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Update on the Stock Picking Contest

It appears that comedian Auggie Smith’s reign as our resident financial whiz might have come to an end.  At the beginning of the year Auggie used the “blindfolded by a Mexican Wrestling-Mask ink blot” process to pick his ten best stocks for the year.  In the past, his controversial “throw darts or shoot the Wall Street Journal with a pellet gun” technique outperformed some of Wall Street’s best stock pickers, but this year he is actually at a loss!  Here are the standings:

Auggie’s value (based on an initial valuation of $10,000) – $9156.

Investor Place’s Ten Best Stocks – $13,037

Vanguard’s Growth – $11,125

Auggie’s portfolio had a few huge holes, including Tapinator, which lost over 90% of its value, and Xueda Education, which is down over 40%.  Disney is his best performing stock.

In contrast, Investor’s Place had several big winners, including Emerge Energy Services, up over 260%, and Tesla, up over 50%.

Of course there are several months left in the contest, but it is not looking good for Auggie.

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Posted in Investing

What I Did On My Summer Vacation (hint: Disneyland is more fun than lung cancer)

Over the last few months I’ve unfortunately had the opportunity to test our health care system, and personally consider my own mortality.

In March I woke up in the middle of the night in extreme pain.  Suspecting an appendicitis, my wife rushed me to the hospital.  After a few hours of pain killers and tests, they concluded it was most likely a kidney stone and sent me home. They took a Cat Scan, which looked fine, and recommended I send it to my Doctor for his opinion.

My doctor found nodules in my lungs in the Cat Scan that he thought warranted follow up, and three months later I had another Cat Scan.  And that is where the story really begins….

A couple days after my second test I received an email from my Doctor informing me of the following:

  1. My second Cat Scan looked very suspicious for lung cancer.  The nodules had doubled in size.
  2. He was leaving on vacation, and his nurse would follow up with me to get appointments for tests with specialists.
  3. Kiss your ass goodbye, and get ready for a really rotten death.  (OK – he actually didn’t say that, but of course after getting his email I jumped on the internet and did a little research on aggressive lung cancer, which brought me to that conclusion.)

And at this point my first experience with our wonderful health care system begins.  For the next week, working in conjunction with my Doctor’s nurse, I attempted to get appointments with specialists.  It was confusing and frustrating.  I actually went to the doctor’s offices with copies of my Cat Scans – but no matter what I did I was thrown into a dark morass of bureaucracy, at the awful intersection of insurance company nonsense and our health care system’s idiocy.  The only available appointments were weeks – even months away – and from what I read, I probably didn’t have that time to spare.

So I spent the next few days assuming the worst, until I hired a concierge doctor.  For those unfamiliar with the term, a concierge doctor limits their practice to a small number of patients (my doctor takes a maximum of 50).  The patients pay a monthly fee that covers all the costs for that doctor, they get to know you and your medical history intimately, and they handle all the hassles of the health care system.

Within a few hours of hiring the new doctor, I was handed back my life.  He gave me a complete physical, then took my test results to several specialists to examine.  They determined that my original doctor and radiologist has misread the results, and that there had been no growth in my lungs.  He also arranged an appointment with a specialist a day later, and just to be sure, he arranged a lung biopsy to be performed two days after that, which also tested negative for cancer.  The total cost for all of this (and bills are still coming in) is around $50,000.

Luckily I had the resources to hire the concierge doctor, otherwise they still might be shuffling me around our messy health care system.  I learned a lot of tough lessons through the process:

  1. Always get a second, even a third opinion.  Our wonderful new technologies often lead to incorrect diagnosis.
  2. You need to be your own health care advocate (or find someone that loves you willing to fight the fight).  The system is a maze of incompetence that will suck you in.
  3. A lung biopsy is more serious and painful than they tell you.
  4. The everyday frustrations of life seem very inconsequential when faced with your own demise.
  5. Giving up cigars really isn’t that tough.

After witnessing it first hand, it is no wonder that we have one of the world’s most expensive health care systems, yet we rank very poorly in the quality of healthcare.

 

 

One Response to What I Did On My Summer Vacation (hint: Disneyland is more fun than lung cancer)

  1. Bob Cook says:

    Man……….really glad to read the outcome – glad you’re okay. My kids agree with you, by the way – Disney IS better than lung cancer.

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Posted in Life

Five Easy Ways To Save On Your Taxes

As you agonize over your 2013 tax return and see the sting the new tax law is inflicting, here are some ways to reduce the bite. Some are retro-active to last year so there is still time to act.

Briefly, the “American Taxpayer Relief Act of 2012” effective for 2013 eliminates virtually all of the tax preferences of the Bush administration. It increases the top tax rate from 35% to 39.6% and overlays an additional .9% Medicare surcharge on incomes over $250,000 for married tax filers and $200,000 for singles. For high incomes, the new law also eliminates personal exemptions, phases out the benefits of itemized deductions such as interest, state income tax, and property taxes, imposes a Medicare surcharge tax of 3.8% on excess investment income and higher capital gains tax rates. Federal taxes, when combined with state income taxes (especially in high-tax states such Oregon and California), yield tax rates over 50%.

So what can you do?

If you have self-employed income such as consulting fees, you can open a Qualified Retirement Plan (“QRP”) with your broker by completing a few simple forms. A QRP is essentially a personal retirement plan that enables you to contribute up to 20% of the net profits from consulting or similar income up to a maximum of $51,000 for 2013. This is in addition to any 401(K) contributions that you may have from your regular job. You can still open an account now and make a contribution against 2013 taxes.

Second, if you have a new-high deductible health care plan you are now eligible for a Health Savings Account (“HSA”). An HSA is a separate account where you can contribute extra money to pay for medical costs that aren’t covered. If you are married, you can contribute up to $6,550 ($7,550 if over age 50) annually for 2014 and slightly less for 2013. The contributions are 100% tax deductible and there is no income limit. When you withdraw money for qualified medical expenses it is not taxed and you can carry over unused amounts in perpetuity. All income earned is tax free and you can even invest in mutual funds. This is a terrific benefit! You may want to look at your insurance needs and the combination of a high-deductive plan coupled with an HSA may be right for you. And like a QRP, you can still make tax deductible contributions now against your 2013 taxes.

Third, if you have children or young relatives and would like to give them a gift, I recommend setting up a college fund using your state’s 529 program. This is a fantastic way to fund college as income earned in the plan is tax free and qualified withdrawals are not taxed. In some states, such as Oregon, you can deduct the contributions against your state income taxes resulting in a nice benefit for doing a good thing.

Fourth is the tried and true use of tax-exempt interest income. This is one of the few items that passed thru the new law with minimal impact. It is even a better deal now with the new high tax rates and the very low rates on bank accounts and CDs. They normally take the form of city or state issued notes and bonds and the interest is excluded from your taxes so this may warrant a renewed look.

Last, I encourage you to review year-end brokerage statements and not rely solely on downloading the data directly into Turbo Tax. In my case I had several thousand dollars of “accrued interest” that required a manual adjustment; otherwise I would have paid tax on interest I did not earn.

I hope you find these useful with the usual disclaimer of reviewing your tax situation with a tax professional to fully understand all the issues.

Ray Link is a CPA and holds an MBA from the Wharton School. He is EVP/CFO of FEI Company (NASDAQ: FEIC), a world leader in nano-scale imaging for industry and science. He is also on the on the Board of Directors of Cascade Microtech (NASDAQ: CSCD) and nLight Photonics.

One Response to Five Easy Ways To Save On Your Taxes

  1. Scott says:

    Great additional benefits for added information Ray, while I miss the beauty of Portland, I don’t miss paying the taxes for it. These are some great ideas for me to look at further.

    Thanks,
    Scott
    One of the few conservative visitors

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Posted in Investing

Introducing the 2014 Bizzy Life Stock Picking Competition

Auggie gives the “thumbs up” to this year’s stock picking competition.

Financial Genius – Or Just Another Mexican Wrestling Fan?

Regular readers know that each year we sponsor a “Ten Best Stocks For the Year” contest, pitting stand-up comic Auggie Smith (who admittedly knows absolutely nothing about investments, and assumes that a broker is the guy that buys his weed in volume), against financial experts who have had years of training and experience at managing stock portfolios.

In our first contest two years ago, Auggie threw darts at the Wall Street Journal to build his stock portfolio. Not that Auggie has any Simian attributes – but we were testing the theory “could a dart throwing monkey pick better stocks than the experts?”

And the answer to that question?

Yes.

We tracked Auggie’s hypothetical $10,000 portfolio against Kiplinger’s Ten Best stocks for the year, and Auggie trounced the experts.

Last year Auggie took on Barron’s ten best stocks for the year, plus a diversified Vanguard fund. Instead of darts he fired a pellet gun at the financial pages while under the influence of a very earthy Pinot Noir - and once again, firmly destroyed the financial experts.  It wasn’t even close.

Coincidence?  Is Auggie some kind of financial savant?  Or is the stock market really just a crap shoot that goes where it wants to go, and really can’t be predicted, and the so-called financial experts just charge a lot as they throw their own darts?  Lets continue to try and answer these questions.

We are pleased to present our 2014 competition. This year, for some reason Auggie donned a bizarre and disturbing Mexican wrestling mask purchased in San Jose Del Cabo after downing a couple shots of high grade blanco tequila. He then had his lovely wife Julie blindfold him and spin him around until he was close to heaving, then she pointed him at the financial pages to put ink blots next to stocks.  As you can see from the photos, this was a highly innovative and scientific approach to financial management.  I like to call it “Auggie’s Parking Lot Picks”.   Not the kind of thing they would teach at Harvard Business School – but Auggie is a financial maverick.

So here are Auggie’s Ten Best Stock Picks for 2014:

  1. American Financial Group
  2. AmReit
  3. Allegheny Technologies
  4. Baltic Trading
  5. Walt Disney
  6. Manchester United
  7. Tapinator
  8. TCF Financial Corporation
  9. Xueda Education Corporation
  10. Grupe Aeropuerto

Hmmm, interesting choices.  He’s going a bit international this year.  I can’t say I am filled with optimism, but a year ago I would have guessed Barron’s had him beat.  This year we have a new competitor, InvestorPlace’s ten best picks. They queried experts from around the country, and chose these ten fine companies and funds:

  1. Tesla
  2. Proshares Short Emerging Markets
  3. Emerge Energy Services
  4. Fortegra Financial
  5. Financial Spider
  6. Banco Santander
  7. Vanguard Dividend Appreciation
  8. Citigroup
  9. Fleetcor
  10. MTN Group

Also interesting choices.  Banks and other companies that don’t really make anything but just repackage money, an innovative electric car company that has already had a big run….

It will be an interesting year.  Let the games begin!

 

 

 

 

 

 

 

 

2 Responses to Introducing the 2014 Bizzy Life Stock Picking Competition

  1. don says:

    this is great……..i follow it every year………great idea tim………..

  2. Robert Cook says:

    Tim – couple of things – really impatient for an update, and disappointed that a line of stock trader bb guns have still not found their way to market

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Posted in Investing

Bitcoins – Buyer Beware

It seems every time I pick up a magazine or watch a show on investing someone is touting Bitcoins. Even Congress and the White House have endorsed the benefits of an alternative currency system.

So what is a Bitcoin? It is an on-line digital currency supposedly created by a Japanese computer programmer under the pseudonym Satoshi Nakamoto (although no one has ever met this person). The idea of a Bitcoin is to replace government-issued currencies and the need to settle transactions through a central banking system. It is a virtual currency whose total issuance is controlled by a network of computers by a sophisticated algorithm. As opposed to a government that can continue to print money endlessly, thereby deflating its value, the network has a finite amount of coins or tokens that can be issued. The total supply of Bitcoins is theoretically limited to 21 million with approximately 11 million already issued.

So how did Bitcoins get created in the first place? To get a newly minted Bitcoin requires one to solve a complex equation whose answer is a 64 digit number. The people who attempt to solve this are known as “miners” as they are sort of mining for “gold” via an on-line network. Their reward for their work is currently 25 Bitcoins, but that amount will decrease over time and you will likely need a network of computers to be successful. The equation gets more and more complex over time with the amount of Bitcoins issued per year limited and decreasing each year with all issued by 2040. Of course you can buy a Bitcoin just like buying gold or common stock.

So what can I do with a Bitcoin? Bitcoins are becoming more widely accepted as a viable alternative to cash. You can actually buy goods and service by exchanging Bitcoins and a several networks have developed to exchange them. The underworld loves them as they do not have to launder a Bitcoin as they do with regular cash.

The value of Bitcoins, just like gold or shares of common stock, are determined by supply and demand. However the value of a Bitcoin is extremely volatile ranging from under $200 to over $1,300 in 2013 and now valued at around $750. On a daily basis the value often moves up or down by 10%. It often takes up to 50 minutes to process and settle a trade using Bitcoins.

So are Bitcoins safe and something I should own? In my opinion a strong NO to both. Unlike the good old US dollar, a Bitcoin is not backed by anything. It exists only in cyberspace in a network whose issuance is controlled by a complex algorithm written by an unknown person. While you may say that there is nothing backing the dollar, I beg to differ. There is an established government that for over 225 years has made good on its debts. While we are off the gold standard and there is no hard asset per se backing the dollar, the US government still owns vast holdings including about 30% of all the land in the country. There is NOTHING backing a Bitcoin. Some point to the controlled network making Bitcoins “tamper-proof” with a limited supply as benefits. However, the network supporting them was recently hacked causing a sharp drop in values and now I am seeing more and more articles on how to steal Bitcoins. I suspect this is simply a large scale Ponzi-style scheme developed in Russia or China and the developers are just waiting to flood the market with newly minted tokens. Supporters say that they are like gold but can be exchanged easier but they fail to point out the near 30% crash in gold prices in 2013 whose price was inflated by speculation. And unlike Bitcoins, gold is actually an industrial commodity that has some intrinsic value. A Bitcoin only has value if someone will pay more for it.

My advice is to sell off any Bitcoins you have and do not accept them in your business. If you are smart enough to be a miner – go ahead but don’t hold onto the tokens for too long.
As a student of history and finance this very much reminds me of the tulip mania in Holland in the 1600s and the dot-com bubble of the 1990s and both ended badly for investors.

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Posted in Investing