Army Post Road

     For the year 2007 I effectively paid the state of Iowa no income tax. One of the good things the state has done since the start of Operations Enduring Freedom (Afghanistan) and Iraqi Freedom is to make all military pay received because of those two operations exempt from state income taxes. Even though half of my income last year (housing allowance, subsistence allowance, meal per diem) was non-taxable by any government, the state of Iowa has gone one step further and said none of my income in their eyes is. Because of that, sometime in the next 4 days I should be getting my $1,178 interest-free loan to the state back.
     With that, and with any luck, hopefully I will be able to avoid getting a job before I get back on active-duty. It’s not that I don’t want a job (and what follows may just be excuse-making on my part) but these have not been the best of circumstances for me to get one under. For the first week to ten days that I was here I didn’t have much of any plan on how long I was going to be here in Des Moines or where for sure I wanted to go after that. Once I decided to get back on active-duty one way or another (join the Regular Army or get re-mobilized) then that basically eliminated anything that would be something resembling a career choice (i.e. that’s why I didn’t apply to be a Des Moines cop). After talking to the recruiter and getting the likely timeframe of when I could and (hopefully) should be back on active-duty, I’d spend almost as much time in interviews as I probably would actually working and then I’d just have to quit the job. I didn’t want to go through that and I didn’t want to put any employers through that. Plus, I doubt I’d get that first paycheck very long at all before my first one back on active-duty. Having a job would be nice. Having a reason to wake up before noon (besides to see Erin Burnett on CNBC) would be nice.

     I came across this post on Finance Gets Personal by Finance Girl entitled, Financial “I Never” with Finance Girl.

     I swear I’m going to start posting regularly soon. I suppose I have no excuse not to with all this sitting around I do.

     I like to think that when a concept for investment comes along, I don’t have to receive a huge kick in the groin to see it. Sometimes it only takes a cover story on BusinessWeek to see it.

      Their cover story in last week’s edition will have me on the lookout for every possible chance of Indian infrastructure investments. Just in January State Street Global Advisors launched the SPDR FTSE/Macquarie Global Infrastructure 100 ETF (GII). It’s not a perfect play but can you imagine that the 100 best publicly-traded infrastructure companies in the world won’t be benefiting from this move to modernize India?

     I came across the following scenario at The Tao Of Making Money:

Assume you are an average 25 year old with $25,000 debt (on account of your student loan) You have been given a lump sum $10,000 and the following four choices:

1. Invest it for your retirement funds.
2. Save/invest it for your future home.
3. Save/invest it towards your child’s/children’s future college education.
4. Pay part of your student loan debt.

You can pick only one of the above choices towards which you should use the entire $10,000. Which one will you pick? ..and Why? Assume that the rate of return on the three investments choices is the same and the student loan charges you an interest rate that is equal to this rate of return. Would your answer be any different if the amount was $25,000 instead of $10,000? Again, you can pick only one of the choices.

     My response is to say: PAY OFF THE DEBT! Since the rate of return on the investments is the same as the interest charges then there isn’t any opportunity cost between the four options. The sooner you can pay off debt, especially if the interest it costs you is equal to what you could earn with your discretionary money, the sooner you can stop servicing the debt and exclusively save.

     Let’s take our $25,000 debt for example. If the interest is 5% (accrued monthly) then the accrural for the first month is $104.17. So after one month we owe $25,104.17. If we pay it down by $10,000 and then we only owe $15,104.17, the next interest accrual will only be $62.93 and you’ll owe $15,167.10. If, on the other hand, we invest our $10,000 instead of pay the debt, we accrue only $41.67 in interest and have made only our standard student loan payment.

     If we take the second scenario, we’ve just been given $25,000, paying off the debt becomes and even more enticing option. We can completely retire our debt, eliminating that as a future expense in the future, and devote the money we’ve been paying for the student loan and invest it monthly.

     If the interest rates were different between the student loan and any of our investments, that changes the whole scenario and adds a few steps to the decision-making process.

     In an article I read this morning on thestreet.com talking about possible mega-mergers and aquisitions I came across the following:

They’d rather rule in Hell than serve in Heaven.

The they in the quote is referring to the Ford family and how they’d rather keep a controlling stake in a failing Ford Motor Company than a sizeable stake in a successful Boeing (the company the author speculated would be a possible candidate to acquire/merge with Ford). If you’ve been following any of Ford’s on-going trouble’s lately, you know how apt the description is.

Five Business Hook-Ups You Might See is the article in question.

     Ok, so maybe my headline is misleading but CFO.com has a story about how the stock returns do have a noticeable, direct correlation with the lunar calendar. This, however, does not mean you need to start trading to hedge against vampirism or lycanthropy.

     Speaking of the Oracle of Omaha: Berkshire-Hathaway is an incredibly well run company. They’re perpetually profitable. The stock appreciates constantly. BUT THEY DON’T PAY A DIVIDEND! They’re awash in enormous amounts of cash and the only thing it’s spent on is investments. No buybacks, no dividends. The capital appreciation since Buffett started in the mid-60s has been astonishing but c’mon Warren, spread the wealth. Err, spread it a little thicker.

     To paraphrase the second richest man in the world: “I’ve lived in the same house virtually my entire life; my clothes are more expensive now but they still look cheap when I put them on. You’ve got to love what you’re doing every day. I’ve got all the money in the world, why would I be doing something I didn’t love?”

     Their politics certainly differentiate the two men and by looking at their investment styles, you wouldnt’ find much commonality other than they’ve both been wildly sucessful but, via Barry Ritholtz’s Big Picture, I’ve found that someone has found 23 traits that bind the two super-investors together. Barry blogs about it here.