warren buffett
Warren Buffett

Warren Buffett’s great-nephew is poised to take his “blank-check” company public on Thursday.Alex Buffett Rozek, the grandson of Warren’s late sister Doris Buffett, is the co-CEO and co-chairman of Boston Omaha Corporation.Boston Omaha formed Yellowstone Acquisition Company, a “SPAC” or investment vehicle that raises money on public markets to finance a future acquisition, and hopes to raise $150 million from its market debut.Rozek and his business partner will use the funds to target a company in the homebuilding, homebuilding-related manufacturing, financial services, or commercial real estate industries.Visit Business Insider’s homepage for more stories.

Warren Buffett’s great-nephew is set to take his “blank-check” company public on Thursday, joining the likes of billionaire investors Bill Ackman and Chamath Palihapitiya in raising money to make a future, as-yet-unknown acquisition.

Alex Buffett Rozek, the grandson of Warren’s late sister Doris Buffett, is the co-chairman and co-CEO of Boston Omaha Corporation. Boston Omaha is a holding company with some similarities to Buffett’s Berkshire Hathaway conglomerate, as it has business interests across the advertising, insurance, and broadband-internet industries.

Read More: Market wizard Jim Rogers started trading with $600 and now has a reported net worth of $300 million. He shares the 8 trading rules that ensured his success.

Boston Omaha formed Yellowstone Acquisition Company — a special-purpose acquisition company or “SPAC” — and filed to take it public in early September. It initially hoped to raise $200 million, but ultimately cut its target to $150 million. Yellowstone’s shares are expected to begin trading on Thursday.

Rozek and his co-chairman and co-CEO, Adam Peterson, plan to use the listing proceeds to acquire a business in the homebuilding, homebuilding-related manufacturing, financial services, or commercial real estate industries.

The pair may be seeking to emulate Rozek’s great-uncle, who has made scores of lucrative deals during his career. Some of the Berkshire chief’s most famous ones include his bailouts of Goldman Sachs, General Electric, and Bank of America, and his $37 billion takeover of Precision Castparts.

Read More: MORGAN STANLEY: Buy these 61 stocks that will offer major earnings-driven upside following an imminent 10% market sell-off

Doris, Rozek’s grandmother, is best known for dealing with the stream of letters seeking aid from her billionaire brother. She gifted more than $180 million over the course of 25 years.

Rozek helped his grandmother with her philanthropy, and continues to chair the boards of two foundations linked to her: Learning by Giving and the Letters Foundation.

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Trader NYSE

US stocks closed lower on Thursday as investors continued to digest the Fed’s uncertain economic outlook and weekly jobless claims that still exceed the highs of the Great Recession.Federal Reserve Chair Jerome Powell’s comments on Wednesday expressed uncertainty in the economic recovery and mentioned that the Fed didn’t expect to raise interest rates until at least 2023.Additionally, weekly jobless claims fell by more than 30,000 from the previous week, to 860,000, though that was higher than the consensus estimate of 850,000. The current weekly jobless claim figures are still well above the 6650,000 peak reached during the Great Recession in 2009.Oil prices traded higher after reports that Saudia Arabia stressed OPEC+ compliance to its members. West Texas Intermediate crude jumped as much as 2.6%, to $41.22 per barrel.Watch major indexes update live here.

US stocks fell on Thursday as investors continued to digest comments from Federal Reserve Chair Jerome Powell and weekly jobless-claims data.

Federal Reserve Chairman Jerome Powell’s comments on Wednesday expressed uncertainty in the economic recovery and mentioned that the Fed didn’t expect to raise interest rates until at least 2023.

In a signal that the economic recovery from the COVID-19 pandemic is muddling along, weekly jobless claims fell by more than 30,000 from the previous week, to 860,000, slightly higher than the consensus estimate of 850,000.

The current weekly jobless claim figures are still well above the 6650,000 peak reached during the Great Recession in 2009.

Tech stocks led the decline even after the cloud-tech platform Snowflake staged the biggest initial public offering of the year on Wednesday. Its stock more than doubled in its first day of trading.

Here’s where US indexes stood at the 4 p.m. market close on Thursday:

S&P 500: 3,357.01, down 0.8%Dow Jones industrial average: 27,901.98, down 0.5% (130 points)Nasdaq composite: 10,910.28, down 1.3%

Read more: A Wall Street firm says investors should buy these 15 cheap, high-earning stocks now to beat the market in 2021 as more expensive companies fall behind

Going forward, investors will likely turn their attention to additional stimulus measures from Congress. While Republicans and Democrats haven’t landed on the same page on a “skinny” deal, key negotiators have seemed increasingly optimistic about a deal, and pressure is mounting to get a deal done before the November election.

President Donald Trump on Wednesday said Republicans should warm up to the idea of sending bigger direct payments to Americans.

Meanwhile, technical traders likely have their eye on the 50-day moving average, as multiple US stock market indexes converge on the important support level.

Read more: Legendary options trader Tony Saliba famously put together 70 straight months of profits greater than $100,000. Here’s an inside look at the strategy that propelled him to millionaire status before age 25.

Elsewhere, Yelp said in a report that 60% of the 163,735 businesses that had closed in the US as of August 31 because of the pandemic wouldn’t reopen, suggesting that small businesses have fared worse than big ones. The total business closures represented a 23% jump since mid-July, Yelp said.

The SPAC craze continued as Richard Branson announced plans to launch a $400 million special-purpose acquisition company. Branson has experience with SPACs: His Virgin Galactic went public via merging with a SPAC led by the billionaire investor Chamath Palihapitiya.

Spot gold fell as much as 1.3%, to $1,932.95 per ounce. The US dollar extended its decline while Treasury yields were mostly flat.

Crude-oil futures rose markedly after Saudia Arabia stressed to OPEC+ members to stick to their production quotas and to not overproduce,according to Bloomberg. West Texas Intermediate crude jumped as much as 2.6%, to $41.22 per barrel. Brent crude, oil’s international standard, rose 3%, to $43.50 per barrel, at intraday highs.

Read more: 3 top investing executives lay out the biggest risks to markets heading into a volatile election season — and share their best recommendations for navigating what happens next

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Rental Property vs Stocks – Tracking Experiment Continued …

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A couple months ago I talked about comparing rental property vs stocks, using 2 of my personal assets as examples we can track over time. One is a personal IRA account (backstory here) which is invested in a total stock market index fund. The other is a duplex rental property located in Texas (backstory here).

On July 1st of this year, both of these assets were worth almost exactly the same amount… ~$109,600. Now, just 60 days later, there’s a huge difference in value between them.

My goal with tracking these two investments side-by-side is to see which one outperforms the other, both short-term and long-term.

I know it’s unfair to compare the growth of a physical rental property vs a stock portfolio because they are contrasting investment strategies. But, I’m gonna compare them anyway because I’m a weirdo and I think it’s fun! This experiment is kind of like racing a dog against a horse. (😂 I just got a funny image in my head). Each has unique strengths and weaknesses so it’ll be interesting to juxtapose them over time and debate about which is the better investment.

Rental property vs stocks: Updates July & Aug 2020

As of September 1, here are the current values for each asset:

IRA account value:  $124,117  (has grown +$14,515 since July 1)

Holy cow! Nobody could have predicted the recent stock market return and sharp bounce back after the crash earlier this year. As a reminder, this account is 100% invested in FSKAX, a Fidelity mutual fund that replicates the Dow Jones U.S. Total Stock Market Index. In March, this account went as low as $77k — what a fascinating recovery.

graph showing 1 year growth of IRA account

While I’d love for this crazy growth to continue, good times like this can’t go on forever. But unless there’s a sudden correction, it’s safe to say this IRA will be worth more than the rental property investment for a long while…

Rental property value:  $111,623  (has grown +$1,997 since July 1)

Buy and hold real estate is a much slower and steadier investing game. I don’t think I’ll ever see a massive sudden surge in value (or dramatic downturn 🤞) for this property. For me, volatility is neither a good thing or a bad thing, because I’m invested for the long term regardless.

Here’s the rental property value breakdown, including the float account and reserve fund:

chart calculating rental property value. Total asset value minus outstanding mortgage

All in all, the value increased $1,997 over 2 months. The outstanding mortgage shrunk by $473 thanks to principal pay down, and the remaining $1,524 came from positive cash flow.

Cash reserves for real estate

I get a lot of questions about my cash reserve or “float account” for this rental property. Feel free to shoot me an email or comment for specifics, and I’ll address a few common questions here:

Why do you have so much cash in the reserve account?… At minimum, I like to keep about 6 month PITI (mortgage payment + tax + insurance) in the reserve account. Also, I pay property taxes (~$5k) and insurance (~$1k) out of this account in a lump sum. Having a large balance also covers expensive emergencies like blown A/C units or sudden loss of rental income.

Is this reserve account separate from your personal bank account?… Yes, I have separate checking accounts for each investment property I own. All mortgage payments are auto-deducted from their respective accounts, and rental income from each place is deposited into them. Although this sounds like a headache (managing multiple checking accounts), it’s actually all on auto-pilot, and it makes calculating individual ROI very easy.

Why do you include cash reserves as part of the asset value?… In my mind, the property can’t exist without the reserve fund. And the reserve wouldn’t exist without the property. So I count them as a single investment asset and count the reserve cash as part of the overall equity. 

Rental property vs stocks: Active management vs. “passive income”!

In addition to looking at the money growth of these assets, I want to also be transparent about the time and energy that goes into maintaining these accounts.

For the IRA, I have spent zero hours managing or even thinking about this account. (OK, that’s a lie – I check the Stocks app on my iPhone about once every 5 minutes – a habit I need to break 🙄). But the point is that as an investor in the overall stock market I don’t need to touch anything to ensure account growth over time. It truly is passive investing.

The rental property, however, is a slightly different story. Some months involve a ton of headaches, others are relatively light. Either way, rental property income is not passive income in my opinion.

I’ve been lucky these past few months, having no major repairs or tenant issues. But, I’ve still spent about 3-4 hours on this investment property. It took about 1-2 hours evaluating refinance options, about 30 mins reviewing monthly P&L statements and talking with my property manager, and maybe 1-2 hours ordering and reviewing a CMA (Comparative Market Analysis) for the property. Not a huge amount of time spent, but time spent nonetheless.

Now you could argue that I didn’t need to do these activities. But I would argue right back that if I didn’t constantly look at options to reduce expenses or increase cash flow, I would miss opportunities to boost my returns. For as long as I own this property I will need to continually analyze it as well as stay on top of what’s happening with the local housing market. It’s the burden of being a responsible real estate investor.

*Quick side note: Not ALL real estate investing involves personal management and effort. A publicly traded REIT (real estate investment trust) is a passive investment and can cover both residential real estate as well as commercial real estate. Personally I don’t do any REIT investing – it’s an investment strategy too advanced for my tiny brain 🙂

Future returns and predictions

As of Sept 1st, my IRA is outpacing the duplex by more than $12k. What will happen in the next few months? I have no clue. I have a feeling this is going to be a tortoise and the hare kind of story. Ultimately, I don’t really care which grows faster or slower, because I own them both already and plan to hold them for a long while.

Would love to hear your thoughts and predictions!

TLDR & summary

Since July, my IRA has grown by $14,515. Booyah! 🐇
In comparison, my rental property’s value only increased $1,997. 🐢  (no complaints!)
The rental had 3-4 hours of management work… The IRA required zero.
Nobody knows what the future holds. We’ll check back in and compare these again in a few months. 🙂

Original Source: budgetsaresexy.com

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