Sarang Ahuja | Finance

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Financial Recovery (1)

Financial Recovery—Acknowledging Your Money Missteps

When it comes to personal finance, it can be easy to continue spending on something that offers you little to no value with a disproportionate level of attachment due to resources you’ve already expended. This is known as the sunk cost fallacy and can cause individuals to act against their best interests and spend more than necessary. When this happens, the best course of action is to ignore the amount already spent and move along, even if this is difficult. Similarly, if you’re caught up in another bad financial habit, the solution is always to acknowledge the issues with your behavior and adjust accordingly. With that in mind, here are a few financial mistakes that are easy to make, but also easy to recognize and fix.

Not planning for a major life change

When something major occurs in your life, you should attempt to anticipate and deal with it as soon as possible. Changing jobs and careers is perhaps the most jarring financial change to make, but the expenses and time associated with major events such as weddings and the birth of a new child can tax you more than you’d expect.

Take advantage of the time you have before the event occurs. When it comes jobs, don’t quit until you’re absolutely certain you’ll be able to support yourself between jobs. Setting up a new job is half the battle, but the other half can often involve pursuing other sources of income that can support you in the interim.

Not tracking online payments

When it comes to online payments, never assume that payments are being made automatically. Even with autopay on, make a list of websites that will be charging you and find time to check them after every payment is made. It can help save you from unexpected late fees and save you the hassle of having to call companies to talk about your payment.

And, as previously stated, never hesitate to let go of a recurring payment if you feel you are no longer gaining value from it.

Not having a budget

Building a budget may seem like a daunting prospect, but there are tried and true rules that can help you easily plan out where your money goes every month. One of the most prominent is the 50/20/30 rule, which states that you should allocate 50% of your monthly funds to necessities, 20% to retirement, savings, and debt payment, and 30% for lifestyle expenses, which involve everything else. You’ll need a way to track this budget, and some online services make it easy, but much of this can be done by writing down relevant information.

Not building additional sources of revenue

Sometimes, time limitations make this difficult, but securing or setting up alternate streams of income can give you more breathing room month to month. This can involve taking on freelance projects, securing a part time job, or even selling old items that you no longer need. Be flexible, and ensure that you have the time to properly dedicate to side projects.

Not having long term goals

Things like retirement can seem like ages away, but knowing the eventual outcomes you are trying to achieve go a long way toward your planning tactics. For that matter, it’s not enough to simply have a goal; you need to know the steps that you want to take to reach that goal, and do the proper research and preparation to ensure that you’ll be able to act on it when the time comes. This can involve managing your debt, creating an emergency fund, and putting serious thought into where you allocate your savings.

A Little Something on the Side

A Little Something on the Side: Getting Started with a Side Job

The dynamic of labor in the United States has changed over the past decade. The long-held institution of the 9-5 job is crumbling in the face of a difficult job market and the increasing interconnectedness of technology. Because of this, individuals are opting to take on smaller part time jobs, sometimes to supplement an existing source of income, and sometimes because of difficulty in securing full time employment. Either way, working a side job can be a valuable asset and resume booster, providing the individual with an alternate cash flow that may not be as consistent or time consuming as a 9-5.

So, if you’re an individual that needs some extra cash, regardless of your reasons for doing so, there are a multitude of avenues you can take. I’d like to discuss some of the options available on the part-time job market.

Driving

Uber and Lyft have effectively disrupted the public transportation industry with crowdsourced drivers and a easy-to-use apps. Known in the industry as rideshare apps, an increasing number of people are becoming Uber and Lyft drivers to earn money on nights and weekends. Though becoming a rideshare driver is not as intensive as becoming a certified taxi driver, there are certain barriers to entry that applicants need to abide by.

Drivers need to submit to a background check in addition to possessing a valid driver’s license, a smartphone, and a car with four exterior doors and five seatbelts. Additionally, some cities may not allow rideshare services to operate, so be sure to know if your area can participate! Still, on a busy weekend night, rideshare drivers can accumulate quite the haul.

Babysitting

Despite being one of the stereotypical jobs for teenagers, a good caregiver can alleviate pressure from parents and make a positive impact on a child’s life. Previously relegated to word of mouth, technology has also made it easier to find babysitting and care gigs. Care.com is one example of a website looking to match babysitters with families in need, and payment is easy to receive through the site.

Depending on when you’re available, you can expect to make anywhere from $12 to $25 an hour babysitting. The high end of the scale is generally seen among night sitters, who assist tired parents with children, particularly babies and newborns.

Writing

Writing freelance blogs and articles has a huge market on the Internet. There are plenty out there if you go looking—but be warned, the pay can often be low. Research is important when writing online; you’ll want to know the regulations of the sites that you’re pitching to, as well as having a solid understanding of the topics that you’re writing about.

Still, nothing beats the flexibility of writing for an online outlet and working wherever you’d like! Find a site that fits your schedule, interests, and needs and have a great time producing quality content.

Design

While it requires a bit of a background to do well, with a bit of artistic know-how, you can create beautiful graphics or design for the web. For doing this, it helps to have a collection of your previous work somewhere on the web; bonus points if you can make your own online portfolio from scratch.

Upwork is an online resource for the errant designer, offering potential leads and jobs to community members. Plus, if you start to gain momentum, the amount of money you can make will increase over time.

Personal Finance for Children

Kids and MoneyIt has long been discussed at what age people should start learning how to manage personal finance. It was only recently that some high schools began to require personal finance courses for graduation. Also, of course, there is the ever-popular list circulating the internet stating ‘Things I Never Learned in High School,’ most of which is related to personal finance. High schoolers, college students, and recent graduates are almost demanding that some personal finance that will be pertinent to the future is taught in school, yet the question of how early to start teaching it still remains. A new report suggests that the ideal time to start teaching personal finance may be earlier than anyone has thought before.

This Building Blocks Report, by the Consumer Financial Protection Board, makes the assertion that personal finance should start being taught at age 3. That’s right; preschoolers should be encouraged to practice make-believe play in order to develop their executive functioning. Executive functioning is, in part, learning control and how to plan, which is very helpful in budgeting. It gives people the willpower to maintain control over their actions, so, the sooner it is developed the better. Some make-believe activities that may help children to develop this section of mental processes are setting up a pretend supermarket in your home, playing accountant, and giving children calculators.

Of course, preschoolers will not be able to understand more complicated personal finance lessons, but they will understand basic concepts. Some things that should be impressed upon them include exchanging money for goods and saving money to get something better later. Remember that this is only the first phase of personal finance lessons.

Once children reach their pre-teenager stage, allowance can be used to further teach about personal finance. For example, requiring those receiving the allowance to save a portion of it each time it is given will teach how beneficial saving can be. It can also instill in them the sense that impulse buys, while fun at the time, are not always the best choice. When kids reach their teenage years, purchasing decisions can really start being discussed. At this age, it is recommended to discuss spending habits in all family activities, from filling up on gas to eating at a restaurant. Teenagers should be helping the family make spending decisions, which will ultimately prepare them for making spending decisions with their own finances in the future.

While it is great that some high schools are making personal finance courses standard, it is clear from the above report that personal finance learning should begin even soon. For more information, check out this Forbes article.

Tech Start-Ups in a Cyclical Market

econ cycle

A recent article in the New York Times ends with the following quote from Bill Gurley, a prominent venture capitalist, regarding current tech start-ups. “Lots of founders today weren’t around in 1999, and they don’t know a thing about financial markets beyond what’s happened in the last 24 months…. To them that’s how this game is played, money is cheap and everything goes up. That’s why we have cycles.”

The cheap money comment deserves further discussion. The fact is that a lot of current tech start-ups have existed mostly or entirely in a period of economic growth, during a time when investors have been forthcoming with funds. “Over the last few years, start-up share prices have gone up nearly every time a private company has raised money. Investors were largely optimistic and generous because they assumed that a variety of factors – including low interest rates, a strengthening American economy and the growing Chinese middle class – would keep the markets positive. Spending more to help a start-up grow into a huge company seemed like a reasonable bet.” It’s worth noting the factors leading to optimism mentioned in that quote. Low interest rates are not something that will go on forever, and raising the rate has been discussed in the financial press a lot lately. The strengthening American economy is going through it’s first major hiccup in a couple of years. The Chinese middle class, while still growing, now finds itself in a country with a slumping economy.

Ultimately, start-ups that have been smart with their money, have solid business plans, and show clear paths toward profitability will still attract capital and will remain strong. The ones that don’t won’t. It’s obviously impossible for every company to grow continuously, and those that have striking weaknesses, though they may be able to hide them during a time of growth and general prosperity, won’t be able to during a down cycle. It’s called an economic correction for a reason.

Market Tumultuous To Say The Least

market-8-24-2015

The big story today in all of the financial papers, on all of the financial sites, and on all of the financial news shows is, of course, about the market correction and its causes. Reactions have ranged from “Hey everyone, let’s not panic,” to “Prepare for Armageddon.” And interestingly, the movement of the market represented just this bipolar sentiment. “The stock market whipped between nauseating drops and roaring comebacks on Monday in a historic day of turbulence,” said an article from NBC News. The Dow dropped nearly 1,100 at the opening bell, came within 115 of break-even, and then dropped again ending the day with a total loss of almost 600 points.

An article in CNN Money was quick to temper fears, saying, “It’s ugly. But before you panic, let’s put this in perspective. This is hardly the worst day ever for stocks. This pullback also comes after six years of stellar stock market gains.” As we all know, markets don’t just gain and gain forever. “I’ve been of the view since late last year that this market is in a vulnerable position,” Jim Paulsen, chief investment strategist and economist for Wells Capital Management is quoted as saying in the above mentioned NBC News article. “It’s gone almost straight up for six years.”

While economic prospects if Paulsen’s assessment is correct could make many investors uneasy, it would support one of the CNN Money article’s more optimistic points, made to prevent panic. “Stocks don’t just go up. We all know that, but it’s been easy to forget it in recent years…The S&P 500 has gained about 220% in the past six years. The plunge in the past few days has whipped out a mere 11% of those gains.”

The primary causes of the loss of investor confidence – the state of the Chinese economy and depressed oil prices – do not have quick fixes. But if rash reaction can be staved off, the correction can remain a correction and not turn into something much worse.

Investors Aren’t Happy About the Samsung Merger

Sarang Ahuja samsung

In late May, Samsung proposed an $8 billion merger of two company affiliates: Samsung C&T and Cheil Industries. The proposition is scheduled to go to a shareholder vote on July 17, but investors are heavily criticising the deal.

Shareholders are suspicious of transactions between affiliates, as these kinds of deals often benefit insiders at the expense their investors. Adding to concerns is the fact that these large South Korean companies are usually family-controlled. In fact, the founding family of Samsung currently owns 42% of Cheil Industries, leading many believe that this merger might be motivated by family interests.

Last year Lee Kun-hee, the chairman of Samsung and head of the family, had a heart attack. Since then, his children have been working to consolidate company holdings, and the acquisition of C&T could be a way for the family to prepare for Kun-hee’s passing, which will come with approximately $5 billion in inheritance tax. C&T owns a 4.1 percent stake in Samsung Electronics and a 17 percent stake in Samsung SDS.

One of the most active critics of this deal has been Elliott Management, a $26 billion investment firm that owns a 7 percent stake in Samsung C&T. They filed an initial lawsuit in South Korea asking the Seoul central district court to put a stop to the transaction. Unfortunately for them, a judge declined the request. In a second suit, Elliott Management asked the court to block the sale of the 5.76 percent C&T stake to KCC, since KCC is a company that holds a stake in Cheil Industries. Samsung argues that the terms of the deal comply with South Korean law, that the merger is necessary for the success of C&T, and that investors like Elliott Management are just interested in short-term gains.

Another critic is Hugh Young, managing director in Asia for Aberdeen Asset Management, a $491 billion financial firm. His main concern is the merger ratio, which he doesn’t feel recognizes the full value of the company. C&T was trading at depressed levels before the proposed merger due to slow revenue in the first quarter of 2015. The day before the deal was announced, C&T’s share price was 40 percent below its aggregate net asset value while Cheil Industries’ stock was trading at 131 times estimated earnings. This means that C&T stockholders will receive 0.35 Cheil shares for each of their shares should the deal go through.

One key player that has not spoken up about the transaction is NPS, the South Korean pension system that owns a 10 percent stake in C&T. They will likely end up determining the results of the vote.

The reaction to this transaction highlights a common feeling among investors: if South Korean companies don’t become more pro-investor in their practices, their stocks will continue to trade at a lower rate than rivals in other developed countries. While investors are doing all they can to put a stop to these kinds of actions, it’s not looking like true reform is coming anytime soon.

Potential Acquisition of Broadcom by Avago

sarang ahuja avago-technologies

Avago Technologies, a chip maker for wireless communications and corporate data storage devices is in advanced talks to purchase Broadcom Corp., one of their competitors, in a potential $35 billion deal. This follows the current trend in this market, which is currently rife with takeovers.

These talks also come during a time when large chip makers are showing weak revenue gains, and are therefore turning to acquiring other companies. Broadcom is one of these struggling companies. The Chief Executive of Broadcom was quoted in the Wall Street Journal article about this topic as follows: “It’s really economically difficult to be a small semiconductor maker now…. The larger companies are going to look for consolidation.” This appears to be just what is happening. This being the case, it sort of makes sense that companies like Avago and Broadcom, neither of which are completely dominant over their individual markets, would merge in order to compete with giants like Intel and Qualcomm.

Avago has been aggressively taking over companies in their industry for the last couple of years, though none of these acquisitions has been this big. In fact, a $35 billion deal would be bigger than the total of all of their acquisitions since 2013, which have come to about $8 billion. It seems that their taking what has been working for them and now doing it on a much larger scale – over that same time period they’ve increased their market cap by over $25 billion and their stock has risen by more than 40%.

Scott McGregor, the previously quoted Chief Executive had another interesting quote in the same article. “About six months ago I said in five-to-10 years, half of the companies we know today won’t exist anymore…. And it’s pretty solid on that track.” Whether his prediction proves to be exactly correct is still to be seen, but what is certain is that the market place will look different.

Oil Production Slowdown Temporarily Sends Up Price

sarang ahuja oil well

The surprising news that stockpiles of domestic crude oil rose at a slower rate than at any other time this year sent the price of oil up yesterday. Still, there is a debate among analysts about where the price will go from here. From a New York Times article on the subject: “In a report on Wednesday, the International Energy Agency said that the outlook for oil prices remained uncertain. Given the price collapse, ‘one might be hoping for more clarity on supply and demand,’ the agency acknowledged in its monthly Oil Market Report. ‘Yet in some ways, the outlook is only getting murkier.'”

Some, like Citigroup, predict that prices will remain at a depressed level, and that they may continue to fall “as output remains high, supply builds up and investors who had helped prop up prices begin to sell.” Others, like Royal Dutch Shell, are “expecting prices to recover much of their recent drop over the next few years.”

One wildcard in the market right now is the effect of the proposed nuclear deal with Iran which would lift, or at least sharply reduce, sanctions on the country which is a major oil producer. Though it would take some time for Iran to increase their oil production for a wider world market, their already stored oil could be available for export relatively quickly.

Whatever the future holds, the current state of oil in the US is this: domestic stockpiles have increased for 14 straight weeks, and now stand at over 480 Million barrels, which is the highest level since 1982.

Poker at the Borgata

I recently participated in the the Borgata Poker Deep Stacks Challenge. It was a great tournament as always. I placed 8th out of 300, and I’m looking forward to the next tournament. Here’s a quick summary of the last hand I played from the coverage of the event:

“After coming in as one of the shorter stacks at this Final Table you wouldn’t have pegged Steve Macchia as the betting favorite to notch the first two knockouts but after moving near the chip average after eliminating Micky Takahira, he’d be back at it sending Sarang Ahuja to the rail in 8th place.

“Ahuja, who was getting into the “danger zone” would move all-in pre-flop and get called by Macchia, who held Ace of Clubs and 10 of Spades.

“He’d need to hit holding 9 and 7 of Clubs and he would pair up on the flop, but Macchia would as well putting him in dire need of help on the turn and river to save his tournament life.

“It wouldn’t come and Ahuja, who’s tournament resume may seem “light” but actually shows some massive WSOP cashes from 2009 and 2010 totaling close to $30,000, would be the next player sent packing from this Final Table, making just over $1,700 for his Event 5 efforts.”

As I said on Twitter right after being knocked out, you can’t be completely card dead at a final table. A few ill timed bluffs and you’re done.

Now I’m looking forward to what’s ahead. I’ve already booked my flights to participate this years World Series of Poker starting June 3rd, and needless to say, I’m excited to be in the hunt for the bracelet. 

VPNs Dissolving National Boundaries Online

sarang ahuja vpnVPNs (VPN is an acronym that stands for Virtual Private Network) were once thought of as tools used by people who wanted extra computer security, or dissidents trying to keep their online activity secret, or any number of other individuals trying to sustain a higher level of privacy around their online activity. More recently, however, VPNs have been used for some of the most mundane and typical of web purposes – accessing entertainment by enhancing the ease with which one can watch movies and TV through Netflix and other such services that cannot be accessed through IP addresses in certain locations.

Someone in Italy, for example, can’t access Netflix from an Italian IP address (It’s tough to believe that this will be the case in many countries for much longer, with millions of American citizens living temporarily or permanently abroad, and rampant interest in American media around the globe). But if an American visitor to or resident in another country sets up a VPN with an American IP address, Netflix thinks they are still in the US, and they can continue on with their marathon of Breaking Bad, The Wire, True Detective, or any other addictive TV show old or new without being frustrated by having to stop or falling behind their friends back in the States.

One thing that was sort of funny in this New York Times article about this is the quote from a Netflix spokesman: “There’s not a lot we can do to track that since VPNs by their very nature are set up to be difficult to spot.” The concern, in this small quote at least, doesn’t exactly sound urgent. Though circumventing regional barriers is against the Netflix terms of use, people on a VPN still pay for the service. It is not a hack of the movie streaming service, just a way to facilitate access.

That movie streaming services and countless other online services of every sort are, in many cases, no longer subject to national boundaries has major implications for how we consume media, conduct business, and interact in general. To sum it up with a quote from the above mentioned article by the founder and CEO of a cloud based accounting software, “Tech is globalizing everything, so anyone building just a regional strategy isn’t thinking big enough.”

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