8 a.m. Miami. The close of my business year. This time of year, I do a quick review of money matters. There is a difference in that I do not extensively analyze the past. The future planning was done before I invested, so this review is really a plan-ahead session. I looked up some facts by Train. (see 11/25/02) and indeed the National Debt exceeds the total value of all businesses on the stock exchanges. I see his logic, that soon the politicians will debauch the currency to manage this debt.
I've read through history that this action wipes out the savings of the middle class and hits pensioners on fixed incomes. I still say it's better to have $10,000 invested than nothing, because no matter what happens, you're still better off.
Take my broker’s view, who does not see the reasons for my large investments, (proportionally 30 to 40%) in tax-free municipal bonds, when the market is at a low. My thinking is easier. I've long since determined that these bonds return almost the same as real estate. Every $200 invested brings in $1 per month net, but you don't have to borrow to do it. That is, my first $6,000 in Muni’s buys my daily cup of coffee at a restaurant, and I still got my $6,000.
[Author's note: please note that this calculation that refers to the real estate market is a very complicated scenario in which the use of credit is stripped away in every form to get at the basics of what is really happening. I've been doing this calculation since the advent of spreadsheets, so if you come up with a different answer, you need only look back to find the error where you're including credit in the formula. Note, Financial Planning is the college course where I got 100%, which the instructor stated publicly was “nothing short of incredible”.
The reason for the coffee comparison is that coffee is one of my daily habits. In my own lifetime, I have seen coffee go up from 10 cents a cup up to $1.85. As of today, coffee costs one dollar per cup at Denny's. Based on a 30 day month, with $6,000 invested, I can have a “free” coffee every day.
Now, even if the price of coffee goes up, I doubt that would cause me to quit drinking it, for because of my $6,000 buffer, I only have to pay the difference in price. Hence, I don't buy that argument that you shouldn't invest at all because of inflation, for I'm still better off than those who didn't invest.
There is another reason for referring to coffee in terms of an investment. I can claim to have spent $21,000 on restaurant coffee when I was 19. As a lad, I used to collect those 1917 lead pennies from my paper route and set them aside. In college, when my parents refused to send me even one dollar of the thousands and thousands they had promised, I did count out each 15 cents of those lead pennies for my daily treat of one cup of coffee until I had spent them all. I had intended to keep those pennies as n investment, and in 1995, I looked up what these pennies were worth as collector’s items. All of mine were in near mint condition. Bingo! I was out $21,000. Thanks again, mom and dad.
My broker is Tammye Jean Lafayette, a.k.a. “TJ”. We've never met. All transactions are by snail mail. Sadly, she took quite ill and passed away a few short years later. I have nothing good to say about the people who replaced her.
