Top 5: Silver lining benefits of coronavirus

Just like you, the Fox family has had to hunker down as we go through this crazy time.  I haven’t been able to write a post lately because of a little thing called . . . homeschooling.

Since we’re fully invested, we’ve lost about one third of our net worth, in line with the overall market decline.  In addition to homeschooling we’ve been on pretty much full lockdown in North Carolina.  A bit more trivially, I am missing out on the NCAA tournament which I had tickets to and I’m totally bummed that the NBA season is done since I love watching basketball.

With all that negativity, it’s important that we do try to stay positive and embrace the upsides that might come from all this craziness.  Here are my top 5 investing/financial benefits that could come from the coronavirus experience.

5.  The internet:  Everyone knows the internet is bigger than ginormous, but it has really shined.  With homeschooling I’ve made a lot of lessons by using the limitless free resources other parents and schools have made available online.  The cubs and I do science and geography lessons everyday and youtube is an amazing resource for that.

Foxy Lady and I have been watching shows on Amazon Prime.  Given how much we order off Amazon, Prime would be a given anyway, but with the shows we’re basically getting Netflix-lite for free.  As it is, Prime comes out to about $8 a month which seems a screaming bargain.

Pretty much every public library in the country offers access to download an enormous collection of books for free.  I haven’t bought an actual book in probably 10 years, and I haven’t read a physical book in over a year; I just get any book I want for free on my tablet through my library.

Of course, we knew all this, but I think the pandemic has really highlighted how much is out there and how much is for free.  It’s truly astonishing.  INFLATION KILLER.

4. Online grocery shopping:  When we moved down to Charlotte we were near a Walmart that allowed for online grocery shopping and then you would pick up your order at the store.  It’s not home delivery (I think they were just going to start this before the pandemic hit), but it’s still pretty sweet. 

I love this way of shopping, and Walmart loves it too.  Our grocery bill has actually gone down because we don’t have impulse buys and we don’t buy things we already have (I am terrible with that when it comes to cucumbers for some reason).  Walmart loves it because it cuts down on people they need in the store, theft, damage to merchandise, and a lot more.  Everyone wins.

With all the social distancing, I’d like to see this promoted more.  Think of all the infected people who come shop, touch different stuff, and get others sick.  A grocery store is the most necessary of stores right now so we can’t shut them down, but they are also one that is infecting people the most.  Why can’t states say if you buy online and pick up without going into the store your order won’t be charged sales tax?  That would be a helluva bargain compared to shutting down entire swaths of the economy.

Long-term if more and more people do that, grocery stores can turn into distribution centers that run much leaner—less space, less people needed.  They save money and pass that on to us.

3.  Euthanizing zombie retail:  The pandemic will bankrupt a lot of companies.  Broadly, that’s a sad thing, since some of those are going to be good companies that just got swept up in this tsunami.

But there are a lot of companies that will go under that should go under.  They are crappy companies with crappy business models selling something that customers don’t want.  Go to a local mall and you’ll see a ton of them.  Right now they’re dying a slow death and the chances of them making it are zero.

This business cycle will “put them down” and free up that space, those workers, that capital to be used on businesses that do make sense and can work. 

2. Changing teaching:  Schools closings have forced us to use a completely new paradigm for teaching our students.  Actually, the approach to teaching has largely been unchanged for a couple thousand years—students go to a school, listen to a teacher who stands in the front of the room, and there you go.

Sure, in my lifetime, technology has made some inroads, but compared to other industries the impact has been pretty muted.  Look at the role technology plays in your kid’s classroom (pre-virus) compared to the role it played when we were kids.  Now look at how technology has totally transformed other industries—purchasing airline tickets, watching movies at home, consuming breaking news, listening to music, trading stocks, looking up any possible bit of information you’d ever want to know, and on and on.

I’m not saying schools in their current form should be abolished, but there is absolutely a compelling case to make major change.  Should there be more home learning?  Better distance interaction (see #1)?  I don’t know the exact answer, but I do know that this experience will show that there is a ton of opportunity for improvement—better educational outcomes costing less money.  Like always, those that drive that improvement will make tons (the US spends about $700 billion on education).

1. Video-conferencing:  As I mentioned here, I think there is a ton of potential for video-conferencing to really transform the world in a positive way.  Most of corporate America has been told to stay home and telecommute.  We still have meetings, still need to interact with people, and still need to get business done.  Now we just need to do it remotely instead of face to face.

This is the major opportunity for video conferencing.  Right now the technology is kludgy.  It’s no where close to what is necessary to make it a seamless substitute for those in-person meetings.  A few of my nerd friends and I got together for some Dungeons and Dragons action, and it was not ideal (I’d give it a C-).

However, once the technology comes in the demand seems unlimited.  It will create so much value (think about not having to take a two hour, $500 flight for a 60-minute meeting).  It will also make collaboration SO MUCH more productive.  I said this could be a trillion dollar opportunity, and now in the teeth of coronavirus, I think I might have underestimated it by 2-3x.

So there you have it.  It sucks what we’re all going through, but we will get through it as a society, no question.  More specifically, as investors we’ll come out of this stronger than before; I absolutely believe that.  

How much stock should you have in the company you work for?


A common question investors have is “How much of my investments should be in my company’s stock?”  Many of us work for publicly traded companies (Stocky worked for Medtronic and Foxy Lady used to work for VF).  Many of those companies include stock as a significant part of their employees’ compensation.  So what is an omnivore to do?  The short answer is: Don’t invest a lot in your employer.

It adds up

The general thinking among companies is that it’s good for their employees to own company stock.  It motivates them to work hard, so then the company does better, which then raises the stock, and that finally makes the employee richer.  See everyone wins.

My sense is that before 2000 compensation in the form of stock was much more prevalent.  I can speak to my experience at Medtronic:  The default for your 401k investments was Medtronic stock.  When they did the 401k match, the match was in Medtronic stock.  They also have a program where you can buy Medtronic stock at a 15% discount compared to the market price.  You had the option to take your bonus in cash or get a larger bonus in Medtronic stock options.  Long-term incentives are given in stock and options.  High performers can get awards of stock or options.

What difference can you really make?

The company wants you to do it because collectively if a lot of their employees own stock, they are probably motivated to do better.  But as an individual, what difference can you really make?  I know that sounds anathema, like when people say they don’t vote because one vote doesn’t make a difference (I do vote in every election, but the way).

Let’s think about that for a minute.  Stocky worked at Medtronic, a company which has about 50,000 employees and earns $20 billion each year.  Actually, I think I did really good work, and let’s imagine that because I worked my furry little tail off, I was able to develop programs that led to an extra $2 million in sales.  That’s a lot actually (I think I might have been underpaid), but compared to the bigger picture, that such a tiny drop in the bucket that it wouldn’t affect Medtronic stock in any possible way.

On the other hand, if I bust my tail and work hard, my bosses will see that and I’ll get a raise and a promotion.  That’s where the real upside for me is.  Not in the impact on the stock.  I’m sorry to say that, but it’s true.  The payoff in owning stock (compared to owning a diversified mutual fund) just isn’t there.  But the downside is very real if things don’t go well (more on this in a second).

Since Medtronic is a really huge company, maybe an individual can’t make much of a difference.  But wouldn’t an individual employee be able to have a bigger impact on the company’s stock if they were at a smaller company?  Maybe it makes sense for people in smaller companies to own more of their company stock for that reason.

The logic is sound—certainly if you work at a smaller company your individual contributions will have an outsized impact.  But the negative is that your risk goes up as well.  Larger companies tend to have greater margins for error when things go bad.  If you’re in a smaller company, the risk of bankruptcy or some other catastrophic event with the stock is so much higher.  And remember, as an investor you’re looking to lower risk not raise it.  So with all this I don’t the think argument for an individual to be a shareowner so they can drive the stock upwards holds a lot of weight, especially when you compare it to the downside.

What happened to loyalty?

If you own a lot of your employer’s stock, you’re violating the first rule of diversification.  The whole point of diversification is to make sure that one company or one sector or one “something” can’t hurt you too much if everything goes to hell.  Think about that with your own company.  The single most valuable “financial asset” you have is probably your career and the future earnings that go with that.

Now imagine that something goes terribly wrong with your company (a product recall, losing a lawsuit, missing the boat on a market trend, etc.).  If you’re an employee that sucks because you’ll probably get smaller bonuses and raises; at the extreme you might get let go.  If you’re a shareholder that sucks because the value of your stock will go down.  If you’re an employee and a stockholder you get the double whammy.  That is what diversification is trying to save you from.

But wait a minute.  I can hear some people say stuff about loyalty and having faith in your company and putting your money where your mouth is.  To that I say “hooey”.  If you’re working hard every day to help your company succeed, isn’t that loyalty and faith?

Remember that your portfolio is ultimately meant to support you in your life’s goals.  For most of us that probably means securing a comfortable retirement.

Just to put things in perspective, every year a few stocks that get removed from the S&P 500 because of “insufficient market capitalization”.  That is French for “the stock went down so much the company wasn’t considered S&P 500 material any more.”  7 stocks out of 500 doesn’t seem like a lot but that’s about 1.5% of the entire index.  And remember that the S&P 500 as a whole was up 29%!!!  That was an awesome year for the entire index, yet still 7 companies couldn’t make the cut.  Imagine what would happen in an average year or even a bad year.

Let’s think about the fate of the employees at those companies for a second.  Being kicked off the S&P 500 is a bit of a slap in the face so you know things at the company aren’t good.  There’s probably a lot of things happening like stores closing, people being laid off, salaries being frozen, moratoriums of new hiring so the existing employees have to work more.  Just a bunch of bad stuff, right?  So if you’re working there life probably isn’t awesome, and the idea of polishing up your resume is probably pretty top-of-mind.

Now imagine all that is happening while a big portion of your portfolio is taking a dive (remember, these companies got booted off the S&P 500 because their stocks went too low).  Ouch.  That is definitely rubbing salt in the wound.  In the investing world managing risk, and minimizing it where you can without impacting your return, is super-duper important.  When you own a lot of stock in your company, you’re just taking on unnecessary risk.

So there we are.  There’s definitely some romantic notion of owning stock in the company you work for.  It seems like the right thing to do.  But you’re just taking on risk needlessly.  My advice is that you should really keep that to the absolute minimum.  In the Fox household, we sell the Medtronic stock when we can.  It’s not that we don’t think it’s a great company (it is) or we don’t have faith in its future prospects (we do).  It’s just we don’t want to bear the risk that something really bad could go down, leading to me possibly losing my job just as your portfolio is doing a belly flop.

How much of your portfolio is of your company stock?

Should you invest in gold?

Long before there were ever stocks or bonds, the original investment was gold.  Heck, even before there was paper currency or even coins, gold was the original “money”. 

That begs the question, What role should gold have in your portfolio?  If you don’t want to read to the end, my quick answer is “None”.  However, if you want to have a bit of a better answer, let’s dig in.

Gold as an investment

Just like stocks and bonds, gold is an investment.  The idea is to buy it and have it increase in value.  Makes sense.  And historically, it seems to have been a good one—back in 1950 an ounce of gold was worth about $375 and today it’s worth about $1300.  Not bad (or is it???).

However, there is a major difference between gold (and broadly commodities) as an investment compared to stocks and bonds.  Gold is a store of value.  If you buy gold it doesn’t “do” anything.  It just sits in a vault collecting dust until you sell it to someone else.

That’s very different from stocks and bonds.  When you buy a stock that money “does” something.  It builds a factory that produces stuff or it buys a car that delivers goods or on and on.  What ever it is, it’s creating something of value, making the pie bigger.  That is a huge difference compared to gold, and it’s a huge advantage that stocks and bonds have over gold.  You actually see that play out by looking at the long-term investment performance of gold versus stocks.

Golden diversification

Statistically speaking, gold gives an investor more diversification than probably any other asset.  We all know that diversification is a good thing, so this means that gold is a great investment, right?

Well, not really.  Stick with me on this one.  Gold is negatively correlated with stocks (for you fellow statistics nerds, the correlation is about -0.12).  Basically, that means when stocks go up gold tends to go down, and when stocks go down gold tends to go up. 

Over the short term, that’s probably a pretty good thing, especially if you want to make sure that your investments don’t tank.  In fact, that’s one of the reasons gold is sometimes called “portfolio insurance”.  It helps protect the value of your portfolio if stocks start falling, since gold tends to go up when stocks go down.

However, over the long-term, that’s super counter-productive.  We all know that over longer periods of time, stocks have a very strong upward trend.  If gold is negatively correlated with stocks, and if over the long-term stocks nearly always go up, then that means that over the long-term gold nearly always goes (wait for it) . . . down.

That doesn’t seem right, but the data is solid.  Look back to 1950: an ounce of gold cost $375.  About 70 years later, in 2019, it’s about $1300.  That’s an increase of about 250% which might seem pretty good, but over 70 years that’s actually pretty bad, about 1.8% per year.

Contrast that with stocks.  Back in 1950 the S&P 500 started at 17, and today it’s at about 2900.  That’s an increase of about 17,000%, or about 7.7% per year.  WOW!!!

Just to add salt in the wound, inflation (it pains me to say since I think the data is suspect) was about 3.5% since 1950.  Put all that together, and gold has actually lost purchasing power since 1950.  Yikes!!!

A matter of faith

Fundamentally, if you have faith that the world will continue to operate with some sense of order, then gold isn’t a very good investment.  So long as people accept those green pieces of paper you call dollars in exchange for goods and services and our laws continue to work, gold is just a shiny yellow metal.

However, if society unravels, then gold becomes the universal currency.  The 1930s (Great Depression), the 1970s (OPEC shock), and 2008 (Great Recession) were all periods where gold experienced huge price increases.  Those are also when the viability of the financial world order were in question.  Each time, people were actively questioning if capitalism and banks and the general financial ecosystem worked. 

People got all worked up and thought we were on the brink of oblivion.  Gold became a “safe haven”. People knew no matter what happened, that shiny yellow metal would be worth something.  They didn’t necessarily believe that about pieces of paper called dollars, euros, and yuans.

Yet, the world order hasn’t crumbled.  Fiat currencies are still worth something.  Laws still work, so that stock you own means that 1/1,000,000 of that factory and all it’s input belongs to you.  Hence, gold remains just a shiny, yellow metal.  

The bottom line is that stocks have been a great long-term investment, and gold hasn’t.  And that’s directly tied to the world maintaining a sense of order.  So long as you think that world order is durable and we’re not going to descend into anarchy Walking-Dead style, then gold isn’t going to be a good investment.

So the survey says: “Stay away from gold as an investment in your portfolio.”

Putting a bow on December 2018

The new year is a great time to take account of things in life.  We look at the year just ended, reflect on our successes and failures, decide how this year will be better, make our resolutions, and take on the new year.

I was all prepared to write a few posts on all that, but then the tidal wave that was December 2018 hit.  I posted last week right at its depths, but even the craziness of the last few days of the year require, neh demand, its own post.  So let’s put a bow on that crazy month.

As bad as it was . . .

I posted last Monday, Christmas Eve, that with a bit over a week to go, December 2018 had already become the 4th worst month in the 69-year history of the S&P 500.  Going into that trading day, we were down 12% for the month, and then in an act worthy of Old Testament God, the market plunged that day another 3%.  Just in time for the holiday.  Thanks a lot.

It was bad and we were in the teeth of an all-time bad stock market plunge.  If you think of it as the 4th worst (or 3rd worst after that Monday) month in almost 70 years, you’d expect something like this once every 25 years or so.  That’s a generational storm.  Batten down the hatches.

. . . and how it ended

But there’s a reason that December ends after the 31st day and not the 24th day.  The day after Christmas (obviously markets were closed for Christmas), the markets increased 5% which is a crazy high amount.

Before we look at the larger picture, let’s just reflect on December 26 for a second.  It was the largest point gain day for both the S&P 500 and the Dow Jones Industrial Average.  Also, it was the 18th largest percentage increase for the S&P—top 18 out of over 17,000 trading days since 1950.  Not bad.

Back to the story, so Wednesday there was a big recovery but we were still down a lot.  But the market kept chugging along each day, and it ended the month up 7% for the lows on Christmas Eve.  Let’s not fool ourselves.  It was still down 9% for the month, but compared to where we were as Santa was loading up the sleigh, that’s not that bad.

In fact, while there’s no doubt that December 2018 was a bad month, it didn’t even rank in the Top 10 worst months of all time (it was at 11).  Not that that should make you feel good, but we were thinking we were being hit with a generational storm, and it ended up being an every 5 or 6-year storm.  Those things happen.

The stock market is a very complex human experiment, but in a lot of ways it’s very simple.  I think the crazy roller coaster ride in the month of December (and more broadly all of 2018) really illustrates this.  Things are never as bad as they seem, and the best strategy is usually to just sit tight and let the craziness work its way out of the system.

I hope everyone has a wonderful Christmas and New Year.  Next up you’ll see how the Fox family did on their investments including the wins and losses, so makes sure you have a box of tissues.

A month of freefall

Holy Crap!!!  I was all set to do a post on Fidelity’s zero-fee mutual funds as a follow up to last Wednesday’s post on index mutual funds.  But the stock market has had other ideas.  So far this month stocks have tumbled 12%.  12!!!

There seems like a lot going on that we need to process, so let’s start breaking this down.

Dec 2018 in context

There’s still a week to go, but as it stands right now, stocks are down 12% for the month.  Of course there’s one more week left in the month so things could go up and it won’t be as bad, or things could get worse and . . . well, let’s try to stay positive.

No matter how you slice it, 12% is a lot.  Just to put it in perspective, since 1950, when the S&P 500 started, there have been 828 months, and Dec 2018 ranks as the 4th worst month of all time.  In 70ish years we’re in the midst of the 4th worst month. 

Think of this as a generational storm.  I don’t know if that’s comforting or dispiriting.  Months like this happen, and it has been worse in the past, yet this is on the Mount Rushmore of all-time bad investing months.

Just in case you’re wondering what the 10 worst months for the S&P 500 are, here you go:

Month ending S&P 500 close Return
Oct-87 252 -21.8%
Oct-08 969 -16.9%
Aug-98 957 -14.6%
Dec-18 2417 -12.4%
Sep-74 64 -11.9%
Nov-73 96 -11.4%
Sep-02 815 -11.0%
Feb-09 735 -11.0%
Mar-80 102 -10.2%
Aug-90 323 -9.4%

Sit tight

What’s done is done.  The stock market has cratered, and unless you have a time machine, you just need to accept this really tough month and then look to the future.  That’s where I think things get a lot more comforting.

You can take that table above and then add two additional pieces of data: how stocks did in the next month and how stocks did over the next year.  That paints a completely different picture.

Month S&P 500 close Return Next month return Next 12-month return
Oct-87 252 -21.8% -8.5% 21.1%
Oct-08 969 -16.9% -7.5% 15.6%
Aug-98 957 -14.6% 6.2% 29.8%
Dec-18 2417 -12.4%
Sep-74 64 -11.9% 16.3% 13.5%
Nov-73 96 -11.4% 1.7% -28.3%
Sep-02 815 -11.0% 8.6% 12.4%
Feb-09 735 -11.0% 8.5% 38.4%
Mar-80 102 -10.2% 4.1% 28.0%
Aug-90 323 -9.4% -5.1% 29.2%

Who knows what will happen in January 2019 or the next 12 months, much less the next week (I certainly don’t).  Yet if you use history as a guide, there’s a lot of reason for optimism.

Of the 9 months that made the top 10 that we have data on, 6 of those 9 month saw gains in the stock market the next month.  I would definitely take an even-money bet that January 2019 will be a up month.  But by no means is it a sure thing; look at Oct-87 and Oct-08, the two worst months.  Those were followed up by brutal months.

Things look even better if you push the time horizon out from one month to a year.  For those 9 really bad months, if you looked at the market a year later, things looked good, really good.  8 of those 9 examples saw the market up, and all of those up years were up double digits.  They made up for the bad month and then some.  Of course, November 1973 shows you that’s not a certainty, but the fact that almost 90% the time things recover fully makes me feel pretty good.

What’s going to happen?

As I was doing the research for this post, I was struck by the examples of those really bad months.  Some of them are explainable while others are a bit odd.  October 1987 was Black Monday; October 2008 and February 2009 were the Great Recession; September 2002 was the popping of the Dot Com bubble;and November 1973, September 1974, and March 1980 were all a part of the Stagflation lost decade of the Nixon and Carter debacles.

Those others are a bit odd in that there really wasn’t a powerful reason that has survived the test of time.  I am sure you could look it up, but off-hand I couldn’t tell you what happened in August 1998 or August 1990.  Things were going well and as you can clearly see, a year later that bad month was a distant blot in the rear-view mirror.

I feel like that is what we’ll think of for December 2018.  By all measures things are going well for the economy.  The economy seems to be growing well, unemployment is low, and inflation is tame (between 2-3%).  Those are generally the Big 3 that you look at to see how things are doing, and they all seem okay or even better than okay.

That’s not to say there aren’t risks.  Of course there are, but there always are.  Brexit seems like it will have a rocky landing, the trade war between the US and China looms large, Trump pulling troops out of Syria might destabilizing, sovereign debt continues to pile up, and on and on and on.  That’s true now but there were other “risks” you could have sighted for any of those other Top-10 bad months.  I don’t think things are particularly worse now.

As always, I am optimistic about the stock market.  I think this month will be similar to August 1998 or August 1990 in that the statistics show it was a bad month, but people can’t really tell you much about it because it was in the midst of good times. 

That said, I do think there is the potential that we might be in for a couple lean years, maybe of the +/- 5% variety.  Over the past 5 years, since 2013, the market is up 70%, so it doesn’t seem unreasonable that we’re “due” for a bad year or two.

Week in review (1-Sep-2017)

Similar to the last two weeks, this week is dominated by a social (and weather) story.  Before it was the Google memo and then the unrest in Charlottesville; now it’s Harvey in Houston.  The difference as it relates to this blog is that the impact Harvey is having on Houston also has some major implications for the financial markets.

In the end, curiously, the markets had a steady climb this week, rising almost 2% in the US and almost 1% for the other global markets.  What gives?


Obviously, Harvey has dominated the headlines.  The hurricane pummeled Houston, putting it under several feet of water.  It has been a human tragedy that we have all seen on television, but in a way it’s oddly encouraging.

Houston is the 4th largest city in the country and it has just suffered a massive body blow.  As bad as it is: 1) There is no doubt that Houston will recover and after a bit of time (probably much less than most would expect) the city will be back to normal.  2) The rest of the country has been cranking along just fine.

From a financial and investing perspective, that means we’ll feel a bit of a blip as Houston gets knocked down and then gets back to it’s feet, but it should be short and shallow, and then after not too long it will be like it never happened.  That’s truly a testament to the amazing diversity and robustness of our economy.


Gas prices go up

Outside of Houston, the rest of us are feeling Harvey’s impact at the pump.  About 20% of all gasoline is refined in the area impacted by the hurricane.  Here in Greensboro, that has caused gas prices to jump from about $2.19 to $2.59.

This won’t last very long, as those refineries are going to be back online soon, but in the meantime, it will have an impact.  This is a bit of a bummer, because the extra we are all paying for gas really isn’t going to anyone.  People aren’t getting higher profits that they can spend or anything like that.  One way to think of it is that extra money it’s being “swallowed up” by the closed refineries.

That’s what economists call a dead-weight loss, and it’s never good.  Fortunately, it will be over soon.


Chemical plants blow up

Harvey’s destruction has obviously caused a lot of damage, in homes and businesses.  The one that has hit the news is the peroxide plant which lost power and then blew up.  Obviously that one instance is going to cost millions of dollars to repair.

The total tab for Harvey’s destruction is expected to come in at about $190 billion.  That’s a tremendous amount of money, about the total GDP of an entire country like Greece.  However, for the US that’s a bit of a drop in the bucket.  That will come to about 1% of our nation’s GDP.  One way to think of it is that every American will need to pony up about 1% this year to pay for Harvey’s damage.  That’s a lot but definitely doable.


US revising GDP growth upwards

With all that damage from Harvey, how are stocks up so much?

The economy is strong, innovation is happening, and things are just plugging along.  In fact, the economy just clocked in a 3% growth rate.  In the past several years it has been pretty volatile but averaging more in the 2% range.

If this 3% growth becomes sustainable that’s a huge deal.  That extra 1% pays for Harvey’s damage by itself.  That extra 1% is a will really turbo boost the stock market.  I think the optimism for that is keeping things at record levels.


So there you have it.  With the dominate story being bad news, stocks were up, and that’s really a testament to how strong things are for the stock market right now.

Top 5—Financial moves when the stork is coming


A lot of our readers are starting their families or have younger kids.  Foxy Lady and I have been so blessed to bring two wonderful little cubs into the world.  As you embark on parenthood and rearing little ones, what are the financial considerations you need to make?  Surprisingly, I don’t think there are all that many:


5. Set up your health insurance. Depending on when you find out your pregnant, the chances are you will have an enrollment period with your health insurance.  Foxy Lady and I screwed this up twice since both of our boys were born in October (we found out we were pregnant in February so we missed the open enrollment while pregnant), but let’s imagine that found out that we were pregnant in October and the baby was due in June.

When open enrollment comes around every December and goes in effect in January, we would have bought the primo policy that gives the best coverage.  Normally, we don’t pick the Cadillac policy that our work offers because we’re relatively healthy and don’t go to the doctor a lot.  Under normal circumstances we get a middle-of-the-road policy.  If we happen to have a medical issue (like with ‘Lil Fox in 2014) we know we’ll spend a little more in out of pocket, but that doesn’t happen very often so we generally come out ahead.

However, when you’re expecting you know for sure you’re going to spend a lot of time in the hospital and you’re going to have a lot of doctor’s visits, and that gets expensive.  If you know this is coming, get the insurance policy that has the higher premium every paycheck but then covers most or all of those expenses.  Had we done this with our boys, we probably would have saved $3000-4000 on each little guy.  As it is, I’ve told both boys they owe us that money and it should be treated as a loan accruing interest, but neither has acknowledged the righteousness of my claim.


4. Set up your flex spending account. Similar to #5, if you’re having a baby you know you’re going to have some medical expenses. Make sure at open enrollment you set up your flex spending account to pay for those.  With flex spending accounts you can pay for medical expenses using before-tax dollars.  So that $2000 you had to pay with pre-tax dollars only feels like $1300.

Also, once you have kids, you can use a flex spending account to pay for childcare.  The government allows up to $5000 per child to be tax deductible (I’m not a tax expert, but that’s my understanding) if you use a flex spending account.  Spending $5000 in pre-tax dollars instead of after-tax dollars is pretty sweet.  And for childcare it seems like a no-brainer that amounts to about $1500 per year.  Most of us know for sure that we’re going to have childcare expenses.  Why not spend the hour it takes to save that money (if $1500 isn’t worth an hour of your time, then I’d like for you to help me with my finances).


3. Steel yourself against crazy “baby” spending. Definitely when you are going to have a baby there is a lot of stuff that you need, and this is especially true for your first child.  But for everything item that you do need there are probably 5 that you don’t need.  Baby stuff has become a big business and the people who market this stuff are smart.  They know you want the best for your child, and they aren’t above pulling on your heart strings to let you think that you “need this to be a good, loving parent.”

We did get the diaper genie and are glad we did.  We never got the bottle warmer, and never missed it for a second.  We got a pee tent (when you’re changing your son’s diaper and keeping him from peeing everywhere between diapers) and never used them.  We got three strollers with our first—a regular that the car seat fits into, a jogger, and an umbrella stroller—and used all three but we never have really used the tandem stroller once Mini Fox joined his brother.  There are a million more examples but you get my point.

This isn’t a baby blog, so I’ll stop there.  Just understand my point is that you can spend hundreds and thousands and tens of thousands of dollars on baby stuff, much of which you won’t need and none of which will make you love your baby any more.


2. Start a 529 account. If you are planning on paying for some or all of your child’s education (that’s a big “if” and one I covered here), a 529 is a no-brainer.  Basically, a 529 allows you to take after-tax money and invest it for your kid’s education.  That money can grow tax free so when you take it out you won’t pay any taxes on it.  In that way it’s very similar to a Roth IRA.

Doing back of the envelop math, if you saved $500 per month for your child’s education that would give you about $200,000 after 18 years.  Of that $200k, about $110k would be what you put in and $90k would be what you gained on your investments.  Without a 529 you would be taxed on that $90k gain; depending on your tax bracket that could be $30-40k you would owe Uncle Sam.  With a 529 you get to keep that.  Think about that for a second—basically the tax advantages of a 529 buy you another year of college.  It’s like buy three years, get the fourth year for free.


1. Love. This is a finance and investing blog so I always focus on money, but with your baby your love is a million times more important than anything you can do that has a dollar sign attached to it.  There will be some costs, a few of which we discussed above, but not as many as you’d think.  You’ll spend some on diapers and formula, as much or as little on clothes as your fashion sense (or lack thereof) allows, and you’re pretty much set.

Very often, somewhat to your chagrin, they’ll find more joy in the box that expensive toy comes in than the toy itself.  Library books are free, and children’s books in general are pretty inexpensive, so reading to your kids (one of the best things you can do according to child development experts) is pretty cheap and really rewarding.  And walks to the park and rides on the swings are still free.  As is keeping your cool when your kid puts one of his rubber balls under the treadmill, having it sucked into the motor so now it makes a funny noise.

As you embark on parenthood it’s a crazy rollercoaster.  Sure there are a couple financial bows you have to tie, but I don’t believe near as many as a lot of people would have you believe.


Happy parenting.  For those parents out there, what were the major financial items you had to take care of when your bundle of joy arrived?

The tail of Squirt


Squirt and Stocky 6 years ago, back when we still lived in Chicago.


I write a lot about investing on this blog with the purpose of helping you achieve your financial goals.  Of course, “financial goals” is a fancy way of saying make more money with your investments.  Isn’t that what we want after all?  To make more money so we can have a comfortable life, have a secure retirement, pay for our kids’ educations, support the charities that are important to us.

But it’s a long road, and it can be easy to lose sight of those goals.  Sometimes all your hard work, your thrift, and your smart investing just become numbers on a bank statement.  Well, I want to share with you a story of how smart investing allowed us to make a really good decision that our family benefits from each and every single day.


The dreaded “C”

Our family has been blessed with two amazing little boys, but before Lil’ Fox and Mini Fox joined us, we had Squirt, our impetuous Staffordshire Bull Terrier.  Squirt is getting up there in years, last May she turned 14, so we know that at some point she’ll go to heaven (actually, probably not because she isn’t a well behaved dog, but you get my meaning).

Not one to be left out, Squirt enjoys (actually she totally hates) dressing up in her Halloween costume

About six months ago a bump started growing on her side.  It got progressively bigger, but we figured that she was old and that’s what happened to older dogs.  But then it started oozing gross stuff, and we knew we had to get it checked out.  They did a biopsy and gave us the terrible news that the tumor was malignant, and an aggressive one at that.  Fortunately, we did have options, namely surgery.

Now I don’t want to lose perspective on these things in a world where humans suffer from cancer and other diseases, but we were pretty devastated.  Squirt was our baby before we had babies.  She was there when we were married, moved into our new house in LA with us, welcomed home both boys.  In particular she’s really great with the boys despite the abuse they dish out.  I guess they have an understanding—she steals their food if they aren’t careful and they can lay on her if they’re tired (Mini Fox has taken to gumming her tail).

Pete and Squirt
Mini Fox contemplating Squirt’s tail . . . tasty

We took her into the veterinary surgery center where they checked her out.  They said that they would have to do a pretty major surgery to remove two masses, but they felt there was a pretty good prognosis. That was great news!!!  Oh, and the bill would be about $5000.  That was less than great news.


Thank you, smart investing

Foxy Lady and I talked about it for a long time.  What should we do?  What would you do?  Squirt was 14 years old and she had lived a great life.  Was this her time to shuffle off this mortal coil?  Should we let her bow out gracefully on her own terms, instead of putting her through a painful surgery?  It was a really tough decision for us.  Again, we appreciate that we’re talking about a dog, and a 14-year-old dog at that, but she’s our baby.

And then there was the cost–$5000.  That was a lot of money.  That is a lot of money.  On the cusp of me quitting my job and us becoming a single-income family, that was really a lot of money.  Of course, we didn’t want to make a decision about the life and death of our dog based on money, but you have to factor that in.  She was 14 and had cancer.  Did it make sense to spend that much money?

However, we started thinking about it and while $5000 is unquestionably a big number, in some ways it’s not.  Allow me to explain.  On this blog, we talk about all the ways that you can get higher returns by being smart with taxes, using low-cost mutual funds, and being smart with asset allocation.  $5000 is six months of using an index mutual fund instead of an actively managed one; it’s three months of doing investing ourselves instead of hiring a professional; it’s a year’s tax advantage of using a 401k.

When we put the cost of Squirt’s surgery in that perspective, that we’d make that up in a few months by doing a few simple things with our investments, it became a lot more palatable.  We were able to be comfortable with the cost of the surgery, or at least play mind games with ourselves to justify it in our head, and then just made our decision based on what was best for Squirt.  As you probably guessed, we went ahead with the surgery.

Post surgery
It was a pretty major deal, a 12-inch incision on her back and then another 8-inch one on her leg that you can’t see. Foxy Lady started calling her “Frankensquirty”

I share this story because this is a tangible way that investing wisely has impacted our lives in the here and now.  I couldn’t imagine having to make a decision on Squirt’s life if I was thinking in the back of my mind, “Can we really afford this?”  Smart investing generates more money, but that’s a means to an end.  What it really gives you is freedom and comfort and security, and in our case wet kisses.

Squirt sneaks in a wet kiss on an unsuspecting Lil’ Fox a couple years ago



So we had the surgery.  The timing couldn’t have been worse.  All this was happening in the midst of my leaving Medtronic and then us moving to North Carolina.  Two weeks after her surgery we took Squirt on a 2500-mile road trip just to make an already challenging situation more difficult.

Two months after surgery and she’s doing great.  They biopsied the mass they removed and said that there were no cancer cells along the margins, so that means it wasn’t spreading.  Great news!!!  She’s adjusting to her new home.  She has found the little nooks where she likes to take naps and the strategic spot between where the boys eat to maximize the amount of fallen food she can pounce on.  There are a ton of trails that she can walk along and several creeks and streams that she can wade through.  Her wheels aren’t what they once were, but she can still chase that tennis ball like a champ.  The boys had no idea of what was going on, but what they do know is that their dog is there to play with, lay on, pet, and yell at when a cheese stick theft has occurred.

Lil’ Fox taking a nap, deciding a dog is more comfortable than a pillow

Project Runway should SHOWCASE women of all shapes and sizes

 Please share this if you believe that Project Runway should celebrate women of all shapes and sizes and ages.  My hope is enough people share this that it ultimately gets to Heidi Klum and the people at Lifetime Television.  Maybe if they know their fans and viewers want to see a variety of women models, they’ll make the change.  I hope you join me in this.


If you ever want to know where to find Foxy Lady and me on Thursday nights, it’s in front of the television watching our favorite show, Project Runway.  We have been longtime devotees; we started watching the show together during its 4th season when we were dating in Chicago.

She loves it for the fashion.  I am man enough to admit I love it too, mostly to see the creative process take shape.  So there you go, a Project Runway lovefest.

A typical Project Runway model–super young, super tall, super thin

But there is something that has always bugged me—Project Runway still exclusively uses “model-sized” models for all its runway shows.  They’re all your stereotypical model—early 20s, 5’10”-ish and 110-ish pounds, stick-thin with super-long legs.  Of course we know that isn’t the real world.  You take 1000 women off the street and maybe 2 look like that.  The other 998?  They’re thin and short, chubby and short-waisted, tall and muscular, big-busted, big-butted, and a hundred other shapes.  Why doesn’t Project Runway let these women also be the muses for its designers?

Granted, in one or two episodes a season, they do use non-model-sized models, but those shows tend to be gimmicks.  Last season in episode 13.9 they designed clothes for kids and in the following episode (13.10) they picked models up off the street, although I must confess I don’t remember a huge diversity in the shapes and sizes of those women.  But all the other episodes use exclusively super-young,  super-tall, super-thin models.

This is a normal-sized, middle-aged woman who was a model. How did she get the gig? She was the mom of one of the designers on one of the gimmick episodes.

The season before that in episode 12.10 the designers created outfits for Project Runway superfans (sadly, I was not included among the group), and there you saw women with a lot of different shapes and sizes.  All the other episodes: you guessed it, super-young and super-tall and super-thin.

I could go on and on.  Suffice it to say, in any given season there are about 15 episodes and one or two of them use models that deviate from the super-young, super-tall, super-thin look.

pr model 1
The designers showed they could make this “real world” woman, who is a little on the heavier side, look just as fabulous as a super-young, super-thin, super-tall model.

Call to action

So here is my call to action for Lifetime and Heidi Klum.  Start using models that represent the diversity of the women in this country.

Sure, there are probably excuses that the show could use, but they’re all pretty weak:

The designers are used to working with super-young, super-tall, super-thin models:  This actually comes up a lot in those episodes where they do use normal-sized women.  The designers complain that they don’t know how to size their garment for a woman with big boobs or a big butt (Carlos from season 8 shared these sentiments to nice comic effect).  My answer—tough cookies.  Learn to make clothes for these women, after all if you want to be a successful designer, you’re going to need to.  I guarantee you that Michael Kors or Brooks Brothers (two design houses that have strong ties to Project Runway) sell more clothes that are larger than size 4 than are smaller.

It wouldn’t be fair if some designers got different sized models—the models need to be “standardized”:  I can see the logic here, but it’s something where you can either accept the excuse or not.  I choose to not accept it.  Women of any shape can be beautiful.  One of the designers’ jobs is to create the garments that bring out that beauty.  Some will need to accentuate the butt while others need to downplay it, same for the bust or the wide hips or the thick ribcage.  But isn’t that part of the challenge?

The supply of different-sized models just isn’t there:  Bullshit.  They do the shows in New York City.  If they did a casting call for models of all shapes and sizes, they would get tons (literally and figuratively) of women.

They need professional models:  Somewhat related to the above comment.  In the episodes where they have different-sized models they tend to be gimmicks (fellow designers, dog owners, designers’ mothers or sisters, superfans, women off the street, etc.) so they aren’t using professional models.  It becomes frustrating for the designers because the models start complaining about stupid stuff or start giving their opinions when it isn’t appropriate. A good example of this was in the fourth season when Christian Siriano (the eventual winner) made a prom dress for a highly opinionated and difficult high school girl (episode 4.7).    I get the frustration, and I get that you need a professional model who can keep her mouth shut, wear the clothes, strut down the runway, and highlight the garment’s best qualities.  Here’s a solution—hire professional models who are different sized.  There are thousands of them out there if you’re just willing to look.


As I said at the beginning, Foxy Lady and I are huge Project Runway fans.  And we aren’t alone—Project Runway averages about 2 million viewers per episode.  With great power comes great responsibility.  

Project Runway is uniquely positioned to make a real difference in the fashion industry and maybe society at large.  They can continue to nearly exclusively use super-young, super-tall, super-thin models.  That perpetuates the travesty that that is normal, leading to all sorts of problems especially for girls and young women like low self-esteem and eating disorders.

Super young, super tall, super thin. Actually, this woman doesn’t look healthy. Doesn’t she look like she has an eating disorder? And she is who Project Runway is showcasing?!?!

Or they can pick up the gauntlet and show that women of all sizes can be models, women of all sizes can be beautiful, women of all sizes can strut their stuff.  If it stopped there, I think it would make really interesting viewing.  The designers would be faced with an additional dimension of challenge and the runway shows would be a lot more entertaining.

But the real upside is maybe that could impact the whole fashion industry.  In a single week more people tune into Project Runway than attend all the fashion shows during fashion week.  If they can show that there is an audience for different-sized models, and even more importantly a market for them (afterall, fashion is a business), maybe that will convince Ralph Lauren or Dolce & Gabbana or Vera Wang to follow suit (literally and figuratively).  I hope they do.


If you agree please share this and let’s see if we can get it to Heidi Klum and Lifetime Television.

I’m Back . . . and retired


Loyal Stocky Fox readers, I know I tested your patience by taking a prolonged break, but I’m back.  I’m a big believer in using excuses, and I have a few good ones for why I wasn’t able to write any posts for the past two months.  Actually, we’ve had some major life changes and are just starting to see the light at the end of the tunnel.


I’m retired!!!

Probably the single biggest change is that I quit my real job and am now entering the ranks of the unemployed, stay-at-home foxes, mid-life crisis ranks of the country.  About a year-and-a-half ago, when we found out we were pregnant with our second cub, Foxy Lady and I really started talking about life and what we wanted.  Fortunately, because a lot of the smart investing we had been doing, much of which I have chronicled in this blog, we had a nice little nestegg that gave us some real options.  After a ton of discussion we decided that I would become a stay-at-home fox.

It took a while to sort everything out with work and to make sure we landed as softly as possible.  After taking advantage of California’s very generous paternity leave program, Medtronic and I parted ways after 16 years (I started there as a 21-year-old wide-eyed cub—crazy).  As an aside, I think Medtronic is a fantastic company and am so thankful that I spent so much of my career with them.  Financially, they are wonderful and have so many programs that allow their employees to build a secure financial situation.

And now I am done with working.  I won’t have a boss anymore . . . actually, I guess I have two bosses: Lil’ Fox and Mini Fox, but they’re pretty cool.  Obviously, when you change careers or even end your career, that has a ton of impact on your finances so you can expect a lot of posts on us going through this transition.


We moved

This is a big deal (but not so big a deal as me retiring since that had three exclamation points).  After Foxy Lady and I decided that I was going to bow out of the game, there wasn’t nearly as strong a tie living in Southern California, so she started looking for opportunities across the country (SoCal isn’t a very good market for her industry).

With that freedom of location, she found an amazing position in Greensboro, North Carolina, with VF Corporation (they own clothing brands like The North Face, Timberland, Vans, Jansport, Lee Jeans, Wrangler, and many more).  It was an awesome opportunity for her—a nice promotion, more money, and a move into the fashion industry which she’s totally passionate about.

If you’ve ever moved, you know that it’s a crazy time in general.  With two little kids and a 14-year-old dog, it’s just insane.  We’re about two months into the craziness and probably have another month to go before we are completely settled in our new home with all our furniture.  It’s been a wild ride and one I’ll certainly be glad to put behind me.

Just like with retiring, when you move there are a ton of decisions that you have to make that have a ton of financial implications.  Getting these right can result in tens or hundreds of thousands of dollars over the years, so you can be assured that I’ll use the move as fodder for plenty of posts as well.


So there you go.  That’s what’s been happening on our side.  Thanks for sticking with me and look forward to some kickin’ posts coming down the pike.  Tomorrow I’ll post on the Top 5 financial blunders people make by following their instincts.