January 03, 2008

What's been in my ears Lately, whenever I turn on my iPod, it's to listen to one of three things: Adam Carolla Ken Burns' Jazz Bill Simmons' iMixes We'll go through them one at a time. Adam Carolla's radio show can be downloaded automatically through iTunes, one segment at a time, commercial-free. His style of comedy is not for everyone, but I think he's a genius. Not only is he great at pointing out hypocrisy, like when he rants about how he hates the lottery, but he's also got a very inspirational rags-to-riches story, a community college dropout who fought his way into fame by working his ass off. There's a great LA Magazine article about him, with a quote I think about a lot. He said: “It’s action that matters. If you don’t like your life, change it. You can change your life. You may feel the same, but if you change your behavior, you will be different.” Ken Burns' jazz collection has served as a terrific introduction to the world of jazz for me. I've been reading about the genre lately, and intending to listen to more of it, but I didn't know quite where to start. It's intimidating to me, like Starbucks was before I figured out that "venti" meant "large". I'm sure that a year from now, I'll have a good sized collection, and I'll know what I'm talking about, but it's a scary new world to me at the moment. Bill Simmons is my favorite sports writer, but he also has extraordinarily eclectic taste in music. Whenever he's written about music in the past, I almost always either don't agree with him, or don't know the bands he's talking about. However, he does brag that he always controls the iPod on long car rides with his family or friends, so maybe he's onto something. He mentioned in a column once that he'd put together a few iMixes on iTunes, and when I checked them out, I'd never seen any of the bands before. I was going for a long walk the other day, and downloaded one of them to try it out. It's actually pretty good, and it's not stuff I'd have ever heard otherwise.
My real estate investing beliefs that get me in trouble How many times have you heard someone say: "Owning real estate is better than renting because, when you rent, you're throwing money away." It's such a common sentiment, it can actually be awkward if you try to offer a dissenting view point. The problem is, the conversation quickly gets heated in many cases, because the person with whom you disagree has usually made a significant financial investment in real estate, and they want to defend that investment. Because I'm relatively young, and haven't invested in real estate, I'm quickly labeled as naïve. Well, I have reasons for the way I feel, and here they are. There are 6 situations where I think a real estate investment makes sense, and none of them involve avoiding "throwing money away". There's some overlap, or, as we would say in consulting, this list is not M.E.C.E. (mutually exclusive and collectively exhaustive): The home you want to live in, has no equivalent that can be rented. For example, there aren't many $10M homes that can be rented. If that's where you want to live and you can afford it, buy it. If you want to live in the building right next to your office to have a walking commute, and that building only has condos for sale, it may make sense to own. Your investment portfolio can absorb the down payment without being overwhelmed. If the $40K down payment on an urban condo is a reasonable % of your portfolio, it can be a great form of diversification, as real estate and securities are somewhat uncorrelated (+0.24 r-squared between US REIT's and the S&P, according to Investopedia). You can get a lot of the benefits of exposure to real estate through financial engineering without actually owning a home (e.g. buying into a REIT), but home ownership preferred by many. You have a unique opportunity that looks HIGHLY likely to prosper. If you have a friend with a lengthy track record of success, who offers you the opportunity to join him in a project, perhaps that deserves a disproportionate allocation in your portfolio. The key is, anytime you're buying real estate, someone else is selling. What do you know that they don't? If your friend is letting you in on his project, is it because he needs capital, or because he sees this as riskier than previous projects? If someone needs to move in a hurry,...


I'm a Sox fan first and a Harvard Business School student second.

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