Newsletter Archive
Issues older than 90 days

Available Issues

The Dark Side of Student Loans
Issue #528, June 25, 2018

The Cost of Out-sourcing Convenience
Issue #527, June 18, 2018

Social Security: 66 or 70?
Issue #526, June 11, 2018

Student Loans: There’s (Unfortunately) a Lot More!
Issue #525, June 04, 2018

Co-signing a Note
Issue #524A, May 31, 2018

The Knight Frank Luxury Index and Collectables
Issue #524, May 28, 2018

The Importance of Diversification: The Myth of Diversification
Issue #523, May 21, 2018

How to Save Thousands on Your Food Bill
Issue #522, May 14, 2018

MoviePass and Other Things
Issue #521A, May 10, 2018

Degree Inflation, Long Training Periods, and “Certification”  Part III
Issue #521, May 07, 2018

Degree Inflation, Long Training Periods, and Certification” Part II of III
Issue #520, April 30, 2018

Follow-up on Several Things
Issue #519A, April 25, 2018

Degree Inflation, Long Training Periods, and “Certification”: Part I of II
Issue #519, April 23, 2018

The Kids Birthday Party Hustle
Issue #518A, April 18, 2018

A Pension Question: Part II of II
Issue #518, April 16, 2018

A Physician is an Executive
Issue #517A, April 11, 2018

A Pension Question: Part I of II
Issue #517, April 09, 2018

Is the Correction Over?
Issue #516A, April 05, 2018

Used Car Dealers, Student Loans, the Chinese, and Uncle George’s Rule
Issue #516, April 02, 2018

Starter Homes
Issue #515, March 26, 2018

Redecorating: Beware!
Issue #514, March 19, 2018

NASDAQ Closes at Record High
Issue #513, March 12, 2018

A 40% Chance
Issue #512, March 05, 2018

Several Things
Issue #511, February 27, 2018

Human Capital, Education and Wealth
Issue #510, February 19, 2018

Another Stock Market Update
Issue #509A, February 18, 2018

Some Thoughts on Savings
Issue #509, February 12, 2018

A Stock Market Upfate
Issue #508S, February 10, 2018

Who Can You Trust? Part II of II
Issue #508, February 05, 2018

The Christmas Decoration Pre-worn Jeans Hustle
Issue #Interim Bulletin #507A, February 03, 2018

2018 Outlook for Financial Markets
Issue #507, January 29, 2018

Who Can You Trust? Part I of II
Issue #506, January 22, 2018

Life Insurance Settlements
Issue #505, January 15, 2018

Commodities and Buying the Breakout
Issue #504, January 08, 2018

Buffett Wins His Bet
Issue #503A, January 04, 2018

Practice Real Estate and Free Agency
Issue #503, January 01, 2018

Outlook for 2018: Part III: Stocks and Bonds
Issue #502, December 25, 2017

My Outlook for 2018: Part Ii: Precious Metals
Issue #501A, December 21, 2017

Outlook for 2018: Hard Assets: Part I of III
Issue #501, December 18, 2017

More Thoughts on Bitcoin
Issue #500A, December 14, 2017

Fees and Good Relations with Bankers
Issue #500, December 11, 2017

Salvator Mundi
Issue #499A, December 07, 2017

Should You Rent or Own a Home?
Issue #499, December 04, 2017

A Gift Subscription
Issue #Interim Bulletin #498A, December 02, 2017

Stocks vs Real Estate: Asset Allocation: Part II of II
Issue #498, November 27, 2017

When Good Enough is Fine
Issue #497A, November 22, 2017

Stocks vs Real Estate: Asset Allocation. Part I of II
Issue #497, November 20, 2017

The Saudi Arrests and the Perils of Foreign Investing
Issue #496, November 13, 2017

Gambling and Las Vegas
Issue #495, November 06, 2017

Some Tips on Auto Insurance
Issue #494, October 31, 2017

Bitcoin and the Digital (Crypto) Currencies
Issue #493, October 23, 2017

The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017

Student Loans: But Wait, There’s More!
Issue #452, January 13, 2017

A Second Home
Issue #Interim Bulletin #451A, January 04, 2017

The Consumer Confidence Index
Issue #451, January 02, 2017


By Robert M. Doroghazi, M.D., F.A.C.C.

Should You Rent or Own a Home?

Issue #499, December 04, 2017

    Good general advice for any presentation, oral or written, is to state your goals clearly at the outset. It is easier for people to follow along and appreciate the points you make to support your thesis. But I’m going to start this newsletter by telling you what I’m not going to discuss.
    A study was released earlier this year which showed that in the US the average homeowner pays 54% more per month than the average renter. It does not take into account equity accumulation, tax deductions, home appreciation, the fact that rents tend to rise while your mortgage payment is fixed, etc. Different things are being compared. It really means nothing, so don’t let it fool you.
    The “round trip” fees and commissions to buy and sell a home are—at least—10%, so figure that in a stable market you must own a home a minimum of 5 years to recoup the costs. As the old saying goes: The easiest way to get rich is to keep your first job, your first wife, and your first home.
    I strongly recommend that a graduating medical student not buy a home. In fact, it is renting during your training period that allows the heavily indebted young doctor to save the down payment and build financial reserves to buy a home when they finish training and enter practice. Bottom line: for everyone, unless you are sure you want to make this place your final home, you are much better off renting. 
    Now for the main point: when you are finally where you want to be, and plan to stay there at least until you retire (you are in your late 30s, and 40s and 50s, and raising your kids), should you rent or buy? As I pointed out in the last 2 newsletters, real estate generates a return and tends to track inflation well, but only stocks generate true growth. In the end, are you better off renting and investing the difference in the stock market (or your business), or buying a home?
    There are the intangibles of owning a home, which by definition, can’t be quantified, and mean different things to different people. I admit, intangibles are important to me. I have my vegetable garden, my strawberry patch, my blackberries, and a smokehouse next to the garage to put the finishing touches on our home-made kolbasz (Hungarian pork sausage). Such things may or may not carry the same significance to others. My home is my castle: I can do what I want.
    For many years, home ownership in the US has been between 63% and 67%. For a third of people, the intangibles are mowing the lawn, raking leaves and shoveling snow. They are glad to leave that to someone else. There are many people who just don’t want to own. 
    One way to think of a mortgage is systemically enforced savings. You must send in that check every month. Do not underestimate the equity accumulation, price appreciation aspect of home ownership. When the mortgage is paid off 1) you know you will always have a place to live. There is insurance, taxes and upkeep, but they are nowhere near as much as rent. 2) it’s like an armored car driving up to your doorstep every month and dropping off a bag of money, money you can do with as you please (hopefully it will be invested), and 3) you can tap into the equity by A) taking a reverse mortgage, B) downsizing, or C) selling the home (maybe to your children and renting it back from them).
    If you own a second home, it can be rented to generate at least some portion of the expenses. It can be purchased with the long-term plan that it will be your retirement home. You can then sell your first home to realize the equity, or the second home can be sold for the same reason. Many people prefer not to own a second home, because it ties up money, and restricts where you travel. These are valid points.
    What if you rented all along and invested the 54% difference every month in the stock market? Would you be “ahead”, have a greater net worth, at age 65? The numbers suggest you probably would be. Let’s forget that you would still be paying rent, and focus on real life. This is a great opportunity to compare classical to behavioral economics. The former considers all investors to be rational. Please! How many truly rational people do you know? How many would be disciplined enough to send in the 54% difference every month, year in and year out, for their adult lives? As soon as they felt flush, that they had enough, they would forget the deposits at start to spend the loot.
    There clearly are times in your life, esp. when you are younger, that renting makes real economic sense. I believe there are times, esp. as you get older, and plan to stay in one place for many years, that owning a home is the way to go. In the end, it’s what you prefer. I don’t believe you can be dogmatic on this question. If you prefer to put down roots and stay put, as I do, you should own. If you want to rent, that’s fine too. There are strengths and weaknesses to both. 
    Several questions from a subscriber about last week’s letter on asset allocation:
    1) “Do you consider REITs in the real estate or stock category? They do represent real estate, but not like owning a stand of timber or a rental home, and are influenced by the action of the stock market”.
    RMD comment: Owning a stock is easier than owning a rental, and is far more liquid, but REITs do give exposure to the real estate market. Their allure is the high dividends.
    Part of this is also perception. You own 1,000 shares of a REIT that was up 24 cents that day. You say “I made $240 today”. You don’t say that about your rental duplex, but it also could have been up $240 that day.
    2) “What do you think about municipal bonds, especially ones from your state of residence that are exempt from local, state and federal taxes? There are ETFs and mutual funds that have low fees and provide diversification”.
    RMD comment: Municipal bonds are a legitimate investment vehicle. The problem with bonds at present is the artificially low interest rates. Before the inflation of the 1970s, a common investment strategy for the elderly wealthy was to have a laddered municipal bond portfolio. They would live on the tax-free income, and roll the bonds over as they matured. Until bonds earn their traditional “real” return of 3-4% above inflation, I have difficulty recommending them.
    Today’s Barron’s is more positive on munis: “One certain impact for tax reform will be a huge week for muni-bond sales…as states and localities rush to issue bonds that would be curbed under the proposed legislation. With the probability of cheaper prices and higher yields…maybe you should consider stuffing munis in your family’s holiday stockings”. 
    Since ThanksG, Bitcoin has been as low as $8,000 and as high as $11,000. Is it different this time?
    RMD comment: History says it’s never different.
    I often end the newsletter with comments on books. As I’ve noted many, many times, knowledge doesn’t just appear in your head, it has to be put there, and the only way to do that is to read. Bill Gates and Mark Cuban read 3-4 hours a day, 50 books per year. Warren Buffett spends his entire day reading.
    The Undoing Project: A Friendship that Changed Out Lives (Lewis, Norton). Michael Lewis is a big-time author, including The Big Short and Moneyball. This is not in the top half of his works. I couldn’t finish it.
    The Republic for Which it Stands: The US during Reconstruction and the Gilded Age (White, Oxford). This book tells what it what like in the South after the Civil War.
    This was posted yesterday as an Interim Bulletin and I’ve already received some subscriptions. Thank you.
A Gift Subscription
    Many magazines, such as Forbes, provide the opportunity to give a gift subscription. From now through the end of the year, you can give a one-year subscription to this newsletter as a gift for $50, and I will extend your subscription for one year.
    I have always provided discounts to students and physicians-in-training. For $50, you can give 5 students or 2 physicians-in-training a one-year subscription, and I will extend your subscription one year. 
    This would be a perfect gift for your personal physician. If you are a physician, it would be a great gift for a new associate, or another physician. I’m sure all of you know at least one person who would appreciate this newsletter.
    Consider a gift subscription to your financial advisor. If you have a $1,000,000 net worth and this subscription can increase your return merely 0.1%, that’s $1,000, enough to pay for the newsletter as long as we are both around.
    Reality check: after writing this newsletter for 12 years, I can (unfortunately) assure you that the people who need this advice the most are the least likely to take it. Give the gift to someone who needs it, and will appreciate it, and read the newsletters.
    For many years I have allowed subscribers to let relatives “piggy-back” on their subscription for $25 per year, which many of you do. This is a reminder that is available.
    For new subscriptions, I need their mailing address and email. Please tell them I will be contacting them. Use my email and address listed above.
    Thank you, and have a Happy Holidays.

Site by Delta Systems powered by ExpressionEngine