Aaron and I went to dinner at Houston’s steakhouse with Holly tonight and then saw the new Angelina Joli film Salt at the Palace Theater in the Country Club Plaza.  It was a great time, Holly looked fantastic, and it was nice to get out of the office and just hang out. (Side note: It so drives me nuts that I ended that sentence in a preposition but I know it is colloquially.)

The only downside is I had a box of M&M’s.  Remember that whole we get closer-or-further-away-from-our-goals-one-choice-at-a-time-thing I was telling you about earlier?  Yeah, that moved me further away from my goals.  But they were tasty. (Aaron had Junior Mints and Holly had Reece’s Pieces).  But the truth is … I wanted them and was glad the peer pressure gave me an excuse to give into the temptation!  God bless old friends.

The movie was good.  As Aaron said, you sometimes forget that Angelina Joli is an actress with an actual job, and that she is good at it.  We hope she doesn’t turn into Tom Cruise, who no one we know can watch anymore because he can’t become the character (his insane behavior is always present when he’s on screen; you can’t get it out of your mind).

As we came out of the movie theater, here was the view from the over-the-street walkway, which I liked:

Kansas City Country Club Plaza Movie Theater

Aaron and Holly in the Movie Theater

We passed the Country Club Plaza Brooks Brothers but they were closed, unfortunately: (more…)

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Part I of the Next Book Is Almost Done …

Joshua Kennon Intrinsic Value Book Manuscript

There are some editing things that need to be done before I turn Part I over for layout but it's almost done. This is a huge milestone because it lays the foundation for the rest of the book and is the most mathematically intensive part of the manuscript.

Today, I should wrap up the quasi-final draft of Part I of the book, which covers somewhere between 110 and 130 pages and provides a list of virtually all of the time value of money equations that are important to new investors.  (I think the final book will end up being roughly 300 to 400 pages but I reserve the right to change that.)  It teaches:

  • How to calculate your compound annual rate of return (e.g., “I had $10,000 five years ago and now the account is worth $31,500.  What rate of interest did I earn each year?  Is that good?”)
  • How to estimate your future net worth based upon your current savings habits (e.g., “I put away $500 per month for 25 years and earn 11%.  How much will I have at the end when it is time to liquidate the account?”)
  • How to discount cash flows (e.g., “I am going to buy a bakery that earns $31,500 per year.  I want to earn 17% on my investment.  How much should I pay?”)
  • How to isolate mortgage interest and principal components (e.g., “I borrowed $300,000 at 9.25% for 15 years.  How much interest and principal will my 37th payment be?”)

And much, much more.  Basically, I walk new investors through what the formulas are, how they are calculated, and provide examples that could happen in real-life.  So formulas like this (see below) would make sense and you would see how to take out a calculator, complete them, and put them to work in your own life to help aid you in whatever it is you want … a new house, a more profitable business, or higher returns on your investments.

FVA Formulas Book

Modified Internal Rate of Return Formula IRR

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Ruby as Andrew Carnegie

In the Facebook Super Tycoons game, Ruby now has 8 steel mills with an eye on expansion. Take that, Andrew Carnegie!

My grandma Ruby is finally on Facebook.  As a result, we got her playing the Tycoons game that I have been obsessed with for the past few months (as evidenced by the total blog posts I’ve written about it).  Since my last update, I’ve increased my net worth in the game from almost nothing when I started two months ago to roughly $6 billion today.

With the commodity price inflation that has happened, we got Ruby setup and she started with a few hundred thousand dollars, like all players.  Then, we used her profits to buy nothing but steel mills, optimize the plants so they require only 1 kilowatt of power and 1 gallon of water every 5 minutes, drastically cutting her operating expenses.

As a result, she now has eight steel mills with an eye on expansion.  My guess is that once everything is fully optimized, her existing investments would generate a maximum of $13,248,000 per day in the game if commodity prices remain constant (they have been hyper-inflating lately).  She can then use that stream of earnings to get into other industries, if she so chooses.

(Insert Evil Laugh Here) as she looks over her eight factories …

Steel Mills in Tycoon Facebook GameSteel Mills in Tycoon Facebook GameSteel Mills in Tycoon Facebook GameSteel Mills in Tycoon Facebook GameSteel Mills in Tycoon Facebook GameSteel Mills in Tycoon Facebook GameSteel Mills in Tycoon Facebook GameSteel Mills in Tycoon Facebook Game

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My new iPhone arrived a few hours ago and here is the first picture I took. It is a 5+ megapixel camera, which is far higher than the first generation, which is what I had been using (or not using as it were).  I should be able to capture a lot more images from my life for the blog, which is one of the reasons I’m excited about getting it.

Picture of Manuscript from new iPhone

The first photo I took from my new iPhone, which arrived a few hours ago. It is of the manuscript (the chapter I'm currently working on involves discounting cash flows for growing annuities where the payment increases at a regular rate each year).

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You know those days where you struggle to focus? Where you have a ton of stuff to do but you just. can’t. make. it. happen? Yeah. Today is one of those for me. I’ve been looking for any distraction I can not to work because I’m just burnt out on this manuscript. So, I decided to go get a cup of coffee.

Instead, I pass the piano and thought, “Why not try and figure out the chords to ‘Summertime’ just for the heck of it?” So I sat down, flipped on the Mac, and hit record. The quality isn’t great but this was an impromptu thing. Anyway, this is not a recipe for success … maybe I need to take some of that stuff they give to the ADHD kids in elementary schools. For now, it’s back to the grind … I just finished writing the section explaining how to calculate the present value of annuities when the payment is growing. I have no idea what I’ll work on now …

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You may have noticed there hasn’t been a lot of heavy financial articles on my personal blog for the past two or three weeks.  Some of you have written me asking the reason.  Normally, all of my best content goes to About.com and anything that isn’t suitable for beginners (the more advanced stuff) gets put here as an outlet.  So … what gives?

It’s simple: I’m closing in on 100+ pages in the manuscript on the next book, which is a beginner’s guide to basic finance.  Thus, I’m spending most of my day and night writing about time value of money formulas and solving for intrinsic value.  Since I’m writing about finance almost every waking hour of the day, the last thing I want to do is keep it up here on the blog.

As a result, when I sit down to update everyone, I’m not thinking about discount rates or which dividend stock I bought that morning.  Instead, I want a distraction … the video games, the shopping trips, the dinners, the political news …

We will return to our regularly scheduled programming shortly, but I think you all will be pleased with the finished product so it will be worth the wait. I’m hoping for an October publication date but I won’t release it until I’m completely satisfied.

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