I wanted to take this opportunity to thank you, the reader, first and foremost. I once joked when I first wrote this blog that the only person who read it was my Mother who would comment that I was better off spending my time making more money or finding a wife. While Thicken My Wallet never had tens of thousands of readers, it maintained a loyal and steady readership throughout its time. Thank you for your loyalty.

I also want to thank the personal finance blogsphere community. Without them, I would have had a lot less links, comments, story ideas and corrections to my post (done ever so politely). Thank you for taking your journey at the same time as mine.

Finally, I want to thank the guest columnists or interview subjects who gave so generously of their time and insight. Thank you for teaching me.

I have been asked several times why I am ending this blog. Quite simply, life caught up to me. There were too many balls to juggle at once. I would rather retire this blog now than periodically post or write posts lacking any analytical quality. Those who know me know that one of my favorite sayings in life is “you should do something different with your life every 5 years.” Having reached the 5 year mark, this blog’s journey has ended and it is time for me to do something different as well.

The blog will remain up for the immediate future. I hope my sometimes unique viewpoints will enlighten someone down the road.

I am going to impart 3 final thoughts learned while bloging:

1. Let’s start with a mind-set lesson. Personal finance is a long and boring road. I would equate it with rolling a boulder up a hill. Do not stop rolling because of a small blip. Do not change course and roll another boulder because your neighbor says his boulder is sexy and you need to roll the sexy boulder too. Remember the lesson is to keep going one step at a time and do not get discouraged if it feels like you are making no progress. Roll long enough at a steady pace and pretty soon the boulder begins to roll itself.
2. Learn the hard skill of planning financially and creating and balancing your budget. Then learn the soft skill of having the willpower and discipline to stick to it.
3. Life can be and should be a life-long learning process. I started blogging about finding jobs and how to be a good employee because: (i) a reader requested it; and (ii) I was not very good at being a good boss so I decided to be a better one by partially blogging about it. It is not my call whether I am a good boss or not. What I can state definitively is there was a lot of self-discovery and learning in trying to make myself a better boss. Do not let anyone discourage you from learning.  Being good at personal finance is not about being the smartest or having the most degrees. It is about continuously learning and adjusting as you learn.  I would argue this applies to more than just personal finance but to life as well.

That’s it folks. I wish you and yours the best of health, success and happiness. Once again, I thank you for reading these past 5 years.

TMW: Five years flies when you are having fun. During that time, I had the great privilege of having people read my blog and the great privilege of interacting with other bloggers such as the both of you; we are such a walking stereotype- Canadian personal finance bloggers are so polite to one another! For all three of us, we begun blogging pre credit crisis and lived mostly to tell tales of our survival. What do you think are the largest changes you have seen in the last 5 years?

PB: I will start first. Near the top of that list would be the impact and growth of social media. Certainly there has been an explosion of personal finance blogs (I can’t keep up with even the new Canadian ones, let alone globally), but there have been a few that have been around longer than 5 years. I’m just coming up to 5 years of blogging in July, and I know Ram was blogging years before that. We’ve all seen some blogs come and go and many have evolved. I change my blog’s theme once a year and I’m getting the itch again, although it will be less drastic this round. 

Beyond the personal blogs, professional corporate blogs have taken off as well. Most of them are “me too” blogs with little value, but some companies get it and are doing great things. 

Then there’s twitter. Perhaps I’m biased as an active twitter user, but clearly it’s a force to be reckoned with on many fronts. There are hedge funds that aggregate sentiment from twitter to drive investment strategies. “Regular” news is dissected to a new level by various market participants opining in 140 characters or less and it lets you peer into the minds of people you normally would not have access to. But it’s also helped disseminate good financial sense and opinions to new audiences as well. What I find really interesting is to see who other people follow. It’s quite surprising sometimes.

CC: I’m going to concur with Preet on this one. When I started out, there were basically no Canadian financial blogs. Today, there are thousands and thousands covering every niche of the financial world. Facebook and Twitter have come out of nowhere to dominate the social media space. Even traditional media has jumped onto the social media bandwagon in a major way. The comments section of the news media is a place for lively (and often nasty) discussions.

 TMW: Technology is a double edged sword. It has made out lives easier in so many ways. It is so much easier to track things using websites and apps.  But here’s my concern about it.  Technology also has allowed us to segregate ourselves and only hear content we want to here. For example, to Preet’s story, the twitter user base is tiny as a percentage of the general population but hedge funds are now driving investment strategies from hashtags? Is there not a sampling bias underlining that strategy which sows the seeds of its own destruction?

PB: I just want to point out I listed that as an example of how twitter is being used, not that I condone it!

CC: That’s the downside of social media. A good example is Covestor, that allows members to follow and presumably duplicate the trading activity of “investing leaders”. How crazy is that?

TMW: I wonder if Bernie Madoff started his, ahem, fund today how Covestor would tell its subscribers to duplicate his strategies! I am going to go a slightly but related change from the both of you. The internet is “paid” for by advertising. What this has done, and someone much smarter than me has articulated this, is ingrained in our mind that everything is for sale. Quite simply, we live in a sales society where sales and marketing has an inordinate influence on our lives. Just look at the concept of “personal branding”. If that isn’t a concept taken straight from the marketing department to your door, then I don’t know what is.

CC- name one good thing that has happened to the personal finance space in the last 5 years and one bad thing.

CC: The introduction of Tax-Free Savings Accounts (TFSAs) is far and away the best thing to have happened to Canadians in the past five years. What’s not to love about TFSAs? Investments held within these accounts are sheltered from tax. No taxes are levied on withdrawals. Even better, withdrawals are added to the contribution room of future years. And the icing on the cake: withdrawals will not affect income-tested Government benefits such as Old Age Security payments. I think that fifty years from now, we’ll look back at the 2000s and think fondly of the birth of TFSAs.

TMW: Yes but the only problem with the TFSA is that contribution rates tend to be quite low- at least from what I have been told- and I actually think people are utilizing them improperly. With the interest rate so low, you undertake your high risk/high reward investing in the TFSA and your long-term prudent investing in your RRSP. Of course, this assumes people are fully maxing out their RRSP and TFSA. If not, save, save and save. What you purchase afterwards has a lower priority to making savings part of a daily finance habit.

CC: Your point about low interest rates is topical. The continuation of the low interest environment is, in my opinion, by far the worst thing to have happened to Canadians. On one hand, it is hurting savers, especially those who are retired and depend on earning a decent interest on their savings to fund their living expenses. In fact, after adjusting for inflation, the interest rate these days is barely positive and has remained so for many years now. On the other hand, low interest rates have resulted in higher prices for pretty much every asset class. This is most evident in the housing market. Younger Canadians have taken on massive amounts of debt to finance their first homes, which will crimp their savings capacity in the years ahead. Canadians who already owned a home have taken advantage of higher home prices by tapping into their home equity resulting in an explosion in secured lines of credit. One has to wonder what will happen to this party when interest rates normalize.

TMW:  If there is one thing the credit crisis taught is that we have most likely not lived in “normal” for 15-20 years. Interest rates have been historically low since the 90’s. It is, as you point out, caused all sorts of unintended consequences.  I am not sure when interest rates will normalize since the setting of interest rates is almost driven as much by politics than policy these days. Preet- one good and bad thing in the last 5 years.

PB: Both are easy: the growth in acceptance of index funds by investors and the industry is a positive. Going back to the social media angle, when your peers are recommending passive strategies and products, you are more likely to look into it and ask your own questions. While not quite the same as the Arab Spring, the transparency is starting to wake investors up to life beyond The Matrix of high fee funds and lackluster relationships between clients and advisors. 

The one bad thing I’ll mention is linked. Sometimes a little information is a dangerous thing. People tend to focus too much on just the fee aspect. I’m all for transparency and pointing out the facts, but firing your advisor and saving 2% in fees is great so long as you can do all the things a good advisor can do – which may be as simple as being a stupidity brake (I’m stealing that from you) to as complex as full blown financial planning, retirement projecting, estate planning, etc. Very few people can really do it themselves. The fortitude required to stick to a plan is incredibly difficult. I often see people who’ve decided to become couch potatoes after 20 minutes of reading. It’s amazing how much you question yourself when things are going south, no matter how well you believed you could do it in theory.

The separation of investment planning and financial planning, and the transparency of fees versus having them embedded in products, is still in its infancy. We talk about it a lot on blogs and in the papers, but let’s be serious: that reaches a small audience. Most people don’t read the business section, and fewer people read investment focused blogs.

TMW: In partial defense of the fee aspect, although I agree with you, the old saying in law is “focus on the result and not the cost (and that will be $500 an hour please!).” If, OVER TIME, (super emphasis on the concept of “over time”), the results are not there, I do agree a focus on the fees is warranted.

What I get worried about though is in the world characterized by internet self-righteousness (would we write half the stuff people write on the internet if they had to say it publicly with their real name attached to it), we set the standard for advisors way too high. I love DIY investing but if the reason why you are being driven there is because your advisor had 1 bad year in 10 years of managing your money, and one somehow thinks they can be the perfect investor, then I worry about the outcome.

My bad is related to Preet’s comment about personal finance still being a niche interest (if you can call planning your life an “interest”).  There is this continuing cultural shift away from self-dependency. Read enough news about pension shortfalls and it is apparent in some circles that personal finance is someone else’s problem. Culture is an intangible that influences how we think and act; the term “keeping up with the Jones” is really short-hand for being sweep up in societal norms and mores. It is important for readers to remember to recognize that in some instances it is ok to swim against the tide.

As for a good thing, I have to agree with both of you. Choice in savings vehicles and products is good. But it is tempered by the fact you can have choice but if no one acts upon the choice, what good is such a choice?   

Final question guys, if you had to write a farewell blog, what 3 things would you want your readers to take away from your experiences?

PB:First, I would want them to know that it truly was a two way experience. I’ve learned so much from many readers over time. I’ve loved every comment, good or bad, and every discussion and debate. After writing for the Globe and Mail, where there are plenty of trolls and personal attacks, it’s nice to know there are people who can debate without resorting to immature behaviour. That being said, I have pretty thick skin. I don’t get emotionally worked up about negative responses any more. At  all. In fact, I kind of enjoy them in a funny little way. Especially the ones from uninformed industry participants who tend to make themselves look just as bad as the public perception of them. There are a lot of great industry participants, don’t get me wrong, but man alive there are too many incompetent ones.

TMW: yeah, sorry for calling you a “stupid head” on the Globe site the other day. Johnny123 is actually me. I admit it.

PB: Ah, so that was you all along. Ignore the Trojan I sent to your computer then.  

As for #2, I hope it goes without saying, but our industry is in dire need of reform and I hope I’ve helped contribute to that conversation. I don’t know what the perfect answer is, and quite frankly there probably is no perfect answer, but a better answer? Absolutely. People are living longer, saving less, and governments and corporations want to download longevity risk away from themselves. Financial planning is more important than ever. Given that entry requirements to become a financial advisor are too low, I hope people realize that the onus is on them to educate themselves. I think our regular readers probably fit that bill already, so perhaps I’m singing to the choir but again, our audiences are relatively small. But while there is a lot of angst against the industry, much focused on the advisors, I think more should be focused on the lack of guidance to the industry. You know those disclaimers on the bottom of fund ads? The ones that say “Past performance doesn’t guarantee future performance”? Those should be the same font size as the big past performance numbers on the advertisement.

The last thing I would want readers to take away is that while the investing part is sexier, the planning part is more important. If you have dependants, you need life insurance to protect them in case you die. You need to protect your income with disability insurance in case you lose the ability to work. Even some benefits plans don’t have great DI coverage. Things like this can derail all your plans tomorrow, in a heartbeat. Investing is a long term endeavor. Planning looks at everything, budgeting, tax planning, retirement forecasting, risk mitigation, estate planning, and more. Most people look at this backwards.

CC: First, even though I write mostly about investing, it is secondary to establishing a savings habit and keeping it going. Savings isn’t sexy but it is the foundation for financial success. The key is finding a strategy that works. It may be as simple as setting aside a percentage of income and spending the rest. Or it may be slightly more involved as analyzing spending habits and finding ways to economize.

My second item would be similar to Preet’s third. It is about doing the simple things such as setting aside some funds to handle life’s inevitable emergencies, avoiding credit card debt, protecting our loved ones through insurance, taking advantage of “free money” such as employer match of RRSP contributions etc.

Third, we should try and invest our savings a little more wisely. Even if we invest through an advisor, we owe it to ourselves to make sure the right person is doing the job. And if we are a DIY investor, we owe it to ourselves to approach investing seriously and avoid serious financial setbacks.

TMW: I am going to cheat and say- tune in on April 30 for my last post. Gentlemen, it has been a pleasure being part of the same community as you. I wish I could have invited 10, 20, 50 more bloggers to chat but then this post would be 200,000 words long. I am constantly amazed by the ideas, depth of analysis and patience the both of you display on your blog. I want to thank the both of you on behalf of myself and most likely thousands of readers for continuing to write. I hope we can keep in touch. All the best to the both of you, your families and your blog. Thank you.

CC: And I want to thank you for your insightful posts for the past five years. Your blog will remain a source of reference for me personally. And, my best wishes to you in all your endeavors!

PB: Yes, it will be a bit of a sad day when TMW goes quiet. I’ve thoroughly enjoyed your unique perspective. You will be missed.

I am pleased to offer my sincerest congratulations to Thicken My Wallet for its thoughtful and innovative approach to personal finances and related issues over the last number of years. In particular, TMW deserves a hearty round of applause for sustaining the effort for so long. Thinking and blogging about any topic takes real energy, intellectual rigour and genuine stick-to-itdness! Well done!

As this is my own farewell blog post on TMW, I’d also like to thank readers that came along with me a few years ago when I was blogging regularly in this space about my family’s personal finances. We had some interesting discussions.

The journey continues, of course. My family’s finances have evolved somewhat, but the same issues remain. On the plus side, our family unit is stable (i.e. no divorce, no new kids), making some long-term financial commitments predictable. On the downside, my husband and I continue to disagree on such basics as whether we’re doing ok, if not well (me), or if we are actually verging on disaster (him). In particular, we continue to wonder at each other’s consumer spending habits (“Why does she need another freakin’ pair of black shoes?” “My god, is he seriously wearing that shirt from six years ago twice this week?”).

I think what we have both learned about finances is that, at least in this stage of our lives, planning and thinking in both the long- and shot-terms pays off. For example, we’ve discussed moving to another part of the city quite seriously. We don’t have any pressing reason to do so – we’re looking at a nicer neighborhood, with a slightly better school, and closer to a large number of friends. We can afford this, just, but should we bother? We live in a pretty nice neighborhood with a great school and don’t actually find it hard to get to see our friends. So we are most likely staying put. The benefits of having a manageable mortgage vastly outweigh all other considerations. With that under control, we also realized we are more likely to be able to at least consider bigger renovations, or perhaps a vacation property, or perhaps private school for our kids (but definitely not all three!).

What’s interesting to me about this is how long it took us to come to this conclusion – almost a year. But the take-home lesson is that we did it without fighting. Because we’ve done so much planning around finances and how we want to sort our financial and life priorities, the conversations were much more civilized than when we started talking about money years ago. Metrics help – setting out goals, tasks, commitments, budgets – by making money management understandable is real terms.

It’s taken a long time and some compromise, but we both feel comfortable that we are on a stable, sustainable track, heading towards goals we’ve agreed on.

All the best, TMW readers! There are other financial blogs out there, but nothing will replace TMW!

The topic is, far and away, too complicated to write in a short blog post (and, if this blog had continued, it would have slanted significantly more to these issues). But, think about it this way. In a pre Smartphone era (let’s call this pre circa 2007 when the iPhone was introduced), an “average” citizen’s largest fear was that all the information the government had on you could be used against you.  Fast forward to today and, arguably in an era of relative  public sector impotence and intensive statistical analysis and analytics by the private sector, that same citizen should be concerned about how all the data cookies collect when surfing, we volunteer on social media or provide as part of an affiliate program.

The information is being used to influence our behavior.  Sometimes in good ways and sometimes in bad ways. Take online behavioral marketing. In the simplest sense of the concept, programs collect information on one’s surfing habits- key word terms in searches, key word terms in emails sent, pages visited etc.- and creates an online profile for that person. Every time that person visits sites with this program, it links the person with the online profile and begins to send advertising and content they think the person will find interesting.

In the abstract, this is great. One does not have to dig through pages and pages of sites with no valuable content. However, what if you need to save money and all you keep getting bombarded with is offers to buy more stuff? What if your child is the one being tagged by these programs? What if you did not even know this was happening?

Erosion of personal privacy does not get a lot of play in the mainstream media. After all, they want to know as much about its readers so they can advertise more effectively too. But, the erosion of personal privacy is a personal finance issue ranging from resisting temptation when sticking to a budget to protecting oneself from online fraud.

I have often remarked that giving my address and phone number to a retailer is not worth enough to get 2% off my next purchase. As our world becomes more digital and the race to collect more and more information increases, just think about what cost you put on your own privacy.

1. Find some grumpy older supervisor to tell stories about how young workers are entitled, lazy and difficult to manage.
2. Find a young worker to tell stories about how out of touch employers are to the needs of the younger employee.
3. Find some “expert” conveniently branding themselves as “Generation Y employment consultants”- sigh, find an issue and someone has branded themselves a consultant to that issue – to give some generalized and canned MBA-speak advice (“create a workplace that fosters innovation and a free flow exchange of ideas”)
4. Find some enlightened employer who is doing it right.

Guess what? Every young employee, regardless of generation, finds entering the work-force tough. This is not news. Using a wedge issue, such as generational tension, to create a story is not news either.

Fundamentally, one moves from one environment, the education system, which is structured to serve the student to another, the work-place, which is structured so that the student now employee serves the institution.  Most people would be unhappy with this change. When I entered into the work-force approximately 15 years ago, most of my friends and I thought the same thing:

1. The boss seems so out of touch.
2. This is it? This is what I spent 15-20 years in school for? I am so depressed.
3. I am underpaid for all the crap they are asking me to do.

A sense of displacement, alienation and rejection of the ruling institutions is not unusual upon entering adulthood. The “Lost Generation” is a term popularized by Ernest Hemingway to describe the generation who came of age in the 1920’s who rejected post World War I values. Times change, human nature does not. Young workers feeling unhappy is not news. That we have the technology to express this 24/7 is the largest change.

Given several of my employees are new to the work-force (less than 3 years removed from university), I would offer these three tips:

1. Network- we live in free agent nation. I explicitly tell my employees that I have no expectation they will be with me for a long time (one of my philosophies in life being you should do something different every 5 years. Hence, the blog ending in year 5). The best way to hop from one interesting thing to another is to meet new people with similar interests. Notice I did not say to network to find a job. Network to find people who share your values, have similar interests and who you can help in life and vice versa.   If you want tips to network, read The Start-Up of You.
2. Find mentors- notices I used the plural. Experience, in some context, is really a pleasant way to say you failed at something and survived to tell the tale. Rather than write off the old guy as out of touch, he may actually have a few tips to share with you.
3. Understand that the struggle itself is what makes you a better person- nothing worth pursuing is easy in life. You are supposed to fail at something you have never done before. There will be employers who simply don’t get it. This is part of life. Even the most negative work experiences can grant you nuggets of wisdom. Work in a hostile work environment or with hostile clients? Congratulations, you have just learned how to deal with difficult people on a daily basis.

Workplace struggles for younger employees is nothing new. The key is how to manage it best. Best of luck.

A colleague of mine is quite a successful business person. He once made the observation that an employee who is unreliable at home suddenly does not become reliable the moment they step through the door. Although anyone is capable of self-improvement, you are more or less working from a certain base once you get to a certain age.

The analysis is not fundamental different when it comes to personal finance. Our personal finance strategies should, more or less, mirror who we are as people. The blogsphere is awash in great investment strategies and ideas. However, readers should be cautious about adopting them lock, stock and barrel. After all, they are written from a particular context which may or may match the reader’s goals.

For example, I love to read about people who want to retire early. I wish them all the best. But, this life choice is not for me. As sick as this sounds, I derive a lot of joy from working; I am one of those people who will sit cannot sit around for more than 2 days on vacation without finding something to work on.

If the goal of any successful venture is to know your exit strategy before you enter (another great business lesson readily transportable to the personal finance realm), then the end goal of personal finance should be dependent on one’s life goal. This, in turn, requires that one know yourself well.

Thus, rather than ask active vs. passive, real estate vs. securities, domestic vs. international, figure out who you are first. The answers to the questions after that become much easier to answer.

But is this advertising true?

One of the most misunderstood parts of the bankruptcy process is who the trustees in bankruptcy represent. When an individual declares or is assigned into bankruptcy, their assets are put into a legal fiction known as the bankrupt estate. It is the trustee in bankruptcy’s job to administer the estate.

In a “straight” consumer bankruptcy, typically defined as a liquidation of the bankrupt estates’ assets less any exempt assets (a non Division I or II Proposal bankruptcy filing in Canada or a Chapter 7 filing in the United States), the trustee represents the creditors in the collection and disposing of assets in the estate for distribution to the creditors.

In plain English, the trustees are, by law, required to act in the interests of the creditors even though it is the bankrupt who pays for the trustee’s services. Since in a straight bankruptcy, there is often very little to distribute, the trustee in bankruptcy is often looking for transactions which run afoul bankruptcy laws (mainly, gifts to non-arm’s length parties, payment of creditors out of the order of priorities, hiding of monies etc.).

In a restructuring (a Division I or Division II proposal in Canada and a Chapter 13 filing in the US), the trustee continues to represent the creditors. However, the person who files the  reorganization continues to have control over their assets (unlike a straight bankruptcy where the trustee takes control of the bankrupt’s financial affairs); the trustee is, practically speaking, more co-operative and supportive of the debtor.

Keep in mind though that the trustee in a reorganization may work on contingency based on a percentage of debt collected. Thus, their financial incentives may run counter to the debtor.

The point is not to avoid a trustee in bankruptcy. In some filing, one has to hire a trustee in bankruptcy.  Instead, be aware of who the trustee is representing.

The second reason was that vendors continue to believe their condo was worth more than what the market thought. Looking at a very narrow desired price range and in a small geographic zone, we (my real estate agent and I) saw three different places drop their prices after languishing on the market for a long time. I was unwilling to buy in such an inflated market especially with a large supply of condos coming on board locally.

However, as promised in my last update about my real estate search, here is how my real estate agent looks at pricing (any mistakes are my own). My one huge caveat is that this type of analysis is only supposed to give you a rough guide into valuation.

There are other factors that will play into price (willingness/desperation of vendor or purchaser cannot be captured into a spreadsheet). The primary purpose of this analysis is to see whether the vendor is even in the ballpark and to walk into negotiations with more than “your pricing is crazy” as the primary negotiating point.  Without further ado,

1. Take the price the vendor purchased the condo for (for new builds, you are looking at price per square foot in the area for a comparable space)
2. For each year held by the vendor, add to the original purchase price the percentage of increase/decrease of prices in the MLS zone; make sure that if it is a house, you are looking at housing increase/decrease and if for a condo, you are looking at price increase/decreases in condos only.
3. Add to the price the sum of: (cost of improvements)(percentage of return). Percentage of return is, admittedly, a subjective number. However, you can be reasonable about it. For example, my agent attributed the cost of new paint as providing 100% return in one unit since it was done a month before a condo listed.

(What I have deliberately omitted here is the impact of property taxes on the analysis. Since I am purchaser side, I am not concerned about property taxes on my return on investment.  If you are vendor side, you have to add in the effect of property taxes on your return. In jurisdictions with high property taxes or where the province/state and the municipality charge property tax, it takes more to get back to even where the property is being purchased and sold in a short period of time.

 The impact of property tax is consistently overlooked in vendors making decisions. It is also, in my opinion, a primary cause of why inexperienced or unsophisticated real estate investors are losing money in the real estate market. A buy and flip strategy, which frequently occurs in many condo purchases in Toronto, has to consider the cost of property tax on return on investment- especially since Toronto and the Province of Ontario assess separate property taxes, requiring a shrewd vendor to now price in the cost of acquisition, the cost of recovering property taxes and inflation in pricing to get them even back to even. In a market full of supply of certain types of condos, obtaining the right price in short term speculation is becoming increasingly difficult. The longer a vendor holds a property, the greater the mitigation of these factors.  I digress so back to the post).

To give you an example, assume a condo was purchased in 2010 for $300,000. The average increase in condo prices in the MLS zone was 10% and the vendor spent $1,000 on a new washer and dryer. Let’s assume the percentage of return is 100% that year on the washer/dryer. At the end of 2010, the condo is worth $331,000 [($300,000)(1.10) + $1000).

In 2011, the average increase in the condo prices in the MLS zone was 5%. The vendor makes no upgrades.  Let’s assume the percentage of return on the washer and dryer is now 80% (again, this part of the analysis is subjective. The purpose again is not to get an exact price but to provide some analysis). At the end of 2011, the condo is worth $347,300 [($330,000)(1.05) + $800).

The vendor lists this condo in early 2012 for $370,000. Even building in 5% commission, the condo should be in the range of $365,000. Therefore, you have yourself some wiggle room in negotiations. If the condo is listed for $380,000, you know the vendor is starting to push towards the upper range of acceptable pricing and there must be something unique about the place or they are being greedy.

This analysis requires a lot of data. Thus, you need a real estate who is willing to work hard.  The cost of improvements figures must be provided by a willing vendor and the real estate agent has to crunch some numbers. It is by no means an easy process but, if you are interested in a place, it will help provide some guidelines as to valuations. The point is not to match the number correctly given there are some imperfections to the methodology. The point is to see whether to see whether the price is within a ballpark to begin reasonable negotiations.

Good luck.

How has this affected investing? One of the key pillars of active investing is to find companies with “economic moats”- some type of competitive advantage one company has over its competitors. Typical economic moats include a game changing technology, customer loyalty to a brand or high barriers to entry due to the regulatory environment. But in a world were capital and information demands to be free, and corporate spin is frequently and vocally counter-acted by social media, are economic moats not so much moats but small gullies?

Consider that in the 1920′s and 1930′s, the average tenure of a business on the S & P 500 was 65 years. By 1990′s, the average tenure was down to 10 years. Competitive pressures, environmental changes and freer markets makes it hard for any business to stay on top. Consider the words of the consulting firm of Deloitte who noted that the “topple rate“- the rate at which economic moats disappear from industry leaders: “nearly every advantage, once gained, is shown to be temporary. The notion of “sustainable” competitive advantage is increasingly illusive as the pace of change in the business world speeds up.”

Part of the reason why topple rates keep increasing is brand disloyalty is increasing. The younger the demographic, the less the brand loyalty. A generation born with a smartphone attached to their ear are more likely to rely on internet reviews, peer comments and feedback than forming brand loyalty through being the recipient of advertising. As a generation below 20 continues to age (Warren Buffett likes to remark there are 4 million Americans turning 22 each year as a sign America will once again be strong), how likely will the economic moat stocks of their parent’s generation be the economic moat stocks for them if customer loyalty is a disappearing concept (see Blackberry as exhibit A)?

In a world where technology has leveled the playing field, it is increasingly become more and more difficult to pick winners in the stock market. Statistically speaking, it can be done. However, the point of most passive investors is that the chances of falling within the minority of those who can beat a board based market benchmark is small. As technology and demographic trends narrow economic moats, will the percentage of active investors beating the market becoming smaller and smaller?

In an age where governments, institutions and individuals cannot seem to control their spending, is it time to classify credit card companies as a sin stock? Incurring debt obviously does not have the same unethical or immoral connotation as gambling, smoking or arms dealing. However, charging close to 20% interest on credit card debt is not exactly a moral business practice either. Many argue that the ease to which credit card companies are giving cards to people- especially the young or economical vulnerable- is part of the reason why we, as a society, cannot seem to control our spending.

The ethics of whether being a credit card issuer is sinful or not is a subjective one. However, from a financial perspective, credit card companies do seem to share at least two traits with sin stocks.

Firstly, they seemed to be engaged in wide ranging litigation and regulatory action. MasterCard Incorporated reported in its last financial report that it had to set aside $770 million pre tax charge related to allegations that MasterCard is charging too high an intercharge fee; none of the allegations have been proven.

Secondly, publicly traded credit card companies perform well in bad economic times. For example, both Visa Inc. and MasterCard Incorporated reported double digit revenue and net operating revenue growth in the last quarter. Both Visa and MasterCard have also raised dividends recently and have a history of frequent dividend increases. In other words, if you can stomach investing in people becoming more indebted, credit card companies may not be a bad investment.