Tag Archives: business

Nate’s Numbers Hub December 2015

Markets

$2,091 = S&P 500 close 4 Dec 2015 (Yahoo Finance)

26.09 = S&P 500 P/E Ratio on 7 Dec 2015 based on previous 10 years of earnings, AKA “Shiller Ratio,” “CAPE Ratio,” or “PE 10.” (www.multpl.com)

$26.1 trillion = total US market capitalization = $18.7 trillion NYSE + $7.4 trillion NASDAQ

$18.3 trillion = annual US GNP estimate (www.BEA.gov, GDP and the National Income and Product Account (NIPA) Historical Tables, Table 1.7.5)

121.5% = “Buffett Indicator” current as of 7 December 2015. This number is a variation* on [Total Market Capitalization] / GNP**.

(The calculation is explained here. Numerator obtained from Federal Reserve Bank of St. Louis, current value obtained by extrapolating with the Wilshire 5000 Index. The denominator is obtained from the BEA’s GNP from above. Calculations and chart in this Excel spreadsheet).

*Instead of using actual market cap value, I used “Nonfinancial corporate business; corporate equities; liability, Level” from the Federal Reserve Bank of St. Louis because the data is available since 1945. That number is only reported quarterly, so the Wilshire 5000 index is used to extrapolate to find the current value.

**The GDP is used by some reports instead of GNP, but Buffett uses the GNP. GDP and GNP are very similar, within about 1% of each other, and don’t fluctuate like total market cap does.

Buffett Indicator chart with various standard deviation lines based only on past data.
Buffett Indicator chart with various standard deviation lines based only on past data.

I have to pick an economist. My pick is John P. Hussman. He posts straightforward charts showing strong correlation between current indicators and future results. He uses the S&P 500 to measure performance and he has consistently posted weekly since 2003. All of his posts are available for quick reference: Hussman Funds Weekly Market Comment.

236 = current Consumer Price Index. This number is adjusted so that it averages 100 from 1982-1984. For the first year this number was calculated, 1913, the value was 9.9 (BLS)

0-1/4 = target range for the federal funds rate. (www.federalreserve.gov, 28 Oct 2015 FOMC Statement, and bankrate.com)

“Yield Curve” at stockcharts.com

6.42 = Chinese Yuan Renminbi for 1 US dollar (x-rates.com)

My Market Tools, Long-Term to Specific

  1. Buffett Indicator from above
  2. My economist pick: John P. Hussman, referenced above.
  3. Investor’s Business Daily Big Picture
  4. CANSLIM checklist for picking individual stocks

Energy

All energy data here is in petajoules = 1 quadrillion joules = “1-with-fifteen-zeros” joules, which can quickly be converted to other units of energy for comparison:

1 petajoule =

  • 163,456 barrels of oil, energy from (BOE)
  • 277.8 gigawatt-hours = 277,800,000 kilowatt-hours
  • 0.02388 million tonnes of oil equivalents (MTOE)
  • 0.0009478 quadrillion British Thermal Units (BTU)
  • 0.0009202 trillion cubic feet of natural gas, energy from (based on 1,030 BTU / cubic foot, IEA website)

389,000 petajoules = 2013 global energy consumption estimate (International Energy Agency, Key World Statistics 2015)

103,000 petajoules = 2013 US energy consumption estimate, 26.5% of global total (US Energy Information Administration Annual Energy Review, Table 1.1)

See also the US energy flow graph, Section 1.0, for a visualization of energy use.

10,100,000 petajoules = energy contained in the 1,656 billion barrels of proved world petroleum reserves (US Energy Information Administration), using the above conversion as an estimate of the energy equivalent.

7,578,000 petajoules = energy contained in the 6,973 trillion cubic feet of proved world natural gas reserves (US Energy Information Administration). This is probably a very rough estimate because of variance in the energy contained in different natural gas.

$39.93 / barrel = current price of WTI crude oil (US EIA) = $6,527,000 / petajoule of energy

$2.11 / million BTU = Henry Hub spot price of energy from natural gas (US EIA) = $1,942,000 / petajoule from natural gas

6.527 / 1.942 = 3.4: oil energy currently costs 3.4 times as much as natural gas energy.

Commodities

$1,086 = price of one ounce of gold (goldprice.org)

$14.54 = price of one ounce of silver (goldprice.org)

1,086 / 14.54 = 75, current gold-silver ratio, historical range of 14 – 100 since 1975 (goldprice.org charts)

Jobs

322 million = total US population (US Census Bureau Population Clock)

252 million = US civilian noninstitutional population

59.3% = employment-population ratio, which is the percentage of civilian noninstitutional population who are employed. Total employed is 149 million people. This is 46.2% of the total population.

5.0% = “unemployment rate” the most-often-reported percentage that does not include people who are not seeking employment, whether receiving unemployment benefits, welfare, or otherwise.

Click here for historical employment numbers. For more detail in easy-to-read charts, see “Charting the Labor Market.” The data is also broken down regionally and by state.

(US Department of Labor, Bureau of Labor Statistics Current Population Survey, November 2015)

Big Money 2

I wrote a post called Big Money almost 2 years ago in January 2014. This is a follow-up to that post to update the numbers.

$18.1 trillion = annual US gross domestic product estimate (www.BEA.gov)

$3.2 trillion = US government tax revenue, fiscal year 2015 estimated (http://www.gpo.gov, Fiscal Year 2016, Historical Tables, Table 2.1)

$18.7 trillion = US government national debt as of today (www.treasurydirect.gov)

$0.40 trillion = interest expense on US government outstanding debt, fiscal year 2015 (www.treasurydirect.gov)

0.40 / 18.7 = 2.1% average annual interest rate on the national debt

0.40 / 3.2 = 12%, interest expense as a percentage of tax revenue

$3.53 trillion = currency exchange reserves held by the Chinese government as of Oct 2015 (www.tradingeconomics.com) This has been steadily decreasing since it peaked at $3.99 trillion in mid-2014.

$4.25 trillion = money supply inflation as of Nov 2015 by the practice of quantitative easing (www.federalreserve.gov with data interpretation help by Wikipedia) This amount has been relatively steady since Oct 2014.

All of the US government numbers come directly from balance sheets available on .gov sites. It was calming to find the numbers I’ve heard about in the news on a regular old balance sheet. I don’t think I will rush to cash in my savings bond.

Ventures Update October 2015

695 Riverview Drive

We have made steady improvement on the apartment building.

  • The parking lot is resurfaced and it looks great.
2015 11 04 New Pic from Front 2
Notice the new pavement in the parking lot. Also, the front lights are now on a dusk to dawn sensor, so they are on all night.
  • We have good paying tenants, and have received all of our rent due since April.
  • Since July, we have averaged 8/9 occupancy.
  • We currently have 7 occupied. I remodeled one of the two empty units and we have people lined up to rent them when they are ready next week.
  • The market rent has increased to at least $650. We may look to get $675. When we purchased the building, average rent per unit was $465. If we rent the vacant units for $650, our average rent will be $560. That’s a 20% increase over 2.5 years!

I am in the process of hiring new management (again), and I am excited to have an experienced professional on board.

Simple Kneads Gluten-Free Bread

Devaunt and Tristaun have been working full-time to develop the business in Raleigh, North Carolina. It has been so successful that they have brought Nick Rapkoch in full-time as well to help with marketing and distribution. This short summary does not do justice to what they are doing in Raleigh. Simple Kneads is the real deal!

Click the picture for the Simple Kneads website.
Click the picture for the Simple Kneads website.

Kineomen

I visited Devaunt and Nick in Raleigh in August. We ate mostly gluten-free bread with lots of butter, and we talked about real estate and business. Loaves of gluten-free bread were everywhere. I felt like we were drug dealers and that was our product. Tony Montana said, “don’t get high on your own supply,” but I don’t think that applies to high-end bread.

Currently, their time is taken up on their best opportunity, which is Simple Kneads. I came away from the meeting recognizing that I have to get my traveling out of the way before I commit to starting a business or another real estate venture. My current real estate investment is enough for me for now and I am on a steep learning curve.

The Stock Market

In December of 2013, I decided to get out of the stock market completely. That money has been sitting in cash ever since, gaining near zero interest. On the day I sold, the S&P 500 closed at 1775 on 13 December. Today, it closed at 2090, up 17.7%. I owned VWIAX mutual fund at the time and I sold it for 61.46. Today, its value is 62.17, up just 1%. I missed VWIAX’s dividends of about 3.5% per year, so I actually missed out on a total of 8% of gains. The market is not up as much as I thought it was. I don’t feel so bad about my decision.

I have decided to consider stocks again for my retirement accounts using the strategy of “buy fear, sell greed.” Phrased a different way, I want to “do the right thing as an investor by standing behind good companies when nobody else will.” I do not believe that now is that time. Investors have not been really burned since 2008. Confidence is high. Money is cheap, in fact almost free to borrow. Cautious, pessimistic investors who haven’t bought into the current market look like fools for their missed opportunity. Most of the bad news has been around for a while. There is ongoing conflict in the middle east. China steadily gains ground while each country fights to devalue its currencies. Russia acts more and more boldly each year. Washington plays brinkmanship games with the federal budget. Economists continue to warn that holding interest rates at zero is a short-term band-aid that is causing the next “bubble.” Investors are numb to it and blindly throwing their money at stocks. I ask people why they are in stocks and I hear, “well, I wasn’t, but it just kept going up and I didn’t want to miss out.” Who can blame them? What else are they going to do, put it in a savings account for 0.1% interest?

It’s easy to put money in stocks right now. It feels safe. Therefore everybody is doing it. Therefore, I’m still staying out! … So then why write this whole thing? I have been out of stocks for two years.

Because now I know what I’m looking for:

I am looking for the time when the market “needs investors’ confidence.” The economists will be talking about years of recession. Investors will be just recovering from the gains they lost. The news will be talking about the “new norm, where stocks aren’t safe, and maybe even the dollar isn’t safe.” When everyone is down and out, that is the time to be positive. That is the time to use a good system to pick the winners that will see us through.

Vino de Coco

Same same. Tim Bowles is in the Philippines. It has been fun to be a part of the venture. Tim is quite a salesman and I think that coconut wine will succeed. Maybe I’ll go visit!

Click the picture for the website.
Click the picture for the website.

Apartment Building: A Black Hole of Time

This week, I got sucked into doing my own handyman work on my apartments. On the one hand, it has taken up all of my time. On the other hand, I have learned a lot and the building continues to progress. In two years, our rent has increased from just under $500 to over $600. We have 8 / 9 units rented now, most importantly with quality tenants who reliably pay rent, and I am upgrading the empty unit with potential renters awaiting showing at $625 per month.

I drove 187 miles and biked 80 miles this week, putting driving up 820 miles to 529 miles. It was not a good week for the bike!

What is the “ecliptic,” and how does it relate to the signs of the zodiac? Answer. The ecliptic is the plane defined by our orbit around the sun. It also refers to the path the sun appears to take on the celestial background. The signs of the zodiac are based on which constellation the sun is passing through during the period. Ironically, it is during your birth month that you are least able to see your associated constellation in the night sky because it rises and sets with the sun during that time.

In one sentence, why do we use AC electricity instead of DC electricity for our power grid?

Ventures Update June 2015

695 Riverview Drive

I am currently reading the book Multi-Family Millions, and it is transforming the way we look at our property. The author, David Lindahl, has been successful on a larger scale in exactly the type of property that 695 Riverview is. He calls what we are doing—creating value by turning over to higher quality tenants and higher rent—“repositioning.” Important note: Zell did not recommend this book to me. I discovered it, and read it first, and I deserve all the credit for any positive outcome that comes from it! Click the book below to link to it on Amazon.

Reading the book after having owned the property for almost 2 years highlights our successes and mistakes from the past and enables us to make better decisions in the future. For example, the book points out that multi-family commercial properties generally make more money than their smaller residential counterparts. I ran the numbers before we bought and that is exactly why we chose it. The numbers are far better than smaller properties in terms of cash flow. Despite the issues we have had, we have never had fewer than 6 tenants at a time paying rent and that money has been crucial. Bottom line, we bought a great property with a lot of potential and the book reinforces that fact.

Conversely, we made some big mistakes. First, we tried to self-manage the property. It was way too much for one person to properly handle without being fully-committed. The book adamantly advocates hiring a property manager. He is right, and it took us 8 months to learn that the hard way. The book also says to hire a good property manager and lays out exactly what to look for, how to hire, and how to ensure results.

The second mistake that we made was to delay resurfacing the parking lot because it costs a lot of money. The book recommends to start by fixing the exterior in order to change the perception of the building within the local community. It is absolutely worth the money in order to attract better tenants. We have learned that from our 2 worst tenants—who we evicted—and who each cost us a lot of money. We are getting resurfacing estimates as we speak and the job should be done by the end of July.

With the amount we plan to spend on improvements this year, it now appears that we may not be profitable in 2015. A lot of the maintenance that we have completed until now has been backed-up maintenance that was deferred by the previous owner, and we have moved on to improvement projects. The increased value of the property due to the improvements and rent increase is easily making up for the few thousand dollars that we are in the red in terms of actual cash flow.

Gluten-Free Bread

Gluten-free bread from Shiloh’s Five Loaves is now being marketed as “Simple Kneads.” Tristaun and Devaunt in Raleigh are rapidly transitioning from the “stand-up” phase to the “distribution and profitability” phase. The new website speaks for itself. Click on the picture to visit it:

Click the picture for the Simple Kneads Website.
Click the picture for the Simple Kneads Website.

Kineomen

Devaunt and Nick have been busy networking in the Raleigh area and sifting through opportunities to find the next Kineomen investment (Simple Kneads gluten-free bread being Kineomen’s first investment). Devaunt has focused primarily on Simple Kneads, while Nick has taken on some clients as a business consultant. I am still a relatively small investor working to develop ideas that I could take on as my own project.

Coconut Wine (Vino de Coco)

When I originally invested in Vino de Coco, I hoped that I would eventually get a chance to learn more about the business and gain experience from them as a start-up. I finally got a chance to meet Tim Bowles, the Vino de Coco co-founder who was our contact for the investment. His stories are fascinating. I decided to keep my investment with them and consider a future partnership.

Click the picture for the website.
Click the picture for the website.

Ventures Update April 2015

695 Riverview Drive

Summary: 9-unit apartment building near Columbus, Ohio and Ohio State’s  campus that I bought with my brother, Thad in July 2013. As of 1 April 2015, it is managed by North Point Asset Management.

Recent

  • Management: switched property manager from Renting Ohio to North Point Asset Management (NPAM). So far, NPAM is doing well. However, Renting Ohio seemed great in the first several months, so I will reserve my evaluation for now.
  • I left this review on Renting Ohio’s business Facebook page. Look for my name under 2 star reviews. Or download here. I made the review extra negative to get his attention so that he would send documents I needed for my taxes. It is truthful and accurate. He ended up helping with the turnover as much as he was able.
  • Switched from a dumpster in the front yard to much more sightly–and less expensive–bins for trash removal.
2015 04 15 Riverview from Front no Dumpster
April 2015 photo of the building. The dumpster is gone, and there are bins under the archway, but we haven’t yet planted grass where the dumpster was.

2014 Summary, and 2015 Projection

  • 2014 Profit and Loss pdf.
  • Rounded off to the nearest $500, we show a loss of $13,500.
  • Almost $9,000 of expense is depreciation of the building. The accountant currently handles the depreciation schedule. For a rough calculation of cash flow: ($13,500) + $9,000 in depreciation = ($4,500). Bottom line, negative cash flow!
  • There are 3 key items that we expect to be different in 2015, in our favor, that will improve the bottom line:
    • 1. from January 2014 to April 2014, we did not have a professional property manager and basically were not marketing at all. We had 3 empty units. At $500 per month per unit, for 4 months, that is $6,000 worth of vacancy. They were filled within 6 weeks of hiring a manager in April. If just 2 of the three were occupied, that’s a $4,000 improvement for 2015.
    • 2. In January of 2014, we had a pipe freeze and burst in a vacant unit. It wasn’t discovered until the manager (Thad) entered the unit to install a space heater. He was too late; the pipe had burst 30 minutes prior. The water to the building had to be shut off, and the unit had to be gutted carpet to drywall. This cost about $2,000 and was totally preventable.
    • 3. We spent $3,500 in October to an electrician to make the building compliant with its aluminum wiring. This was a one-time cost to improve a problem that existed when we purchased the property. It can be easily prevented in the future by hiring a competent electrician and ensuring that he knows about aluminum wiring and installs appropriate equipment. Aluminum compatible fixtures are only slightly more expensive.
  • A reasonable expectation for 2015 cash flow is: ($4,500) + $4,000 (improved occupancy) + $2,000 (no frozen burst pipe) + $3,500 (no expensive electrician bill) = $5,000 positive cash flow for the year.
  • There are some items I didn’t list that are negative, but they are roughly equal to the unlisted that are positive. The 3 items I listed are by far the largest.

Gluten-Free Bread

2014 09 Shilohs Five Loaves

Shiloh’s Five Loaves is a gluten-free bread company based in Raleigh, North Carolina. Devaunt LeClaire of Kineomen is the business brains behind the operation while his brother is the baker.

  • As of early April, Tristaun was busy in the newly-leased building with the newly-installed equipment doing test runs baking bread while Devaunt was out coordinating sales. Busy, and progressing close to on schedule! New picture next time…

Kineomen

I became a Kineomen investor in November 2014. Shiloh’s Five Loaves is Kineomen’s primary investment project currently. Kineomen recently proposed a real estate business in Ohio and I am considering a small project this fall to test the viability and get the ball rolling.

Coconut Wine (Vino de Coco)

Coconut wine based in the Philippines. Click the picture for Vino de Coco's website.
Coconut wine based in the Philippines. Click the picture for Vino de Coco’s website.
  • Click on the picture for Vino de Coco’s website.
  • No real update. Seeking repayment of loan. Plan to make a full attempt at repayment this summer.

Ventures Update January 2015

695 Riverview Drive

Summary: 9-unit apartment building near Columbus, Ohio and Ohio State’s  campus that I bought with my brother, Thad. It is managed by Renting Ohio since April 2014.

Recent Updates

  • In October, electrician John Kelly completed all electrical work required for compliance with the aluminum wiring in the building. It was expensive–about $4600–but had to be done and now it can easily and effectively be maintained by hiring electricians qualified to work with aluminum.
  • Switched from a dumpster in the front yard to much more sightly–and less expensive–bins for trash removal.
  • For the months May-December that Renting Ohio has been managing the property, we averaged 13% vacancy. This counts for 2 months of unpaid rent as vacancy. This tenant is being evicted.
  • December 2014 was the first month with no unscheduled maintenance fees.
  • With two new leases signed, we stand to be fully occupied 1 February!

Gluten-Free Bread

2014 09 Shilohs Five Loaves

Shiloh’s Five Loaves is a gluten-free bread company based in Raleigh, North Carolina. Devaunt LeClaire of Kineomen is the business brains behind the operation while his brother is the baker.

  • On schedule to deliver its first loaves of bread to Raleigh-area stores in February!

Kineomen

I became a Kineomen investor in November. Shiloh’s Five Loaves is Kineomen’s only investment project to date. More to follow.

Coconut Wine (Vino de Coco)

Coconut wine based in the Philippines. Click the picture for Vino de Coco's website.
Coconut wine based in the Philippines. Click the picture for Vino de Coco’s website.
  • No update. The company is doing well (I think), but not pushing information to investors. Seeking repayment of loan.

 

Ventures Update September 2014

695 Riverview Drive

Summary: 9-unit apartment building near Columbus, Ohio and Ohio State’s  campus that I bought with my brother, Thad. It is managed by Renting Ohio since April 2014.

Profitable? Yes. August 2014 was a profitable month and “normal” enough to be repeated and sustained. I populated the spreadsheet that I use to evaluate properties with the numbers from August. Accounting for 11% vacancy, the expected cash flow is $255 / month. Maintenance and improvements have cost a lot, but are starting to taper off. Rent is steadily increasing with the market and with the improving condition of the building.

Riverview Cash Flow Aug 2014
Riverview Cash Flow Spreadsheet

Recent Updates

  • Hired electrician to ensure safety of aluminum wiring. (~$1500)
  • Switched from a dumpster in the front yard to much more sightly–and less expensive–bins for trash removal.
  • Met the owner of 675 Riverview, a neighboring building with the exact same layout. Shared contact info, ideas, and got some tips. In August, he resurfaced his parking lot, painted lines, and it looks great, but costs $7500 to have done.
  • Installed a bike rack with brother’s help. ($150)
  • Touched up the paint on the white trim on the front.
  • Determined that the dilapidated fence is the neighbor’s fence, not ours.
The dumpster was an absolute eyesore and had to go.
The dumpster was an absolute eyesore and had to go.

Gluten-Free Bread

2014 09 Shilohs Five Loaves

Shiloh’s Five Loaves is a gluten-free bread company based in Raleigh, North Carolina. For more information, I can put you in touch with co-founder, Devaunt LeClaire. The investment window is open until 31 October 2014.

Coconut Wine (Vino de Coco)

Coconut wine based in the Philippines. Click the picture for Vino de Coco's website.
Coconut wine based in the Philippines. Click the picture for Vino de Coco’s website.

I lent money to this company in October 2011 with a friend. We have yet to be repaid, but the company is doing well as far as we can tell. They are currently seeking investors. I do not plan on investing further.

Stock Market

I sold all my stocks in December 2013 have been in cash since. After reading How to Make Money in Stocks by William O’Neill of Investor’s Business Daily, I determined that if I were able to make money in stocks, it would always be a gamble and it takes a lot of time just like any other investment. I decided I want to invest in things I am familiar with personally.

Big Money

Consider these numbers to put some current news topics in perspective:

$16.9 trillion = annual US gross domestic product estimate (www.BEA.gov)

$2.7 trillion = total US government annual tax revenue, fiscal year 2013 estimated (http://www.gpo.gov, Fiscal Year 2014, Historical Tables, Table 2.1)

$17.2 trillion = US government national debt (www.treasurydirect.gov)

$3.66 trillion = currency exchange reserves held by the Chinese government as of Oct 2013 (www.blogs.wsj.com)

$3.57 trillion = money supply inflation as of Oct 2013 by the practice of quantitative easing (www.federalreserve.gov with data interpretation help by Wikipedia)

17.2 / 2.7 = 6.4. The US government owes more than 6 times what it brings in annually with taxes. (per my own math)

3.66 / 2.7 = 1.4. the value of China’s foreign exchange reserves are equal to the US government tax revenue for a over year and a quarter.

Check out the links. There is a story behind each of these numbers, but the numbers themselves are generally not disputed.