Dipping Your Toe in the Market

I’m going to take a detour from the wonderful world of vagabonding and look at investments.

You may be thinking, “Paul, you’re not a certified professional. How could you possibly know about investing?” You’re right—I’m not a certified professional, so I will emphatically say that my advice is merely based on my 25-plus years of investing my hard-earned money (and gaining the trust of my wife, to invest her hard-earned funds). It’s based upon my having my fair share of dogs and duds—and some went belly-up. It’s also based upon my fair share of satisfactory stocks, and grand-slam homerun equities. And it really only requires a handful of grand-slam stocks to get you to a point where you can breathe a little easier—as long as you know when to step out and take that breather.

And now we are in the midst of a “unique” scenario. We have an unpredictable government in Washington and we are in the apex of a high-flying stock market. Both pretty disconcerting, if you ask me. So why would I urge anyone to engage in the stock market? Because it’s still better than the meager returns of bank accounts. It’s not a replacement for a savings account (you still have to keep about 6 months worth of savings in a money market or savings account… “just in case”). It’s a complement. I invest via CapitalOne Investing—and I’ve done this for close to 20 years (through its predecessor company, ShareBuilder). You can reach CapitalOne here or here.

The good news about investing is that it is simple, if you pay attention to the purpose:  Buy the company, not the hype. You are investing in an asset that you expect to appreciate in value as time goes on. As legendary investor Peter Lynch said: “Never invest in any idea you can't illustrate with a crayon.” Another pearl of wisdom from Lynch is, “If you're prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won't get bored.”

Like I said, it’s not complicated. If you can buy a house or an antique, you can buy a stock.

To keep your eye on the prize, focus on three things as your North Star: 1. Taking a hint from Peter Lynch: K.I.S.S. (Keep it simple, stupid!). If you can’t explain what the company does without turning your brain into a balloon animal, then you’re asking for trouble; 2. Do all things in moderation; and 3. Run away when the crowd runs in and run in when the crowd runs away.

So what do I mean by these three cryptic things? The first should be pretty clear from my Peter Lynch reference. The second is, very simply put, dipping your toe in the market through dollar-cost averaging. Start out with one stable security that has seen a bunch of ups and downs. An easy one is Berkshire Hathaway, Inc., B shares (BRK.B). The legendary Oracle of Omaha, Warren Buffett, runs this company—which is basically (for lack of a better term) one very large mutual fund. Note, that Mr. Buffett, a wise man with a wicked sense of humor, does not issue dividends. But that’s ok: the more a company invests in itself, the more likely it is to appreciate in value. Another easy choice for monthly dividends is Realty IncomeCorp. (O), which calls itself “The Monthly Divided Company”. Realty Income is what’s known as a Real Estate Investment Trust (REIT). It purchases commercial real estate that is leased to tenants under long-term lease agreements, generally 10-20 years. The lease payments generated each month are used to support predictable monthly dividend payments to their shareholders. Realty Income owns over 4,900 properties, diversified with 248 commercial tenants operating in 47 industries, located throughout 49 states and Puerto Rico. Realty Income issues monthly dividends, which you may (and I highly recommend this) reinvest automatically; while rates of return can change depending upon price fluctuation, O’s current yield on an annualized basis is 4%, so if you think about this in comparison with the average bank account, it’s a no-brainer!

Point of disclosure: I own both BRK.B and O in my portfolio, and I’ve had them in my portfolio for about 15 years.

One last stock I would recommend for dipping your toe in the water is Starbucks (SBUX), because I’m a coffee addict.  And, honestly, if you have never heard of Starbucks, I would question your take on reality. The company’s dividend is on the low end (1.7%) but still better than the earnings of a savings account. It is a company that has gone from mere food and beverage service, to a veritable necessity among coffee generations, which makes the likelihood of price appreciation in the long run (5+ years) pretty strong. I’ve owned SBUX for 10 years, taken my profit once (meaning: I cashed in stock that appreciated to the point that I took out my original dollar investment and I still have a boatload of shares that are delivering dividends and price appreciation; this illustrates the magic of dividend reinvestment and dollar-cost averaging right there), and benefitted from a 2-for-1 stock split (splits don’t generally change the value of the investment, but make it more attractive for others in the market to purchase shares, thus pushing price appreciation—supply and demand, my friends!).

That last point (Run away when the crowd runs in and run in when the crowd runs away) is a contrarian viewpoint that is embraced by Warren Buffett. The stock market relies on groupthink when we get to the heady highs that we’ve experienced in the last couple of months. What can you expect from this? People who shouldn’t be buying, are buying just because “everyone else is doing it.” Take it from Mr. Buffett and your’s truly: be patient and buy at bargain prices. I have a chunk of cash in my portfolio that is burning a hole in my pocket, but right now, I’m not seeing anything that is floating my boat right now. And, frankly, the irregularity of the current administration gives me pause as well. That doesn’t mean you should NOT invest in the market now (this is why I suggested the aforementioned BRK.B, O and SBUX), but when the “correction” comes (and it will come--it could be a mild correction or a downright nasty one; we don’t know until it happens, but they do happen), be ready to jump in and buy more. This is what we mean by running away when others run in, and vice versa.

I don’t plan to make this a regular feature, but as time goes on, I’ll be sure to give some tips, hints and, God willing, the VERY RARE “don’t do this” advice on investing.

One more thing:  The lion’s share of my investments are nestled in my IRA and Roth IRA accounts, so it ensures that these are long-term investments. I recommend any high dividend investments go into a tax-deferred investment, like an IRA or Roth IRA, so you don’t have to pay taxes each year on your dividends. That doesn’t mean you should not have stocks in a taxable account (I do), but a stock like BRK.B may be better suited to a taxable account because of the tax advantages that capital gains have over dividends.

And, while I would be as proud as anything to have your trust in my advice, I would feel much better if you consult a certified professional and/or do your own research. A good website to start you out on researching potential investments is The Motley Fool. It’s very accessible from a linguistic perspective—they speak “normal Joe or Jane”. And if you find you’re ready to harvest those gains, don’t forget to pay your taxes and use a good program (or accountant) to help you do that!

Go ahead. Dip your toe in the market. Be aware, use your noggin, and don’t go with the crowd (unless it’s part of a company’s successful business model).

Peace and profit!

Postscript from 25 February: This article from Fortune online came out about my hero, Warren Buffett (link embedded), whose letter to shareholders was just published. He points out that his bet with a hedge fund manager worked to his advantage. The bet? $500,000 that his pick over a 10 year investment period--a Vanguard fund based on the S&P 500--would outperform a hedge fund manager's pick of 5 hedge funds of his choosing. Buffett won, and proceeded to eloquently slash and burn hedge fund managers' penchant for high fees and mediocre returns.

Chania - A Precious Cretan Gem

Lunch hanging out to dry

I’ll be taking a trip on the way-back machine to 2008, but it’s a town as relevant today as it was a decade ago. Chania (or Hania, or better yet: Χανιά) is a gorgeous, yet rough-and-tumble city on the northwestern coast of the island of Crete--the largest of all the Greek islands. Rather similar to it's Mediterranean cousin to the northwest--I'm talking about Sicily--it also has quite its own culture that the native Cretans proudly differentiate from the rest of Greece. Chania is the capital of it's western province, and also hosts a large naval port to its eastern flank.Chania is a hustling and buzzing harbor city, as cool as it can be. At one time it was the capital city of the island, and that makes it special in the hearts of all Cretans. The city sits around a picture-perfect, if overly touristed, harbor, framed by elegant Venetian and Ottoman houses and a string of waterfront bars and tavernas.The mosque of Kioutsouk Hasan sits on one end, and a Venetian fortress sits on the other. And in the mix is the lighthouse of Chania, the icon of the city.

The old town, an atmospheric, pungent and crowded quarter, is characterized by narrow crisscrossing lanes full of tiny boutiques, souvenir and craft shops, and cozy restaurants and gelato shops. The streets are a delightful labyrinth of exploration for those of us who love getting lost and have time to throw agendas out the window. Find a patch of sunlight coming through the sunlight, you’ll likely stumble across the occasional lazy cat or napping dog. 

Chania old harbor, from the lighthouse 

Take a stroll into the Turkish quarter, and you’ll encounter a more vibrant, youthful energy of coffee shops, wine bars and hip and trendy restaurants. And you're bound to run into a minaret or two, if you're paying attention, that is.

Where to stay in Chania

Hotel Vilelmine from the church courtyard

My favorite place to lay my weary bones down is by far Hotel Vilelmine at 32 Betolo Street (GPS: 35.515036, 24.018013).

The hotel has a rustic, yet swanky feel and is situated right in the middle of the old town, right next to the Church of the Virgin Mary (Ιερός Ναός Εισοδίων της Θεοτόκου) or better known as the Trimartiri, Chania’s main church. 

Of course, you should be prepared for occasional (early) serenades of the church’s bells, but the charm of the hotel overcomes any aural inconvenience. Besides, you’ll have a ready-made alarm clock of classic proportions, gratis! 

At the Vilelmine, you may get
free entertainment, like the occasional wedding!

The Vilelmine is a former mansion of the Fournarakis family, whose construction began in 1898. The hotel is named after one of the daughters of this family, and is restored to look as it did in the early 1900’s.

Cafe in the Vilelmine

There is a café on the ground floor, where you can enjoy a light breakfast of yogurt with honey,fresh fruit and Greek pastries (and don't forget the coffee). It’s definitely a must, if you are in the mood for a luxurious, historical residence.

Eats and Drinks

"Well of the Turk" taverna

There are a plethora of tavernas and restaurants, cafes and bars to visit in Chania. One guarantee is that anything on the harbor will be laden with tourists and priced to match (that is, more inflated for the tourist crowd). Your best bet would be to venture more toward either the interior, or away from the city center/harbor area for an experience that the locals savor.

Well of the Turk at Sarpaki 1-3 (closed Tuesdays) is housed in a former Turkish hammam (bath), and is a romantic taverna that specializes in rich cuisine inspired by North African, Turkey and the Middle East, prepared with fresh ingredients sourced in Crete.
Apostolis I & II on Akti Enoseos in the east harbor (11:30am to 1am, May-Sept.; reduced hours rest of year) are highly respected locales located in two separate buildings near each other. Their specialties are fresh fish and Cretan cuisine. The more popular of the two is Apostolis II, since the owner is ever-present, but Apostolis I has a slightly less expensive menu. Both I and II have the same choices on their menus.

Thalassino Ageri (open from 7:30pm, April through mid-October), a fish tavern at Vivilaki 35, is off the beaten path, about 2km east of the city center, in Chania’s old tannery district. It is a delightful place to watch a sunset over the Mediterranean. Thalassino Ageri is regarded by many as one of the top fish eateries in Crete, with an ever-changing menu dictated by the day’s catch. Of course, kalamari is not to be missed at this spot. Take a taxi or if you would like to work up an appetite, follow El Venizelou, turning left at Noel St as soon as you veer away from the coast.

Shopping

Chania is widely considered the best place to shop in Crete. Within the labyrinthine streets are a plethora of tiny handicraft stores, boutiques and markets. The covered market in the heart of the old town is good for local flair, where you’ll find Cretan honey, olives, meats and cheese, as well as handmade trinkets and souvenirs.

The covered market in
old town Chania

Nearby Skridlof Street touts numerous leatherworkers hawking quality, affordable, leather goods made by hand. They have many more purses, handbags and shoes, but you are bound to find other leather goods. Ceramics and glassware are Chania specialties as well. You may stumble upon a non-descript place to get some interesting souvenirs that are practical, and enjoy some animated conversation with the locals, some of which had spent considerable time in the USA.

Day-Tripping or Getting Out of Town
A lovely, if somewhat crowded beach is the city beach (Nea Chora Beach) just west of the center, easily accessible by foot (2km or 25 minutes along Akti Kinari, to keep your eyes on the prize—the turquoise Mediterranean waters, in this case; otherwise, the hike is less lengthy and more direct going through town). Take water and your beach equipment with you. Sure, there are even lovelier beaches on the western side of Crete, but you can’t beat the convenience of going by foot!

Stavros, on a chilly October morning.

For a slice of cinematic history, take a bus from the central bus station (at Kelaidi 25-27) to Stavros Beach on the Akrtotiri peninsula. One characteristic feature of the area is a very steep camel-backed mountain rising opposite Stavros harbor. Here, several scenes from “Zorba the Greek” were filmed (especially those where Anthony Quinn danced his Sirtaki Dance) in 1964, when Stavros was a tiny fishing village.

The beach itself is crescent-shaped. A word to the wise, though: based upon personal experience, the weather in mid-October is chilly (no wonder there weren’t any open tavernas there!), so if you really have a jones to re-create Zorba’s dance, bundle up! And know the bus timetables (although timeliness is relative in Greece—just be aware that schedules are “nice to have’s” and not “musts”).

If you want to really hit the road for some serious sun time, try Paleochora on the southern coast (accessible by bus or car). Or backtrack to Rethymnon Province to the southern coast and one of the most unique beaches around: Preveli Beach.

Preveli -- a river runs through it

Be aware that it is approximately 2-3 hours by car from Chania, so your best bet is to put this on your list when visiting the southern part of Rethymnon Province for a few days).

In a Nutshell...

All told, Chania was one of our favorite destinations in Crete, and for good reason: atmosphere, culture all around, and seafood! It is a must-visit if you are willing to take off for Crete. If the city is all you want to savor, give yourself at least two days, but longer stays with the occasional road trip is where the pleasurable Chania experience is!

Getting there: Chania International Airport (CHQ) is accessible from several major European cities and from Athens and Thessaloniki. It is located 14 km east of Chania on the Akrotiri peninsula.

Ferries also arrive at the local deep water port for Chania, Souda, also near the airport. There are daily ferries are primarily from Piraeus, near Athens, and require overnight passage. Be aware that ferry strikes may take place from time to time, so be flexible when choosing the ferry transportation method.