Friday, May 29, 2009

The power of branding

One of my favorite classes at Miami University was a Marketing class about branding taught by Professor McCarthy. During my semester in that class I sat in the front row and soaked up as much of the information as possible because I found the subject matter fascinating. I remember thinking that there were people out there who received paychecks not because they did anything, but because they “managed a brand.” As the class went on I learned the hard work that people put in to manage a brand and how important it was to protect your brand’s equity.

This class prepared me well for my first job out of college at the World Wide Leader of Cheap Chic where we had a training class all about “managing your brand.” In that class you learned not to talk about your night of drinking on the elevator because it would negatively affect how people viewed you. The basic concepts learned in my training class made sense to me just like my class at Miami , but Brand Managers in general have a whole emperor without clothes feeling about it.

This all leads into what I think is the perfect example of the power of a brand and one that I think is blog worthy.

Last Thursday I brought a case of Northern Light beer for my softball team to enjoy. The main reason I bought the beer was because I knew the team enjoyed light beers and it was the cheapest beer at the liquor store coming in at the friendly price of $9.99. For the most part people drank the beer and got ready for softball without any commotion. However, there were a few people that brought into question the quality of the beer and proposed coming up with a team beer. The suggestions for the team beer were Bud Light, PBR, Miller Light, Coors Light or Michelob Golden Light. One person brought up that Miller Light and that email was quickly answered by someone else who thought that Miller Light was below-average (not the word he used) and that we should go with PBR. Anyway, there was a lot of emails back in forth without a consensus reached on the team beer.

My point in this argument was that there is no difference between Northern Light, Bud Light, Miller Light, etc. I have done a blind taste test before with light beers and the odds of me picking which beer went with which can were about as good as the odds of me picking the next lottery winner out of a phone book. In my mind the only difference between the beers I have *mentioned is marketing. There is a reason why people in Milwaukee like Miller Light and people in St. Louis like Bud Light and it doesn’t have anything to do with taste. There is also a reason why Bud Light is $16 a case while Northern Light is $10 a case and that reason is TV ad campaigns like the “Drinkability” one with the cute brunette girl with a slightly weird nose.

*There is of course a difference between distinct beers like Guinness and beers like Natural Light. My point is just on the basic low-end light beers that you find at gas stations.

I would have never imagined there the perceived quality difference between light beers would be so huge that it would cause such an uproar among my softball friends. I would have never imagined the power of branding would be so crystal clear. I guess I should have paid more attention in my Branding class, because it is apparent to me that a company’s brand equity might be the most powerful thing they have going.

Thursday, May 28, 2009

Engagement Jersey

Just recently M and I got engaged and to help celebrate the occasion I gave her a lovely diamond engagement ring. When she walked into work the next Monday she was able to show all her coworkers her new bling. In fact anybody who wishes to see her ring will get an enthusiastic yes from M. It has been over a month since and she still smiles when she looks down at her hand.

The whole scene above could be written about any newly engaged couple. It is a pretty familiar script where the guy buys a girl an *expensive diamond ring and then the wedding planning begins. If you would like to read a wonderful short article on the history of engagement rings check out this article on Slate. From reading that article I learned how the diamond engagement ring became popular as well as the writer’s opinion on how the engagement ring is basically not fair. The girl receives this piece of jewelry “while her beau is out there sign-free and all too easily trespassable, until the wedding.”

*The rule I had always been told was that it was 2 months salary. I never knew if that meant pre-tax salary, post-tax, post tax and 401K, etc. I mean 2 months salary is a lot of money no matter how you slice and dice it, but if it is 2 months of pre-tax salary then we are talking about a ridiculous amount.

Right now I am not going to get into the history of the diamond ring or whether or not that is an appropriate symbol of love. I am not going to get into the marketing campaign ("a diamond is forever") or the outrageous cost burden a diamond ring places on some people. These things concern me, but right now I am just going to get into the fairness of the engagement ring.

My idea tries to remedy the problem of fairness as well as allow guys to announce to the world that they are also engaged. This additional step is blatant consumerism that should make certain retailers happy, but more importantly I think it will make the groom-to-be happy. It is no more ridiculous and made up than the engagement ring. The additional step is for the bride-to-be to buy the guy an engagement jersey.

What is an engagement jersey you might wonder? An engagement jersey is an authentic retro jersey that the sports-minded guy who just got engaged would be able to wear around proudly in much the same way an engagement ring is worn by the girl. Engagement jerseys are expensive, but considering how much the guy pays on the ring I think most girls would be ok with that deal. In fact I think the general rule of thumb should be that the girl spends between 5%-10% of the cost of the diamond ring on the engagement jersey. Therefore if the average engagement ring is between $3500 and $4000 (reference here) then the average engagement jersey should be between $175 and $400. It just so happens that the Tiffany’s of jerseys (Mitchell and Ness ) falls in this range with most of their jerseys coming in at the $275/$300 mark. For those of you that are unfamiliar with the company, Mitchell and Ness is sports retailer known for their quality and their accuracy in providing the avid sports fan with authentic retro jerseys.

M is familiar with my engagement jersey rule and is waiting on my decision on which jersey I like the best. I have been going through the website and have considered many jerseys. You see this is my one time to get it right since you only get one engagement jersey. My frontrunners are a 1984 Dan Marino jersey, a 1983 Walter Payton jersey and a 1965 Harmon Killebrew jersey. Or if I wanted Mary to get off cheap I could ask for a Rod Carew jersey or even an old Shane Battier Duke jersey. The jury is still out on which jersey I will pick, but in the meantime I would like to focus your attention on the three most random jerseys that Mitchell and Ness makes:

1995/1996 – Dan Majerle All Star game jersey - For the fan who just loves Thunder Dan Majerle, but doesn't want his normal home jersey. In fact this jersey shown below is perfect for those fans who just love Majerle's 1995/1996 All Star game appearance. Just in case you didn't know Dan Majerle went 4-12 with 10 points in a Western Conference win. Six players on his own team scored more points than him in the game and only one player (Gary Payton) shot a worse percentage. Seriously, why would anyone get this jersey?

1989 – Dave Dravecky Giants jersey - I had never heard of this guy, so I looked him up and found the following on his Wikipedia page. A former baseball player who broke his arm twice (including one while throwing a normal pitch) and then later became a Christian motivational speaker. Seriously this jersey has to be for a very specialized market.

1995 Eddie Jones Rookie Game jersey - The most random of all jerseys. It is a jersey for a random Nba. player who at one point in his career could be considered above-average. Not only that, but it is a jersey for a Rookie Game. Not an All-Star game, but a Rookie Game. Here is how Mitchell and Ness describes the jersey:

"On February 11, 1995 the finest rookies in the NBA took the hardwood at the American West Arena for the Second Annual Rookie Game in Phoenix. Eddie Jones, a breakout star from Temple University representing the Los Angeles Lakers received the game MVP award. Despite a loss for his team in overtime, Jones managed to outscore every other rookie on the court in just 29 minutes of playing time capturing the MVP title. "

I can't figure out for the life of me why anyone would want the below jersey:

Anyway, I need to get some rest because tomorrow is a big day of packing up for the move into our new place in Edina. I am very excited for the luxuries (otherwise known as normal stuff for other people) of our new place.

Happy birthday M.

Monday, May 25, 2009

Busch Stadium review

St. Louis is one of those baseball cities that needs a park that matches the level of devotion shown by their fans. Make no mistake about it St. Louis is a Cardinals town. The fans come early, stay late and know what they are talking about when it comes to baseball. You have to love a place where dressing up to go out on the town means putting on your best Albert Pujols jersey. They love baseball and they love their Cardinals. With the new Busch Stadium the people in charge decided to try and tap into this love and create a ballpark worthy of the Cardinals fans.

Unfortunately for the group of us that went to the game we only were able to see two innings before rain delayed and ultimately postponed the game. Therefore I have seen the Brewers-Cardinals play at Busch Stadium, but haven't actually seen a completed game. Still I feel like I can review the stadium based on those 2 innings. If you want an expert's opinion check out Jim Caple's article written back in 2006.

Scalping/Ticket prices - C-
There were a few scalpers available and the one we talked to was very willing to do business with us. This of course had a lot to do with the fact that rain was expected and the game was definitely in doubt. We were able to get what we thought was a good deal by trading up our $35 seats for $90 lower level seats. Of course this was a bad deal in two ways. First the view from the seats was terrible. We could barely see the plate and were only perfectly positioned to see any plays made by the right fielder. The fact that these tickets had a face value of $90 upset me then and still upsets me now. That seems like way too much money to spend on tickets where you can't really even see the game. Below is a good picture of what we could see from our $90 tickets right before the dark rain clouds opened up on us:

Overall the ticket prices in general seem too high. Of course it is hard to analyze the ticket prices when their are 20 categories. You can buy tickets in the Cardinals Club, Champions Club, Legends Club, Infield Field Box, Dugout Box, Casino Queen Party Porch, Infield Terrace Box, etc, etc. I feel like I need a tour guide to help me out just ordering tickets online. And overall I deduct points that the cheapest tickets listed on the website are $16 with most of the tickets being between $30-$60. It seems like Busch Stadium knew that Cardinals fans are a loyal bunch and are willing to pay a premium price for the tickets.

Aesthetic Appeal - A-
I love how there are so many Cardinals logos everywhere you look. I love the fact that their is one scoreboard to keep track of the Cardinals game and another scoreboard that keeps track of all the other games going on in great detail. I love the old-school feel of the park. I love seeing the Arch from behind the outfield.

All in all it is a really well made park that looks great from the inside. The only reason that isn't a A or A+ is because from the outside the park looks fine, but not spectacular. That is a minor fault on otherwise wonderful looking park.

Fans - A
It is hard to find fault in any of the Cardinals fans. They are nice (zero instances of anything rude being said to the many Brewers fans in town), respectful and generally have a great appreciation for the Cardinals and the game of baseball. The Busch Stadium video crew does a great job of cultivating this knowledge by showing past moments of Cardinals history on the scoreboard as well as other great moments in baseball history on the TVs in the concourse. During the 2+ hour rain delay everyone remained calm and very well behaved even as the beer flowed freely among the fans.

Buzz - B
Most of the buzz was due to the approaching storm that ended up postponing the game. I unfortunately can't comment on the buzz for a normal game since everyone was rightly concerned about the rain.

Food - N/A
I had just finished plowing through a BBQ platter an hour before the game and at first pitch was in no mood to try out any of the many options at Busch Stadium. By the end of the rain delay I decided to try out one of their signature dishes the bratzel, but I ended up coming home empty handed because the bratzel was sold out. I can comment that the beer was $7.75, which seems a tad too high considering the fact that it is St. Louis and Budweiser is only a few short miles away.

Fun things to do besides the game - C
I liked to watch the scoreboard to see the Twins-Yankees game or check out the Cardinals highlights from year's past, but besides that there wasn't much else to do. Busch Stadium seemed to be saying that they were a ballpark and by attending you will agree to devout 2-3 hours of your life to baseball. They seemed content letting other ballparks build up bells and whistles for kids and disinterested baseball fans.

Overall impression - B
Busch Stadium felt to me a lot like Turner Field in Atlanta, but with better fans, higher prices and a little bit more pride in the home team. I liked it, but not as much as I thought would. The sightlines were good, the ushers were incredibly friendly and overall I really like Cardinals fans. Still I think that going to Cardinals games would make my wallet a lot lighter and I would have to be careful with what tickets I purchased. There has to good, cheaper seats out there, but for the one game that I went to I felt like we were swindled. Who knew that the better Missouri ballpark was the underdog down I-70?

Monday, May 18, 2009

Missouri baseball trip

"They should do a Real World Kansas City.” – Brian

At the beginning of the trip that above quote would have sounded ridiculous, but by the end of the trip it sounded like gospel. On I-35 heading back to Minneapolis through the fields of Iowa we were discussing possible reasons (NCAA tournament, Royals-Twins, College World Series) that would bring us back to Kansas City. Now I am getting ahead of myself, so let's start with a timeline of the events of the weekend with my thoughts at the time.


  • 7am - I wake up slightly tired from staying up watching the Rockets-Lakers playoff game. No worries though since I am sure I will get lots of sleep over the weekend.
  • 7:30am – We (myself and two of my guy friends) leave Minneapolis.

  • 9:30am – I am able to convince everyone to let my further my quixotic goal of getting my picture next to every sign. Now, despite Iowa being the neighbors to the south I have never stepped foot in or driven through the state. Therefore this was the perfect opportunity to remedy that situation because who knew when I would come back. Below is another state off my list:

  • 10am – We stop for gas in some small town in Iowa. At the gas station I noticed they were selling their own chicken, so I thought I would test my *gas-station chicken theory out in Iowa. I am pleased to report that the chicken drummies were very tasty and a good morning snack.

    *I am convinced that the best fried chicken comes from gas stations. This genesis of this theory probably goes back to high school when I would go get a chicken kabob for $2.50 at the Chevron on Old Agency Road in Ridgeland, MS. That chicken put fast food chicken to shame.
  • Noon – Now it is time for lunch in Iowa City, Iowa, where we choose the not so local establishment called KFC. The best thing I can write about the new grilled chicken they just recently started offering is that it is edible. Add another point to my gas station chicken theory even if it is an unfair fight to compare grilled chicken with fried chicken.

  • 3pm – Our drive is going fine until we start to notice dark clouds that are quickly followed by the sky emptying on us just outside Mark Twain’s birthplace in Hannibal, Missouri.
  • 4pm – Unfortunately we realize that unlike the Metrodome Busch Stadium is an outdoor park and that rain is probably not something we want to see in the forecast. No worries though since it can't rain on our baseball road trip....right? I mean this is the only game that we bought tickets for in advance.
  • 4:30pm – The longest part of the trip is over as we arrive in St. Louis at our desired destination of Pappy’s Smokehouse. There we order the Big Ben platter consisting of a full rack of ribs, a half chicken, a pile of pulled pork, a pile of beef brisket and sides of sweet potato fries, potato salad, baked beans, and deep-fried corn on the cob. The three of us put on our eating shoes and proceeded to finish our plates.
  • 5pm – Welcome to downtown St. Louis as we arrive at the hotel and immediately check the local news for weather updates. Not good news.
  • 6:30pm – We stupidly “upgrade” our seats with a scalper despite the fact that we knew rain was coming and also the fact that our original seats would have been better despite being 1/3 the price of the upgrades. I don't know how the Cardinals can charge $90 for seats where you can barely see the field.
  • 7:10pm – First pitch of a game that only exists in the minds of the people in attendance.
  • 7:30pm – The Cardinals up 2-0 on a home run by some player who probably really hated the fact that the game ended up getting canceled.
  • 7:40pm – Rain delay. No worries though as the National Weather Service is advising that we should be back in business by 8:30pm.
  • 8:30pm – It is now raining even harder.
  • 9pm – We are still in the concourse of Busch Stadium watching the rain and wondering when/if they are going to call the game.
  • 9:30pm – Now, we are wondering if the Busch Stadium officials are purposely not calling the game because they want to sell more concessions.
  • 10pm – A waitress down near the lower club seats tells us the game has been postponed. We don’t know if her information is accurate and are even more confused as to why they haven’t announced anything to the crowd.
  • 10:30pm – Game is finally called. I think less of the Busch Stadium officials for the poor communication that might have even been unethical.
  • 11:30pm – 3am - Go out to “the Landing” in St. Louis where we started talking with this Scottish businessman in town having a drink. We decided to be his best wingman (since we are all in relationships) and go bar hopping with him. Not much to report from the rest of the evening besides the fact that we all had unsuccesful runs at the casino. Anything we can do to help stimulate the local economy. Pappy's barbecue was definetly the highlight of the day and St. Louis.
  • 3am - Sleep


  • 8:30am - I wake up due to a missed call from someone from Mississippi. Why is it whenever I get a missed call from my home state the person always seems urgent and extremely tough to understand? Would a "hello, how are you" be too much to ask for?
  • 11am - We all wake up for good and two out of the three of us head over to the Arch.
  • 11:15am - We are stopped in line because a radioactive sensor went off and they had to check each person to find the source.
  • 11:45am - We finally get into the Arch only to realize that we don't have time to go up in the elevators, so we check out the museum and then turn around to go back to the hotel.
  • 1pm - After packing up it is on to I-70 and off to Kansas City. Goodbye St. Louis. We aren't shedding any tears about leaving the city.
  • 1:15pm - It is time for Brian and I to introduce Soumen to the power of Bob Evans. The under $5 country biscuit breakfast took me back to the glory days at Miami.
  • 4:30pm- We arrive at Arthur Bryant's in Kansas City. This is supposed to be the best BBQ in the city and based on the line at a random eating time it looked like a lot of people agreed with that statement. The ordering system at Arthur Bryant's reminds us all of the soup nazi from Seinfield. The line is snakes around like what you would expect at an amusment park until you reach this spot where you are supposed to order. At that time you are supposed to hand over your plate and let the worker know what you want. During this time he is yelling at people (including customers) and making it very difficult to place your order. I end up getting the brisket sandwich with pulled pork and fries, which is great except that I twice declined fries when he asked if I wanted them. However, after tasting the que it is easy to see why people put up with this poor customer service. Below is not too in focus picture of my meal:

  • 6pm - Game time between the Orioles and Royals. There is a clear sky and no chance of rain, which is very welcome news to us after Friday night. Just like Busch stadium I will have another post on my review of hte park. Let's just say that I was impressed and loved the scoreboard and fountains.
  • 9pm - O's win 3-2.

  • 10pm-3am - Kansas City just recently built this new Power and Light District next to the also relatively new Sprint Center.

    What is their to say about the Power and Light District? First lets start off by stating the fact that it is worth the $850M that was spent on it. It is incredible. Just imagine Bourbon Street crossed with a huge wedding and some unique bars. Do you want to go to a sports bar? Check. What about a Irish bar to see a U2 cover band? Yep. And bowling, sipping a mint julep at the Maker's Mark lounge, a beach bar, and even a country western bar with a mechanical bull are just a few steps away. All of this surrounds an open air courtyard where drinking/dancing in the streets is legal and encouraged. There really isn't anything bad to write about the place and it makes me jealous that Minneapolis doesn't have such a fun, all-inclusive bar scene.

  • 3am-4am - After a few cocktails we were all thankful for the street vendor serving up gyros just out side the Power and Light District. While enjoying our late night food I start up a discussion with some guys about Kobe vs. LeBron. The conversation is intellgent, heated (but respectful) and all in all very surprising considering the time of the evening, the state of mind of everyone, and the fact that we didn't know these guys. What a great way of capping off the evening.


  • 11am - Wake up.
  • Noon - Leave for the Sunday O's -Royals game.
  • 1pm-4pm - Royals win the series by beating the O's 7-4 despite committing 4 errors.

  • 4pm - 11pm - Drive through Iowa and get back to Minneapolis after one great baseball, barbecue, beer and bourbon roadtrip.

Quick best/better of from the trip

  • Best food - Ribs from Pappy's. All 3 of us agreed on this.
  • Better ballpark - The K
  • Better city - Kansas City
  • Better enterainment district - Power and Light
  • Better national monument - The Arch. I don't think their was any competetion, but I was starting to feel bad for St. Louis.
  • Best part of the drive - Probably through Hannibal Missouri even though that isn't saying much since southern Minnesota, Iowa and Missouri are pretty boring areas to drive through.

Friday, May 15, 2009

St. Louis

40 minutes away from game time between the Brewers and Cardinals and we are attentively watching the weather right now because there is a tornado warning in the areas surrounding St. Louis.   Right now it is not raining, but estimates for rain range from 7pm-9pm with most people forecasting when (not if) it is going to rain.   We are currently hoping to get 5 innings at least. 

Stay tuned.

In other news I was able to cross Iowa off my state sign list.   Also, I had some incredible BBQ at Pappy's Smokehouse in St. Louis.  The Big Ben platter was incredible.   

Wednesday, May 13, 2009

Great article

If you were looking for a wonderful article to read you could do much worse than this article by Malcolm Gladwell.

Tuesday, May 12, 2009

Dogs and updates

I am working on a long post right now that I anticipate will be finished by the end of the week, so stay tuned loyal blog readers. In the meantime a few quick updates and one observation. The one observation is that I get annoyed at people who refer to their pets as if they are children. Specifically if someone says something like "Buttercup just really loves his Mama." This is confusing to someone who doesn't know the person because the initial thought is that this deranged speaker named their child Buttercup. Once the listener realizes that they are talking about their dog or cat then they must only think this person is slightly strange.

Other quick updates:
  • This weekend I am going on a roadtrip surrounding the 3 Bs that should be essential to any guy's summer: baseball, BBQ and beer. If you were so inclined I guess you could add to that list "buds" or if you were single maybe even "brunettes." I am going to stick with the first 3 Bs though as I explore the best baseball, BBQ and beer in St. Louis and Kansas City. Stay tuned for my ballpark reviews of the new Busch Stadium as well as the renovated Kauffman Stadium.
  • M and I are heading back to MS for Memorial Day. A Stamps burger will be on the schedule as long as there is no family reunion conflict for the Stamps family.
  • The weekend after that M and I move into our new place in Edina. Like everything else there is more to come later.

Monday, May 4, 2009

Renting vs. Buying

I was discussing M and I’s decision to rent a duplex as opposed to buy a home with some of my coworkers the other day. My coworkers are proud home owners who thought I had made a mistake not buying a place. Their reasons were the $8K first time home buyers credit thanks to the government, the extremely low interest rates available, and the fact that the housing market has supposedly bottomed out. All of those are very good reasons and things I considered when looking at the option of buying.

However, I still thought that renting a place was the best option because of the following 6 reasons.

  1. Flexibility – Two years ago I decided to look for a new job. I talked to and in some cases visited companies based in North Carolina, Wisconsin, Ohio as well as my current state of Minnesota. It was a great experience that at one point led me to believe I was certainly moving to North Carolina to accept a job offer. Instead, in the final hour I received an offer from a company here in Minneapolis that was better than the offer in North Carolina. I decided to spend at least the next few years in the frozen tundra. Why does this matter? If I had bought a place in Minneapolis then I would have been stuck looking at local companies. That would have reduced my options and almost definitely would have reduced my starting salary. As a renter I am free to go wherever I want and my living arrangement didn’t hold me back. The flexibility is a huge key in renting because I have found that in many cases the owner doesn’t own their home nearly as much as the home owns their owner. Which leads me to my next point.
  2. The myth of home ownership – What do it mean to "own a home?" In my mind it means that you either paid in full for a house or have come to the conclusion of your mortgage. If you put 20% down on a house, then on day one you own 20% of the home with the other 80% belonging to the bank. Now it doesn’t take a genius to realize how long it will take for you to own a home if you take out a 30 year mortgage. (The answer of course is 30 years). However, how many people (besides my parents) actually make it to the end of their 30 year mortgage? Let’s say that after a few years you want to move and sell your home. How much of a home do you own at different intervals? I did the math using an amortization table and came up with a question to ask some of my friends and family to see what they thought. Below is the question I asked

    Zeke decides to buy a $300,000 home. He put 20% down ($60,000) meaning that he has a loan from the Bank of Kevin for $240,000. His monthly payment is $1274 for the 30 year fixed mortgage. Zeke plans on moving after 3 years. How much of the home will he own after 3 years?

    Zeke changes after his first 3 years and decides to stay an additional 2 years. Now how much of the home will he own after 5 years?

    Zeke finds out he really enjoys the winter and decides to an additional 5 years. Now how much of the home will he own after 10 years? (Answers below in italics)

    The answers I received for the most part very, very optimistic. One answer I got was 35% after 3 years, 46% after 5 years, and 71% after 10 years. Another was “he owns the whole thing the whole time.” A few of my friends gave realistic answers like 28%/33.3%/46.7%. Now, the tricky thing with this question is that without the Internet or at least a computer program it is nearly impossible to calculate the answer. I was hoping to get the best guesses from my friends to see what people thought about home buying. Most of the people quizzed understood the basic concept that you pay more interest at the beginning of a 30 year mortgage, but they didn’t know how that broke down by year. Just in case you were curious though the answer are that after 3 years Zeke would own 24% of the home, after 5 years, 27%, and after 10 years he would own 35%. This is all of course after he put down 20%, which means that in 10 years he would have gained an additional 15% stake in his home. This long, rambling point I am trying to make is that you don’t really build equity until after you have owned a home for a long, long time. And owning a home for a long, long time reduces flexibility that can be in high demand with changes in your family (marriage? kids?), job (layoffs?) or many other things.

  3. Reduces your “rainy day fund.” When I looked at buying a home back in 2006 I bought a “Home Buying for Dummies” book to help guide me along in the process. One of the key points I got from the book was that you had to pay a monthly penalty if you didn’t put at least 20% down when buying your home. Therefore having at least 20% of the home’s price was one of my basic rules because I didn’t want to get caught paying that penalty. Apparently while I was reading this book there were other more creative people who had found ways around this penalty. I heard you used to be able to buy a house with 0% down! Apparently the real estate market has tightened their rules a little bit since I found out from my prospective realtor that “you used to be able to put less than 5% down on a mortgage - now, the only option is an FHA with 3.5%, which does have extra monthly "fees" attached to the payment.” With all of that being written if I were to buy a home now I would still use the 20% down payment rule, which means if I wanted to buy an average (median) home in Minneapolis (for $221K) then I would have to put down over $44K. $44K is a lot of money that one might wish wasn’t tied up in a home when something really bad happens. If you get laid off (a possibility in today's economy) or injured (medical costs are extremely high) then you might wish you had the $44K to help you out during your time of need. One of the basic rules from magazines like Money is that one needs to hold 6 months of normal expenses in an easily accessible, safe account. If you have $44K sunk into a home it is not easily accessible and also as evidenced in some housing markets like Miami or Las Vegas it isn’t exactly safe. $44K would be more than enough for 6 months of normal expenses (unless you live like Flo-Rida) and that security in this economical climate would help someone like me sleep a little easier at night.

  4. Stocks – I am stealing this from an article “5 Reasons Renting Still Beats Buying” but stocks have returned 7% a year (he stole this stat from Wharton professor Jeremy Siegel) ending in 2004, while houses have returned a 0.4% a year over 114 years ending in 2004. Both of those percentages are adjusted according to inflation, so keep that in mind when reading more below. Now let me go through an exercise where I bought a $221K home with $44K as my down payment. Taking into account that stocks return 7% as a historical average and a home returns 0.4% here is my calculation on what would be a better financial option. Let’s say that I am one of those rare few that make it to the end of my 30 year mortgage and my home is now worth $249K. That $249K is less than the $336K I would now have in stocks after 30 years of 7% a year returns on the $44K down payment. Now of course just because homes have historically gone up 0.4% and stocks have gone up 7% on average does not mean the same will be true in the future. The DOW has dropped 21.9% in the past 10 years, so I can certainly understand the argument against the 7% number. However, home prices (especially in some areas) have been going down as well, so in this market it seems like one would have been better just putting their money underneath their pillow. Based on what you think about the stock market or the real estate market then maybe you will argue with my math above. I just wanted to provide the argument that based on the historical returns putting you money in stocks seems to make more sense than putting it in a home.

  5. But isn’t rent just throwing away your money. Yes. But so is buying a home. Even with today’s really low interest rates you still have to pay a lot more than a home is worth over the length of a 30 year mortgage. In fact for Zeke to buy the $300K house used in the example in point two he would have to pay $218K in interest on the $240K loan over the course of his 30 year mortgage. Even with the very low interest rates around 4.9%, this amounts to paying almost double your loan. Check out the calculation yourself with an amortization table such as the one on All of that is based on the full completion of a 30 year loan, which is probably unlikely. Let's say that after 5 years in the house Zeke wants to move out. He will have thrown away over $56K just paying interest, which averages out to $941 a month. At that time in his mortgage the $56K is nearly 3 times what he has paid off in principal and is basically the "rent" he pays on his loan. Also, none of this is taking into account the home maintenance (I was shocked to find out how much it costs to trim the trees around your house), which can easily make one wish that they had a landlord to take care of those expenses.

  6. Location, location, location. Some day this might be a reason to buy a home as opposed to rent, but right now I can’t think of a much worse place to live than at the end or large, sprawling suburb that is far away from downtown or my place of employment. Spending time in traffic is not something I want to do with my life. Also, many of the suburbs where houses are on sale are not within walking distance of any shops, restaurants, movie theaters, etc. However, a lot of the places where you can rent are in the heart of the city or in a cool area with many things to do. I have been on a kick trying to find out different address’s walk scores to see what fun activities are within walking distance. The freedom of being able to walk to a bar (or probably more important walk home) or go pick up some fresh fruit from a grocery store or go play basketball at a local park is an important aspect of any living space for me. There are examples of places that you can buy that have great walk scores, but I would say that odds are better that rental properties have a much better walk score than homes.

I haven’t bought a house yet because of these reasons and because renting has allowed me to save a lot more money that I would be able to do if I bought a home. Of course I might reconsider someday and decide to push my chips to the middle of the table and buy a home. There are advantages in buying a home, but this post is long enough and I know plenty of other people who can carry that flag much better than me.

Saturday, May 2, 2009

Big news

Dear loyal readers....I am sorry for the delay in blog posts. Not that this an excuse, but the past weeks have been very busy. There has been little time to sit at a computer and write a post. The dust has now settled though, so here comes the post that some have been waiting for.

On Saturday, April 18th I finally got around to finishing the Ballad of the Whiskey Robber: A True Story of Bank Heists, Ice Hockey, Translvanian Pelt Smuggling, Moonlighting Detectives, and Broken Hearts. The book was ok and I enjoyed learning more about Hungary. Anyway, besides that big news I also went on a walk around the Lake of the Isles and proposed to M. Don't believe me? There are pictures if you need proof or if you are just curious. I am very excited that M said yes and that it was such a great evening.

Then this past weekend (April 25th-26th) M and I went house/apartment hunting with my parents. We found out that even though we are perfect DINKS (double income, no kids) there weren't any houses that we really loved in our price range. It is one thing to rent a place that we don't really love, but to buy a place that we don't really love would feel very constraining. Therefore we decided to go the renting route and after walking through 4 consecutive duds we found the perfect place for us. We have decided to sign a year lease for one side of this Edina duplex with central air, a dishwasher, 2 bedrooms, an unfinished basement, a nice sized living room, a fireplace, a garage, and it is within walking distance of a lot of restaurants, a grocery store, a liquor store, a Walgreens, etc. I typed in our new address on Walk Score and our place got an above average 83. That is 83 more points that former President Bush's walk score at his ranch in Texas.

Considering I got engaged 2 weekends ago and found a new place to live last week it kind of makes me wonder what will happen this weekend. So far not much as we went to see a friend's band last night and tonight we have a double date scheduled at Chino Latino. The only really big thing I can think of is Game 7 of the Bulls-Celtics series. M has informed me I might be missing part or most of the game because of the double date obligation, but I have faith that I will be able to sneak away for the all important 4th quarter and overtimes.