Don’t Short When it Comes to Secular Investing

Good morning! Today Troy continues about the investing for beginners series. In the previous post he covered what you should do in a cyclical bull market. But what do you do (as a secular investor) in a cyclical bear market? Investing in a cyclical bear market is very different from investing in a cyclical bull market.

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How do credit cards work?

Credit

A credit card can be a really useful financial tool if used correctly. A straightforward and simple way to borrow money, a credit card is similar in many ways to a debit card. Just as with the latter, a credit card can be used to pay for services, purchase goods and even to withdraw cash. Once your chosen lender (a bank, building society or credit specialist) has deemed you responsible enough to become a credit card user, you will receive your card and you will be ready to go.

How Can I Use a Credit Card?

For some customers, a credit card is there purely for emergencies, whilst others will use it on a regular basis to purchase goods and services. Either way, each card comes with a set credit amount that cannot be exceeded. This is based on a range of factors, from income to credit rating, and it is important that customers stick to the agreed limit. By keeping up with monthly repayments, customers are putting themselves into a position to obtain more lines of credit, whether this is another card or secured loans, as their borrowing profile improves.

How Does a Credit Card Work?

As with a debit card, chip and pin machines in shops and organisations are able to read details encrypted on a credit card in order to successfully complete a transaction. And one of the greatest benefits of a credit card is that it can be used the world over, making it an excellent travel companion. But it is vital that borrowers remember their responsibilities in repaying any debts, particularly the monthly request for money from their lender.

Although repayment amounts can vary from lender to lender, most companies will ask for at least 2% to 5% of the total outstanding each month. It is therefore really important that whilst enjoying the freedom and flexibility a credit card can provide, you are also aware that interest on missed payments can be quite steep and as such should be avoided at all costs.

What Are the Disadvantages of a Credit Card?

Of course, the lure of what some see as ‘free’ money can lead to serious financial difficulties. As responsible as lenders are, some customers simply find managing their borrowing too difficult to handle.

Being honest with your credit card provider is a must if you are going to avoid the serious ramifications unpaid debts can bring. It is important to speak candidly to the organisation that issued your card and try to come to a compromise regarding repayments. The potential solutions will vary from business to business, but this could be a case of reducing payments on a short-term basis before reducing the credit limit to avoid similar issues arising again.

Perhaps the worst step to take if you are struggling to meet monthly repayments is to take out another card in order to cover the first. Every time you apply for any type of credit and are turned down, your credit rating can be impacted on. So thinking carefully before taking out a card is a must.

Other Options

If you have fallen into serious arrears with credit card repayments, and you have exhausted other lines of enquiry and you are now not sure where to turn, there is another option. For many consumers, a debt consolidation loan such as the one available from Evolution Money, means that paying back a raft of creditors is far easier to handle than before. An efficient way to both pay back borrowed money and improve your credit rating, such a loan can be just the thing to get you back on the right financial track.

Deciding whether to invest in a home rooftop solar electric power system (Part 2 of 2)

Deciding whether to invest in a home rooftop solar electric power system (Part 2 of 2)

  Today I am happy to welcome back Larry from The Skilled Investor, who has written a two-part post about home rooftop solar electric power systems. If you missed part 1, check out the link below. Let me know if you would like to guest post on RFI.

 

Solar capital investments justified by tiered pricing electric utility savings have similarities to personal tax optimization strategies

The bottom line question in the 6kW versus 9kW decision was whether the $10,000 added cost was worth it to eliminate most lower cost Tier 1 and 2 utility power purchases. My client decided it was not worth and wanted to save his cash.

Since we had worked together on his comprehensive financial plan six months before, I explained to my client why this analytic situation was similar to the income tax optimizations and investment capital gains tax optimizations we had done earlier. Tax optimization is largely an exercise in avoiding unnecessary taxable events and in not paying taxes at unnecessarily high rates.

These are two examples of investment and retirement tax optimization:

  • A) always holding investments longer so that they will be taxed at more favorable federal long-term capital rates and
  • B) positioning or locating different investment asset classes between taxable and tax-advantaged retirement accounts to avoid unnecessary taxable investment income that would force higher tax payments and even push a taxpayer up into higher tax brackets.

The solar array decision had parallels to a financial investment decision regarding tax savings from buying a smaller versus a larger primary residence home. A smaller home purchase could increase federal income real estate tax and home mortgage interest itemized tax deductions enough to lower taxable income and reduce federal tax rate brackets. With these deductions and perhaps a lower federal income tax bracket, a taxpayer might decide that they have enough deductions and are comfortable with paying the taxes due. While they might have purchased a more expensive home to gain even higher real estate tax and home mortgage interest itemized tax deductions, this tax payer might decide that the added tax savings would not justify the increased mortgage debt and the other expenses that go with owning a larger home.

By analogy, the 6kW system was the more valuable “itemized deduction” that could obtain through an investment. A 6,000 watt solar system would dramatically reduce my client’s electric utility and drop his typical usage down into into Edison’s 13 cent tier 1 “tax bracket”. Since the next utility “tax bracket” upward is Tier 2 is 16 cents per kWh, my client felt that it would be okay to get pushed up into that bracket for some electricity charges during occasional months.

Buying the 6,000 watt solar system assured my client that he would rarely if ever get taxed at the significantly higher Tier 3 and 4 tax rates of $.27/kWh and $.31/kWh. He decided that he would achieve enough “itemized deductions” with the 6kW system and would be most satisfied, even if he had to pay some much smaller monthly electric utility bills along the way. However, he did not see a reason to buy the larger 6,000 watt solar power system, because the additional “itemized deductions” were not that valuable for utility bill “tax reduction” and because future utility power purchase “tax credits” were uncertain.

Where does charging the Tesla electric car fit into this analysis of rooftop solar system economics?

Remember that at first my client had decided to investigate buying a rooftop solar system primarily so that he could save money on charging his new Tesla electric car. After I looked at the situation, charging the car seemed almost irrelevant to the decision on whether to buy a rooftop solar electric system. The primary factors that would justify the system related to the existing electrical consumption of the household and primarily the use of air conditioning during peak daytime periods from spring until fall. If existing home electrical use factors were not enough to justify a rooftop solar photo-voltaic power system, then powering a relatively lightly used electric car would not make be decisive.

If driven on a regular basis, of course, the Tesla certainly would need to be charged and would draw power. First, we looked at the likely pattern of usage for the electric car. This car was to be the second, “fun” car in the household and would not be required for commuting. This expected usage pattern provided a lot of flexibility as to when the car could be charged day or night. The Tesla charging system has a timer on it so that you can set the time of day to charge. Therefore, my client would have full control over when to draw power from either the rooftop solar system and/or the electrical utility grid.

Next, we looked at the special tier pricing system that Southern California Edison was offering for night time charging of an electric car. Note that this would be a substitute for a rooftop solar system. All power would still be drawn from the Edison electrical utility. All that would change would be the tier pricing system plus and electric car charging port installed in the home.

Southern California Edison offered special home electric power pricing plans for electric car owners, but I failed to see why any home owner would choose one of them over the regular home four tier pricing plan that I summarized above. For example, with one of the special home electric needs and electric car plan, Edison offered a lower priced Tier of 9 cents per kWH at “Super Off-Peak” time (midnight to 6AM). Saving 4 cents more per kilowatt hour in the middle of the night would seem beneficial. However, this special plan would track power usage by time of day and differentiate charges across a 24 hour period with tier pricing that changed from summer to winter. In contrast, the regular four tier billing system did not track usage by time of day and simply totaled electrical usage over the month.

The problem with this home plus electric car 24 hour billing system is that Edison would jack up the maximum 10 AM to 6 PM “on peak” day time rate to $.35 in the winter and $.47 in the summer. This seems like a particularly lousy financial deal. You could save 4 cents per kWh to charge you electric car, but only in the wee hours of the night. In exchange, Edison will charge you 16 cents more per kWh to run your air conditioning in the day time all summer long. I think Edison should go back to the drawing board and restructure this rate plan. It is not clear why any rational home owner with air conditioning, which most larger Southern California homes have and use, would chose that rate plan, if they did not already have a rooftop solar power array that would meet peak summer power needs.

Following this analysis, my suggestion to my client was that with a 6kW system, he was likely to have excess generating capacity in the mornings most days from spring to fall that he could use to charge the Tesla essentially “for free”. While there are a few weeks in the summer that require air conditioning all day long, most of the time many people at the base of the San Bernardino mountains just keep the windows open the mornings before things begin to heat up. Then, shut their windows mid-day and turn on their air conditioning. On most days from spring to fall, the Tesla could charge on excess power solar power.

In the winter, the rooftop solar system would generate less power but there is no need for air conditioning unless global warming takes us to hell in a hand basket much more quickly than expected. Therefore in the winter my client can still probably charge the Tesla “for free” in daytime off his solar array. Any days throughout the year where solar electric power is inadequate, the rate for power from the utility to charge the car would most likely have an effective price of 13 or 16 cents per kWh. Of course, it might turn out in the future that credits for selling excess rooftop solar electric power would become both attractive and more predictable. If that is the case, then he could always add 3kW more to the rooftop solar panel array to take advantage of the opportunity.

In summary, my client began looking at a rooftop solar power array to solve what turned out to be the wrong financial problem. However, once we did some analysis, the a home solar panel system still seemed like a good investment to save on home power bills largely caused by summer air conditioning costs. Once installed, my client will probably be able to piggy back charging his Tesla from the solar array on most mornings. As his back up power source, he will be able to fall back to relatively low cost electric power from the utility, when needed.

An Introduction into Technical Indicators

 Troy continues about the investing for beginners series. Today we’re going to focus on the technical indicators that are most commonly used for trend following.

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Dogs are just like tiny humans

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Aren’t they? Little Great Dane Napoleon has now been around for a month, and the more he is, the more resemblances I see with my toddler niece…

 

They will be on their best behavior when they expect a treat.

I still have to see a genuine “I am sitting perfectly still looking at you with my big wide eyes but it is not because you are eating cookies” attitude.

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They are stubborn

And even though they perfectly understand they can’t do something, they do it anyway because they feel like it. Like choosing the sofa to eat a bone instead of the floor.

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Whenever you wear your Sunday best, there will be drool on it.

Or they’ll grab and stretch it. You hesitate every time would like to wear white. They love to eat your hair too.

 

 

Even the most boring of your daily tasks are so fascinating to them that they will follow you everywhere you go, dancing around your feet and making you dizzy.

My parents got rid of that by having my little sister follow me instead, which was sooo annoying.

 

You want the best for them, but spoiling them is often not the best solution.

Sugar rush after licking the cake batter? That will only happen once.

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They sleep all day and want you to take care of them at night.

What is it with them insisting on being on China’s time?

 

They love you unconditionally and you are the most amazing person in their eyes Smile

Napoleon always has a sunny disposition and is always up for cheering you up when you need.

 

You can’t stop worrying about them

Isn’t it crazy? I mean, it’s just a dog, right? I spent some time after he came along reading all sort of crap on the internet (young parents, don’t do that!), and now that he has hippo almost daily, I worry. I worry that he grows too fast because his race is such that they get bone problems if they grow quickly. I worry that he will only live 6-8 years according to Wikipedia, while most dogs live much longer. It never stops.

 

They are masters at manipulation and crocodile tears.

Napoleon starts crying before I even grab him to punish him when he does something wrong.

 

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“I am so sad I don’t even know if 12 cookies would do the trick to cheer me up”

 

You get them fancy toys, they play with the packaging.

Ok, fancy is a bit much, the dollar store toys got discarded in favor of Napoleon’s two favorite toys in the whole wide world: bottom half of a soda bottle and $0.10 orange electric duct tube.

 

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They don’t need as much as you think.

$8 mini bottle of tearless dog shampoo? Napoleon is perfectly happy with our regular Head&Shoulder. But sometimes it takes strong will to ignore the marketers and their finely targeted products.

dog approved

 

They can’t talk but they sure get the message across.

“give me more cookies” couldn’t be clearer if they spoke.

 

You never want to leave something at their height.

After a few trial and error, namely chewed shoes, chewed laptop charger, … the house has been dog proofed.

 

Potty training can be hazardous

Napoleon is getting used to the garden grass, but sometimes he loves to have a go at the bed instead…

 

They look just like you

Remember on Disney’s 101 Dalmatians, that part where they suggest owners and dogs look very much alike?

101 dalmatians

Same here, Napoleon loves hikes,

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road trips (we brought him back home on day 1 inside a motorcycle pannier but he is way too big for biking now),

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and cuddling in bed

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They are expensive!

We are far from kids’ costs but if you get crazy with the pet treats and gadgets, you can spend a fortune. So far, Napoleon had cost $191 to buy and get set up, to which we add a $5 leptospirosis shot, a $3 parvovirus shot (we go the the cattle shop where they give him a shot with no wait, while the vet charges $12), and a second $30 bag of Puppy Chow. The bag lasted a month, so I guess he will eat around $70 a month as an adult dog, wow!

Thankfully, we have staff to take care of him if we go away for a while, but if you don’t you have to add the cost of kennels and such on top.