right; my mom came off the boat from Italy in the mid-1960s, and she and my grandparents are the same way.

    I think it's more of an Old World or immigrant mentality...

    It's certainly not American, with our $5.00 lattes in throw-away cups and name-brand ibuprofen.

    You'll never find Advil in Yuliya's closet. You won't find it in my grandfather's either, and he pays cash for oceanfront property.

    Now, don't misunderstand the insight. Buying store-brand medications alone won't make you rich.

    It helps, but it's the philosophy that's important.

    That same attitude is beneficial in minor purchases and major acquisitions.

    If you must carry debt - for education or an essential purchase - Yuliya says to get the lowest rate available and pay off a little extra principle each month.

    She was on my lower back when she got around to telling me the secrets of actually making money...

    Be Patient, Be Ready

    Once you've got the spending and mentality under control, it's time to start growing your coffers.

    "First thing is do what you love," she said, omitting the preposition and highlighting her accent.

    "How can you be successful if you hate where you go and what you do every day?"

    I could tell by the stress melting away that she loved her job.

    "You Americans all want to get rich quick and easy," she continued. There's a time and a place for that, Yuliya went on to say. But first you have to start slow...

    Make investments that save you money first.

    Yuliya told me she has a retirement plan through work and keeps a separate IRA for additional tax advantages.

    "One saves me tax money now and the other later, plus I save for retirement. What is better than this?" she asked me. It was hard to argue with her logic.

    "Then," she continued, "start buying things that pay you."

    Being from Russia, Yuliya had a soft spot for energy and commodities. She told me about energy trusts that own land and charge companies to drill for oil and gas and to mine other natural resources. They then pay her a dividend between 5% and 15% from what they charge in rent.

    I also learned how individual companies pay her quarterly based on the profit they make. Gazprom, the largest Russian oil company, pays her 2.27% every year. Her bank's only offering 0.81%.

    "Once you have this good set-up, then you are ready for big winner," she said as our session came to a close.

    "You save and grow slow, and then you can act on good opportunities."

    Yuliya said the current North American shale boom is one of the best 'good opportunities' she's ever seen.

    Call it like you see it,

    Nick Hodge Signature

    Nick Hodge

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    May 07 10:11 AM | Link | Comment!
  • Cuba Embargo Opportunities

    Obama, hookers, booze, coke-filled sex orgies!

    That was the takeaway for most folks in the United States regarding the recent Summit of Americas Conference.

    And that's the way our country likes it.

    Give us the dirt that doesn't dirty our own hands.

    Give us a fresh coat of high-def shine on the American dream so we don't have to pay attention to our political leaders who are dismantling our freedoms from inside the halls of Congress.

    Let us cry about high gas prices while turning a blind eye to the economic implosion that's going to leave our children on the hook for a debt they shouldn't have to pay.

    Let us debate politics on Internet message boards with hostility and vitriol while the bureaucrats we continue to elect conduct business as usual.

    And of course, let us ignore the fact that this most recent Summit of Americas Conference further demonstrates how we continue to ignore failed policies and free market opportunities in an effort to placate partisan slaves.

    A 40-Year Train Wreck

    For the sake of clarification, the Summit of America's Conference wasn't a complete dud. After all, Colombia did agree to implement a free trade agreement ratified by the U.S. last year (one that will increase exports to the tune of about $1 billion).

    But I would argue that President Obama still dropped the ball on two very important issues addressed at this summit. And these are issues that directly affect our economy and national security.

    The first was the discussion of drug policy - more specifically, legalization.

    As is typical with any run-of-the-mill politician, the president shied from offering anything substantial, only barely catering to a "potential" debate. In other words, this guy ain't rocking the boat this close to an election.

    But the fact remains the U.S. war on drugs has been the longest-running failed war this country has ever waged.

    In 2010 alone, the U.S. spent more than $15 billion fighting this war.

    That's a rate of about $500 per second.

    To date, this 40-year train wreck has shown to be a political, social, and economic burden that has cost taxpayers more than $1 trillion.

    And what do we have to show for that money?

    Well, since the war on drugs started, drug use has been relatively consistent, particularly among young adults. And with the U.S. serving as a supply chain endpoint, drug-related violence continues to wreak havoc throughout South, Central, and North America.

    Our prisons are now insanely overcrowded with non-violent drug offenders. Since 1995, the U.S. prison population has grown an average of 43,000 inmates per year, of which about 25 percent are sentenced for drug law violations.

    At an average cost of about $29,000 a year to incarcerate a single non-violent prisoner on a drug-related charge, this is hardly a wise use of our tax dollars, resources, and human capital.

    The second issue Obama ducked was Cuba.

    Big shocker there.

    But you know the story... You can't win national elections without Florida, and you can't win Florida if you support opening up relations with Cuba (at least right now).

    As a result, we continue to miss out on the dozens of opportunities that the rest of the world has access to.

    ¡Viva Cuba!

    The bottom line is Cuba poses absolutely no threat to the United States.

    Moreover, ever since Raul Castro took over for his brother, steps towards economic reforms have increased.

    These include, but are not limited to:

    • Moving 500,000 people out of the state sector into private enterprise

    • Allowing citizens to start small businesses

    • Permitting the sale of real estate

    And of course, we know there's a lot of money at stake here for us, too.

    The American Farm Bureau has estimated the export market for products of U.S. farms and ranchers could be worth about $1 billion.

    And the U.S. International Trade Commission has reported the embargo costs U.S. firms as much as $1.2 billion a year.

    Meanwhile, I've yet to hear a single rational argument that can justify the continuation of this embargo.

    There's always the hypocritical human rights argument, an issue that's irrelevant when it comes to plenty of other countries we regularly do business with.

    Then there are those who point to Cuba as being an enemy of the U.S. and hosting terrorists. Yet we do plenty of business with Saudi Arabia, home to 15 of the 19 hijackers from September 11th.

    And of course, there are the few remaining dinosaurs in Washington who continue to believe if we stand our ground and hold our breath long enough, Cuba will wave a white flag.

    But as Congressman Ron Paul pointed out earlier this year, we should quit this isolation business of not talking to people:

    We talked to the Soviets. We talk to the Chinese. And we opened up trade, and we're not killing each other now. We fought with the Vietnamese for a long time.

    We finally gave up, started talking to them, now we trade with them. I don't know why the Cuban people should be so intimidating.

    I think we're living in the dark ages when we can't even talk to the Cuban people. I think it's not 1962 anymore. And we don't have to use force and intimidation and overthrow governments.

    We couldn't agree more.

    A Facade of Morality

    Of course, despite recent economic reform in Cuba - and really, just the pure logic of it all - there's still no telling when we'll have enough lawmakers in Washington with the stones to stand up to this facade of patriotism and morality.

    And while I do believe this embarrassing embargo will be lifted some day, it's nearly impossible to get any clarity on when that'll actually happen.

    So for investors with an eye on Cuba, it should be understood that opportunities will be severely limited for the foreseeable future. Beyond the Herzfeld Caribbean Basin Fund (NASDAQ: CUBA), there remain few opportunities for the average U.S. investor...

    Of course, we're more than happy to continue to profit in the meantime from some pretty sweet natural gas developments here in the United States.

    To a new way of life and a new generation of wealth,

    Jeff Siegel

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 26 3:02 PM | Link | Comment!
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