MilitaryToFinance
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Posts posted by MilitaryToFinance
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Speaking of which.. NBOKC/Marty - what are the 15 year fixed VA rates nowadays? Is there any difference between a 760 and 805 score, rate wise? I distrust the Quicken loans pop ups...
Beware that interest rates are moving up. My house hunting has been slow moving and I keep watching my quoted rate move up and up.
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Thanks guys. Is it just the more stringent inspection that worries sellers or they aren't familiar with VA loans and people don't like what they aren't familiar with? I'll be taking out a jumbo loan so even though it's VA I'll be putting down at least 10%. I'm not sure why the seller would care how much the buyer is putting down but that's the only other big difference I can think of.
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Has anybody had problems with the seller of a house using a VA loan? I've been warned by multiple people that sellers don't really like VA loans and if there is more than one offer you will lose out to the conventional loan. I'm especially curious because I live in an area where very few people would have experience with VA loans but the rates I'm being quoted are 50-75bps better for the VA loan than conventional. I have a disability rating so the funding fee is waived for me as well so I would like to use the VA loan if possible but the stories have me worried.
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I'll chime in with my thoughts although I think my specific experience is probably less relevant. I'm happy to give details on my career and path here but I can count on both hands the number of veterans I know in my entire industry so it might not be that helpful.
That said I have some general thoughts on civilian life. First, I think it's worth saying that when it comes to the trade off between pay and work/life balance the airlines are really hard to beat. That doesn't make it the right answer but it is worth keeping in mind. All of my peers who make decent six figure paychecks work 10-12 hours a day and many either travel a lot or work weekends. If a company offers free breakfast and dinner as a perk it isn't because they are nice, it's because they expect you to be at the office before breakfast and still working after dinner. I chose money over balance but it was an explicut choice that I knew I was making up front.
If you are getting out after your commitment, not retiring at 20, both consulting and investment banking love military vets. They tend to hire young so I'm not sure they are viable options after a full career. Investment banking is a brutal grind but if you don't mind the hours it is pretty much a guarantee you'll make $300-$500k mid-career with the possibility of much more if you make Managing Director. The hiring cycle is fairly standardized and there are a number of groups/programs targeting vets. Vets on Wall Street is a good one, I also second whoever recommended ACP. I didn't get my job through them but they paired me with a great mentor who introduced me to lots of his contracts. Goldman Sachs has a veterans internship program each year and if you aren't a screwup you will get an offer for a fulltime job.
Consulting is good because it opens up options if you don't really know what you want to do. Most people who start at the big firms, McKinsey/Bain/BCG are the favorites, only stay for 3 or 4 years. After that you will have worked on 5 or 6 projects with different companies in different industries and you'll have a good idea what's out there. If the consulting lifestyle isn't for you it's very easy to transition to a management role at one of the companies you consulted with. If you have a family this is a tough path because consultants are the people keeping the airlines in business. Normal month will have you on the road Mon-Thur 3 weeks a month.
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What about it made you laugh? The fiscal situation in Puerto Rico is similar with billions of muni debt which is currently impossible to pay. We've spent a couple hundred hours researching Puerto Rico and the various issuers, legal claims and priorities so i have a much better understanding of that than I do of the Illinois debt.
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Anyone going long on Illinois Muni Bonds?
I would wait on this. When Illinois gets downgraded to junk because they can't pass a budget you will see forced selling by large institutions who's investment mandates won't let them own junk debt. Even after that this is going to take years to sort out in court so there's no rush to get involved. I know the Puerto Rico situation a lot better than IL so I'm not sure exactly what kinds of debt has been issued there but if you can find bonds with any sort of special revenue pledge those will have a better legal claim. Look for bonds backed by sales tax or infrastructure. They already sold the toll road but one of the airports might have bonds paid by airport fees and taxes. Your biggest problem is the massive sucking black hole of completely unfunded pension liabilities in a state where the court has already ruled pension claims are non-negotiable. Remember the government and unions negotiated and agreed to change the pension a few years back and some retiree sued and the court agreed that even the union couldn't negotiate a decrease in their own benefits.
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Merger-arb has been a very dangerous strategy in the last 18 months. If the stock is trading over 130% wide a week before the deal is closing you have to think there is a reason for that. I hope you weren't holding out for the $7.
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On 6/9/2017 at 2:02 PM, Orbit said:
NVDA is getting destroyed today after this http://citronresearch.com/nvidia-trade-back-130/
Andrew Left is known as a self-promoting douchenozzle but he's not always wrong. It's very hard to see a scenario where NVDA justifies its valuation but there is a lot of blind credulity and enthusiasm for any tech company with a growth story these days. Makes shorting brutal.
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You can still see a movie for $7? My theater is $19.95/ticket + $1.50 service charge and that's before they bend you over buying popcorn.
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I definitely agree with you there. If you're getting a "hot tip" you're the sucker at the table. However I do believe if you are willing to put in the effort to research individual names and situations you can do better than the market over time. It requires a significant amount of effort to do so and is something you really need to have a personal interest in to commit the amount of time necessary to be successful. My suggestion is for people to start with areas they have some level of expertise already because you aren't going to compete with the professionals in the amount of time you can dedicate to research. So know your strengths and play to them. If you're a pilot with a Poly Sci degree maybe don't try and outsmart the PhD's by investing in small cap biotech stocks.
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Figures...
http://www.nydailynews.com/sports/football/colin-kaepernick-hypocrite-ends-protest-job-article-1.2986931
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On 2/25/2017 at 11:03 AM, Vetter said:
Read "A Random Walk Down Wall Street" and you'll realize it's a rigged game. By the time you find the next great stock, most likely it's past it's prime.
If you believe in Random Walk then you believe in efficient markets which by definition is the opposite of a rigged game. It means that no matter what you buy the price of all information is already in the stock so in aggregate you won't beat the market. In order to rig the market somebody would need to have information you don't and be taking advantage of you. The book is an interest read but you have to remember the reason we have economists is to make weathermen look accurate. Efficient Markets Hypothesis makes for building great theoretical models and having fun with math but has been widely refuted by real world market dynamics.
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Bad news from 4th Circuit. Maryland scary gun ban and magazine ban both ruled constitutional. Main precedent DC v Heller doesn't apply to weapons of war and AR/AK variants are considered weapons of war by the court.
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It certainly looks cheap, especially on an ex-cash basis. If they really cut the repatriation tax as much as planned that will be huge for Apple. My concern has always been the dependence on the iPhone and how long that can last. At some point they need a new product to carry the flag and it's hard to see what that will be. It says something when the Apple Watch was considered a flop after selling "only" $6B in the first year. Lots of companies would kill for a $6B revenue product but for Apple it didn't move the needle at all. It will take something massive to replace the profits from the iPhone and I have no idea what that will be.
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1 hour ago, SCardinals said:
The #1 I look at is Apple...Honestly. In 2016 they started at ~120 ish, went down to 90, and slowly climbed back up to 120 by the year's end. Recently beat analysts expectations, now it's the highest it has ever been. They have continually beat up Samsung (not to mention the note7 battery fire outrage) that forced many to switch over. Apple has been gnawing away at the market in China. Buffett bought a ton of shares to kick the year off, BOA and ML have issued a strong buy rating on Apple, with a projection of 145. This year is poised to be an interesting one with the 10yr anniversary of the iPhone, a complete design re-haul, etc. Also their dividends are attractive. I think Apple is a safe bet for the next 2-3 years, but they will have to stop relying on 2/3rds sales from the iPhone to drive growth. That ship will sail soon, and a new market will have to be tackled. Lastly, with the corporate tax rate set to be reduced, Apple will surely bring home a lot of its cash.
Next up is Amazon...Aka the next Walmart. Bezos is such a smart guy- to think they started out with book rental/purchase, e-readers, and now involved with CRM/cloud/web services, Amazon Fresh/grocery. The downside is their $845 price tag, with their last split coming in '98. Another risky attraction. If a split occurs this year, I think Amazon may be a good long-term hold. Unfortunately they miss expectations 3/4ths of the year and after everyone they get hammered...yet claw their way back. With a very high P/E, most are betting on Amazon's future rather than the short-term success, as I think its best years are ahead.
A few words of caution. First, never believe the buy/hold/sell ratings from banks, they don't actually mean buy or hold or sell. I suggest reading this for a quick explanation of how sell-side equity research works: https://www.bloomberg.com/view/articles/2017-01-20/wall-street-analysts-give-investors-what-they-want
Second a stock split cannot change the value of a company. If you think AMZN is a good value after the stock splits it is an equally good value today. 477M shares at $845 gives a market cap of $403B, if they split 2-for-1 you have 954M shares at $422.50 which is still a $403B market cap.
On a stock specific note I disagree with your assessment of Amazon. The retail business has negative working capital so when it was growing rapidly they could reinvest that float into other business areas. As that growth slows they lose that excess cash for investment. With the exception of cloud services they continue to invest in low margin or no margin businesses that don't earn an ROIC above their cost of capital. Growth without profitability is value destructive. Groceries are a terrible business, the music and video offerings have escalating costs and Amazon has no competitive advantage in either of them. Nobody is making money in the restaurant take-out business. At 172x P/E (think of a bond with a 0.58% interest rate and no guaranteed payout), 3x Sales and 34x EV/EBITDA you are betting everything on profitability 10+ years in the future. Maybe you'll be right but there are many other, lower-risk options out there in my opinion.
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Ammo question for the group. How do you pick your ammo loads? All of my shooting has been punching holes in paper so I've never cared that much about what I'm shooting. But for CCW or hunting where it matters more how did you settle on what you're using? How much is it really worth it to pay up for some of the specialty ammo?
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Businesses generally only pay interest on their loans (sometimes the principal will amortize) and landlords generate monthly income from their properties. Taking out a loan where you are repaying the principal and interest on a monthly basis to invest in the market you won't be able to match the cashflow as well as those other two. That said, if you're in a position where you can make the monthly payments and your cash flow is low risk (both should be true on a $4k loan and military employment) then it really isn't a bad idea. It's the same reason lots of people with high paying jobs and 6 digit investment accounts only make the minimum payments on their student loans. No matter what Dave Ramsey is selling you in his books, a little leverage isn't a bad thing.
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On 8/12/2016 at 0:03 PM, spaceman said:
1. Does this plan make any sense? I know I should pay off the student loans ASAP, but I feel like I have some catching up to do retirement savings wise, so maybe it would be worth it to at least max out a Roth IRA for the year and then put more towards the loan after that.
2. Is there a rule of thumb or method for deciding if it's worth it to convert a 401k into a Roth IRA? I know I'd have to pay taxes on the $23k I have to convert, but with my deployment I don't think my taxable income will ever be much lower than it'll be this year.
2b. Traditional to Roth rollovers don't count towards your annual Roth contribution limit, right? So I could roll over my whole $23k plus put in another $11k to max out mine and my wife's contribution for this year, if I understand the rules correctly.
First, yes your plan makes sense. Given where the market is these days and interest rates I think paying down the debt is a smart thing to do. A guaranteed after-tax return of almost 6% is pretty good right now. I would look to max your Roth IRA first though. You don't get to make up for missed years so even if the returns aren't stellar right now you want to take full advantage of any tax breaks available.
For #2, you should do the conversion. That $23k will be counted as taxable income for the year like it was an extra paycheck with $0 withheld. You are correct though that given your deployment your taxable income will be so low that the trade-off is worth it. Look at our politicians these days, do you really believe there is any chance taxes go anywhere but up over the next 20 years? Take the hit today when your income is low. Also I would consult a tax attorney to see if doing the rollover while you're deployed will count that as tax free income. Probably not but worth investigating.
And you are correct, roll-overs do not count as a contribution so you can contribute the full $11,000 on top of the roll over.
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Wealthfront and Betterment are decent options for people who want to automate their investing and don't have the time/inclination to stay on top of rebalancing. They are both predicated on a belief in EMH which I believe is faulty but they are better than most people do investing on their own. You can definitely replicate the strategy yourself with the same ETF's in a traditional brokerage account so you can save the 25bps in management fee. However if your account is large enough to take advantage of the tax loss harvesting (the limits are different between Wealthfront and Betterment but I don't recall who is lower) that should cover the 25bps fee. It isn't something you can opt out of and honestly I have no clue why you would want to. I don't think you understand how the feature works. Why would you not take advantage of a free service which increases your investment returns and the expense of the IRS?
I've met the CFO of Betterment and had to research it during business school. The system is really designed with investor psychology in mind in a way which traditional brokers are not. You can split your account into different sections with different risk tolerances and goals. IE Saving for a Downpayment vs Saving for Retirement vs Kid's College Fund. Money is fungible so technically it doesn't matter that you have different goals, the money in your account is the money in your account and that is how traditional advisers treat it. However research has shown repeatedly that despite what economic theory says that isn't how people think of their money. People do a better job of saving when they think of saving $1,000 for the house and $1,000 for a vacation rather than just putting $2,000 into savings for the month. If this sounds stupid to you then these services probably aren't something you need but I can certainly understand why both of them are successfully bringing in billions in AUM. I'm still curious to see if their customers stick with them during periods of poor market performance and no people to talk to/ask questions.
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On 5/19/2016 at 5:12 PM, 11F... said:
When I was in ROTC, a First Command (I'll buy you a drink AND save you $20,000 if anyone is actually still investing with them...PM me) and a USAA sales pitch were the only 2 "mil sponsored" $$ briefs I ever got while in school. That is embarrassing and borderline criminal for our service members. I was too busy eating chicken wings and drinking beer (amongst other things) to pay much attention in college, but if I would have had half a brain and mapped out my financial life at age 22, I would be set for life by now. If I didn't have a family now, I would never work a day after retiring and live the exact same lifestyle/standard of living as I do now.
This really is a disservice how little they prepare officers for the real world and saving for their future. Unless you teach yourself nobody ever talks about it.
Real estate plays a role in an investment strategy but the real returns on stocks will outperform in the long run and you shouldn't be sacrificing equity investments to focus solely on real estate. If you take a step back and think about it you'll realize the risks you might not be thinking about. Imagine if I came to you and said I have a great investment strategy for you. i have an investment that will grow in-line with inflation over time, I want you to take the majority of your net worth, leverage it 4:1, and buy this highly illiquid asset and I'm going to take a 6% commission on the trade. In any other situation you would be told you're crazy for that.
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On 2/25/2016 at 0:05 PM, Day Man said:
Good post, MtF. What names do you see as having "depressed valuations?"
Sorry I missed this question before. Unfortunately I'm not allowed to discuss specific names on social media but in general there are some interesting cyclical names out there. The industrial chemicals space (look at TiO2, ethylene producers, epoxies) has a number of low valuation companies as the commodity bubble bursting in China has hid chemicals and materials companies hard. At this point you have stocks trading at depressed multiples on depressed earnings sometimes at less than half what it would cost to replace the factories today. As long as they have enough cash flow to not go bankrupt these are stocks that will recover significantly when the market cycle turns. Additionally you have financial companies trading below book value who earn good ROEs through the cycle. Low interest rates hurt banks and there is fear of how much bad debt they are holding from the oil collapse but I think the fear is excessive. Regional banks in the Northeast aren't going to face significant write-downs from energy loans for instance.
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On 2/12/2016 at 8:49 PM, bluedevil said:
Bear market approaching?
Here are my thoughts. I believe the fears of a recession are overblown. There are lots of not great things going on right now certainly but we are still growing, albeit slowly. That said, I’m not particularly bullish on US equity markets right now. I’m finding a lot more things I want to short than I want to buy right now. The destruction in energy markets is having knock on effects into industrial companies such that low input prices from oil aren’t helping margins as much as would be expected.
The market is currently at a slightly expensive multiple on historically peak earnings margins. We have a period of low nominal growth, increasing regulation/compliance costs, low total factor productivity gains and heavy debt burdens. Even without a recession that situation easily sets up to see limited topline growth, increasing overhead expenses, lower earnings and lower multiples on those lower earnings. For individuals who can’t/shouldn’t short stocks in their personal accounts I would be looking to sit on some extra cash and start adding to names with depressed valuations.
China is a potential disaster and that represents a wildcard that is hard to predict. The short metals/mining trade was a fairly obvious one but the potential fallout from a credit crisis in China is more difficult to estimate. Here is some food for thought though. Before the financial crisis the US banking system had assets equal to 100% of GDP, China today is at 340% of GDP. 10% loan losses in China would equal $3.5T in losses (prior credit cycles have had loan losses as much as 30% so 10% is conservative), losses in the US during the financial crisis totaled $650B. To combat that $650B the Fed had to expand their balance sheet by $4.2T, what is China going to have to do to recapitalize $3.5T in losses? Is it even possible?
There are my semi-coherent Friday morning ramblings as I procrastinate doing real work.
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I got hit with this my first year on IRR but not since. They ordered me to must in Colorado, I called and told them I live in NY now and they said ok you don't have to go to Colorado. A week later I got new orders to muster in NY. It was a huge waste of time when I went. There was supposed to be a VA rep to talk about benefits but they were a no show. It was really just 3 hours of the Reserve unit trying to recruit people to sign up as a full time reservist. They said nothing applicable to an officer, they thought everybody in the room was an E-4 or E-5 and they spent the whole time talking about how if you join their SF unit they have lots of slots for E-7+ so you could get promoted. I brought my laptop and did real work after I signed in. Nothing but a reminder of all the worst parts of being in the military all rolled into one morning.
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15 hours ago, ThreeHoler said:
It will also leave you available to get a good MBA or other MS/MA as desired for post-AF employment.
This is so important and I'm glad I'm not the only one harping on this point. If you are checking the box with the easiest masters degree then do it in something pointless, don't get a crappy MBA to check the box. A good MBA can open up so many employment options you might not even be aware of but once you've done a crappy online MBA you have closed that door on yourself. If you can attend a part-time MBA from a legitimate top program that is one thing but an online only MBA is a bad idea in general. I think this tendency to check the box is why the Air Force is so vastly under-represented in terms of veterans at top MBA programs.
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The new airline thread
in Squadron Bar
Posted
I don't follow this that closely but I've been spending the last few days at an Aerospace and Defense conference. The talk today about commercial aircraft is pretty aggressive over the next 4-5 years. At a strategic level the availability of pilots to fill all these aircraft deliveries and ATC to manage the traffic growth are seen as big risks. I don't track the hiring boards but it sounds like barring a major economic downturn the AF is going to face even more competition for retention for years to come.