A Correction for the New Year

With new years comes new resolutions, and this year I am going to do my best to blog on a regular basis. I hope to often write a weekly post similar to “Up & Down Wall Street” which appears in my favorite weekly investment magazine, “Barron’s”. This weekly blog post will summarize what’s happening in the world in an effort to provide readers a concise understanding of current events and how they affect financial markets. Some weeks there may be many topics covered in one post, and other weeks, like today’s will mostly focus on one topic.

Global markets shed some holiday weight this past week with the main ignition of selloff in the United States coming from China – where in addition to new evidence that their economy is slowing down, traders sold in advance of a ban being lifted allowing large shareholders to liquidate their positions, a rule originally imposed by Beijing in the middle of last summer to stop the free fall of the Chinese market when it was apparent stocks were overvalued for a slowing economy. Since then, in an effort to live up to its command economy nature, the government installed circuit breakers that trip at a certain point and shut off the market when too much selling (or buying) occur. Unfortunately, government intervention often have unintended consequences, and the circuits were tripped only 29 minutes into trading on Thursday morning as the breakers only encouraged investors to dump their holdings before the market could fully shut down. Call me crazy, but when the market is in panic, the rational thing to do is sell sooner, rather than later, to get your money out. To put in bluntly: capital is fleeing from China. And that’s bad news for the Beijing government, who despite what Donald Trump claims, has been doing their very best to prop up the Chinese currency (Yuan or Renminbi) over the past several years. Indeed, in the month of December, the Chinese foreign-exchange reserves plunged almost $110 billion. While the value of the Yuan is indeed falling, Beijing is using their reserves to purchase their own currency in order the prevent it from falling further than it would in a free market.

The trouble with China is that it’s time for a fundamental change in how its economy works. Collapsed commodity prices, overproduction of goods, and a heavy reliance on infrastructure projects have all contributed to investment leaving the country. It should be known that these development cycles are normal. Economies regularly transition their production of goods and services. However, China and its command economy is a special case; the government can only do so much to remain in control and prevent a crash landing, although in cases of overproduction, it’s nearly impossible to avoid turbulence.

Back at home, the continued downward spiral of oil prices is a bit curious considering historically oil has been very geopolitically sensitive and the amount of current unrest in the Middle East would be sure to spike oil prices at any other time. But lower oil prices have boomed auto sales for domestic manufactures, Ford, GM, and Fiat-owned Chrysler who thrive on gas-guzzling SUVs and trucks. Additionally, companies that do business mostly within the United States have seen a rise in profits thanks to a strong dollar. One such company is Christian Brothers Automotive, which has noticed the effect low oil prices has had on consumer’s wallets. The Houston-based company plans to hire a dozen new staff members at its headquarters and open as many new shops in the upcoming year.

If one considers the traditional method of valuing securities (“the present value of all future cash flows discounted back at the required rate of return”) then it most certainly looks like the market is predicting a slowdown here in the United States as well. Fortunately, investors, like anyone else, can become prisoners of the moment and overreact. News unveiled Friday on the labor market is solid, with nearly 300,000 jobs added in the month of December and unemployment remained steady at 5%, which economists often call “full employment”. High single digit drops in the stock market may cause worry, but one must remember that the stock market isn’t the economy, and the economy isn’t the stock market.

Feeding the pig (part one)

It has been quite some time since I’ve written a blog post on personal finance. Indeed the last one came on November 18, 2013. Well now that I am out of school and working 40 hours a week for the next 40ish years of my life, it is indeed time to get serious about investment, retirement, and saving some money. I’ll be using my tax return from Uncle Sam to kick start my portfolio. By the way, the average tax return is about $3000 currently. If we assume that grows at 1% per year, and you were to put that tax return away in an investment account that yields 6% a year by the time you retire (say your working career is 40 years) you will have over $500,000. A lot of people like to spend that “free money” on disposable goods, but hopefully those numbers make you reconsider what you do with that check from the government. Anyway… back to the original topic of this post. What I’m doing with my money. This blog is part 1 of 2. Part 1 is mostly background finance information that should hopefully be useful and interesting to those without a finance education. Part 2 will be about my chosen equities (asset allocation) and why I chose them.

I highlighted my dismal stock portfolio a few years ago and since I’ve taken a few finance courses (in fact, I even minored in finance!). It’s safe to say that this time around I will not be purchasing just a few stocks. In fact, to achieve maximum diversification, I would need a pool of about 30 stocks. But I don’t have the time to research individual stocks nor do I have the money to purchase 30 stocks without parts of my portfolio being seriously overweight. So what’s a young man gotta do to get a good pool of equities? Exchange Traded Funds.

Exchange Traded Funds (ETF) have been around since the 1990’s. They are a group of equities (stocks, bonds, or both) sold as one share. But unlike a normal stock, you’re not buying into a share of one company, you’re buying into a group of companies. The advantage of this is it allows investors to achieve greater diversification than selecting individual stocks. Common ETF’s track entire stock market indexes. For example, if you purchase an ETF that tracks the S&P 500 you are essentially purchasing a little bit of every company that is listed in the S&P 500. You could also purchase an ETF that contains just technology companies, healthcare companies, foreign companies, etc. ETF’s are bought and sold on the open market just like any other stock – therefore you and I can purchase a group of ETF’s and achieve a well diversified portfolio with little help from a finance friend. So is there a compelling reason as to why you should or shouldn’t purchase a group of ETF’s yourself and never hire someone to manage a portfolio account for you? Absolutely. Financial managers aren’t really that much better than you or I when it comes to selecting individual stocks. In fact, only about 25% of them beat major indexes every year. So if you were to purchase an index tracking ETF such as SPDR S&P 500 index you would beat 75% of financial professionals every year. The expense ratio on the SPDR fund is .09, meaning purchasing the index cost you $9 for every $1000 invested. Not a bad deal.

While purchasing ETFs is great, it doesnt tell the whole store. We need to know more about understanding our assets as part of a larger portfolio. Here are two terms I’ll talk about a lot in part two and briefly go over here: Asset allocation and rebalancing. The name asset allocation pretty much is its own definition; it is deciding how much cash, bonds, stocks, etc. make up your entire portfolio. Going hand in hand with asset allocation is rebalancing your portfolio. Unfortunately nobody yet has a time machine so we can’t know exactly when to sell stocks (at their highest price) or when to buy stocks (at their lowest price), but rebalancing your portfolio on a regular basis is the next best thing. Allow a quick example: Say on January 1st you have $100 to invest. You put $30 in small US companies, $50 in large US companies, and $20 in international companies. Your asset allocation is 30% small companies, 50% large, 20% international. On June 1st, your small and large US companies have done really well, growing to $40 and $85, but your international companies have lagged behind and stayed at $15. Your asset allocation is now 29%, 61%, and 10%. The idea is to always keep your asset allocation the same, so therefore in order to get back to the original allocation of 30, 50, 20, you will need to sell some of your large US companies and reinvest those profits into the small and international companies. Overtime rebalancing your portfolio has a huge effect. The Wall Street Journal published a short article on this in July, and there are many academic examples studying this.

Okay – so that’s some background information on what I’ll be talking about in my next blog. I promise it won’t be a year and a half before I get to it.

Glory to the Green

The end of my time at the University of North Texas as an undergraduate student has all too quickly come to an end. This Saturday I will leave my life as a student behind and walk across the stage and receive my diploma; a Bachelor of Arts in Economics. My time at UNT has been special. I am thankful for every minute I’ve been able to call this campus my home. From living in a terrible apartment to being one of just a handful of students standing in the rain in December watching Lance Dunbar break the all time rushing record, I will cherish each and every memory.

I arrived on campus as a know-it-all-already libertarian, eager to finish school and make my mark in the real world. In fact, I had actually considered transferring away from UNT because I thought it was too easy (ironic for someone who made a 2.5 GPA his first semester). But then, I took some calculus. I took some advanced economics. Later, I took a course in environmental philosophy taught by a guy named Joey. I realized I didn’t have any of the answers. The academics at UNT, along with one of the most diverse student bodies in the state of Texas really broadened my horizons. I am intellectually honest enough to consider others’ ideas and understand that my own may not be correct. My heart has softened to sympathize with those less fortunate. I understand what it means to support your team because they are your own. For these things, I am grateful.

I have met some amazing people at UNT and in the city of Denton. Everyone who helped create and support my student organization, Mean Green Dodgeball, will not be forgotten. I look forward to connecting with each member again someday. The blue-collar yet creative heartbeat is what makes Denton and UNT so special; it truly is a melting pot.

I will be joining UNT as a full-time staff member starting in January, but there will always be a special place in my heart during my time as an undergraduate. Whenever else in your life are you going to leave a library at 2:00 am to take a break from studying accounting? Yeah, I’m weird because I’ll miss things like that, but my perspective is this: I have the rest of my life to work. I’m going to enjoy everything I can now, even if it is staying up until 2:00 am to study for something like financial markets and institutions.

I’ll end by saying this: If I could do it all over again, I would. The stress of finals, the 8:00 am classes, Spanish, football games, basketball games, papers, Big Mike’s coffee. I would do it all again in a heartbeat, and I would do it all again at the University of North Texas.

Singing glory to the green, singing glory to the white,

For we know our university is striving for the right;

Down the corridor of years, we’ll forget the joys and tears,

But North Texas, North Texas, we love!


Starbucks Season

It is officially cold, and you know what that means? Starbucks. Yes indeed, the little coffee shop with the green logo located on every corner in America; serving the best of burned beans to all craving a caffeine buzz. Starbucks has capitalized on Christmas and the holiday season more than any other company in recent years, and I’m not just talking about how they’ve completely monopolized the white-girl market with their pumpkin spiced lattes.

The reason why Starbucks is so successful is because Starbucks has managed to make you think of their brand when you think of Christmas, without actually trying to sell you on Christmas. All other brands take the following approach to the holiday season: Let’s advertise to consumers how great our discounts are in hopes to get their money. Starbucks takes this approach: Let’s advertise what the holidays are about (ie friends and family) in hopes that those friends and family will visit us. (Apple put out a similarly successful ad last year.)

What Starbucks does so well in addition to their advertisements goes hand in hand: Their red cups, and their holiday drinks. If it’s November and you see someone walking down the street with a red Starbucks cup, you immediately think it must be close to Thanksgiving or Christmas and you may start to think about one of Starbucks holiday-only drinks such as the pumpkin spiced latte or peppermint mocha. When you think of a peppermint mocha or pumpkin spiced latte, you think of Starbucks. I would argue that if you’re with friends or family during the holidays and someone suggests coffee, it’s almost a given that you will go to Starbucks. I say that not because Starbucks is located on every corner, but because during the holidays you want to enrich your life with the things holidays are about (friends, family). The peppermint mocha appeals so perfectly to nostalgia because everyone as a kid grew up eating candy canes around Christmas. And it’s just too easy to associate the pumpkin spiced latte with a pumpkin pie grandma just pulled out of the oven when you were younger. The Starbucks marketing is so non-hostile which is why it works. You go into a Starbucks during December and you’re not bombarded with red-tag sales, you’re bombarded with friends, family, and memories.

The Bible Contract

American and western Christians in general have a difficult problem: Their lives look eerily similar to those who do not attach themselves with Christianity at all. The behavior is exactly the same of the culture around them. (Plenty of research has been done to back up these claims.) What Christians spend their money on and how they spend their time looks nearly identical to those who are not Christians. You must wonder why then, if so many profess the faith, is there not a larger difference in the way the two bodies live? I believe it is due to a “contractual” view of the Bible rather than a covenant view.  To really understand what I mean by this, we have to start from the beginning.

A contract is a legally binding set of terms that enforces behavior among two parties. A contract can orient people against one another as each party protects their self-interests. By contrast, a covenant is a pledge of trust between people themselves. This pledge requires that each person faithfully put their trust in each other and not the legally binding arrangement of the contract. A covenant pledge in Old Testament time was so powerful that often times animals would be sacrificed as a way to say, “may this be our blood if the covenant is broken”. People enter into covenants because they trust one another, people enter into contracts precisely because they don’t.

In the Old Testament, God is always working through his people through covenants (Gen. 9:1-17, Gen 15, Gen 17, Exod. 20-31, Sam 7:4-16). Some of them explicit and others implied. All of these covenants of course are carried out through faith and trusting one another. In the New Testament, the New Covenant in which God gives to all willing to accept Jesus as their Lord and savior. With this new covenant, it is extremely important that we recognize that the New Testament expresses it in terms of a marriage. Christ is described as a bridegroom who has come to Earth to find a bride (Matt. 9:15). And all who belong to the church are the bride of Christ. What makes this even more awesome is if we look at the old Jewish tradition of marriage and how it relates to Christ. In ancient times a man and a woman would be legally married a year or two before they ever had a ceremony. During this time the groom would typically go away and either secure an income, build a house, or otherwise build security for his future family. This was known as the “betrothal” period. During the start of the betrothal period, it was customary for the husband to give his wife a gift before they would leave and prepare a place for them. This gift symbolized a promising pledge that the husband would return once the preparations were in place for both the bride and the husband. It is clear that we are also in the “betrothal” period with Christ, as he has “gone to prepare a place for you” (John 14:3). And the gift Christ has given us is the gift of the Holy Spirit as he goes to prepare a place for us.  Christ’s proposal to us was when he was nailed to the cross, and in this betrothal period we are learning to be the faithful, radiant bride Jesus came to redeem. We are to use this time to break from “the pattern of this world”. Like a marriage, your surrender to Christ is something that is supposed to be faithfully lived out. If you view the Gospels as a covenant, this makes a lot of sense; if you have a contractual view, this is probably radically different than what you have been taught.

The New Testament talks about salvation in three phases, “were saved” (Romans 8:24), “being saved” (1 Cor. 1:18, 2 Cor. 2:15), and “shall be saved” (Romans 5:10). These three phases don’t make a whole lot of sense if you view salvation as a contract, but make perfect sense if you think that salvation is our marriage to Christ. Indeed in the Christian circle, “When were you saved?” is a common question. But this question implies a static and contractual relationship with God that contributes to “cultural Christianity” as my friend Garrett Engel would say. So long as you were once saved, and you pray a “sinners prayer” you have not broken the contract. But this mindset allows Christians to look for loopholes which others see and point out as hypocritical. Do you think what Paul wrote in 1 Cor. 6:18 that he meant, “see how close you can get before you cross the line”? If you were in a marriage, would you ask your husband or wife how much could you get away with before he/she divorced you? When we have this mindset, we are more focused on not breaking the contract in order to “stay out of jail”, rather than developing a real relationship with Christ. God isn’t interested in making a deal with you, but rather he wants to enter a marriage-like covenantal relationship with you.

Logic and Interpretation Need not Apply

A couple of weeks ago I had the unfortunate experience of running into a preaching couple on campus. Like your typical southern evangelist that shows up on campus, this pair’s purpose for coming to campus was to damn every person that walks by for being a sinner, and, condemn them to Hell. Last week it was Brother Micah and his wife on campus. Normally I never talk to these people, because there is pretty much nothing you can say or do that will win any favor with them. They will simply pull verses out of context and use the verses themselves as reasoning. Indeed, this past week was no different. Brother Micah was on campus to presumably try to bring others to Christ – a fact for which I actually condoned him for. For too many of us Christians spend day to day as functioning atheists, not looking for opportunities in which we can serve Christ or at least better preparing ourselves for that time. Instead of bringing anyone to even want to learn more about Jesus, Brother Micah initiated a response that I can only imagine is probably a common theme across his campus tours… Women took off their clothes, men kissed other men, and women kissed other women, simply to spite Brother Micah and his wife.

As I mentioned, I normally don’t care to talk to these guys, but a few Tuesdays ago I actually decided to just stop and listen. After Micah had finished talking with someone, I went up to him and said, “Hey, I respect you actually getting out and wanting to draw people to Jesus, but I’m not sure if this is the best way to go about it.” He blew up on me. Indeed he condemned me for everything you could imagine. He said I had no chance of being saved, and even said, “I know you’re not saved because you have not quoted any scripture to me word for word.” Absolutely insane. All I wanted to do was try and have a conversation — understand his perspective even — as to why he thought this approach was better than actually, you know, loving and serving your neighbor as yourself. I unfortunately didn’t get any of that.

Instead, I wonder now what is the basis for his beliefs. And, I am pretty sure, he is using scripture as an idol. Indeed the level of certainty he had was the equivalent to the level of “faith” he had. In John 5:39-40, Jesus says, “You study the Scriptures diligently because you think that in them you have eternal life. These are the very Scriptures that testify about me, yet you refuse to come to me to have life.” Indeed, Jesus is the bread of life (John 6:35) and all throughout the New Testament we are called to look like Jesus, which looks like the cross (1 John 3:16, Romans 5:8). It is on the cross in which we see the fullness of God’s love demonstrated. But if you’re not looking like the cross but yet judging as only God can judge then you must be wonderfully certain that your knowledge of scripture is what leads your to salvation. Case in point is when he told me I would not be saved because I hadn’t quoted any scripture. Brother Micah lives his life very much like the Pharisees in Jesus’ time in which he has memorized scripture thinking in the scripture itself had life.

Gregory Boyd in Benefit of the Doubt puts it wonderfully when he says (alluding to John 5:39-40), “This episode demonstrates that the way we believe what we believe can transform what we believe into an idol that actually blocks us from getting life from Christ – even when what we believe is completely true! And this happens whenever we are confident we are okay with God because of what we believe rather than because of our relationship with the one true source of life. If what makes us feel okay with God is our confidence in the correctness of our beliefs, then our confidence in our beliefs is, in effect, our god. This is what gives us our false sense of life.”

Thoughts on Pornography and the Degration of Women

This evening I went to The Village church in Denton, TX. The lesson was on the creation of Man and Women, but if you’ve ever listened to Matt Chandler, everything remotely related to the scripture will be brought up. One of those things that was brought up tonight was something I’ve never blogged on: pornography.

To understand my thoughts on this subject, we must start in Genesis. Specifically we’re only looking at two verses, Genesis Chapter 1 verses 26 and 27. These verses read:

[26]Then God said, “Let us make human beings in our image, to be like us. They will reign over the fish in the sea, the birds in the sky, the livestock, all the wild animals on the earth, and the small animals that scurry along the ground.” [27]So God created human beings in his own image. In the image of God he created them; male and female he created them.

At first glance, these two verses appear to just tell the basic story of creation of humans. While on the surface that is correct, we must look a little deeper into the meaning. If you are a Christian then you undoubtedly believe that God is perfect. Therefore, to be made in the image of God automatically gives beings made in this image self worth. Human worth is not dependent on possessions, achievements, attractiveness, or any other worldly materials but rather on the fact that each person is made in God’s image and shares His characteristics.
So, I can hear you asking, how is this related to pornography? Great question. When you watch porn you go from having the ability to appreciate a fellow human being made in God’s image to treating the human being as a product not made in His image and used for consumption. Indeed you are essentially stripping the self-worth from that human.

For this to make the most sense, you must read Genesis Chapter 1 up to verse 26. Before God created human beings, he created other things such as plants, trees, and animals made for consumption. These things God did not make in His image because plants and animals cannot reflect characteristics of God such as love, patience, forgiveness, kindness, and faithfulness. Therefore, when you consume pornography, you are treating the human as not someone with self-worth made in the image of God, but rather a product. This does not stop with pornography however. In fact, the same analogy applies to, and in my opinion intensifies, when talking about strip clubs, “massage parlors”, prostitution, and human trafficking.

When watching porn, hiring a prostitute, or going to a strip club, you are literally stripping that persons’ worth and degrading them. There is no little girl or boy that grows up wanting to be a stripper or a porn star. Indeed there is an innate sense of self-worth that comes from being made in God’s image that drives us towards other professions. It is only during the most desperate times do people choose to go down this path because they feel they have no other options. Wouldn’t it be a great world if there was so little demand for adult-entertainment that strip clubs and prostitutes could not make money? How about instead of pushing these people down and declaring they have no self worth by consuming them we actually were to bring them up and recognize the divine image in each person?

But, Austin, it’s just entertainment, after all, being a student of the free market, do you not support a voluntary transaction of services? Indeed I am very free-market oriented, boarder-line libertarian. However, I believe the consumption of pornography, prostitution, and the like can easily have the “coolidge effect”  which could lead to infidelity, paying prostitutes, and even just looking at all women lustfully. These things are bad enough, but when you combine infidelity into the married home, you are clearly asking for disaster. Man is suppose to project the image of God and lead his family to also project the image of God and show His grace. However, by choosing to treat people as products for consumption rather than recognizing their divine characteristics, you are not aligning yourself under God which you must do in order to lead your family to project His greatness. In the end, this infidelity can split a family causing children to not only not know their biological father, but also not know their Father in Heaven, as there is no man to be the head of the household.

Also – just a quick note… while I mostly wrote this post from a male-accusation perspective, women are not immune here. BYU reports that 33.3% of pornography website visitors are women. I will let someone else write from that perspective though…

Where are the broken areas?

I often like to surf on Google Maps for no other reason than because I have a rather simple mind and I like to look at geography. I happened to be sliding around Dallas when I came across the Highland Park area and decided to go into the street view. The particular street I was on had a mixture of simple modest homes, and newly constructed behemoths. For whatever reason, that got me thinking: Where are the broken areas in the world? My good friend, Father Clint Wilson from St. Davids Church in Denton mentioned to me once that he intentionally moved into a broken area when he was starting a ministry in Denver, Colorado. I knew the “broken area” was a poor neighborhood because 1) There was a drive-by at his house (or close to it), and 2) Young priests often can’t afford to live in anywhere but lower to middle class neighborhoods. But now I am wondering, why do we always associate broken areas with poor, crime filled, neighborhoods? Could a rich, gated community not be just as broken? Christ often says it is very difficult for a rich man to get to heaven. Yet, I have not heard of any ministries targeted at the ultra-rich. Perhaps we assume that the area isn’t broken at all, because if they live in a gated community, there’s a good chance they’re probably giving some money away. But at the point when you’re living in a gated community, the extra surplus of wealth you have does not mean a whole lot to you (diminishing marginal utility). Christ makes this clear in Mark 12:43-44, “Calling his disciples to him, Jesus said, I tell you the truth, this poor widow as put more into the treasury than all the others. They all gave out of their wealth; but she, out of her poverty, put in everything – all she had to live on.” As people of wealth will often tell you, “time is money”, I wonder what a ministry targeted at the rich would look like. Perhaps rich giving more time than money? It’s some food (preferably communion wafers) for thought.

In the Now

I am currently reading Present Perfect by Gregory Boyd. I love Greg Boyd’s writing style, because much like his other book, Myth of a Christian Nation, he never holds back and never beats around the bush. While I’m only about half-way through the book, I just want to write a quick blog post about some of his points.

The book is about “Finding God in the Now”… what does that mean? It means that we’re suppose to be surrendering our life to God right now. Being a Christian does not mean that at one time we surrendered our life, but rather the only life you have to surrender is the one you are living right now.  Gregory Boyd makes the analogy:

Think of it like a marriage. Thirty-one years ago I looked into my wife’s gorgeous eyes and pledged my life to her. But my pledge wasn’t itself the life I pledged to her. My pledge didn’t magically give us a good marriage. Rather, the actual life I pledged to my wife was the life I have lived each and every moment since I made that pledge. The only life I have to give to my wife is the life I live moment-by-moment. The quality of my marriage, therefore, isn’t derived by whether I made a pledge thirty-one years ago. It’s determined by how I live out that pledge now.  The same is true for our relationship with Christ. The important question is not, Did I once surrender my life to Christ? The important question is, Am I surrendered to Christ right now?

In a later chapter, Boyd also makes a great point that I had never thought of before: In life on earth, each passing moment means we are one moment closer to death. Yet, the one who is eternal Life invites us to participate in His life each and every moment. So by submitting your life to His right now are you really closer to death, or to life?

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