I logged into my stock account the other day and realized that contrary to my previous claim/strategy of investing solely in Warren Buffet's Berkshire Hathaway, I had no Berkshire shares left. Time for an update, I reckon.
So what happened? Nothing against Berkshire, for sure. I sold almost all of my shares at a profit, and I still have full faith in the company. But sometimes opportunities come along that are too good to pass up, two of which I'm currently invested in.
Some of my money is in BP, the A-holes who spilled a bunch of oil in the gulf. After that disaster their stock plummeted to around half of its value, and I started thinking.
Is the whole company REALLY worth HALF as much as it was yesterday because of the spill? I'm nothing more than a pure amateur when it comes to valuating companies, but that seemed extremely harsh to me. Also, I had been thinking a lot about how people are really overreactionary (not a word, I know), and I couldn't help but think that this selling orgy might have something to do with that.
So I sold some Berkshire stock and bought a bunch of BP. I've since sold some of it (to buy this domain), but it's gone from my $31.9 purchase price to $49.25 as of this writing, in just six months. That's almost a 55% profit.
I haven't sold yet because I'm waiting for a year to pass. No point in paying short term capital gains if you don't have to.
I won't say I have my fingers crossed for another ecological disaster, but I will say that when it does happen, I'm going to be ready to cash in on it.
And now for an investing strategy you can take advantage of, too. You know those hippies who are always talking about how unfair it is that credit card companies "rape" their customers (hint: it's not unfair if you agree to it)? While they're off complaining, I'm gazing out the window with a smile on my face, fantasizing about how awesome it would be to get to loan money at such exorbitant rates.
A few months ago this fantasy came to reality by way of Lending Club. Lending Club is a site where people can apply for loans from their peers. If you have money to spare, you can invest it with them, choosing individually which loans you'd like to partially fund.
For example, a mother of three might be asking for a loan to get her foundation fixed. She provides all the usual credit/income information to Lending Club for your viewing pleasure, and she'll actually answer questions about the loan. This is awesome because you can take the time to actually make a good decision on each loan, unlike banks which must go by formulas.
Best of all, Lending Club publishes statistics on its various loans. Historically the best returns are found with the high D low E loans (A is best, F is worst). So those are what I invest in. The problem with worse loans is that some will default, so it's important to diversify your risk. I have $10k invested through Lending Club right now, and each loan is $50 to $200.
It's only been a few months, but my returns are averaging 17.8% right now. That's better than Berkshire and I imagine it to be less risky as well. With average defaults (meaning I am no better than average at choosing loans), I can expect that to fall to 15%.
On top of that 17.8%, I've also received 2% in bonuses. Every month there's some promotion going on. Right now you can get 3% on 15k. I don't have that much to invest, so I'm not doing it. Two months ago was 2% on 5k, which I did. As my loans get paid off (people tend to pay more than the minimum, so this is faster than expected), I withdraw all of the money. Once I withdraw enough to qualify for another bonus, I'll put it back in. Counting the bonuses, I'm pushing 20% returns here
Thanks to an awesome blog reader, I'm speaking at SXSW this year! WOO! More details coming when I have them.
Progress on my big project mentioned a few posts back is great. I'll be applying to YC Summer '11. If you're thinking of applying then, don't. it will be brutal trying to work in my shadow.
I'll keep giving out TaskSmash codes until they aren't getting snapped up. If you can't get one, keep trying! BTW, I don't really need feedback right now. I have a lot of it, and I probably won't get to it for a while. I'm giving out the codes because I think even though it's a bit rough, TS is the best way to stay accountable.