Bed and Breakfasting

It’s year end 2018, and this is my last posting for calendar 2018.  If you have invested in the stock market during the past year, there is a high likelihood that you have positions that are losing money.  If so, perhaps you are thinking of selling those positions, or maybe you already have sold those losing positions, during the last few days of 2018 so that your loss can offset gains that you may have earned on the remainder of your portfolio.  It’s fine and even a good idea to sell loser positions, but you have to remember one thing:  If you buy back your loser security within 30 days of selling it, any loss you take will be disallowed by the IRS.  This includes selling losers at the end of one tax year and buying the position back right after the new year.  Can’t do it!

Bed and Breakfasting

In the extreme case, you sell your position in the last minutes of December 31 trading and buy the same position back when the bell rings on January 2.  This is called “Bed and Breakfasting” especially in the UK because you are only out for such a short period.

Wash Sale

In the US, it is called a Wash Sale when you buy a substantially alike security within 30 days of selling at a loss.  This could mean selling the S&P 500 Index ETF (the SPY) at a loss and then turn around and buy the Vanguard S&P 500 ETF (the VOO) within 30 days.  Not exactly the same but substantially so.  This is a Wash Sale and any loss on the sale of the SPY would be disallowed by the IRS.  Wait 31 days and then buy it back?  That’s ok, and your loss on the sale would be allowed.


The IRS reports that they are so understaffed that they are substantially reducing the number of audits they conduct.  In related news, capital punishment has become less and less frequent.  Nevertheless, the same logic should apply:  Just because bad stuff is less likely to happen to you doesn’t mean you should be more incented to try to get away with the bad act.  Don’t commit capital harm to another person, and don’t try to outsmart the IRS by selling now at the end of the year and buy back the same position right after the 1st of the new year.  If you do, you are waving the red flag in front of the bull.  You are asking to be audited.  Luckily, I have never been audited and hope that remains the case.  One of the ways I do so is to make sure I don’t buy the same position back again for 30 days after selling it at a loss.  

Christmas and Sharing

The whole concept behind giving Christmas gifts is that you are sharing your joy of Jesus’ birth by giving gifts to others.  Usually this means your immediate family but you should take it a step further if you don’t already and share your gifts with total strangers.  Don’t know any total strangers?  No problem!  Give through your church or place of worship, through your City, or through established gift-giving organizations such as Salvation Army or Toys for Tots, which you can typically access through your fire department.

Giving and Financial Planning

This is a blog about investing and financial planning, and so giving money away doesn’t sound like it should be part of a financial plan, but it is.  For 2018, the Standard Deduction for Married Filing Jointly jumped to $24,000, which means that those who earn and therefore give small amounts are unlikely to benefit by charitable giving because they are less likely to itemize their deductions because there itemized expenditures are less likely to be higher than their standard deduction.  Therefore, most giving that you do will be out of the kindness of your heart, which is, if you think about it, the way most giving is done anyhow.  If you give your kids or grandchildren or others a small gift, you probably aren’t thinking about tax consequences.  Instead, your gift says you are joyful with the recipient and you want to share your joy.

Why Do You Earn Money?

Other than to earn enough money to feed, clothe, and house yourself, why else do you go to work every day to earn money?  What better reason is there than to have enough to share with others?  The motivation to have enough to share with others is a very important reason why we work and earn money.  If you are motivated by a cause such as giving to others that is greater than yourself, you will be more likely to want to get out of bed every morning and drag yourself to your job.  That is why Christmas and Sharing is a very important part of someone’s financial plan.  Achieving the plan in and of itself is a good motivator, but helping others is better.


Eat Your Vegetables

I joke that my job as a CERTIFIED FINANCIAL PLANNER™ is to tell people to eat their vegetables.  Meaning, I tell people to do something or things that they know is good for them and that they already know they should be doing.  Not spending as much as you take home is like eating your vegetables:  You know you should do it but sometimes it’s tough to stomach and you want to do something else.

Harry says, “Eat Your Vegetables!!!”

Really:  Eat Your Vegetables

In today’s posting, I am suggesting that you literally Eat Your Vegetables as part of your financial plan.  Why?  Because eating your vegetables is good for you, which means you will likely be more healthy, which means you are less likely to need expensive doctor and specialist visits and hospital stays when you are older, which means you won’t need to spend as much money on medical care.  Staying healthy is a great financial plan with a lot of other added benefits.  


What prompted me to write this is this report of the United Health Foundation’s 2018 America’s Health Rankings by state.  This is the 29th annual ranking.  Despite the emphasis on obesity, the problem is getting worse.  Hawaii and several New England states rank the best and Louisiana, Mississippi and Alabama (SEC states all) rank the worst.  Hawaii surprises me – Having been to Hawaii a few times, I have seen some really fat Hawaiians, but I guess it averages out.  For all of the yoga and exercise some of us (collectively) do, it sounds like more of us needs to do some more.

Vegetables Are Cheap

The other good thing about vegetables is that they are cheap.  At least, they are much cheaper than fast food.  I am fortunate enough to live where there are a lot of farmers’ markets as well as a permanent farmer’s market store, and good vegetables can be had very cheaply there.  Eat healthier and save money while you are doing so – what could be a better financial plan than that?

Arguments Against

I know there will always be arguments against healthy eating.  George H.W. Bush hated broccoli and he lived until 94.  Thin people can get Alzheimer’s just as well as fat people.  All true, but these are the exceptions to the rule.  If you look to hope in the exceptions, you are lying to yourself and making excuses for your own poor habits.


I’m not advocating going Vegan.  I am just saying that you eat your vegetables.  Direct consumption of vegetables appears to be a far more effective way of supplying your body with needed vitamins and nutrients than taking vitamin supplements, studies have shown.  You know you should save some of your take home pay each month, and you know you should eat your vegetables, so go and do so!

China: The News of Today

If you watch CNBC, Fox Business, or Bloomberg TV, or if you follow the financial markets regularly, does it seem to you that the markets focus in on one geopolitical event and trade up or down based almost solely on that news?  And, if you see this, do you think markets are overreacting to said news of the day?  Currently, it seems that the markets are trading substantially on news about trade and China, including the arrest in Canada of the CFO of Huawei.  Before, it was interest rates.  Before that, it was the murder of Khashoggi.  Now, I agree that issues with China and trade are newsworthy and may have an impact on aspects of the US economy and US companies, but should these issues provide the sole impetus for the direction of all stocks, with the effect of minimizing other issues such as corporate profits?

US – China Trade War!  Oh No!


My point, if you haven’t yet figured it out, is that financial news outlets try to condense the news into small memes or soundbites.  Investors and even institutional traders pick up on these news and try to trade and profit on their perception of investor sentiment based on these news memes.  Then, if markets move too much in one direction, algorithmic trading programs kick in and exacerbate the issue.  I don’t think there is much fundamental about it; what you have (or can have) is a bunch of memes spread end-to-end on one another, with the meme spreaders perhaps forgetting from day to day what yesterday’s meme was.  “It looks bad today, but yesterday it looked good, so is today worse than yesterday was good?  Should I sell today even though I bought yesterday?”  It can get very confusing.

Take a Step Back

As with all other forms of news, if you want to move forward with your sanity intact, sometimes you have to take a step back, take a breath of fresh air, and turn off the financial news.  Financial news is addicting, but like other forms of addiction, it can and probably will do you harm at some point during the process.  Instead of letting the financial news control you, you need to take control of your own financial news.  Buy in when you see a good opportunity, and maybe think about dollar-cost-averaging your position so that you spread out your basis and therefore buy at a reasonable average price over time.  Don’t get sucked in by the financial media.  Today’s China Trade story will morph into a different story tomorrow, whether it is interest rates, the unemployment rate, or the next election cycle.  Imagine the hugest supertanker in the world, times 100:  This is the US economy, which is about 24% of the world economy.  It doesn’t turn on a dime and it continues to churn in a certain direction despite the hits it takes from the outside.  You should invest and financial plan based on the pace of that supertanker, not based on the little insects that might run into it from time to time.


The China Trade story is significant but what we are seeing now is just a bunch of posturing or negotiating tactics by both sides.  Both the US and China’s best interest is in keeping a lid on any escalating trade battles.  Despite what you may read and feel, both countries are acting rationally, if a little overdone.  Remember that US corporate earnings are strong and are projected to remain strong for the next year, if not perhaps as strong as they have been in the past year.  Earnings, more than headlines, will drive stock performance, and the future with earnings looks rosy.

Uncertainty in the Millennial Generation

We are moving from an era of increasing certainty to an era of increasing uncertainty.  This is roiling the stock markets and causing all kinds of conniptions among the Millennials who are increasingly in charge of world financial markets.  Here are some examples of increasing uncertainty:

  • The Federal Reserve Bank has stated it will no longer be as forthcoming in spelling out projected future interest rate changes.
  • Apple will no longer report iPhone unit sales because they want to focus on total revenues and profitability rather than unit sales.
  • We don’t know if there might be an end to trade negotiations between the US and China, and so we sell any stock that has any China connection.  Presumably we are ok with continued Chinese theft of American proprietary products and technology as long as we don’t have to pay 25% more for the stuff we buy at Wal-Mart that is made in China.
  • President Donald Trump is obviously an Intuitive rather than a Sensate on the Myers-Briggs scale, which means he is, shall we say, unpredictable.  President Trump’s Tweets and other actions abet geopolitical turmoil, which is probably what the President wants but not what the Millennials want.
Millennial Attitudes Rule

We Are All Millennials

I have two Millennial children.  However, when I say Millennial Generation, I really mean the Millennial attitude about things.  Millennials don’t want criticism.  They don’t want to be surprised.  They want all information available to them at all times and they want it now.  They have not had experience with struggles and bad times.  They seldom hear discouraging words.  Regardless of whether or not we are actual Millennials, born between 1981 and 1996, we are all (or many of us are) Millennials because we have the same attitudes about wanting it all and wanting it now and about not being able to stomach adversity or uncertainty.  People with these attitudes are the drivers of financial markets, and this is one big reason why we are seeing such high levels of volatility in the markets now as opposed to the previous several years.

Rudyard Kipling

“If you can keep your head when all about you
     Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
    (Yadda, yadda, yadda for several verses),
Yours is the Earth and everything that’s in it,
     And – which is more – you’ll be a man, my son!”

Also Warren Buffet, who admonishes to Be Greedy when Others are Fearful.  The point of quoting Kipling and Buffet is that in Volatility lies Opportunity for you.  If you can live with the uncertainty of not knowing exactly what the Fed is going to do, or how many iPhone units Apple sells in a quarter, or when or even if China trade gets resolved, then there is money to be made by buying the dips and holding through the tempest of uncertainty that we now have.  It takes moxie, but nobody ever said making money in the stock market is easy.  


Don’t try to catch a falling knife, but buying Index ETF’s and building positions during pullbacks caused by increasing uncertainty is a good play, I believe.  The discount on financial assets right now due to uncertainty is likely too much.  Pick your positions, stick to your guns, and I believe you will be rewarded in the longer term.

Should You Open a Christmas Club Account?

Do you have a Christmas Club account at your bank or credit union?  Did your parents have such an account?  Do you even know what a Christmas Club account is?

Vintage Christmas Club Account Ad


Christmas Club accounts are bank savings accounts, the purpose of which is to save for Christmas spending.  They are a relic of the Great Depression-era in the US, and they remained popular through most of the remainder of the 20th Century.  Banks and other savings institutions used to advertise for people to open a Christmas Club account.  The idea was that if you set up a separate account to save for Christmas and if you deposited some money into the account throughout the year, it would smooth out your expenses and make the cost of Christmas more bearable.  Back in the day when passbook savings accounts such as Christmas Club accounts paid 5%, you made a decent return on your savings.

Out of Favor

Christmas Club accounts have fallen out of favor in recent decades, perhaps with the deregulation of rates paid on such accounts (rates are much lower now) and with increased bank costs associated with handling these accounts.  Retail banking isn’t as profitable as it once was for banks.  Anyhow, banks no longer advertise for and promote Christmas Club accounts, and so they have fallen out of favor.

Savings Buckets

Though Christmas Club accounts per se are not as popular, their underlying concept is increasingly popular.  The concept is that you have different buckets of savings for different goals that you have.  Paying for Christmas each year is an important goal and having a separate bucket of savings for Christmas is an old-school concept that makes a lot of sense in the new-school of today’s financial planning.  They also become an interesting Future Value mathematics challenge:  If I deposit $200 monthly and it earns 5% compounded, how much money will I have at the end of 12 months?  Answer:  $2,455.77.  And, because it is all self-directed and not subject to IRS regulation (except for taxable interest income on the account), you can choose not to spend all of your balance this year and so get a head start on next year.


Should you open a Christmas Club account?  If you work at a job that is primarily salary-based and you don’t get a year-end bonus, a Christmas Club account makes a lot of sense.  Your income is smoothed out, and so should your expenses, especially if you tend to spend a lot on Christmas.  Where to find a Christmas Club account?  A Google search says that a Credit Union is currently the best place, but failing that, any separate account at any bank will do.  Moreover, think about the Christmas Club account concept for other financial goals.  Do you want to travel?  Open a Travel Club account – not that such a thing exists, but you could make one up just by going to your bank branch and opening up a separate savings account.  It is a way of enforcing savings and spending discipline, which are sorely lacking with some people, as well as with most governments.


The price of a barrel of oil in the New York futures market has fallen about 33% in the past 2 months.  Prices at the gas pump are lower, but not by 33%.  Some are happy about oil’s drop and some are not.  What should you think about it?  What is going to happen with oil in the future?  Read on.

Offshore Oil Rig


There are several reasons out there as to why oil has declined this much this quickly, including but not limited to the following:

  • Concern about lagging global growth in the future;
  • The relative strength of the US Dollar as the world reserve currency;
  • A current glut of supply worldwide;
  • Seasonal issues – we are between the busy Summer and Winter seasons when more oil is used;
  • Relative geopolitical calm so far, particularly by Iran;
  • Increasing availability and affordability of alternatives to oil as an energy source;
  • The Saudis have opened the spigots in order to placate the world in the face of a PR nightmare due to the murder of the journalist Khashoggi;
  • Increasing production in the US coupled with the low cost of production in the US relative to the remainder of the world.


The 2-month drop in oil prices has resulted in a “contango”, which means that the price of oil available today, known as the spot price, is lower than the price available to pay for delivery one year in the future.  This contango situation is reflective of the current supply glut.  It is also is somewhat abnormal, as current spot prices are usually above prices a year out in the future, a condition known as “backwardation”, the opposite of contango.  It also means that prices a year out in the future have not fallen as much as have immediate spot prices, which is a healthy sign.

OPEC in Vienna

As you read this, OPEC is meeting in Vienna.  Likely they are discussing this drop in prices and what they should do about it.  There is talk out there that Saudi Arabia, the largest producer in OPEC, will leave and disband the cartel.  I don’t think that is likely – Saudi Arabia needs OPEC right at this moment.  Russia has involved itself in OPEC in recent years and likely will do so again.  Look for moderate self-imposed production cuts to come out of this Vienna meeting, which should at least temporarily boost the price of oil.

Is It Good for the USA?

10 or even 8 years ago a drop in the price of oil would have been an unquestioned good thing here in the US.  Now, however, with so much job growth in the country tied to oil production, and with the US now either even or ahead of Saudi Arabia as the leading oil producer in the world, lower oil prices are not such a good thing.  


I don’t see oil falling significantly farther because winter usage will soon kick in, because future global growth indicators will turn out to be stronger than anticipated, and because the current $50/barrel level is the lowest necessary for US producers (at a macro level) to make money.  That said, don’t bet on oil doing a quick reversal and going straight back up.  V-shaped recoveries have not typically happened in the oil markets throughout history.  Oil is an extremely complicated commodity and a lot of economic and geopolitical issues play a factor in its price.  

Corporate Culture Is Important

All companies have a corporate culture.  Some cultures are stronger than others.  As long as they buy into the corporate culture, employees like working at such companies.  How can you determine whether or not your employer or the company you invest in has a strong culture?  Strong is a relative term and so you have to figure it out for yourself and make your own decision.  If you work there and you like the corporate culture, you are a good fit and it works for you.  Some employees like working at a company with a strong corporate culture and others enjoy a less strong culture so that they can do things their own way as long as they get the job done.  If you are just an investor and are not on-site every day, it may be more difficult to tell if the company has a stronger or weaker culture, but it behooves you to try to figure that out through reading up on the company’s website or by asking people at the company.  Culture is an important driver of corporate success.

Origins of Culture

An organization’s culture can flow from a number of different areas, including but not limited to the following:

  • A corporate “Credo” or set of ethics or Mission Statement from which their products and way of doing business are rooted.
  • A statement of purpose of why the organization is in business in the first place and what they hope to accomplish.
  • A commitment by organizations not only to take care of its employees but also to reach out to family members to ensure a greater well-being and thus enhance the employee’s working experience.
  • A decentralized or flat governance structure that allows lower employees direct access to management and therefore a sense that their input matters.


Some examples of organizations that are known to have a strong corporate culture include the following:

  • The US Marine Corps
  • Goldman Sachs
  • McKinzie & Company
  • Facebook
  • Google
  • Salesforce
  • Johnson & Johnson
  • Procter & Gamble

All of these organizations have been successful for a relatively long period of time, and there strong corporate cultures have contributed to their success.  Do you think your employer or your investment fits with the above list?


The first 4 letters of Culture are Cult.  Sometimes, a culture can be too strong and thereby crush any diversity of thought.  That is not good for those who get crushed.  It is not good to create an organization full of mind-numbed robots.  Companies claim they seek a diverse workforce, but in reality companies can have difficulty melding employees with different ideas with the “corporate way” of doing things.  “My way or the highway” is not good and it is a challenge for companies who claim to want diversity to actually implement it successful.  It is a difficult balancing act.


If you are looking at investing in a company, or even if you are considering a job offer, take a step back from just looking at the financial statements and consider if the corporate culture is strong or if you agree with it and can advocate for it.  If you can, then perhaps you have a greater insight than others and you can see greater possibilities in the opportunity.