Protecting Poppy
Kyle McIntosh | Sep 9, 2021
OUR DOG LIKES SOCKS. A few months after Poppy joined our family, she consumed her first sock. Since then, she’s eaten two more. After the first sock was removed, our veterinarian offered some valuable advice: Get pet insurance because Poppy is likely to do this again. Within a few days, we purchased a policy from Healthy Paws for $38 a month. The policy has proven valuable: We’ve had four other unplanned trips to the vet over the past 21 months. For those considering pet insurance—especially first-time pet owners—here’s why I’d recommend coverage: Ease of use. Everything with Healthy Paws is done through a well-designed app. It was easy to sign up and submit claims. For costs you incur, you simply take a picture of the invoice. It’s then reviewed within a few days. So far, there’s been no pushback on charges we’ve submitted and the insurer has always paid claims—net of deductibles—within a few weeks. Straightforward coverage. I often hold my breath when I receive a medical bill for our family’s health coverage because I’m never sure what’s covered. By contrast, Healthy Paws makes coverage easy to understand. We have a deductible of $250 per year. After that, pet insurance covers 80% of most charges. So far, all tests, treatments and prescriptions have been covered. Good return on investment. We saw pet insurance as a safety net that would provide peace of mind. We never thought we’d see a positive return on investment. But so far, our premiums have been $800, while the insurance has covered $1,500 in claims. That recovery rate of 188% is well above the industry average of 70%. We hope our recovery rate is much lower in the future. That said, it’s good to know we’re covered if Poppy gets a hankering for another sock.
Read more » My SPAC Experience
Kyle McIntosh | Jun 23, 2021
SHAQ AND A-ROD have gotten involved in special purpose acquisition companies, or SPACs, one of the hottest products on Wall Street over the past year. I got there a few years earlier. In 2018, I invested $5,000 in a SPAC that has since underperformed the market. Still, I got some hands-on experience ahead of the 2020-21 boom. Thinking of buying a SPAC? Based on my investment, here’s what you can expect. Tom Farley isn’t a household name like Shaq or A-Rod, but he is a star in the field of business—and he was one of my classmates at Georgetown University. I’ve watched his career as he rose from being an investment banker in the late 1990s to become president of the New York Stock Exchange in 2014. In 2018, Farley left the NYSE to lead a SPAC called Far Point Acquisition Corp. After reading Far Point’s prospectus, I purchased 500 shares at the offering price of $10 per share. The prospectus indicated Far Point would target companies to acquire in the “financial technology, technology or financial services industry.” While this approach seemed compelling, I was mainly investing in Far Point based on the track record of its sponsors, including Farley. My view: When investing in a SPAC, you should focus on finding a team of sponsors who can identify an attractive target and successfully complete an acquisition. As with most other SPACs, Far Point had 24 months to identify an acquisition target. If Far Point’s sponsors couldn’t identify a target during that time, they would return the funds invested to shareholders. For most of the first two years I held Far Point, there was limited news about the company and there was little change in the company’s stock price. Of the 548 trading days between the company’s IPO (initial public…
Read more » Driven to What?
Kyle McIntosh | Mar 10, 2022
IN THE FIRST WEEK of March, prices for regular unleaded gas sprinted past $5 per gallon in Ventura County, California. Last week, a station I pass on my way to work increased its price three times in 36 hours. Before work on Thursday, March 3, the price was $4.89 per gallon. By the end of that same day, the price was up to $5.09. When I left work on Friday, March 4, the price had been jacked up again, this time to $5.29. As I write this post on Wednesday, March 9, the price has ticked up to $5.69 per gallon. That’s an increase of 80 cents, or 16%, in less than a week. The last time I saw prices over $5 was July 2008. While I don’t remember adjusting my habits when prices hit $4 or $4.50 in 2008, there was something about the $5 threshold that led me and many others to change our daily routine. With 2022 prices looking like they’ll be over $5 per gallon for an extended period, I’m curious to see when and how consumers will change their behavior this time around. Here’s what I’ll be watching for: Wading into the carpool. In 2008, I commuted 50 miles roundtrip. While I lived close to a handful of my coworkers, we all preferred to drive solo most days. But when prices touched $5 per gallon, a group of us started to carpool a few days per week. With continued COVID worries and many people working remotely, carpooling options may be limited in 2022. But if prices continue to rise, I suspect many will start sharing commute time with others. Pricing SUVs. In 2008, demand for gas-guzzling sports utility vehicles dropped dramatically in our area. I had two friends who sold Ford Expeditions around this time. Both…
Read more » Last-Minute Selling
Kyle McIntosh | Dec 23, 2021
THIS IS THE TIME of year when many folks rush to purchase last-minute gifts. Not me. While others are out buying, I’m at home selling. You see, this is when I make moves in my brokerage account to limit my tax bill. What have I been up to? First, I logged on to my Schwab account and reviewed my year-to-date realized gains and losses. I had generated $8,000 in long-term capital gains earlier in 2021 by selling an appreciated exchange-traded fund. While I knew I was generating a gain at the time, I postponed any tax-loss selling—until now. My next move was to look across my portfolio for any unrealized losses that could offset my $8,000 gain. Fortunately—although, at the same time, unfortunately—I was sitting on a sizable unrealized loss from a hotel-focused real-estate investment trust. I made the most of this negative position by selling a portion to fully offset the capital gain generated earlier in the year. Now, I’m contemplating selling more of this position to have a net capital loss of $3,000 in 2021. A net capital loss of up to $3,000 can be used to offset ordinary income. My final step: Think about next year. In my case, I won’t have a material change in my income next year, so I’m not making any further moves in 2021. The situation is different for a close friend whose portfolio I recently reviewed. She’ll see her 2022 income spike because of a capital gain from a pending real estate transaction. Because of that gain, any capital gains from portfolio moves in 2022 will likely be taxed at 20%. As she’s looking to diversify away from stocks, she decided to take some gains in 2021 on a heavily appreciated S&P 500 fund. By making this move in 2021, she…
Read more » Kids These Days
Kyle McIntosh | Dec 15, 2021
A FEW WEEKS BACK, Jonathan Clements wrote an article reminding readers that they, too, likely made financial missteps in their younger days. His article was in response to comments by HumbleDollar readers about the perceived lack of financial discipline shown by those currently in their late teens and early 20s. Before my recent career change, I would’ve had the same opinion as many readers. With my new job teaching accounting to undergraduates, however, my perspective has changed. While it’s hard to ignore the pricey lattes accompanying many students to class, I’m bullish on the financial future of today’s college students. First, most students are hustlers. Because of the high cost of college, students often work one or more jobs to help pay for college. I have one student who closely monitors his DoorDash app and knows the optimal times of the week to jump in his car to deliver food. This DoorDash driving is on top of his other work and athletic commitments. I also see students taking advantage of internship opportunities. Given the tight labor market, there’s high demand for student workers among local businesses, especially in accounting. I have one student who will have two paid internships during the spring semester. Instead of relaxing because of a lighter-than-usual course load, she’s ramping up the experience—and income—she’ll collect before she graduates. Another trend I’ve seen: Students are much more interested in stock investing than I was as an undergraduate in the 1990s. I’m regularly approached by students who want to learn how to read financial statements and do fundamental stock analysis. I recently had lunch with a freshman who was keen to learn about the meaning of price-earnings ratios and dividend yields. This student now researches stocks and sends investment ideas to me on a regular basis. A final heart-warmer…
Read more » Betting Against
Kyle McIntosh | Nov 24, 2021
I’M USUALLY BORING when it comes to investing. My portfolio is mostly comprised of stock and bond index funds. I dabble in individual stocks when I come across something I see as interesting, but individual stocks have never made up more than 5% of my portfolio. I currently hold just three individual stocks amounting to less than 2% of my investment holdings. While my interest is occasionally piqued by stocks with upside potential, I’m more often drawn to companies I see as having significant downside. This glass-half-empty orientation likely reflects the professional skepticism that comes with being a CPA. I’ve never acted on my bearish instincts—until now. Recent developments at Peloton Interactive (symbol: PTON) have led me to wager that the stock will continue declining. I’ve followed Peloton closely for years. I love its product. But a series of management missteps have caused me—and many others—to become bearish on the stock. The company’s troubles have included bungling a product recall and unexpectedly bad financial performance. The last straw for me: Peloton recently raised $1 billion through a stock sale—just two weeks after the company’s chief financial officer indicated such an infusion of capital was unnecessary. To act on my bearishness, I decided that buying a put option was the most prudent approach. Unlike shorting a stock—which has an unlimited downside if shares rise—a put option limits my possible loss to the premium I pay for the put. After considering the array of options available, I paid $200 for a put that gives me the right to sell 100 shares of Peloton at a “strike price” of $35 a share in April 2022. There’s a wide range of possible outcomes for this option position, but I’ll give two possibilities. If the stock trades above $35 in April 2022—which is likely, given…
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