warren buffett’s grandfather on having savings for a rainy day

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“…the mental satisfaction of having $1000.00 (in 1939) laid away where you can put your hands on it, is worth more than what interest it might bring, especially if you have the investment in something that you could not realize on quickly.”

Warren Buffett’s grandfather Ernest Buffett writes a letter in 1939 on the importance of what Scott Pape calls Mojo Money, some money tucked away for just in case.

I can’t stress how important this is, or how much it changes your attitude to life. I have quit jobs I wouldn’t have without my mojo money. It allows you to think rationally in non-rational situations.

warren buffett on home ownership

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“Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates. All things considered, the third best investment I ever made was the purchase of my home, though I would have made far more money had I instead rented and used the purchase money to buy stocks. (The two best investments were wedding rings.) For the $31,500 I paid for our house, my family and I gained 52 years of terrific memories with more to come.

But a house can be a nightmare if the buyer’s eyes are bigger than his wallet and if a lender – often protected by a government guarantee – facilitates his fantasy. Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.”

~ Warren E Buffett – the world’s third richest person, even after giving billions to charity, applies some common sense thinking to the dream of home ownership in his entertaining yearly letter to his investors.

In Australia, we still have hugely overpriced houses, and banks willing to facilitate the common fantasy of owning a hugely expensive dream home with lifelong debt. It makes even less financial sense to own an overpriced home in Australia.

quick, feel sorry for property speculators

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“Amy and Wes Rogers are 32-year-old parents of two young boys and the owners of four investment properties, one of which they are selling because they are frightened the government may abandon negative gearing on investment properties.”

This cry-poor article in the Australian newspaper about a family with four investment properties made me feel sick. Seriously, there are struggling Australian families that can’t even afford one drastically overpriced dwelling to house their own family, let alone four as investments, or five if you count their own house.

At least there is a little schadenfreude thrown in for good measure.

But the market is working against the Rogers. The house has been on the market for more than 180 days and, although there have been many viewers, there have been no real offers and the agent has already persuaded them to drop the price by $20,000 to $290,000.

“And now they want us to drop it by another $35,000,” she says. “This house we are trying to sell is tied to another in the way we financed it, and, if we sell Oakdale at this low price, the bank will require a valuation on the other property that’s tied in, and then, if negative gearing laws change, we believe it will drop the value of that second property.” If that happened, they would be left with the much higher original debt to service.

via whocrashedtheeconomy.com

celebrating the end of Osama bin Laden’s lifelong crime spree

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I found this statement on twitter about the death of Osama bin Laden explains the uneasy feelings I have when I see footage of people celebrating in the streets.

Papier mâché wall trophies

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On a recent trip to Los Angeles and San Francisco, I saw these ‘wall trophies’ on sale at Kitty’s favourite store: Anthropologie. They’re quite large, so we could only bring one back to Australia, and we chose the gazelle. Each trophy is hand made in Haiti from recycled materials including old literature written in French. The gazelle looks great on our living room wall.