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Your Weekly Wednesday Dose of Real Estate and Finance Knowledge

I am going to start theming my posts. As previously discussed, I have a lot of interests and try to keep current on what’s happening in the world. None of you may give a hoot (don’t pollute) about what I may share, but if one person makes a more informed decision partly because of it (I love more information) then it’ll be worth it. YWWDREFK is a lot shorter than typing that big title out. I’ll be using that acronym to title these posts.

I’m not going to try and get too deep here, at least not initially. Nor will I try to interject my opinion unabashedly. So here it goes…

Have you heard of dollar cost averaging? The folks on financial TV like to throw the term around in regards to investment strategy. What it all boils down to is this: if you own 5 shares of a stock that you bought for $10, you are in that investment for an average of $10 per share (duh). Now the stock is worth $5. The proponents behind DCA will say it is a great time to buy.

This is how. Now you buy 5 more shares at this new $5 per share price. When added to your existing 5 shares, you now own 10 shares for a total cost to you of $75. This makes your DCA $7.50, or 25% LOWER. That is the selling point. You are now in your investment for a lower average cost. So you can “break even” if the stock only goes up by $2.50 now rather than $5.

But what is never mentioned is that this costs EXTRA money (duh). For some, it is a wise strategy, for others it is not. Something very very similar occurs in the Real Estate (RE) market.

You will keep hearing that home values are rising. I read reports of it everyday. If you pay attention to the details backing many of these statements, you will recognize a similarity to DCA, albeit the opposite.

Let’s say 5 homes sold last year, each one for $200,000. That would make the average price of each home sold $200,000 (duh). Now let’s say this year 5 more homes sell for $400,000 each. When you add them all together, you now have 10 homes sold for a combined $3,000,000, or an average price of $300,000 per homes.

Did prices go up? Well, on average they did. On DCA a home “increased” in value by 50%. You will hear this about many markets, without further explanation behind it, but we will delve into that in later posts. Some RE indices try to take care of this by focussing on “same home sales” rather than the example I provided above.

There is no perfect model though. Repeat sales could go like this…a flipper buys a home for $250,000 all cash. They don’t need to do anything to it other than flip it to somebody else who will be financing their purchase. They received a discount due to paying all cash. They also expect to make money when they sell it, and they do in only 1 month for $300,000. Did home values just increase by 20% in a single month? With that model, they did. What this model has a hard time with is applying increases in price over time and the impetus behind the increase (annual inflation premium, cash discounts, etc.).

Until next week…you can make any piece of information support any side of the claim…

We only hire deaf workers...

How cool is this?

Indian courier service hires only deaf workers

India has one of the largest deaf populations in the world, but social stigmas have eliminated many job opportunities for the roughly 6 percent of the population that is affected. Aiming to empower this isolated group economically, Mirakle Couriers is a service provider that hires only deaf workers.

Mirakle Couriers offers a pickup and delivery service in Mumbai. The company puts a heavy emphasis on the training of employees—right down to the finer points of professional grooming—and has grown dramatically since its late 2008 launch. Its client list now includes Johnson Controls, Bain Capital and the Indian Hotels Company, among many others.

Founded by former investment banker Dhruv Lakra, Mirakle Couriers stresses that it is “not a charity but a social business, where the social element is embedded in the commercial operations”. The firm plans to expand beyond Mumbai to other cities and countries around the world. Social entrepreneurs hither and yon: time to get in touch…?

Talk about doing some good and making a difference.  This has to be one of the coolest things I’ve heard about since Kiva.  We should all have ideas this purposeful.

The music corner

DSC_0018This is the “music corner” I previously referred to. It’s next to the desk and yes, that’s the basket of Toby’s toys there as well. I took a picture because I failed to mention the rain stick we bought in Mexico, which I also consider an instrument. We also bought a nice ukelele when we were in Hawaii (not hundreds of dollars, but not bright pink nor cheesy painted), but for some reason I can’t find it. I know it’s just in one of the many boxes we opted not to unpack and left in the garage. Anyway, so it was good to remember that we’re doing a little better on collecting instruments than I first thought. :)

I have been building a massive list of instruments I want while drooling over this site of kids’ toys and craft stuff that I really like. Too bad I already have next Christmas and birthday completely planned present wise. I’ll have to come up with some excuse. Hehe.

The Intent of things…

I heard a guy on ESPN Radio of all places speaking about intent. Do you view somebody based upon what they did, or the intent with which they did said action? It’s a tricky thing.

It’s the question behind manslaughter. Somebody was killed. But the intent to kill them was not there. So maybe you still go to jail, but you don’t go for too long. So there, obviously, you primarily judge based on intent, but secondarily on the act.

What I heard this morning was trying to completely and entirely separate the two. I do not, personally, believe you can make this distinction. They are intertwined. By ignoring one, you are making the other much too important and perhaps irrelevant at the same time.

But which should be the primary and which the secondary in the way that you view things? Should it be like the court system where intent is primary and action secondary? That is for everybody to decide on their own. To me, if you are careless, you had to make the decision (or lack there of – aka. carelessness) to perform or allow said action to occur. By working on the intent (cause), you can eliminate future occurrences of the action (effect), or at least lessen them to some degree. Conversely, if you try not to perform the action, your carelessness may still exist, and if you slip up (inadvertently) the action will yet again be performed.

Let’s use the manslaughter example. Vehicular. Person A is driving and talking on their cell phone and runs a red, hitting and killing Person B who was crossing the street. What happened? They were careless. Consequence? Somebody was killed. Now let’s try to eliminate both the intent and the action from this scenario. Option 1: Person A does not talk on the cell phone, thereby paying more attention to the road and stops at the red light, Person B safely crosses the street. Option 2: Person A is talking on the cell phone, still runs the red light, but now the action – either Person A or Person B notices before it is to late, there is some swerving going on, death is averted.

What do you think Person A would do afterwards in Option 2? Would they think “I need to avoid people in the road when I drive” or would they think “I should have stopped at the red light?” To me, that’s how I look at things. You either fix the problem (Option 1), or you fix the consequence (Option 2).

The rain in Spain…Phoenix…somewhere

DSC_001311:00 am

DSC_00221:30 pm

I DO like rain. I like the sound, the fact that it makes things grow… it’s just also nice when it then makes way for clear blue skies two and a half hours later! I like how it was absolutely pouring, but there’s barely a cloud to be seen and the sidewalk looks dry in the second picture.