How Do The Rich Invest In Real Estate?

The most common way for the average investor to invest through real estate is to purchase stock interests in a real estate investment trusts (REITs). This comes with three advantages: (1) You get diversification across hundreds if not thousands of properties; (2) You get professional management of the properties; and (3) you get liquid marketability of your investment because you can sell it instantaneously online as easily as a stock.

However, among households with net worths in excess of $2.5 million excluding the value of their primary residence, approximately 34% own real estate outright without any REIT investments, 18% own REITs exclusively, and 15% own both real estate outright as well as REITs. The advantage of owning real estate outright is that you get to benefit from the tangibility, control, and passive activity loss rules that buyers of REITs do not receive.

You might wonder then: How do the affluent … Read the rest of this article!

How Much Money Does Glenn Beck Make From Goldline?

If you visit the website, there is a good chance that you will get met with an advertisement from Goldline–one of the site’s premium sponsors. I was thinking about this after I listened to an old Tim Ferriss podcast in which Glenn Beck discussed his evolution as a media personality and the media’s rebranding of him when he transitioned from CNN to Fox News and became a vocal critic of President Obama’s administration.

The part that catches my attention is the recurring pattern of men making a whole lot of good old-fashioned cash by developing a marketing machine that hypes some deficiency in the capitalist system. In the case of Glenn Beck, he has correctly pointed out that the Federal Reserve has distorted the traditional supply-and-demand aspects of the laissez faire capitalist system by increasing the money supply and affecting the cost and velocity of money that flows … Read the rest of this article!

New Car Prices Show Us Why Young Americans Can’t Get Ahead

Approximately 58% of American adults under the age of 35 will purchase a car that has a negotiated price of $40,000 or greater. This is hardly a surprise, as the Kelly Blue Book has indicated that the average price of a new car crossed the $33,500 last year. The purchase of a new vehicle is something that takes a huge toll on wealth accumulation.

This is because people tend to focus on whether they can handle the monthly car payment rather than analyze the cumulative cost of those car payments to figure out the true cost (which includes interest payments for purchasing the car). With average interest rates for those with credit above 630 is 4.5% for car loans, those monthly $400+ payments are going to cost just shy of $10,000 in interest tacked onto the cost of a car.

If your credit rating is lower and you have to … Read the rest of this article!

Treating Stocks As Businesses Still Works

Last month, I made fun of the fact that Fred’s stock had skyrocketed over 85% on the news that it was set to acquire 865 Rite Aid locations.

My reaction to the news included the following:

“Investors are speaking as if Fred’s got a ‘steal’ by getting each location for a cost of $1.1 million. I do not share in that sentiment. My view is that Fred’s purchase of 865 Rite-Aid locations will, in hindsight, prove to be a classic case study of the kind of market folly that pops up whenever you have a rising market mixed with cheap credit for corporate borrowers.

Despite having 4,600 locations, Rite Aid only brings in $125 million in profits per year. This means that each Rite Aid location, on average, makes $27,173 in net profit per year. I view this as folly because Fred’s is paying an average price of $1.1 … Read the rest of this article!

Netflix Stock Still Has A Profit Problem

If you enjoy movies and TV sitcoms, Netflix (NFLX) offers one of the best tradeoffs for consumers in Western Civilization’s entire experimentation with capitalism. If you watch 50 hours per month, your effective cost of entertainment is only twenty cents per hour. I don’t there’s a better value proposition in the market than that.

Consumers know a good deal when they see one, and Netflix reported yesterday that it picked up 5 million new subscribers to brings it total subscriber count to 93 million. Adjusting for the lower subscriber charges abroad, this means that Netflix is bringing in $5.5 billion per year from its subscriber base.

When you see the price of Netflix stock climb to $143 per share in after-hours trading, the $60 billion valuation for the streaming giant at first sounds reasonable.

But the reality is more complicated than that. Netflix is distinguishable from firms like Pepsi, … Read the rest of this article!