Net Worth 2015-09

Total Net Worth in September: $320,141 (+$1,242)

I am really happy to have a positive month in the face of a pretty bad stock market.  Plus we broke thru the $320K barrier.

During the month we paid off the 401K loan (+4,555).  We worked hard, our original payoff estimate was November.

Assets: ($0)

No change this month.

Since we are taking a conservative view of property price appreciation, we made no changes to the listed values of our real estate.

In addition we used the same KBB values on our vehicles.

Net Cash Accounts: (-$1,566)

This section contains the balances of all of our cash accounts outside of our rental property.  Emergency funds, banking, savings accounts, HSA, FSA and credit cards. We pay the credit cards off in full every month, but the balances obviously change from month to month.

Our credit card balances were up $1,200. We paid our annual car insurance payment this month with our remaining spending staying about the same.

We used some of our cash out of savings to pay off our 401K loan.

In addition we put money down on Property #3.  More to come later.

Net Cash Rental Accounts: (-$3,385)

This area went down this month for 2 reasons 1) We used some of the money in these accounts for deposit on property #3. 2) We didnt collect either of our rent checks on the duplex until October.

I expect next month will be up in this area.

Retirement accounts: (+$946)

OK, it was a tough month in the markets.

However the loan repayments and our monthly 401K contributions overcame the negative market reactions.

During the month we added to our position in Kraft/Heinz, and began a position in Goldman Sachs. We also added to our position in Kinder Morgan (KMI).

I feel like over time Warren Buffet and 3G will do a good job of increasing profits at KHC.  Great brands, a lot of opportunity to expand overseas, and its a great vehicle for future acquisitions.  In addition, they should get a tailwind from the drop in commodity prices, and we are paid a 3% dividend to wait.  Might add more to this position in the future.

I like GS, we were underweight in financials, and they should benefit from increased volatility in the markets.

Neither GS or KHC has been a very good purchase so far, but I think that they are both excellent long term buys and should do well over the next few years.

We have increased our position several times in KMI, and our last purchase this month was at $25/share.  It closed September right under $30/share.  I think this may be close to a bottom for KMI, the stock is paying a dividend just under 6.5%, and they are committed to increasing the dividend significantly over the next 5 years.

Liabilities: (+$5,248)

We paid off our 401K loan (+$4,555), and beat our original projection by 2 months.

The pay-down on our mortgages will continue to be about $700/month over the course of the year.

Thanks for reading, did you have a good month?


Net Worth 2015-08

Total Net Worth in August: $318,899 (+$307)

Not much to the positive side of things, but we were up, so I suppose there is something to celebrate.

We continued with real traction on the 401K loan (+4,846), and we are hoping to have it paid off by November October.

It is amazing how when you focus in on a goal, and track that goal how much progress you can achieve.

Assets: ($0)

Since we are taking a conservative view of property price appreciation, we made no changes to the listed values of our real estate.

In addition we used the same KBB values on our vehicles.

Net Cash Accounts: (+$83)

This section contains the balances of all of our cash accounts outside of our rental property.  Emergency funds, banking, savings accounts, HSA, FSA and credit cards. We pay the credit cards off in full every month, but the balances obviously change from month to month.

Our credit card balances remained almost flat to last month.  The cash accounts were down slightly as we made payments to our credit cards and 401K loan offset by increases to our HSA account.

I doubt this section moves much over the next few months as we hope to put all excess cash towards the 401K loan.

Net Cash Rental Accounts: (+$1,642)

We finally made some headway in this account.  We collected the Aug rent on time (on 8/1), that hadn’t been collected when the July report was posted to this blog. We received both rent checks for Sept and paid off the credit card that is used for rental expenses.

This was offset by an update I did to the liability we have booked for damage deposits.  Previously we recognized an amount for our prior tenants and the new amount (-$425) better reflects the status of our current leases. This was just an accounting change in Quicken for the sake of accuracy in our net worth calculation.

In August,  we renewed one of our tenants for an additional 19 months.  The lease was originally to come due in the fall, and we have now extended it for a little over a year and a half with a slight monthly increase in rent.

It is more difficult to get tenants in the fall/winter, so we did a longer lease at a slightly under market rent to help keep low maintenance tenants who pay on time.  We avoid any vacancies, lock in good tenants, and we move the termination of the lease to the Spring when more people are looking to rent.

Retirement accounts: (-$6,975)

OK, it was a tough month in the markets.

The loan repayments helped our 401K account grow (+$1,200), but overall our investment accounts were down.

During the month we used some cash we had on the sidelines to move into the markets.  We added to positions in Apple, Kinder Morgan, Disney.  In addition we moved some money into our 401K’s various Vanguard index funds.

This market is rough right now, but I think there are some bargains out there, and we continue to put additional cash to work over the next few weeks, especially if the market drops some more.

Liabilities: (+$5,533)

We paid down $4,886 on our 401K loan. I am hoping we can have this paid off in Oct. or Nov.   We are a little ahead of where I thought we would be in paying off this loan. Hopefully we can stay that way.

The pay-down on our mortgages will continue to be about $700/month over the course of the year.

Thanks for reading, how did you do this month?

Stay on the Roller Coaster

ok..the market was terrible last week.

There is no getting around it, the Dow was off 500+ points on Friday. And that was on the heels of a terrible Thursday.

As I write this, it sounds as though we may see more of the same next week as Asian markets and that the futures markets are looking even worse for Monday.

So what to do?

Well what do you do when you ride a roller coaster?  You only get hurt on a roller coaster when you jump off as it is still moving.  Once you are on, there is no point jumping off after the first big dip.

Unless something changes, there is no reason to believe this is anything other than a garden variety market correction.  Yes there might be more downside,  we might lose another 10% or so, but even at this point there are some stocks that I think are interesting.

I still like Disney, Apple, and KMI among others.  I might raise some cash in some other areas with the intent of buying some more of these stocks.  Especially if the markets continue to drop.

I think good high quality stocks who have great cash flow, high dividends (or the ability to increase dividends), and who have premium brand names in their market are the place to be.  KMI as an example is sitting at a 6.2% dividend and has committed to a 10%/year dividend increases for the next 5 years.  Even if they lower that guidance, you are still being paid a huge premium to Treasuries.  Plus you will get a stock price appreciation kicker if the dividend is increased.

Apple and Disney have huge cash flows and have a history of highly successful targeted stock buy backs, and both have huge product launches coming up (DIS with Star Wars, AAPL with a new Iphone).  They are both way off their highs, and both are best in class assets with ecosystems that can’t be duplicated  They will go up over time, and this pull back is giving you a good place to get in, and I like these companies enough I would double down if their stock price drops more.

When oil bottoms (I dont think its quite there yet) I may look at one of Exxon/Hess/Conoco/Chevron, and might double down on an existing position in EOG.

There are a few other positions I might try and increase as well over the next month or two.  Cisco, Financials, Defense, maybe some tech.

In our 401K account we have a larger than ideal percent of our portfolio in a money market fund.  Over the last month or two, I felt like the market was getting sluggish.  Since we have been making extra payments on our 401K loan, we decided it was best to have those extra payments mainly go into a money market and move them into various index funds over time.  The whole idea was to spread out the market risk, especially while the market was near a top.

Now that we have had a pullback, its time to get at least some of that money invested, I am thinking of maybe moving 25% of our cash into the market this week, and maybe another 25% for every 10% market drop. We might also consider additional moves at certain milestones.  For instance after the fed announces their intentions with rates, or after we get past October.

Basically the idea is to take this time of market panic and move into, not out of the market.  Short term the market might drop some more, history tells us that is a good time to buy even more, especially since we are talking a 15-20 year time horizon with retirement funds.  I have every confidence we will do well in the markets over any 20 year time horizon.

Its a roller-coaster, don’t jump off in mid ride.

Investing – My Investment Shopping list 8/10/2015


Last week was wild, a couple of words during the Disney conference call led to a huge sell off in all media stocks.  Disney went from $121/share down to $105/share before recovering later in the week.  The drop was caused entirely over fears of ESPN/ABC etc losing cable subscribers.

I purchased a little over $3000 @ $108.39/share. (I already owned some shares) I thought it was a great time to buy more shares for several reasons.:

  1. Its the top media company.  DIS has rich content in sports, animation, film, content etc.
  2. It reported a fantastic quarter.  EPS +13% qtr over prior year quarter.  YTD vs py YTD up 16%, 19% if you take out one time charges.  And the prior year comparison included Frozen.
  3. The next episode of Star Wars comes out in Dec and it may well be the most profitable film in history.  I expect we will see a huge blockbuster in Q4 and on into 2016.  Then an episode of Star Wars or a Star Wars spin off comes out every year for the foreseeable future.
  4. Disney China opens up shortly and will impact earnings in 2016.
  5. Disney has a history of being big buyers of their stock when the price drops, I suspect they will be big buyers here.

Look, yes we may see some cord cutting, but its going to take some time to happen in a meaningful way. And there is every reason to believe that Disney will be in a great spot to profit in this bold new world, they specialize in content and monetizing that content.  Disney will be well positioned in a cord cutting environment.

I could see some additional turbulence in the stock market, but Disney is now down about 10% and they will be in there buying.


I trimmed out half of my position in DOW.  I really like DOW over the long term, but the market is just hammering all industrials.  There seems to be a repricing going on that factors in a slowdown in China.  I think there is additional downside in the market that could continue to bring down DOW and I felt as though Disney had more  upside. (Plus we own a fair amount of GE, Boeing, and Berkshire Hathaway.B)


I sold half of my position in Verifone.  Its getting hammered, clearly the market believes this is a company that is getting hit by the strong dollar.  When I bought Verifone, I thought it was a good time to get in as the credit card companies are pushing merchants to install smart chip readers, and I thought Verifone would benefit.  Buy selling some Verifone, I open up some cash to buy Apple as a play in part on the growth of Applepay.

My Shopping list:

  1. Raise some additional cash. I am going to look very closely at what stocks I own.  I really think the market is headed for some tough times between now and Oct.  There is a high probability that the fed tightens in Sept, Aug is usually a soft month, the averages arent acting very well, and October at least has the reputation for being bad.  Unless I really love a stock, I am going to get rid of it. I think now is a good time to have a little more cash than normal on hand to pick up bargains if we get a selloff.
  2. I may pick up some additional Apple shares.  Apple is cheap on a PE basis trading around 12x’s earnings, 10x’s if you back out the cash they have on hand.  They had a big quarter in terms of growth, earnings, and free cash flow.  Even if growth slows down there is a ton of free cash flow for Apple to increase dividends or buy back stock.  And Apple has a very good reputation for buying back selectively, I suspect they will be in the market buying after falling 14% off of their April highs.
  3. KMI – I bought some a couple of weeks ago at $35.15.  Since then its dropped to around $32/share.  If it is at that level tomorrow, I will buy some.  A 6.1% dividend is too tempting to pass up.  I talked about why I liked KMI in an earlier post.  Motley Fool weighs in:
  4. COP/CVX and perhaps as a domestic spec EOG.  Oil has to bottom here soon, I may buy some more if we see it get into the $30’s.  This may be an area where I wait to see how the market shakes out over the next couple of months.
  5. Financials, I may add to my position in WFC.  I might initiate something in either GS or JPM.  If the fed raises interest rates, then the banks should benefit.  In addition GS &/or JPM should benefit from additional volatility in the commodity, currency and stock markets.

What stocks/mutual funds are you buying?

Net Worth 2015-06

Total Net Worth in June: $303,529.  (-$5,057)

Ok, so its clear I cant be accused of beginning this blog on a high note.

June was an expensive month.  My wife graduated from school and had friends and family in from out of town to visit. So we spent a lot more than we would have.

In addition our rental property switched tenants.  So we spent some money on getting the place ready for the next tenant.  Items included painting the whole unit, a new dryer, a new refrigerator (unexpectedly stopped worked), pest control, we took out some old carpeting and installed some wood laminate in one of the rooms.  In addition we replaced a half dozen windows.

Assets: (+0)

Going forward I am going to assume the houses at conservative values.  Honestly I have one listed near the purchase price and another at an overly conservative value.  I dont think that I will update housing values very often (if ever).

Our vehicles are both paid for, and every few months I will update the KBB value on both. Vehicle 2 was added to the net worth calculation this year.  We always had it, but I just recently took the time to look up the value.

Net Cash Accounts: (-$3,021)

This section contains the balances of all of our cash accounts outside of our rental property.  Emergency funds, banking, savings accounts, HSA, FSA and credit cards. (we do not include escrow balances in our net worth) We pay the credit cards off in full every month, but the mid month balance will have an impact on this section.

As I said we spent a lot of money this month in order to celebrate my wife’s graduation.  In addition we had some family (kids) who came to visit for a couple of weeks and we spoiled them with concerts, nice meals, cloths etc.  Next month we will tighten the belt a lot.

Net Cash Rental Accounts: (-$1,731)

In this grouping we have a rental checking account, a savings account for emergencies and big ticket items, liabilities booked for the return of damage deposits.  Additionally, in this group we have a credit card for rental expenses that is paid off in full every month.

As I mentioned, this was a tough month for the rental.  We spent money on maintenance getting one of our units turned over for the next tenant and our reserves are a lot lower than I would like them to be.

Hopefully we will get a chance to build a respectable cushion over the next few months.

Retirement accounts: (-$1,087)

Nothing much to say here, we took a small hit on most of our accounts.  In the future I will lay out our view on investing.  In general we aren’t super active with trades or exchanges.  However I didnt like the overall market setup and we moved a month or so ago into a little larger cash position in our 401K and main IRA.  (25-30% in one, and about 15% cash in the other.)  Nothing drastic, but just a little more in cash that we will look to get back into the market over the next few months (if there is a sell-off).

Liabilities: (+783)

This is about the norm every month.  I may book two payments in one month, and none in the other.  But the pay-down from regular payments will be about $800/month over the course of the year.

Just a note, every one of these four loans is tied to one of our two properties.  The 401K loan was done last year to help get into our second property.  We have begun to pay it down early, and with our new income, I anticipate us becoming very aggressive about paying off this loan..

Thanks for reading, hope to hear some feedback.

Why I bought KMI last week, and why I might add some more this week.

Ok, sooner or later I am going to write about our investments.  We have a little bit of diversification between some Vangard funds, some actively managed mutual funds and some individual stocks.

In addition we have about 25% or so of our two largest accounts in cash.

What I like about KMI 

I have owned some form of Kinder Morgan stock for several years now.  I have a core position, but have occasionally traded around it.

KMI is a great company, It was built in part by Rich Kinder, arguably the greatest pipeline guy in history.

Rich Kinder has stepped up into an Executive chairman role, but the remaining management has been stable and they have a reputation for being an effective management team.

The company specializes in the owning and operation of Natural gas, CO2, crude oil, and product pipelines, gathering facilities, and they have other investments including some Jones act ships for domestic crude oil transportation.

KMI gets most of its money from its pipeline business and most pipeline contracts are ‘take or pay’.  Shippers contract for space on a pipeline.  Afterwards they pay KMI whether or not the product actually is shipped.  So the recent drop in Crude prices generally have a relatively small effect on KMI’s earnings.

KMI has a 49.6 PE ratio, a current dividend of $1.96 and a 5.67% dividend yield.  KMI is a regular corporation, they just rolled out of a very complicated LLC structure back into a normal corporate structure. about a year ago  The big advantage is that they have the ability to buy back stock, or to actually retain earnings unlike LLC’s.  They dont have to issue additional stock in order to grow.

Pipelines have a ton of depreciation, they are cash machines but wont ever have great earnings, so really they way to look at them is for their cash flow, their project backlog and their dividend.  I would encourage you to read KMI’s description of backlog, cash flows etc.

They are a complicated company with a lot of moving pieces but the biggest thing I see when reading their transcripts is that they are committed to paying $2.00 in dividends this year, and are on the record as wanting to grow that dividend 10% a year thru 2020.  If I have done the calculation correctly, that would put the dividend at $3.22/share or a 9.24% yield 5 years out.

So why is down from $44.71/share to $34.85?

Well a couple of things,

1) KMI trades in many ETF’s as an energy company.  So as crude oil prices went down, KMI went with them.  I think the market is oversold as KMI has less exposure to energy prices than other companies in its sector.

2) KMI also trades as a bond equivalent, because bond yields have been so low, people have bought KMI as a substitute.  Many people sold KMI with the expectation that the Fed would hike interest rates. It looks now as though the fed hikes will be later and slower than expected.  So you may see a return to dividend stocks in the second half of the year.

3) People are assuming that the low costs of natural gas and crude oil will slow down the availability of growth in the future.  I think this is true true to some extent but overblown.  The reality is during the boom in energy production, a ton of oil was shipped via train.  Its a lot cheaper and safer to transport it via pipeline. So I would expect that new pipelines will still be needed even if production goes down as producers move from rail to pipelines to cut costs.

Also even though the price of natural gas is really low, demand is high.  As a nation we are closing coal fired power plants at an unprecedented rate.  In large part that load is being replaced by natural gas power generation.  So it is very clear that demand for natural gas pipelines will continue to grow much faster than the economy as a whole.  This should provide additional opportunities for KMI in the future.

4) According to CNBC there may be some hedge funds trying to put a bear raid on a large fund with heavy exposure to pipelines.  Williams, ETP and KMI all have been selling off like their house is on fire.  The selling might not be completely done, but its got to be getting close.

Why now?

OK…so bought some additional shares of KMI late last week at $35.15, and I am going to try and get some more if it stays here or goes lower this week.  There seemed to be some signs of capitulation as KMI really moved down a lot.

I am looking at KMI over other pipelines because I am going to use funds in a retirement account (there are some issues with the way the IRS treats LLC’s that are held in tax favored vehicles like 401K’s and IRA’s).

Rich Kinder filed that he bought $3M+ of additional shares in the open market, and yes while its a really small portion of his wealth, Rich does have a pretty good track record of buying low.

The commentators on CNBC suggested they think the hedge fund forced pipeline sell-off has to be nearing completion.  This is the catalyst that creates imo a really good buying opportunity.

If I am wrong, this stock goes down a couple of more dollars at most.  Its already down 22% from its 52 week high.  I dont see much if any more downside left in this stock.  And you are being paid to wait with a dividend that should go up a lot over the next few years.

Like to hear your thoughts.

7/27 Update.

Was unable to buy more on Monday. A good sign was that KMI was up in a down market. I still think it is a good buy, but since we added to our position last week and the market is behaving badly, I will wait a little.  If the price comes down, I will add to our position.  If not, we will just stand pat with what we have.  IF we didnt already own a fair amount  (for us) of KMI, I would be a buyer here.

Our Real Estate Strategy


About two years ago as we decided to enter into the real estate game.  Done right, real estate has the opportunity to provide significantly better returns than the stock market.

Rental real estate provides some protection against inflation.  If we ever see the return of inflation, rents should rise correspondingly, and in retirement real estate should provide cash flow well above any other investment.

We felt interest rates were at a lifetime low and it was the ideal time to lock in a loan and two years ago it seemed as though the market for rental properties was taking off.  Properties were sold the week they came on the market and most of the deals being done were to cash buyers.


We were mindful of having limited capital at least compared to most real estate investors.  So we decided that a major rehab, or even testing the waters of a foreclosure were probably not in our best interest.  Our first property needed to minimize the risk that comes with properties needing to be rehabbed.

We are willing to take risks, but not to the point of walking in a casino and betting our entire net worth on one number at the roulette wheel.  Sure if we do more deals, we might have the occasional property that doesn’t work. However we don’t want to be in a position where we are unable to make payments if any property is unable to perform

For our first rental property we decided that we wanted to put our toe into the water of the landlord game to see if we liked it, if it got us the types of returns we thought were out there etc.

We intend on investing money back into our property so that we may continue to attract top level tenants.  Over the last two years we have repainted both units, bought 2 new refrigerators, a new dish washer, a washing machine, refinished some of the hardwood floors, replaced carpeting in a room with new laminate flooring, replaced a few windows to make sure we have working windows in case of fire and have done some foundation work.  Knock on wood I think we have done most of the heavy lifting, there are a couple of things to get to, but I think overall we have gotten to most of the important items for now.

We don’t intend on taking any money out of our rental property at this time.  The whole point of our real estate at the moment is to have it pay for maintenance, to set aside reserves and to pay off the mortgage.  We have separate accounts for our rentals and try to pay for any expense using our rental checking/savings/cred cards.

We look for options in all of our deals in order to reduce risk.  Can we immediately dispose of any property we buy?  Do we have reserves if we needed to make a large repair? Can we live in a property we own? or can we make money renting a property we live in?  Is there enough equity where we could still sell any given property to get out from under a loan?  Can we afford the payments if one of us is unable to work? (Right now the answer to all of those is yes)


We decided to look for and buy a nicer duplex in an up and coming area a mile from downtown and walking distance from a couple different districts with bars, restaurants etc. Each unit is 1500 sq ft, has two bedrooms and was generally in pretty good condition for a 90 year old house. It is nice enough property where we would be willing to live in it (and we actually did for a year).  Because of its location we have access to a lot of potential tenants that are young professionals and leasing has so far not been an issue.


Our strategy has been to purchase in trendy/ up and coming neighborhoods.  Our duplex clearly fits this situation, and our current residence does as well.  We think in the future there may be a possibility of converting our current residence into a rental.

We will keep looking for properties in neighborhoods that attract young professionals who want to live in urban areas.

The Future:

The goal is to have 4 or 5 properties each one cash flowing and hopefully paid off by retirement.

We will ‘digest’ our current properties, pay off a loan or two, build up some reserves and then save up a solid down payment for our next property.

We are open to buying a fixer upper, or foreclosure in the future.  We might even be willing to do a fix and flip .

I think we are at the end of the recovery from the financial crisis.  So unlike two years ago, the ability to just buy rental ready properties that have solid cash flow I think are gone.  Going forward I think we will have to have to look at other methods of bringing value, maybe fixing up a property, or buying a foreclosure.  Either way I believe we will need more capital available before we make our next move.