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Investment Pancake
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I am retired and live off my portfolio income and real estate rental income. I follow a simple investment strategy: (1) spend less than I earn; (2) use the savings to add more dividend paying stocks and rental properties to my portfolio. By doing this for many years, I've been able to grow my... More
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  • Tagging Azuelos

    (click to enlarge)Azuelos

    Lisbon is covered in two things: graffitti and ancient blue tiles (called Azuelos). The convent where I live has an entire room of azuelos, my favorite of which is the original artwork pictured above - before I decided to put the two art forms together, adding in some hipsters, beatniks and rastas to round out the theme. I'm thinking of trying my hand at painting tiles, to make an actual tile installation that looks something like what I show above. If nothing else, it could make for a great t-shirt.

    (click to enlarge)TKD

    And here's what happens when you put a ten year old TKD expert into a 400 year old tile installation. I still have to work on the color a bit - maybe by darkening up some of the other figures. Haven't decided yet.

    One thing I have decided on is that Friday is going to be a great day. The stock market is now seemingly in a full fledged sell off, and I have a shopping list at the ready. I typically avoid investing in MLPs anywhere besides our taxable accounts - the tax deferral constitutes a massive component of the MLP return, and I feel it is wasted if the asset is parked in a non-taxable account.

    That said, price is what ultimately governs the decision, and that price is now within the range of my be willing to accept some tax-inefficiency. The best way I can think of to manage the two competing considerations is to invest in KMI, which is structured as a C corp but is, nevertheless, squarely into the business model of an MLP. It's distributions are likely to constitute ordinary dividends, rather than nontaxable returns of capital. I don't feel we are losing much, if any, tax efficiency by holding KMI in a ROTH IRA or straight IRA. It is by no means the cheapest MLP, but frankly, I'd rather pay up for quality even if that means sacrificing a bit on the yield. With a buy-and-hold-forever mentality, you really CAN'T invest in anything other than the top shelf in terms of quality.

    I have noticed a few articles out there suggesting that buy and hold investors (like me) are idiots, standing like deer staring into the headlights of an oncoming bear market train. I have a difficult time understanding how you can make this judgment without the benefits of having a time machine. In fact, I have a difficult time following an investment approach that forces you to behave as if you had a time machine when in fact you don't. Trying to time bear markets is, in my view, behaving as if you know things that you cannot possibly know. That is gambling, plain and simple. Buying solid businesses at the best price you can get is my definition of investing, and the fewer other investors are willing to do it, THE BETTER OFF WE ARE. I view the death of buy and hold to be wondrous news, and look forward to snapping up more shares of KMI once the dividends are in and the bills are all paid.

    Tags: KMI
    Aug 25 5:44 AM | Link | Comment!
  • Grocery Shopping In Lisbon

    Today was brilliantly sunny and cool. We stayed home all day with the windows open and built space ships and tanks with legos. Then we went out to do our week's grocery shopping. We don't own a car, so shopping for food involves a considerable hike through Bario Alto, subway rides, and a big uphill walk. This we do inspite of the fact that there are tons of grocery stores all around Bario Alto, but each of them tends to be extremely small, with a tiny selection of various and sundry items ranging from a handfull of produce to batteries. These aren't specialty stores. Each is a general market with an extraordinarily limited selection of unrelated items. These stores represent the way grocery shopping used to be done around the world before the invention of the supermarket. Nowadays, I think most people who stop into these stores are tourists looking to buy a bottle of water, or old time residents who have been shopping this way for decades. There must be 100s of these miniature grocery stores. It is, quite simply, a model of stodgy inefficiency, and rather than poke through ten stores, looking to buy a turnip here and some plastic wrap there, I just go to the big supermarket that requires subway rides and hill hiking.

    There is one sort of medium sized grocery store in Bario Alto, about the size of a typical 7 Eleven in the USA. It's huge compared to most of the one room grocery stores that surround it. The demand for large scale grocery stores is evident: our 7 Eleven sized store is perpetually jam packed. It is so full, in fact, that I can't bring myself to go there. For me, it's worth the extra effort to take the subway three stops and go to the sort of enormous grocery stores that Americans like me enjoy.

    But I see the writing on the wall. If so much as one large grocery chain were to open up anywhere in this area of Lisbon, I would guess that almost every single one of these old style grocers would be put out of business promptly. Yes, there are many elderly residents here who might resist the change, but the overwhelming majority of shoppers probably wouldn't. People would go there to buy beer - but not if the beer was cheaper and colder at a larger, modern grocery store down the street. When it comes to groceries, Bario Alto sometimes feels like life in a small town in the USA before Walmart showed up. Before the idea of convenience was invented. But the simple truth is that the second law of thermodynamics seems to work in reverse where consumers and retail are concerned. It is merely a matter of time.

    For now, though, we haul our shopping cart through the streets each Sunday and enjoy the inefficiency and lack of convenience while we still can. Before it's too late.

    (click to enlarge)Barrio ALto

    Aug 23 6:03 PM | Link | 1 Comment
  • Bargain Hunting At The Mercado

    (click to enlarge)Evening

    There is a lovely park near our home in Barrio Alto, here in Lisbon. From it, you can look out over the city and across the valley to Castillo Sao Jorge. Lots of people gather in this park at night to enjoy the cool breeze off the ocean, to listen to music, and to drink gin and tonics. It's becoming one of our favorite destinations at the end of the day.

    (click to enlarge)Bird

    Another nice place to walk at night is the park in Principe Real, not too far from our apartment. There is an assortment of beautiful trees there, including rubber trees, palm trees, pine trees. But most interesting of all are the parrots. I counted at least eight green parrots flying from one tree to the next squeaking and squawking and generally just making a huge racket. There seemed to be around five of them in the tree in the above photo.

    When we return home, I enjoy taking a few moments to read about financial markets, and noticed that the Dow Jones had dropped 500 points while we were strolling around watching parrots. I didn't bother to read the headlines explaining the reason for the fall, because I don't have to. I've read the same headlines countless times before. They always contain the word "jitters." "The market is down 5% on geopolitical jitters." Or maybe it might be economic jitters. Or earnings jitters. Sometimes, there are some more detailed articles written by technical analysis people - meaning, people who look at charts and think they can see patterns that will predict the future. It's all totally useless information if you follow my investment approach.

    I have a very simple investment strategy. I own about 100 different companies and funds, and a rental property. I collect the dividends and rent, I spend less than I earn and I reinvest the savings. That's the entire business model. I do this regardless of stock prices, and I do it typically once a month, but sometimes more. I have literally no clue at this point what my portfolio's net worth is. Last time I checked was two years ago, I think. I don't even remember. The reason I don't bother looking is that this information also is entirely useless to me. Whether the companies I own pay dividends has literally nothing to do with the company's stock price. And I sell assets maybe twice a year but sometimes less often than that. Knowing what I COULD sell a stock for is useless information to me, because it's not something I do. If you asked me, I'd say that the best thing about living exclusively off dividends, rents and interest (as opposed to capital gains) is that you can pry the sell button off your keyboard, rendering share prices irrelevant for the rest of your entire life.

    So what do I actually do when I'm sitting in front of this computer doing financial stuff? I watch corporate earnings like a hawk, and read practically every bit of shareholder correspondence from any company I own, and many other companies besides. This has little impact on my investment choices, though. I do it to train myself to think like a better business person. The payoff from this activity is probably nothing I'll even see for at least 20 years.

    When I'm reinvesting dividends, I often look to see how much of my portfolio income is attributable to any given company. The five or six smallest positions are the ones I typically want to build up, so I'll pick whichever one of those seems the cheapest. Sometimes, when there is a particularly severe price drop in something I own, it gets my attention and I'll start trying to figure out if the stock is extremely cheap. If so, I might focus on doing that instead of rounding out my portfolio income sources. So truth be told, prices aren't totally irrelevant to me, since I've made a career out of reinvesting in cheap and reviled companies. If I ever retire, I'll just stick my savings into an index fund like Vanguard's total stock and bond market index fund (ticker VBINX). And if that day ever comes, then literally, stock prices will constitute completely useless information and I'll never even bother looking at the stock market again.

    As it happens, I enjoy looking at prices for things I want to buy because like those little old ladies at the mercado, I'm constantly there looking for a deal, poking at the fruits with my umbrella, comparing prices for these oranges over here to those oranges over there, buying little baggies of marcona almonds for a smidgen of money and, with a twinkle in my eye, dropping them into my bottomless little wheeled shopping cart. It's fun, is what it is. When the oranges go on sale, I practically go nuts in ways that make wild-eyed little old ladies with umbrellas at the mercado at closing time (when everything goes on sale) look positively civil by comparison. I love owning great businesses, oh ho ho, but nothing like owning great businesses at rock bottom prices.

    I've asked myself why I am like this. My best guess is because whenever I buy more shares, my portfolio income grows. Yesterday, I bought some shares of Navios Partners, and grew my income by a couple hundred dollars a year for the rest of my life. Sometimes, I get raises for literally doing nothing at all. Today, for example, Altria raised their dividend, which gave me another raise of about $250 a year for life. Whatever is happening with the Dow Jones today or this week has precisely no bearing on how wealthy I feel or don't feel. As far as I'm concerned, I'm wealthier today than I was at the beginning of the week to the tune of $450 a year, every year for the rest of my life (although I expect that amount will increase as Navios and Altria raise dividends over the coming few decades). So much the better if share prices for Altria and Navios drop even HARDER. Now I'll have $450 I can use to buy even more shares at even better prices!

    Sadly, I don't know that I will have too much left to invest at the end of this month. I've got some move-related checks to write, and then I sort of, kind of, invested our savings earlier this week. No matter. I will be back at the mercado with my umbrella soon enough, looking for overlooked produce getting sold at give-away prices. Until then, I might have to just content myself with oranges and sardines rather than shares of blue chip stocks.

    Aug 21 5:32 PM | Link | 7 Comments
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