Is Blogging In A Bubble?

 Big Picture Stuff  57 Responses »
Feb 202012
 

The other morning, as I woke up after my usual 6 naked Taylor Swift dreams, I found the following email*:

Hi Uproar:

How would you like a few hundred bucks, just for putting a link on your blog?

Signed,

Some Advertiser

*Note, some details of this email have been changed, mostly because I’m too lazy to go find the real one**.

**Literally as I typed that last sentence, I got ANOTHER email about advertising on my blog.

I don’t take blogging that seriously. Basically, I try to take 7 penis jokes and turn them into a serious point about finance. Sometimes I succeed, most of the time I fail. I continue to be impressed that my readership continues to creep up. My Mom must be hitting refresh A LOT. I totally don’t pay her either. Anymore.

When it comes to my lax blogging attitude, I’m definitely in the minority. Most bloggers take the medium really seriously. They’re serious about making a sideline income online, dammit. With advertising offers literally falling out of the sky, I can’t say I blame them. For me, in about the last 8 months, blogging has gone from a fun hobby to a serious sideline business. I’m not going to tell you how much I’ve made or anything, but it’s enough money that it’s actually a lucrative activity. I’ve always dreamed of getting paid to make sex jokes, and you people have made it happen. Give yourselves a pat on the groin or something.

But yet, as I watch the medium evolve, I’m wondering if the boom we’re witnessing is sustainable. I do absolutely nothing to attract advertisers, yet they still contact me, increasingly more lately. Bloggers with more readers are experiencing an even bigger boom. Bloggers are increasingly using their expertise to leverage into more traditional media, doing things like writing books and appearing on radio and tv. Others choose to keep their work strictly online, writing for other bloggers or other internet based publications. The point? The market for blogging and blogging related services has exploded, and at least one blogger is concerned it isn’t sustainable.

As most of you know, Mike from The Financial Blogger is all over buying other financial blogs. Him and his silent partner own probably around half a dozen different sites at this point, with no intention of slowing down. He’s all about expanding his empire, even if he has to take on a lot of debt to do so. The guy has borrowed at almost credit card like rates (10%) in order to continue to expand his business.

Mike isn’t alone in this blog buying business though. This forum over at Yakezie has half a dozen bloggers who are interested in buying sites and milking that sweet, sweet PR teet. They range from the incredibly unrealistic (only willing to pay 2 times monthly revenue) to people who are willing to pay a much more generous figure of 18 to 24 times monthly revenue. This is increasingly becoming the industry norm, replacing 12 times monthly revenue as the norm. Not to be outdone, Mike has raised the stakes, indicating he’s now willing to pay up to 48 times monthly revenue, at least sometimes.

We have a market with rapidly rising valuations. Is that the sign of a bubble? Could be.

Meanwhile, we have all sorts of new competition. I can’t find the info on the Yakezie site, but there are approximately 3.2 million new blogs who are just jonesing to get into the club. Their favorite traffic metric is the Alexa rank, which ranks your site’s visitors who have downloaded Alexa’s toolbar.

I have absolutely no interest in joining Yakezie. After I type the next paragraphs, I’m sure I’ll be banned from ever applying to join, which is just fine by me.

Yakezie is nothing but a ponzi scheme, mixed with a dash of communism for good measure. It’s designed to benefit its benevolent ruler at the expense of the peons making up the bottom of the pyramid. There are so many problems with the business model that this humble blogger barely knows where to begin.

Exclusively using Alexa ranking to determine a site’s popularity is like using a dividend yield to exclusively determine an investment’s potential. Everybody in Yakezie visits each other’s sites, sometimes exclusively. Naturally, they all have the Alexa toolbar installed, meaning they’re artificially increasing each other’s rankings. I know of a certain few sites in the network that get considerably less traffic than I do, yet they kill me in Alexa ranking. You guys aren’t fooling everyone.

Do you know how many non-bloggers have the Alexa toolbar installed? I’ll tell you. ZERO.

Meanwhile, they all hang together. They link to each other exclusively, visit each other exclusively, and probably meet for circle jerks in real life. It’s really quite easy for a relatively new blog to get to a respectable level of traffic, all they need to do is have a pulse, join the Yakezie challenge, get linked to by all the other Yakezie blogs, and they get noticed.

How does this relate to a ponzi scheme? Well, like Bernie Madoff can attest, you need new suckers entrants in order to keep the whole thing going. If the network doesn’t grow, Google eventually figures out that only a few blogs are consistently linking to each other, hence reducing the effectiveness of the network. Plus, the benevolent ruler can continue to profit from the network, since it keeps getting bigger. He’s sure trying hard convince the challengers the network is for their benefit. Why do you think the slogan sounds like it came straight from Karl Marx?

And then, the ruler will write posts that do their best to discourage people from trying to make a living online.

I think we can add herd behavior to our bubble list.

Meanwhile, let’s take a look at the underlying industry. All the buzz these days is around the high tech names. Facebook is planning it’s IPO. Google is continuing to chug along. Everyone and their dog has an iPhone. Even companies like Amazon and Netflix are flying high. The whole sector is booming like it’s 1999 again.

To review, let’s take one last look at our bubble list. We have:

1) Easy money

2) Increasing valuations

3) Herd mentality

4) The entire sector is sizzling

So, yeah. 1929 just called. It wants its shtick back.

 Posted by Nelson Smith at 4:47 am

The Problem With No Spend Days

 Big Picture Stuff  9 Responses »
Feb 142012
 

Hot damn, is it some sort of personal finance blog rule that you have to do at least one no spend day per week?

Admittedly, I probably don’t read that many of them. That’s because I generally avoid the types of blogs that talk about stuff like that. Frankly, you’ve got to be an entertaining writer to pull off spending reports. Some can do it, but most can’t. You know, I just don’t want to know about the boring stuff that goes on in your life. YOU SPENT $2.18 ON HOT CHOCOLATE AT TIM HORTON’S? HOW INTERESTING.

On the surface, no spend days don’t really look at bad. The whole point is to avoid spending money. There’s nothing wrong with attempting to not spend money. Most of us (yes, me included) spend too much of it, usually on crap. Anything that cuts down the amount we spend isn’t bad.

But, no spend days aren’t really as good as they seem. What’s that? You want me to use accounting as an example? If you insist.

The Accounting Of No Spend Days

When a company figures out how much inventory they have on hand, they use a pretty simple way to count it, at least most of the time.

Let’s say a company buys a million dollars of inventory, so they can sell widgets. Oh widgets, always being made, never being used. Anyway, as any business does, they buy that inventory so they can sell these widgets at some sort of profit. Inventory drops to $200,000 worth of inventory, so they buy a million bucks more. Inventory now stands at $1.2 million.

Now, which inventory would they sell first? Well, in just about every business, they sell the old stuff first. This makes sense, you want to get the old stuff out so you’re not sitting on it. Maybe it’s perishable, or maybe it’s technology that goes obsolete quickly. Even natural resource companies sell the old stuff first, since nobody wants to store barrels of oil.

What does this have to do with your finances? Say you buy a tank of gas and it lasts you two weeks. In accounting talk, that’s a prepaid expense. If 14 days worth of gas costs you $42, that’s the exact same as buying $3 worth of gas everyday. Nobody does this, because it’s a pain in the ass. It’s the same thing with groceries, your utilities, and so on.

It’s cool that you’re trying to spend less money. Just remember, if you spend money in advance, it kind of isn’t a no spend day at all.

 Posted by Nelson Smith at 4:20 am

How To Increase Your Net Worth – Without Spending A Dime

 Big Picture Stuff, Guest Post  3 Responses »
Feb 082012
 

Nelson’s note: This is a guest post by Arthur Garcia from The Buy and Hold Guys. Arthur demonstrates, via his blog, how he’s building up a passive income stream using real estate. Yes kids, he’s using leverage to get ahead. Anyway, go check out his blog. It gets a personal Financial Uproar thumbs up, which is probably the greatest compliment of all time. Take it away Arthur:

Have you ever wondered what affect your friends have on your finances? Have you ever thought about how your self-worth affects your income? If so, then I think this post will resonate with you. I’m going to share a genuine example of how expanding my network and peer group increased my wealth – all without spending a dime . . .

Upon college graduation, my two closest friends and I hit the pavement interviewing for jobs. After several months and countless interviews, Sal was the first of us to receive a job offer at $38K a year!

Now, you’re probably rolling your eyes and saying to yourself, that’s not a lot of money, big deal. But to us, it was a very big deal. To truly appreciate this situation, you need a little more context. Sal’s mother only made $20K as a housemaid while his father made about $30K a year in customer service.

My father made about $35K a year as a warehouse foreman while my mother (the breadwinner) made a whopping $42K as a recreational coordinator for the city. Our other friend, Joey, had a similar story: his father made $44K as a public school teacher while his mother made $15K as a teacher’s aide.

What impressed Joey and I about Sal’s job offer was that, at 21-years-old, he would be making the same or more than our parents!

A few weeks passed and Joey received a job offer at $29K, but then something interesting happened: he didn’t take it. That same week, I received a job offer at $28K and I too passed on it. To make a long story short, after a few more weeks of interviews, I landed a job earning $36K while Joey accepted an offer of $43K.

What’s the moral of this story? My point is that, just like in the scenario above, people tend to look to their social reference group when making lifestyle choices. As I’ve gotten older, this concept has only become more apparent.

Stop for a moment and consider your closest friends’ annual incomes. Is it a coincidence that they earn similar salaries? The reality is this: the people we spend the most time with become our measuring stick for financial success.

Meeting Tony

After a few years of living in the real world, I (like most of you) learned that $36K is not a lot of money, at least not for the lifestyle I aspired to. It wasn’t until I met someone with a high net worth, a customer named Tony whom I got to know through my day job, that my perspective on money and investing was transformed.

Over the course of two years, we got to know each other rather well. During that time, we had many conversations on life, business and of course, money. He enjoyed talking about his interests in rental property and passive income. Up until that point in my life, I never really considered earning income outside of my day job. And although my parents gave me as many opportunities in life as they could, they didn’t know much about investments or passive income, unless you counted the lotto.

On the contrary, the advice I received growing up was fairly common for a middle-class kid: get a good job and work hard. This left me with only two feasible options: get a promotion or work more hours to increase my salary.

Over the course of many conversations I had with Tony, I started to develop an interest in buying rental property. After sharing this epiphany with Tony, he insisted that I speak with his friend, Ronnie. Several weeks passed and a meeting was set.

The big meeting finally arrived and I spent the better part of two hours picking Ronnie’s brain. He talked

to me about everything from buying his first property, to selling half of his portfolio and becoming a multi-millionaire. I wish I could sum up the conversation with one key take-away, but there really wasn’t any one thing. The only thing I could definitively say is that Ronnie was an average guy, and that after leaving from our meeting, I no longer felt that attaining his level of wealth was out of my grasp.

This leads me to the main point of today’s post: the way to increase your net worth without spending a dime is to broaden your social network. As I mentioned before, the people around you influence your decisions and moreover, your perception of what you think is possible.

Ask yourself, who do I surround myself with? Are these individuals going to help you attain the next level of wealth you desire? Of course, I’m not suggesting that you rank your contacts solely on what they can offer you; however, you do need people capable of educating you in areas that you may not be familiar with in order to grow.

So if you agree that you stand to benefit from expanding your social network, you’re probably wondering, how do I do that? Especially since, as adults, most of us don’t meet people as frequently as we did in high school or college. While there are countless books and tips on networking, I’m going to outline three genuine tips that have worked for me and should be simple to apply to you daily life as well.

1. Search the outer rims of your personal network – Chances are the people closest to you won’t be able to introduce you to the people you need to meet. Why? Most likely, you know nearly everyone in their immediate sphere of influence. Therefore, the people with the highest probability of introducing you to new contacts exist in the outer edges of your friendship circles, such as:

* Acquaintances: Co-workers, church congregation, gym members and extended family relatives.

* Professional contacts: Real estate agents, lawyers, accountants, financial planners, mortgage lenders and people you are servicing (like Tony).

* Friends: Relatives, co-workers and roommates of close friends.

The goal is to let these individuals know what you are trying to accomplish. If you want to learn more about investing in rental property or starting a blog for instance, ask people if they know anyone who has successfully done this. Then, see if they can put you in touch with someone they know. You’ll be surprised by how willing people are to assist you once they know what you are looking for.

2. Go where they go: Where do the people you are trying to meet spend their time? If you are trying to learn how to develop another income stream via blogging, then you need to spend time where the pros are spending time. What seminars and classes do they take? What social clubs are they apart of? What websites and online forums do they browse?

Your goal should be to meet them in their natural habitat (both online and on-ground) and make connections. Get their contact information, offer to take them out to lunch or get them to agree to give you a 10-minute phone call. Prepare a set of questions in advance and don’t waste their time. Successful people love to pay it forward when they feel that the information won’t be wasted effort.

3. Be Sticky: Lastly, stay in touch. If you are going to all the trouble of making a new contact, find an effective way to stay in touch with them, such as:

*Cards: send a thank-you card following  your conversation; maybe include a $5 Starbucks card. Trust me, this goes a long way. You can also do this with holidays and birthdays.

*Sending resources: This is an easy way to add value and stay on their radar. If you see an article or a book that may be of interest to them, send it their way with a friendly “hello”. Of course, don’t bombard them with something every week, but every other month is not a bad idea.

*Phone calls: Get in touch every so often and let them know how you’re applying what you’ve learned and ask for more applicable advice (tactfully, of course).

Closing Thoughts

Since meeting both Ronnie and Tony, I’ve gone on to purchase multiple rental properties over the past two years; and while I’m not yet in a position to walk away from my full-time job, I’ve started to build a sizeable monthly income from the positive cash flow.

I’ve kept in touch with both Ronnie and Tony over the years (as they continue to be valuable mentors), but having applied the above networking tips, I’ve also been able to meet other quality contacts who havecontributed to my personal success and overall well-being.

What about you? What are going to do to expand your network in 2012? Do you have anyone like Tonyor Ronnie in your life? What do you do to stay in touch with these folks?

 Posted by Nelson Smith at 4:20 am

Playing With The House’s Money

 Big Picture Stuff, Stocks  4 Responses »
Feb 062012
 

As I settled into my seat at the blackjack table yesterday ($5 minimum, because I’m a high roller) I made note of the people sitting around me. There were the two cute blondes seated to my right, pretty much the whole reason I picked that particular table. Naturally, they left after about 4 hands. To my left was a young black man, who didn’t know the proper blackjack strategy, but was making up for his ignorance by betting much more than the minimum bet. He often had $25-$50 riding on a single hand.

What was more interesting was his attitude about his chip stack. Once his original $100 was converted to chips, he clearly didn’t think of it as money anymore. He made reckless decisions, like putting all his money at risk a couple times when he got low on chips. These decisions actually worked out well for him, as he left the table with about $300. This was a lot more impressive than my meager $22 profit.

As I watch my fellow gamblers, I find they almost universally make one psychological mistake, one that’s made by all sorts of investors. When they’re making a profit, they view that profit as somehow not belonging to them. They say they’re playing with the “house’s money,” which implies they don’t really consider it a profit. It’s no surprise gamblers are guilty of this, gambling is hardly an activity rational people think they have profit from. But investors often make the same mistakes.

How many investors do you know who actually sell when things skyrocket in value? Take gold for an example. If you bought the shiny yellow metal a few years ago, you’re basically swimming in profits. If you bought enough of it, you could buy some hooker love for a very long time. This would be a waste of money because all you need is 5 minutes, but I digress.

Instead of selling, many gold investors are pounding the table for even higher gains. You’ve all heard the reasons why we’re apparently in the greatest gold bull market of all time. Governments are printing money like crazy, which will inevitably lead to hyperinflation for some reason. Europe is a mess right now, but once America and Japan follow into the debt abyss, gold will really spike. Blah, blah, blah.

Why don’t these gold investors take money off the table? If you’re bullish on other hard assets, you can diversify into U.S. real estate, a beaten up sector that really only has one direction to go. Or you can buy natural gas, a commodity which is bound to get more attention as a green fuel as time goes on. Hell, even oil is a smarter bet here than gold, especially if all this tension with Iran ever gets past the tension point. Iran, such a tease.

The reason gold bugs can be still bullish on gold is because they’re playing with the house’s money. They’re up considerably, so they can afford to take some risks. And one of those risks is continuing to buy gold or it’s less sexy cousin, silver.

Maybe it’ll work out for them, but it probably won’t. These are the same people who were calling for $200 oil back in 2008, higher real estate prices in 2006, and for the tech boom to go on forever in 1999. They get caught up in the moment, not realizing that they should sell when they’re up big. A profit doesn’t become a profit until you sell the investment. Too many people are reluctant to sell because they don’t see the profit as belonging to them. All it looks like is numbers on a piece of paper or a computer screen to them.

Don’t fall victim to this psychological trap. And I think I have a way of protecting you. It’s all about setting targets.

Firstly, I don’t really care for stop losses. For the unaware, a stop loss is a price you set that will automatically sell a stock. Say you buy shares of Nelson Inc. for $10 a share. Nelson Inc. in is the blogging, prostitution and gambling business, in case you’re wondering. You want to protect yourself, so you set a stop loss at $9 per share. Once the stock hits $9, it automatically gets the punt.

So 3 weeks after you buy, Nelson Inc. is down to $9.15 per share. After the market closes one day, news comes out that one of my hookers has gotten syphilis. Obviously, this isn’t good news. So the next morning, the stock opens at $7.50. Guess what price your stop loss would have kicked in at?*

a) $9.00

b) $7.50

c) Impossible to tell

Multiple choice quizzes are fun!

Instead of setting up your account to automatically do your selling for you, all you need to do is set targets in your head. If you liked Nelson Inc. at $10 a share, you’d probably like it even more at $7.50. Take some time to digest the news and to figure out if it’s really that bad, or if it’s Mr. Market overreacting again.

It’s the same thing with setting a sell price. Considering I like to pick contrarian investments, I often have sell targets that are 200 or 300 percent higher than the current price. What I do is look at the range where the stock traded at its highs, then pick a number at the bottom of that range. I know that a stock reaching it’s former trading range is a lot easier than a stock making new record highs.

If you set a sell target before the stock ever gets there, you’ll be less likely to fall into the trap of being greedy when the time comes to sell. Now if you’ll excuse me, I have a fortune to go make at the blackjack tables.

*The answer is actually c, but in reality would end up being close to b.

 Posted by Nelson Smith at 11:25 am

Why Are People Scared To Be Rich?

 Big Picture Stuff  4 Responses »
Jan 312012
 

If you’re not reading the Carnival of Wealth put on by Control Your Cash every Monday, you are truly missing out. Most carnivals are as boring as the 14,389,452 personal finance posts about coupons. THEY ALL SAY THE SAME THING, YET YOU PEOPLE INSIST ON CONTINUING TO WRITE THEM. CYC actually reads each post they get in, and dispenses either praise or scorn, depending on the quality of the post. It’s entertaining, it’s legitimately funny, and it’s at least 79% better than every other carnival I’ve read, excluding the ones I’ve written, which are better than a threesome with two hot chicks while eating a cheeseburger at the same time.

While reading said carnival yesterday, I was brought to a certain blog post. There’s no need to link to the specific article, since a full half of personal finance blogs have written something similar. Stop me if you’ve heard this one before.

Do you know what true wealth is? No silly, it’s not living in a nice house, or driving a nice car, or even owning assets that spin off enough investment income so you don’t have to go work for the man anymore. Nope. Moron. Wealth is being able to spend time with your friends. Wealth is spending time doing things you enjoy with the people you love. Wealth is being able to watch the sunset with your significant other. It’s all so sickeningly sweet.

With apologies to all one of you that’s still offended by bad words, (Hi Mom!) fuck the heck are you talking about man?

First of all, that’s not the definition of wealth at all. Wealth is purely a financial statistic. You may feel blessed that you’re able to enjoy a lemonade on your patio with your friends, but if you’re swimming in credit card debt, you’re some non-wealthy guy who happens to be drinking lemonade. Being lucky enough to enjoy meaningful experiences isn’t really belonging to an exclusive club either. Most of us manage to get close enough to people to do meaningful things with them. Being wealthy is meant to be an exclusive club, since it’s a representation of all the hard work you’ve done to get there. Or the hard work someone else has done to get there, if you’re an heir.

We all have different definitions of wealth. Some people think you’re wealthy if you have a net worth of above $1 million. Others think the magical threshold is if you can afford to quit your job and live on your investment income. Then you have the guy who thinks being wealthy is simply the ability to be able to have nice things, even if you finance them. Don’t listen to that guy. In fact, kick him in the nuts for me.

Have you ever heard the expression “I’d rather be happy than rich?” I’m sure you have, it’s been said by poor people for years now. I have all sorts of problems with that saying. First off, why do the two have to be exclusive? Isn’t is possible to be both happy and rich? How many rich people do you know who walk around brooding all the time? Sure, they have bad days just like the rest of us, but every single rich person I know is generally a pretty happy person. Guess what – their wealth doesn’t inhibit their ability to be happy.

If you’re a poor guy who’s looking for a closer relationship with your parents, or true love, or whatever, you’re going to be kinda bummed out about it. So you’re telling me that a rich guy looking for the same is somehow more sad because he’s got money in the bank? Yeah, no.

Whenever I hear people throw out sayings like that, I know they’ve given up on becoming wealthy. Maybe they just don’t have the knowledge to get ahead. Maybe they’re not willing to put in the work to get ahead. Or maybe they just don’t even think it’s possible. They look at their meager RRSP and throw up their hands. They’ll never get anywhere at that pace. So they give up, get into debt, buy more house than they can really afford (at least they’ll save money with a home insurance quote) and do whatever else they can to effectively shoot down their ability to grow wealth.

People who think that wealth is non-monetary are a big part of the problem. If everybody thinks that being wealthy is playing checkers with your nephew, then that’s all anybody will aspire to do. Getting wealthy is hard, yes. But so is anything worth doing in life. When you liken it to some sort of experience, you cheapen the word and all the work it takes to get there. Acquiring wealth is hard. Having fun with your friends isn’t. Don’t be ashamed to be rich. Don’t be scared to be rich.

And just think of how much better those experiences will be when you don’t have the underlying worry of having enough money.

I’m not saying acquiring wealth should be the be all and end all of your life. But if it isn’t, don’t justify like that. And don’t pretend you’re actually wealthy because of some experiences you’ve had. You’re just not that important.

 Posted by Nelson Smith at 4:20 am
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