Cheat Sheet Q & A:
Today’s Question/Topic: Comparing Bitcoin to the stock market:
You've been skeptical if not critical of bitcoin right along. Recently you've taken the opportunity of the exchange issues to suggest that you wouldn't even consider bitcoin until there is an exchange in the US. You frequently will speak of stock market investing. How is that different than bitcoin?
Bottom Line: This is a great opportunity to articulate the difference between producing and non-producing assets.
I don’t believe in investing in non-producing assets (this is also a Warren Buffet principal). For example if I really believed that gold and/or silver was a great investment I’d be more inclined to invest in a great mining company that produces the metal than the metal itself. Why?
If you buy a non-producing asset like gold, silver or even bitcoin as an investment you actually are gambling and guessing. You’re making the guestimation that someone will pay you more for that medium of exchange than what you paid for it. It doesn’t provide any inherent benefit along the way.
A producing asset like a business is a different story. A frequent misconception of those who aren’t familiar with stock market investing is that it’s similar to a casino and/or gambling in general. That actually couldn’t be further from the truth. Does the average person who walks into a casino win? Of course not right? Only about 5% of casino gamblers turn a profit. Conversely the average stock market investor will turn a profit. In fact the 9% average rate of return in the stock market per year is the highest of any investment or related class in the history of the United States. The reason is the historical trend of the economy and businesses. They grow.
When you invest in a stock you’re investing in the business behind that stock. If it grows you’ll not only be in a position to have a higher share price over time but if you invest well you’ll likely have dividends that will be paid to you along the way as well. When I’m investing in a stock I’m actually not concerned with the day to day price of the shares. I’m interested in the business I’ve invested in growing and paying a dividend to me based on profits over time. Two-thirds of all historic stock market gains have come in the form of dividends that are paid out by companies.
If you have a topic or question you’d like me to address email me: firstname.lastname@example.org
Bumped or shafted by an airline? Yep there's an app for that:
Bottom Line: Did you know that every year Americans are entitled to $2.1 billion worth of benefits and compensation related to airline issues? Or that $450 - $500 million of it never is collected? Those numbers surprised me. Here are a few examples of situation that occur and what you’re entitled to if you’re negatively impacted:
- If you’re bumped from a flight you’re entitled to compensation up to double the value of your ticket up to $650
- If you’re delayed by an hour or more on an international flight you’re potentially eligible for compensation
- If you’re delayed by two hours or more on a domestic flight
Yet so often we don’t know what we’re entitled to in these circumstances. There is a new app called AirHelp that can help you. With AirHelp you can enter your specific issue and it will inform you as to what you’re entitled to and can even assist you with a claim to the airline that owes you based upon the circumstance. Pretty cool.
The stuff in your closet may be worth more than you realize… The best performing collectibles of 2013:
Bottom Line: The collectables market has become a popular alternative to traditional investments in recent years. There can be personable enjoyment derived by the collectable in additional to potential appreciation. Art in particular has gained a great deal of attention in recent years but actually turned out to be the worst performer in 2013 of the leading collectable classes. Here is the 2013 performance breakdown from Knight Frank and WealthInsight:
- Art: -3%
- Furniture: -2%
- Chinese Ceramics 3%
- Jewelry 3%
- Wine 3%
- Watches 4%
- Stamps 5%
- Coins 10%
- Cars 28%
Collectable cars not only easily turned in the best 2013 performance but they also have the largest 10 year gain at a whopping 456%. Maybe with this info you can convince your wife to let you have that car you’ve always had your eye on…
Could Saturday mail delivery end after all?:
Bottom Line: There was a nugget of information in President Obama’s budget that didn’t gain attention. In his budget he cited support for the end of Saturday mail delivery by the USPS. It’s not secret that the USPS is in a dire situation fiscally. The pension program of the USPS has been underfunded for over a year now and the loss from operations totaled $5 billion in 2013 alone.
The Postmaster General has been outlining reforms to generate cost savings for years without getting cooperation from Congress. Among the measures is ending Saturday mail delivery. The USPS said that they lost more than $2 billion in 2013 alone on Saturday mail delivery. Because the USPS is a constitutionally mandated agency they can’t make systemic changes to delivery without Congressional action. Now that the President has indicated that he’d be willing to support the end of Saturday mail delivery we need to put pressure on Congress to act accordingly. It’s a first step towards longer term solvency and survival of the USPS. Otherwise the USPS will collapse fiscally and we’ll likely end up footing the bill as taxpayers for the deficits.
Locally based Newsmax creating a news 24/7 news network:
Bottom Line: There is a good change that you’re familiar with Newsmax and perhaps even some of their health and financial related publications and products. What you may not know is that they’re one of the most successful locally based businesses.
Candidly I didn’t even know News Max was based in West Palm Beach for the first few years I lived here. So as Newsmax has flourished it’s actually been good for the locally economy with job and income growth. And there is about to be much more to the story. Newsmax is ready to round out their media business by adding a 24/7. Coming in June Newsmax will join the ranks of the 24/7 News networks. So what will make them different?
It will resemble their publican. High on information that has an independent bend without as much polarization as some of the Fox News programming. More to come…