A Couple Tough Questions

A brief Q&A with a Christian minister. A special thanks to Andrew Pratt for passing along this information.

Q: Why do a lot of very smart people (PhD’s, etc) often reject God? Why does there have to be scientific evidence to every question? The answer for me is faith, which isn’t accepted by these folks that always want “tangible” evidence.

A: Just as Jesus said that people with great riches will have trouble getting into heaven, so also will people with great intellects. Jesus said,

“Assuredly, I say to you, unless you are converted and become
As little children, you will be no means enter the kingdom of
Heaven. Therefore whoever humbles himself as this little child
is the greatest in the kingdom of heaven.” Matt. 18:3-4

Paul wrote in 1 Corinthians 1:22-23:

“…Jews request a sign and Greeks seek after wisdom; be we
Preach Christ crucified, to the Jews a stumbling block and to
to Greeks foolishness.”

Note: Two books that would be helpful in answering some of these and related questions would be:

Case for Christ by Lee Stroebel and
Letters from A Skeptic by Greg Boyd

I haven't read either of these books, but plan to in the near future!

Investing 101

"The average long-term experience in investing is never surprising, but the short-term experience is always surprising. We now know to focus not on rate of return, but on the informed management of risk."

- Charles Ellis, author "Investment Policy" (1985), as well as ten other books on investing

Why Are Most People Unhappy?

I’ve been thinking a great deal lately about the things we do—meaning the things on our ever pursuant journey towards happiness.

I’ve concluded a few things: All people seek happiness—no doubt about it. Moreover, if someone is participating in activities that bring them pain, it’s likely they are doing so in the short-run—meaning they expect to achieve happiness in the future.

The problem in the journey towards happiness is that most people don’t know where they are going. They don’t think about their lives deep enough to understand what really matters. In addition, people seek others advice before they truly know themselves. If you don’t understand yourself, than how can you get advice from someone else? What are you chasing in life? Is it money? Is it seeking God’s will? Is it finding the love of your life? Are you doing things because other people want you to do them?

A couple things that have helped along the way:

- The place you are in right now is exactly where you’re supposed to be. Don’t always live two steps a head of your current reality. Accept where you are, the things you have, and the people in your life. Don’t ever think you aren’t important enough to make a difference, it’s simply not true. However, this doesn’t mean you can’t plan for the future. Planning for the future and living in the future are two completely different things—don’t get them confused.

- Find yourself spiritually. Whatever this means for you, seek it out, and actively engage yourself to find meaning in your life. Personally, the closer I get to God, the happier I am. You will reap what you sow—no question about it.

- Reserve quiet time to read and think deeply about yourself. Life is hectic, and most people don’t set aside time to reflect on themselves. Ask yourself some questions: Am I living the life I want to live? If not, how can I change? Have I found happiness? If not, what are the things that make me happy?

I truly believe people spend their entire lives seeking happiness, and most never find it—mainly because they don’t know what they’re chasing. What are you chasing?

What You Should Do Now

Bad day for Wall Street—bad day for Apple, Inc. (AAPL). Just weeks after purchasing shares at $170, the computer/iPod maker sunk below $140/share in after-hours. After 19 straight quarters of blowout earnings—Apple disappoints. If the highest quality tech companies are warning about future expectations—what does this say about the current state of financial markets?

It says a couple things: Growth will slow (at least in the short-run); consumers will continue to tighten their belts and curb frivolous spending. In addition, companies that don’t report blowout future growth will get pounded. Are we headed for a recession? It certainly appears that way.

Things are bad. No doubt. However, I’m not panicking—and I don’t plan to sell my shares at a loss. Times like these separate the real investors from the amateurs—the resilient and patient veterans from the uptight day traders looking to make a quick buck. If I can give you any advice at this point it’s this:

- Don’t sell your current holdings. Weather the storm.

- Patience is a virtue—do you have any? Those that sell now will likely give up one full years worth of gains—but wait—this is why you dollar-cost average. Continuing to buy now gives you more shares at a lower price. When the index funds/stocks rebound, it’s a double whammy for your portfolio.

- What do you buy now? The whole market. Little by little. The S&P 500 is at a 52-week low. Keep buying. You’ll thank me in 30 years.

I currently own shares of Apple, Inc.

Fortune Magazine Q&A with John Bogle

Fortune Magazine did a great Q&A with the founder of Vanguard and the creator of the first index fund—John Bogle. The article, dated December 24th, has a few bold predictions—such as the DOW going over 20,000 ten years from now. It seems like a stretch with the way things are going now; however, ten years is a long time, and things will stabilize in the long-run.

John Bogle answering reader’s questions:

Q: What are the odds of a recession right now?
A: I would put the odds of a recession at 75%. This economy is very much consumer-based, and I believe that 70% of the GDP is consumer spending. That’s a very high number. Two things are happening there: Consumers have fewer resources because from 2001 to 2005 they took $5 trillion out of real estate. That will not recur. This is a big drop. We also see weakness in auto sales and retail spending—we even see it at companies like Starbucks. There is another, equally important factor in consumer spending, and that is confidence. Consumers are not going to spend if they are worried about the future.

Q: Where do you see the DOW ten years from now and why?
A: Well, the DOW is a peculiar piece of work. The DOW yield is 2.2% now, vs. the S&P’s 2%. Since I’m expecting a 6% to 7% return on stocks, the DOW ought to grow at 4% to 5% a year. So over ten years, growing 4-5% a year, it would grow by 55% and so it would be slightly over 20,000, give or take. But anybody who is expecting that ought to be prepared for a lot of bumps along the way.

Now for the Brian Reese investment advice: Continue dollar-cost averaging in a passively managed total market index fund or S&P 500 index fund in a Roth IRA. Don’t worry about all the talk from the Fed or the three piece suit wearers on Wall Street. If you can’t handle the bad news, than don’t read about it. Don’t watch it on T.V. Will there be a recession? Maybe. But it doesn’t matter when you have 20+ years until retirement.

Quote of the Day

Some thoughts on self-awareness from The 7 Habits of Highly Effective People:

"The more aware we are of our basic paradigms, maps, or assumptions, and the extent to which we have been influenced by our experience, the more we can take responsibility for those paradigms, examine them, test them against reality, listen to others and be open to their perceptions, thereby getting a larger picture and a far more objective view."

The Christian/atheist Debate

Over the past few weeks I have been proactively searching numerous websites, blogs, etc, for anything related to religion—specifically the Christian/atheist debate. I came across a great article by Tom Flannery at WorldNet Daily called “The Irrationality of Atheism.” The article centered on a debate between two experts in their respected fields Dinesh D’Souza and Christopher Hitchens. Hitchens is the author of the atheist manifesto "God Is Not Great," while D'Souza is the author of "What's So Great About Christianity." Both books I plan to read in the near future.

I did not see the debate, but Flannery ends his blurb with:

"The evidence for God is so overwhelming that it takes far more faith to be an atheist than it does to be a Christian. That fact was demonstrated yet again in the debate between D'Souza and Hitchens, as anyone who watched it objectively would have to conclude."

So I ask the question: Does it take more faith to be an atheist?

Are You Comfortable Socially?

Last night I had the pleasure of meeting some awesome new people about 35 minutes from my home in Arizona. A good friend of mine connected me with them through a simple phone call. After about a five minute conversation, I agreed to meet them at their home for dinner. I had met one of them at my friends wedding last June, but didn’t know the other three. So here is your social litmus test: How comfortable are you meeting people you don’t know? If you’re by yourself will that change your willingness to step outside the box?

I’ve never had a problem jumping into a new social situation, but I’m trying to figure out where that confidence came from. Does it have to do with your upbringing? How do personality differences make a person more or less likely to engage in what most people would deem an “awkward” situation?

I guess I take for granted my willingness to put myself out there because I’m finding a lot of people have a hard time opening up until you get to know them better.

Anyway, the evening turned into a three hour plus talk fest about everything from the mortgage crisis and politics to various outdoor excursions and sporting events here in the Valley. After an exchange of contact information, I (so they say) mistakenly volunteered to baby-sit their dogs whenever they’re out of town—they promise to follow up on my request.

The point of all this is don't be afraid to step outside your comfort zone to meet new people. The only thing I’m regretting is that I didn’t call them earlier…

Apple Part II

I’ve officially put my money where my mouth is by purchasing Apple, Inc (AAPL) this morning at $170/share. I recommended them earlier at $200/share, and I stand by my argument. Granted, I had no idea it would make an afternoon run-up close to $180/share, but that is not the point. The stock may go lower, but here are a few reasons why I felt it was a good entry point:

Apple flat out makes money, and (in my opinion) has some of the most innovative and creative minds in the world leading the company. I don’t know how much the anticipated decrease in consumer spending will affect sales; however, a quick glance at the balance sheet and key valuation metrics had me sold.

They have roughly $15 billion cash on hand, a PEG ratio of 1.51, a trailing P/E ratio of 46 and a forward P/E ratio of 28. When the market stabilizes, a company like Apple will move towards it’s near perfectly estimated future value and trade at that value today. The market has priced them with a trailing P/E near 50 in the past. So, when I see the current valuation off in my estimation, I buy. I think Apple is worth roughly $215 a share in the short-term. However, they MUST continue to exceed Wall Street’s expectations.

The fears of a recession may contribute to an uncharacteristically high beta with technology companies like Apple, Google, etc—meaning: The stock may go lower before it moves higher, but I don’t care—I may hold them forever.

I currently own shares of Apple, Inc.

I Want Your Input!

I had conversation with my parents today about the most important on-the-job skills that make an employee a great asset for a company—meaning: What traits, characteristics, skills, etc, make up the best employees? How do you keep your job during rough times? What skills and attributes are most sought after by employers? How do you know if you’re doing a good job? Etc.

As a college instructor of Business Management and Accounting, my dad started a new class this semester that will get his students internships at various local businesses. We are planning to create a list of important traits, skills, and characteristics so students have a quick reference when venturing into a new work environment.

There are lots of articles relating to “soft skills” on the job, but I want real world input. Here are a few of mine as an example:

1. Be teachable. A new job, experience, etc, means you probably don’t have all the answers, so seek mentors that have been around and know the ropes. Don’t be afraid to ask for help. Let other’s know you want to learn and you value their input. Never stop learning, nobody knows too much.

2. Question the status quo. Just because you’re new doesn’t mean you don’t have great ideas. In fact, you probably have a new and refreshing perspective on many things. However, you must know when you’re crossing the line between new innovative thinking and whining. Don’t be a whiner.

3. Be a leader. No matter what your position, title, experience, etc, don’t be afraid to lead. Leadership comes in many different forms and it isn’t just experience based. Experiment with your own leadership style. You don’t have to be the highest ranking or most tenured individual to lead. Sometimes all it takes is for you to take the reins and show some motivation, and others will follow. See Lt. Gen. Stephen Lorenz on leadership.

Please comment on this post, or email me at: breese27(at)yahoo.com. Thanks!

My First Stock Purchase of 2008

I made my first move of the New Year: I bought 50 shares of Allete (ALE) at $38.60. They are a Minnesota based utility company that dabbles in various investments. The company operates in four segments: Regulated utility, non-regulated energy, real estate, and others. See the full profile here.

After struggling a bit through the spin-off of its car trading company, Adesa, which was bought out in a private equity deal, Allete continues to diversify, while maintaining its core utility business. Basic utility companies serve a fundamental need for consumers, and I don’t see energy getting cheaper anytime soon. Moreover, Allete will continue to diversify as it looks for ways to satisfy shareholders. A rate increase should help their bottom line in the next year as well. The PEG ratio is 2.65—not a great on paper. However, paper champions are not always the company’s that do well. It may be a while before the stock sees $50/share; however, they are paying a 4% dividend.

I am watching other companies closely after $100 a barrel oil came much sooner than expected. I like Apple (AAPL), Caterpillar (CAT), Target (TGT), and Conoco Phillips (COP) as long term holds. I’ll track my progress throughout the year and keep you updated with current holdings, recommendations, etc.

What are you buying?