So this one may be my magnum opus for BiggerPockets. If you want a how-to-guide on due diligence for real estate investment, this 4700-word essay is for you. (And you might want to chase it up with this livestream I did on due diligence). 

First thing I do is break down the process into an easily digestable checklist:

And then I go into much, much, much more detail on each of these points. If you want to get into real estate investment, you need to master due diligence. Otherwise, you'll be left holding the bag (or in this case, a property without any equity because you missed something really important)!

Please, check it out and, for that matter, share it! 

So I was recently selected as one of the Kansas City Business Journal's "People on the Move." Which is cool, so I thought I would go ahead and share that.

On that note it's worth mentioning that last year, our company Stewardship Investments, placed ​36th on the Kansas City Business Journal's Fast 50 List of the fastest growing private businesses in the Kansas City metro area. We hope to make that list again this year.

My newest post for Data Driven Investor (again, sort of) is up (which is also on this site). This one goes into the oh-so-interesting textbook industry. And yes, while textbooks aren't that interesting, the rapid disruption this industry faces and the future of it is actually quite interesting.

​First and foremost, the industry is facing some hard economic times. As I note,

So where do they go from here? Well, read the article and find out!

And here is part 2 of my old series for SwiftEconomics on the decline and fall of musical quality over the ages. (Part 1 is here.) Enjoy:

So a while back I wrote an article about the wacky world of music where talent is ignored in favor of prepackaged, overproduced tweenie heart throbs and beauty queens who have little discernible talent other than a voice that would typically rank around 7 to 8 on a scale from 1 to 10. I have a friend who’s in a very good band called The Hoons. Quite a few have commented that they should be famous or that they will soon become famous… You know, when people realize they’re really good. Unfortunately, since being good is not a qualifier for musical fame, I would hesitate to make such predictions.

The problem is this; people really like music and thereby many will dedicate themselves to it even if the odds of financial windfall are small. Who wouldn’t rather be a musician than say, an insurance salesmen? Thus, there are a lot of really talented musicians and bands out there and they get lost in a sea of other music. The market is over saturated. Whereas there is probably plenty of room for improvement regarding the talent of insurance salesmen.  This may have not been the case in the past as much, but it certainly is now. People can only keep so many bands in their heads at any given time. Dunbar’s number dictates human beings can only conceptualize something like 150 people as friends or acquaintances of note. Everyone else is a number. I suspect our tolerance for musicians and bands is substantially smaller.

Record companies know this, so they’re not really selling music, they’re selling a brand. Why do you think every movie that comes out today is a remake/reboot/reimagining/sequel/spinoff/prequel or adaption of a TV show, video game or at least a book (which seems to be becoming more and more rare). The established brand helps guarantee that the $100 million or so the studio dumps into filming our 2 hours of escapism will come to the top of the enormous mound of garbage begging for our attention (and money). And so it goes with music, just make a smaller investment up front and try to sell a charismatic and attractive “musician” who can technically sing and maybe dance a little. Then sell them songs written by someone else (or something else) that have been scientifically tested to be as catchy (and empty) as possible. While the songs are often overproduced, they are also simple, with very few and very predictable chord changes. This makes them easy to dance to, sing along with and get caught in the head. Throw all that together with said “artist” and boom, a famous musician is born… or probably more accurately designed, tested, manufactured and marketed.

This all makes me rather sad. But at least I could console myself that we had so much music at our disposal anyone could dig through and find stuff that is actually of quality. The production side may be an upside down mess, but the consumption side is an oyster or smorgasbord or something like that.

Then I had a recent conversation with my guitar teacher (who is very good musician, and of course, not famous). He mentioned that in Mozart’s day, he was well known for his operas no his symphonies. At the time, operas were the music of the masses. Lawrence Edelsondescribes it as follows:

Can you imagine Joe Shmoe or some trailer park rednecks going to the opera today? Or maybe some wanksta’s: “Yo Homie, let’s get hella faded and then catch some Pavarotti up in this hizzie!” Sorry, I digress. Sure, it’s great that the masses had a form of entertainment available to them they hadn’t previously had. Indeed, Edelson notes the [positive] change that was starting to take off in the early to mid 1800’s, “During the first half of the nineteenth century, "new forms of popular culture were developing as the industrial revolution generated the two preconditions for mass entertainment: mass production and a mass audience."

That is great. The problem, is that today opera is considered the music of the snobby elite. It’s classy music meant for a more sophisticated audience. So opera went from being a music for the general public, to a music for the elite. My guitar teacher is convinced this is the trend throughout time, and unfortunately, he’s probably right.

Jazz and blues’s were both considered to be the music of “bars and brothels” during the early 20th century. Now they’re classic. The Beatles made mindless, pop music, now they’re the epitome of classic rock and hugely respected as musicians. And I should note, while I do like the Beatles, the simplicity of their songs and the ease with which they are too play, is rather astounding.

OK fine, I like blues and jazz and the Beatles are OK. And I don’t particularly like opera. In fact, I don’t like it at all. But look where this trend is going! Liberals may worry about leaving a wrecked planet to their children (or maybe I should say child…) and conservatives worry about leaving a massive debt. But we can both agree we shouldn’t be leaving Katy Perry and Justin Bieber to our children… dammit, too late… to our children’s children. They’re popularity should die with us.

Unfortunately, it seems we are intent on justifying our hormonally influenced adolescent musical preferences in adulthood by giving such pop music the “classic” label. And with the way this trend is going, it appears that the likes of Britney Spears and Ludacris will become the “classic” music of the next generation. Hell, today their stuff is already turned into symphony arrangements for college marching bands to make fools of themselves with. It’s just a matter of time. Hence a generation more and Beyonce and T Pain will become the operas of the 21st century. Snotty elites will pontificate about the important matters of the day while embracing the deep themes of how “I kissed a girl and I liked it.”

Or maybe they’ll all just go the way of New Kids on the Block… hopefully.
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Or maybe it’s just too much to risk and it would be better if robots just took over.
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Photo Credit: blog.buringman.com

Here's an old article I wrote for SwiftEconomics on the music industry and why the mediocre rise to the top while the truly talented languish in obscurity. Enjoy:

As an amateur guitar player I can say that few things bother me more than the world of professional music. It’s simply all upside down. This was brought home to me when I was invited by some friends to a free concert played at a local bar in Kansas City. Samantha Fish was playing, whom I, like most of you probably, had never heard of. Here’s one of her songs and you can get long previews of her new album here.

While listening to her I couldn’t help but think “why isn’t this girl famous?” She’s got a great voice and is wicked good at the guitar (check out the solo at 3:49) and even the most superficial, Hollywood types have to admit she’s quite pretty. As pretty as this broad at least:

I guess these dime-a-dozen, corporately regurgitated beats can be good to dance to if that’s your sort of thing. But I’d break it down this way: Katy Perry is relatively pretty, a slightly above average singer, perhaps a decent dancer although I’ve never seen it, plays no instrument and I’m almost positive she doesn’t write her songs (not that the trivial drab she sings with three chord progressions would be anything to be proud of).
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Yes, art is all subjective and maybe I just got a thing for bluesy rock (and pretty girls who play guitar) but is anyone going to seriously say that Katy Perry is more talented than Samantha Fish? I would laugh in your face. Indeed, the market seems to have failed here. Although in my beloved market’s defense, even while the most talented may not reach the top, there will be plenty available to choose from. The producer end is all messed up, but with no barriers to entry and lots of ways to release music, there will be more than enough of any genre to satisfy the consumer end of things. My favorite musician of all time is Chris Cornell [Ed. RIP Chris], and now that he’s post-Timbaland craziness, he just completed an acoustic tour of all his old stuff. Here’s “Burden in My Hand” from  his Soundgarden days (which are now, by the way, reunited, OMG indeed):

Pure awesomeness… Still, even Chris Cornell’s fame pales in comparison to Katy Perry, Britney Spears and those assholes who make up Nickelback (yes Nickelback sucks, see here).  Why is this? Is it just our unstoppable cultural decline?
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The Cato Institute released an interesting piece arguing against that by saying in part that “The music of Bach, Mozart, Haydn, and Beethoven is more accessible to today’s listeners than it was to the listeners of the 18th and 19th century.” True, but that’s not really the issue at hand. Perhaps, the very accessibility of such music is the reason why the likes of Mozart and Beethoven have been replaced with the likes of Perry and Spears.

Without attempting to sound like an elitist snob, music and other arts have very likely seen a decline because of the mass appeal an advanced society provides. Normal people may just want a song to rock out to or dance to or teeny bop with. Back in the day when most people were starving, only the most affluent got to enjoy music and other arts with any consistency, at least the more polished sorts that were subsidized by patron saints and the like.

With the utter saturation of art in the world today, music being but one example, marketers must try to build a brand around individual singers and bands. Katy Perry is obviously not particularly talented, but she can mix simple, recycled but relatively catchy beats with a very well-refined brand name that provides plenty of material for mindless tabloids and Access Hollywood drivel. And that sells regardless of what sort of crap she puts on her records (of which there is, unfortunately, much evidence to attest to).

Technology has rapidly expanded this divide. As I mentioned previously with regards to income inequality:

Thus cult of personality became more important than talent. I would argue that intellectual property has also played a part in this. Songs would be much less tied to their writers if IP were reduced or eliminated entirely. I think this would make it harder for the cults of personality and celebrity culture to flourish with regards to music because people would follow the songs more than the artists. Indeed, it would certainly hurt artists on the top of the charts to curtail IP, but it may give a boost to those who are on the lower rungs of popularity.  I recommend Stephan Kinsella’s lecture against intellectual property which discusses this subject in more detail.

Regardless, something is seriously wrong with who makes it and who doesn’t in the world of music.
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Photo Credit: Get This Ripped

My new post (well sort of) for the Data Driven Investor (which was also published on this site) is up. It discusses the Empathic Design Method of decision making, which boils down into five steps:

1. Observation
2. Capturing data
3. Reflection and analysis
4. Brainstorming for solutions
5. Developing prototypes of possible solutions

The method has some key advantages over other decision-making processes because it involves observing what potential customers actually do, not just asking what they want. Often people don't know what they want or have a hard time articulating it. So asking doesn't help that much.

The article goes into much more detail on the process so check it out if you're interested in that sort of thing.

Tom Brady... the undisputed GOAT amongst NFL players and potty mouths:

Yeah, I was rooting for the Chiefs as I live in KC. Heartbreaking... Couldn't you pick any other time to be offside Dee Ford!?!? 

Well, at least the Chiefs didn't lose on a ridiculous blown call like another team that played Sunday. That makes it a bit easier to swallow. 9 Super Bowls... unf*cking believable bro.

My latest article on BiggerPockets is up that delves into rental property additions. Namely, which are the most common and when, and especially if, you should do them. The six items I discuss are:

1. Bedroom or Bathroom Addition
2. Garage Conversions
3. Basement Conversions
4. Attic Conversions
5. Enclosing a Porch
6. Building an Addition

If you're looking to renovate a rental property (or one you're looking to flip), I highly recommend checking this article out. (Of course, I am admittedly a bit biased.)

With the recent Texas ruling that the insurance mandate component of Obamacare is unconstitutional, it seems fitting to republish the article I wrote for SwiftEconomics.com the day before its passing (on March 20th, 2010). Enjoy:

As we approach the vote on healthcare reform, a major question needs to be asked: Why are health insurance stocks trading at close to 52 week highs? Why are pharmaceutical companies doing the same? If the health insurance and pharmaceutical companies are set to lose massive amounts of money if healthcare reform is passed−which is appearing more and more likely−why are these companies doing so well? (1)

On average, these companies saw their stocks rise 79.2% from March 20th, 2009 to March 19th, 2010! Cigna alone went up 115.07%. They have done over 60% better than the Dow Jones Industrial Average, which rose only 48.7% over that same time.
​
The pharmaceutical companies haven’t done as well, but the top five U.S. based pharmaceutical companies’ stocks still rose an average of 24.7% over the past year:

While that’s only about half of what the Dow Jones did, why are the prices going up at all? Stock prices are derived from an estimation of discounted future cash flows. Or, when translated from financial gobbledygook to English, companies are not valued by how much their assets are worth. Instead, they are valued by how much a company is expected to make in the future and how much those future cash flows are worth today (money is worth more now than it is worth in the future, which is why we demand interest on loans). If the 2400 page healthcare bill is expected to reduce these companies’ future profits, investors would expect the present value of these companies’ future cash flows to fall and act accordingly. In other words, their stock values should be going down.

What is going on is actually rather simple. Big corporations have done what they love to do with big government; get in bed together. Unfortunately, it’s us, as the common taxpayers, who will have to foot the bill for this love affair.

This was visible from the beginning. As I’ve discussed before, our current system−built upon almost five decades of heightening government intervention−is littered with corporate handouts. But it was amazing how honest the pharmaceutical industry was about this. In March of 2009, Billy Tauzin, head of PhARMA, the main lobbying group for the pharmaceutical industry, was asked on CNBCwhether investors should be worried about healthcare reform. He responded as follows:

They continued:

And this was back in March of 2009; the deal just got sweeter from there. In August of 2009, The LA Times reported that “Tauzin has morphed into the president’s partner. He has been invited to the White House half a dozen times in recent months.” (4)
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It probably surprises no one that the pharmaceutical industry spends more on lobbying than any other industry. In 2009, they spent a whopping $263 million. The insurance industry came in 4that $164 million (securities and investments was only at $96 million). (5) And no, this didn’t just go to Republicans, as Democrats received 52% of health sector donations and 49% of the pharmaceutical donations in the 2008 election cycle. (6)

And now it is appears quite obvious that Big Pharma and Big Insurance are solidly behind healthcare reform. According to The New York Times, the drug industry has authorized $150 million on television commercials supporting the healthcare overhaul! (7) Below is one example, sponsored by Americans for Stable Quality Care, a group primarily funded by the Pharmaceutical Researchers and Manufacturers of America:

So what is in this bill that has the pharmaceutical and insurance industry so excited? Tim Carney, expert on government-corporate corruption and author of Obamanomics, lists out the main reasons:
​

1. Complex drugs known as biologics will receive a 12 year monopoly patent instead of the standard 5 years
2. The individual mandate will require everyone to buy prescription drug insurance
3. $196 billion in annual subsidies will be given to poor and middle class Americans to buy health insurance
4. It preserves the 2003 Medicare Part D stipulation that prohibits Medicare from negotiating down prices for drugs it subsidizes
5. It continues to prevent re-importation of drugs from Canada (8)

Insurance companies have to weigh the added costs of insuring high-risk people, but they will get more customers and the government will spot much of the bill through subsidies, so this is certainly a win for them, too. And none of this even addresses the political payoffs, such as the “Cornhusker kickback” and the “Louisiana Purchase” that were originally part of the bill. (9)
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All of this corruption is likely a major reason that healthcare reform has become so unpopular. It’s so unpopular that, according to Bloomberg, three states have passed bills and 30 to 35 others have bills pending that would overturn the federal mandates if they are passed. (10) All this pressure has put congressmen in a difficult bind on which way to vote, since their political lives may be at stake. So Nancy Pelosi came up with a way out for them. She even proposed using the Slaughter Rule to pass the bill.  (11) Under the Slaughter Rule, the Senate would vote on a bill, then let House members tinker with the bill and vote on the changes, but not on the bill itself. If they pass the changes, the bill would be ‘deemed’ to have passed the House. It would, more or less, allow a law to be passed while never being voted on in the House of Representatives. For her part, Nancy Pelosi defended the process by saying, “…I like it because people don’t have to vote on the Senate bill.” (12) And then of course, she gave us this gem:

Wow. Just wow. And while most dictators would probably be fond of this, it would seem to be in direct violation of our Constitution which states that “Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States.” (13) I think, even under the loosest of interpretations, that would demand both the House and Senate to pass the bill. But who cares about the Constitution anymore, right?
​
Regardless of the politics behind this bill, it’s important to know that there are options for healthcare reform worth debating on both sides of the aisle. On the left, there’s the single-payer option, which I oppose, but at least the argument for it makes sense. There are other options, too, such as eliminating the employer-mandate, repealing laws that prevent people from shopping across state lines for insurance, allowing for drug re-importation, eliminating HMO’s and the whole system of 3rd party payments that dis-incentivize price shopping, increasing the number of health savings accounts, reducing the power of the FDA, repealing CON Laws, loosening patent laws, etc. But what’s important is that none of that is on the table. What’s on the table is a startling mess of pork-filled, corporate handouts and political kickbacks. And that’s something that liberals, conservatives, socialists and libertarians can all join hands in opposing.
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More reasons to oppose the healthcare bill here.
Tim Carney’s Speech on corporate-government corruption here.
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(1) Numbers derived from Google Finance, March 19, 2010, http://www.google.com/finance
(2) See Jeffrey Young, “Big pharma’s top lobbyist said what?,” The Atlantic, March 6, 2009, http://www.theatlantic.com/business/archive/2009/03/big-pharmas-top-lobbyist-said-what/1284/
(3) Ibid
(4) Tom Hamburger, “Obama gives powerful drug lobby a seat at healthcare table,” LA Times, August 4, 2009, http://articles.latimes.com/2009/aug/04/nation/na-healthcare-pharma4
(5) See “Who’s Up, Who’s Down?,” The Center For Responsive Politics, http://www.opensecrets.org/lobby/incdec.php
(6) Patrick Hollsetin, “More pharma donations for Obama,” Pharma Adhoc, November 10, 2008, http://www.pharma-adhoc.com/index.php?m=1&id=139
(7)  David Kirkpatrick, “Drug Industry to Run Ads Favoring White House Plan,” New York Times, August 8, 2009, http://www.nytimes.com/2009/08/09/health/policy/09lobby.html?_r=3
(8) Timothy P. Carney, “Christmas comes early for the big drug companies,” Washington Examiner, December 23, 2009, http://www.washingtonexaminer.com/politics/Christmas-comes-early-for-the-big-drug-companies-8674150-79934522.html
(9) For a rundown on those scandals and the reluctant removal of them from the bill, see Jordan Fabian, “Obama healthcare plan nixes Ben Nelson’s ‘Cornhusker Kickback’ deal,” The Hill, February 22, 2010, http://thehill.com/blogs/blog-briefing-room/news/82621-obama-healthcare-plan-nixes-ben-nelsons-cornhusker-kickback-deal
(10) Ann Woolner, “States Say We Don’t Need No Stinkin’ Health Reform,” Bloomberg, March 19, 2010, http://www.bloomberg.com/apps/news?pid=20601039&sid=aOaPsHEnNAuY
(11)  “Slaughter House Rules,” Wall Street Journal, March 16, 2010, http://online.wsj.com/article/SB10001424052748703909804575123512773070080.html?utm_source=Newsletter&utm_medium=Email&utm_campaign=Heritage%2BHotsheet
(12) Lori Montgomery and Paul Kane, “House may try to pass Senate health-care bill without voting on it,” Washington Post, March 16, 2010, http://www.washingtonpost.com/wp-dyn/content/article/2010/03/15/AR2010031503742.html
(13) The United States Constitution, Article 1, Section 7, http://www.usconstitution.net/const.html#A1Sec7