Investment Advice: Swensen Update

Leave a reply

The always sensible David Swensen has an interview with the Yale Alumni Magazine that everybody with capital should read. (He has written two books on investing: One for institutional investors, and one for individual investors.)  Naturally, it concords with my general investing advice here.  He slams the actively managed mutual fund industry (“The mutual fund industry is not an investment management industry. It’s a marketing industry.”) and urges individual investors to focus on index investing.

The investor is bombarded with staggering amounts of information, staggering amounts of stimuli that are designed to get the investor to buy and sell and trade, to do exactly the wrong thing, to create excessive profits for these intermediaries that aren’t acting in the investor’s best interests.

Continue reading →

True Printer Costs

Leave a reply

Some years ago consumer printer companies realized that people pay more attention to the up-front cost of a printer than to the cost of feeding it ink or toner.  Today you can essentially get a printer for free if you buy a set of ink cartridges.

Predictably, manufacturers have jacked up the price of consumables far beyond their cost of production, and done everything possible to exclude competition for replacement ink and toner.  This is fine if you print infrequently.  But if you use your printer regularly this back-loaded business model costs you handsomely.  Like commercial users, you would much rather pay up front for the machine and then minimize your ongoing cost of using it.

Enter Kodak, with a brilliant Print & Prosper campaign:  Their new ESP line of multi-function inkjet printers are reasonably priced, but the kicker is that their branded replacement ink runs about one-third the cost of their competitors’.  (It is difficult to find the true cost per page of other consumer printers, but Kodak ran extensive tests to produce these data.)  And this is for more durable pigment ink (as opposed to the fade-prone dye ink used by some competitors).

If you intend to use your printer regularly Kodaks will save you quite a bit of money.

Wireless Email: Peek!

Leave a reply

Peek is a no-frills wireless device that lets you send and receive unlimited Email anywhere you are in range of T-Mobile’s cellular network.  It interfaces with every major webmail service.  The service requires no contract and costs only $20/month.  The device, which comes with one free month of service, lists for only $100 but is regularly available from Costco.com for $80, and is currently shipping for $70.

Wired justifiably named it one of the top gadgets for 2008.

EasyClosets.com

5 Replies

I constructed a room for a walk-in closet, but a walk-in closet is just a room until it has been packed with custom hardware to accommodate the orderly storage of everything one wants to keep in it.

I looked at seven alternatives for furnishing the closet (see Competitors below). Early on I ruled out wire shelving as inferior to solid shelving. Since I was willing to install the hardware myself I couldn’t justify the expense of using full-service California Closets or Closets-By-Design — even after taking advantage of their substantial room to negotiate down from their list prices (it appears that they have a nearly 40% margin to play with). I had one corner to include in the design where I didn’t want to lose any space. Most of the competitors made some tradeoff between using that corner efficiently and keeping it accessible.

In the end I went with EasyClosets.com. I started on their website by requesting a professional design. I provided the room’s measurements and general descriptions of what I wanted the layout to look like and accommodate. A day later a designer had a custom design done which I was able to inspect and tweak myself with their web application. For the difficult corner he had specified radiused corner shelves (which can’t be done with their online app), and he put shallow drawers and shelves on each side to maintain easy access. Using their web app I further tuned the height of vertical panels to ensure that some odd wall receptacles remained accessible. When I was finished I had him check it over one more time. He promptly reconciled a few of my measurements and took my order.

The closet arrived five days later, consisting of 550 pounds of hardware packed in 17 clearly marked boxes. It was no more difficult to assemble than any other laminated wood furniture I’ve done. Everything starts with a horizontal metal track that gets anchored to the walls six inches below the top of the shelf panels. As long as this track is secure and level (which is easy to ensure with a good laser level) everything else falls into place. Granted, that is followed by a whole lot of screwing — cam pins, drawer rails, drawer faces…. A few of the parts I received were damaged, but one quick phone call to their hotline had replacements in my hands two days later. Here’s a picture of the finished closet.

Important note: Costco gives members extra savings and free hardware upgrades at EasyClosets.com, so either access their site from Costco.com or else ask them to apply the Costco concessions for free. (If they won’t, it’s worth the $50 to join Costco, and you can cancel your membership for a full refund later.)

Competitors

  • California Closets, also a Costco affiliate, offers on-site design and installation, but seems to be the most expensive service.
  • Closets by Design offers on-site design and installation that seems to run a little cheaper, though be prepared for a harder sell.
  • Ikea has several closet systems, though it can take some serious research to figure out exactly what fits with what. I considered their Pax system. Since I am within driving distance of one of their stores it would have been a little cheaper than EasyClosets. But I decided against Ikea not only because their corner solution wasted some space, but also because everything has to be built around their modular frames, which push the closet almost two feet out from the wall. If you want to put doors on everything this is essential, but I wanted a more open walk-in closet.
  • The Container Store’s Elfa system might have been competitive while on sale, but their designers couldn’t find a reasonable solution for my corner.  Non-sale prices are too high.
  • Closetmaid and Rubbermaid have the advantage of selling components in every Home Depot and Lowes, but their solid shelving systems apparently offer the least versatility and even though they claim to offer design assistance I was never able to get a response from inquiries.

Boycott Abusive Shipping Charges

2 Replies

Mail-order vendors should not use “shipping and handling” charges to pad their margins.  Shipping should either be free (built-in to listed prices) or else it should reflect only the vendor’s actual cost of shipping a product.  As a matter of principle mail-order vendors should also allow buyers to provide their own FedEx or UPS account numbers to cover shipping, thereby ensuring that the vendor isn’t hiding a margin in that fee.

The practice of padding shipping charges is an abomination to capitalism.  It obscures the true costs of transactions and makes comparison shopping more difficult.

Some vendors argue that their shipping expenses include more than postage: e.g., they have to pay for packaging, warehouse space, etc.  But charging a handling fee to cover those costs of doing mail-order business is no more legitimate than tacking on fees to cover their costs of rent, accounting, advertising, inventory, financing, etc.  Unless customers can barge into the vendor’s warehouse and pick up the items themselves, the vendor is in the mail-order business, and like all mail-order vendors he is expected to prepare orders for shipping.

Feel free to list abusers in the comments.  And let them know you’re taking your business to their competitors until they clean up their act.

Life Insurance

1 Reply

Only buy guaranteed-renewable term life insurance from A-rated insurer. “Whole life” insurance, which accrues value over time, combines savings and investment with insurance. I have heard of no good reason to bundle those activities. But there are good reasons to avoid whole-life insurance, including:

  1. The insurer can embed higher fees.
  2. You expose yourself to credit risk of the insurer.  If the insurer fails then you could potentially lose the value of savings in your whole-life policy.  In contrast, if a term-life insurer fails you have only lost your most recent premium payment.  (Either way you are at risk of not being able to get a new policy in time.)

The purpose of life insurance is to protect those who depend on you being alive against catastrophic consequences of you not being alive.  Therefore, it never makes sense to insure child who does not produce income on which you depend.  It is not necessary to insure a homemaker if you can fall back on extended family in the event of their death for the essential services they provide.

As with all insurance, you pay a premium for protection (insurers generally make profits after paying claims and business overhead), so it is irrational to load up on more insurance than you need — unless you know that you are at a much higher risk of dying than actuaries think you are.

How much insurance is reasonable?  If a young family depends on your income, and you have no savings, then you should probably get enough insurance that your wife and kids could maintain their standard of living for 20 years (or until the children are independent) from the proceeds of a policy.  A healthy young man can get a 10-year guaranteed-renewable $2MM insurance policy for around $600/year.  After 10 years, hopefully he will have saved some money and his dependents will be closer to independence so he could drop his coverage to $1MM.

You should not buy insurance to provide independent heirs with an inheritance.  If you play your cards correctly you should Die Broke.  Older people should eventually be able to self-insure out of their savings.  Once they have no dependents they should eventually plan to purchase an immediate annuity to provide insurance against outliving their own savings.

Last time I bought a term-life policy I found the best contract through Zander Insurance Group, an independent insurance brokerage company that made the process as easy as it has ever been.

Ryobi AIRgrip ProCross Laser Level

1 Reply

Home Depot now has these for $50. Given my past experience with cheaper laser levels I picked one up half expecting to return it. But this is a really cool device! It really does grab onto walls. Its bright lines really are self-leveling. It’s easy to micro-adjust to exactly the point you want it.

It made it so easy for me to hang shelf tracks and nail up chair molding that I decided it belongs on my tool shelf (in its neat soft-sided storage case).

ToolSnob has an early review.

Recoil Reduction Products

4 Replies

I own two over-under field shotguns.  These are light guns optimized for carrying on long walks hunting birds.  But a lighter gun means heavier recoil.  I like to take my field guns trap shooting, but it can be painful to shoot more than a few rounds with 12-gauge or even 20-gauge loads.

Competitive shooters with customized guns and release triggers laugh at the idea of using field guns for sporting clays.  “If you want less recoil you have to add more weight to the gun,” they insist.  Adding weight is certainly one way to dampen recoil.  But I’m a practical guy and I don’t want to turn my light field guns into heavy competition guns.

Fortunately there are other ways to control recoil:

  1. Fit.  This is the primary factor affecting the shooting experience of a bird gun.  If the gun doesn’t fit the shooter then the shooter won’t be able to maintain a correct shooting posture: Cheek “welded” to the stock, butt snugly in the shoulder pocket, and dominant eye aligned with the front sight bead.  If you can’t lock the gun against your cheek and shoulder then the recoil of every shot will slap you (often leaving visible bruises).  If your eye isn’t aligned with the sight then you will probably miss the target.  (The shooter’s eye serves as the rear sight on a bird gun.  It doesn’t take much sight movement to change the point of impact at 20-40 yards!)
  2. Action.  A semiautomatic action will absorb a significant amount of recoil.  Of course that doesn’t help if you’re talking about making a bolt or break action easier to shoot.
  3. Dampers.  You can dissipate recoil energy using damping mechanisms.  Almost every gun comes with a rudimentary damper in the form of a rubber recoil butt pad.  Here I review some more advanced dampers.

Edwards Recoil Reducer

Edwards Recoil Reducers are light cylinders containing a spring-buffered counterweight that absorbs and even redirects (depending on installation angle) recoil.  I got one delivered from Brownells for $60.  It looks and feels like a rugged device.  Edwards has been making these for over forty years and backs each reducer with a lifetime warranty.

Installation in a wooden stock can be a bit of a project.  Take the recoil pad off of any shotgun and you’ll discover a lot of empty space in the stock.  Before you can properly install the reducer you probably need to fill that space with some combination of dowels or other wood trimmed for a tight fit.  Then with a 7/8″ forstner bit you can carefully drill out a hole as high and parallel to the gun’s barrel as possible.  Push the recoil reducer into the hole, make sure it’s snug, and screw the recoil pad back on to hold it in place.

Installation in a hollow plastic stock is simply a matter of unscrewing the recoil pad, positioning the reducer, and filling the remaining space with sprayfoam, as shown here.

After installing the Edwards Recoil Reducer in one of my guns I took it right back to the trap field — still sore from shooting four rounds two days earlier.  The recoil reduction was immediately obvious.  I’m still working on a recoil gauge to quantify peak forces, but to me it felt like close to half of the recoil was gone.  Even after four more rounds with the gun I would have been comfortable continuing to shoot.

Graco GraCoil

Graco’s GraCoil is a butt plate that contains an adjustable piston that compresses up to 5/16″ to absorb recoil.  Compression damping is also what a good recoil pad is supposed to do, but pads aren’t adjustable and they can’t get too mushy before they impact handling.  The GraCoil spring can be tightened just enough that it doesn’t move under the pressure of your shooting stance, but then immediately starts to compress to absorb the recoil of a shot.

GraCoil plates also include a mechanism to enable significant adjustment to the position of the butt pad.  This allows for significant improvements in the fit of a shotgun (which, as noted above, is an essential feature!).  I opted to buy the GraCoil Model GC15-LP which also includes a length-of-pull adjustment.

The GraCoil needs to be ground to fit a particular stock, something I didn’t feel like attempting.  Total cost of the GC15LP with factory installation is $375.  MPC Sports will sell and install the same unit for $325.  I went with the latter vendor.  I carefully reviewed the proposed work with their gunsmith over Email and then mailed my stock to their shop in Atlanta.  The completed piece was back in my hands just a week after they received it.

After tweaking the tension on the piston and getting the butt pad in just the right place shooting with the GraCoil is so easy and natural I really could break clays all day long.

Mysterious Vista Bootloader

Leave a reply

After spending a weekend trying to upgrade a drive I learned some important things about the Windows Vista Bootloader and the solution to a poorly documented problem:

If you use Acronis True Image 10 or Norton Ghost 9 to “clone” or copy a drive that boots using the Windows Vista Bootloader you will get the following message when trying to boot to any operating systems on that drive:

File: \ntldr
Status: 0xc000000e
Info: Selected entry could not be loaded because the application is missing/corrupt.

The reason appears to be that the arcane Vista Bootloader references to the O/S targest on that drive are corrupted (presumably because the Vista Bootloader isn’t backwards compatible with the MBR standards expected by older disk cloning utilities).  The solution is to reset the references using Vista’s BCDEDIT or, better yet, the helpful and free utility EasyBCD.

Tax-Exempt Investments: The Best Opportunity Now

3 Replies

Treasury Inflation Protected Securities (TIPS) are a unique asset class ideally suited to investment in tax-exempt accounts (e.g., retirement accounts like IRAs and 401ks).  TIPS pay interest like regular treasury bonds, but they also appreciate in line with inflation.  The mechanisms by which they pay out are somewhat convoluted and undesirable from a tax perspective, which may contribute to the discount they currently carry in the market.  If you can buy TIPS in a tax-exempt account you don’t have to worry about these nuances.

The clearest way of valuing TIPS is in terms of the “break-even rate of inflation,” which is the inflation rate at which an investor would earn the same from TIPS as from regular treasury bonds of the same maturity.  If realized inflation exceeds the break-even rate then investors in TIPS earn more.  If inflation is lower than the break-even rate then investors in regular treasuries earn more.

Considering the break-even rate, TIPS are extremely cheap.  For example, the break-even rate on 5-year TIPS is 1.12% — well below current inflation, historical inflation, and even the Fed’s target inflation rate.  The dollar faces a number of inflation risk factors, and the current market bailout by the U.S. Treasury only adds to these risks.

Since TIPS are an undervalued, tax-inefficient asset that offer inflation protection they make an ideal investment for tax-exempt retirement portfolios.  Investors who want heightened exposure to these characteristics can buy leveraged CEFs that invest in TIPS: E.g., WIW and WIA.