Buy on Sale

Don’t sacrifice when you can shop smart and save.

Wow, does that tag like look like something written up by a marketing guy for a discount store or what? But that’s not what this is all about. It’s about really shopping smart and taking advantage of sales to buy the things you want and need.

Where I’m Coming From

First, I need to make something clear: I’m not a shopper. I don’t read newspaper ads, looking for the best deals on this and that. I don’t spend hours every week hopping from store to store to save a few bucks. I don’t clip coupons. I don’t have the time or patience for any of that.

And I should also point out that Mike and I are a family of two with just two pets. No kids, no huge meals. Although we might spend as much on food as a family of four, it’s because we like good food. We tend to lean toward quality and the things we really like rather than quantity and settling for second best.

We’re not broke — we’re both still gainfully employed in this f’ed up economy. But like many smart people out there, we’ve seen the writing on the wall. Who knows what could come next? Who knows whether Mike’s company can stay afloat in these troubled times? Or whether people will still be interested in treating themselves to helicopter tours. I’ve already seen a sharp drop in book sales — the real source of my income.

That said, it really irks me to pay more than I have to for the grocery items I like or need. I’m talking about everyday staples, like paper products (toilet paper, paper towels, tissues), coffee, milk, butter, etc.

What I’ve been doing for years now is buying the items I need in quantity when they’re on sale or when I find them somewhere else at a really good price. Here are some examples.

Coffee

Eight O'Clock CoffeeI like Eight O’Clock Coffee. It’s an Arabica bean with a light roast. It’s more robust than Dunkin’ Donuts coffee, which I liked before I left New Jersey and could no longer get here in Arizona. (It’s now available in Arizona; I tried it again and was disappointed.) But it’s mellower than Starbucks or any of the other boutique coffee brands — although I’ll take Starbucks Breakfast Blend in a pinch. I buy it as whole beans and grind it at home as part of my coffee-making ritual. Nothing like a good cup of coffee first thing in the morning, huh?

My local supermarket sells a 12-0z bag (whatever happened to a “pound” of coffee?) of Eight O’Clock coffee beans for $7.59. I think that’s outrageous. But every once in a while, it goes on sale for $4.99. That’s more like it. I buy enough to last until the next sale, saving about $2.60/bag or 21¢ per ounce. Not bad. But recently, they’ve been having these really kick butt sales on the coffee, selling it for $3.89 per bag. That’s about half price. Each time I find it at that price, I buy eight or ten bags.

One of the nice things about coffee is that it’s sold in the kind of airtight containers designed to keep it fresh. While coffee doesn’t have an unlimited shelf life, if stored properly, it should stay fresh for at least half a year. So why not buy it at that low price and stock up? Just make sure you rotate your stock so you’re always using up the older stuff before the new.

And while I’m talking about coffee, it also makes sense t talk about coffee filters. I make my coffee in a Black and Decker single cup coffee maker. I’m the only coffee drinker and I like my coffee brewed just before I drink it. I don’t like coffee that’s been sitting on a pot on a burner for more than maybe 5 minutes. After that, it starts getting stale and I really can’t drink it.

Gold Cone FilterMy coffee maker comes with one of those “gold” filters. It’s a washable thing that’s supposedly better for brewing coffee because it helps the oils of the beans meld together or some such bull. Whatever. What I find is that using the reusable filter guarantees bitter bean residue at the bottom of my cup. I’ll stick to paper filters. The coffee maker takes a #2 cone filter. I don’t buy Melita brand or unbleached or any such nonsense. I buy the cheapest ones I can find — they do the job perfect well. My supermarket sells them in packs of 50 or 100. At my rate of 2+ cups per day, that’s enough filters for one or two months. But over the past summer, I discovered that Wal-Mart sells off-brand paper filters like the ones I use in packs of 250 for less than what I pay for 100 at my local supermarket. So when I go to Wal-Mart — which isn’t very often, thank heaven — I buy two or three packs. Stock up and save.

Oh, and if you’re a coffee aficionado reading this and want to “educate” me about brewing and drinking coffee, save it for another blog. I’m tired of people telling me about how my coffee should be. I make it the way I like it, thank you. My point is not how I brew or drink coffee. It’s how I buy what I like and stock up when it’s at a good price.

Other Products

My husband and I don’t go grocery shopping. We go to the store when we need something and buy what we need, along with a few other things. You’ll never see us in the supermarket with a cart full of groceries. We’re usually able to check out on the 15-items-or-less line. It’s been that way for years, since the days in New Jersey when we’d walk to our local grocery store/meat market after work each day and buy dinner right before we cooked it.

You might think that this kind of shopping is less conducive to saving money. It isn’t really — at least not for us. (Again, remember that we don’t have a family to feed.) We’re still walking many of the aisles of the supermarket. And we’re still keeping an eye out for bargains. When butter goes on sale, we buy two or three pounds and freeze what we don’t immediately need. The same goes (without the freezer) for canned items such as chicken broth and soups. (We don’t eat much canned food.) Pasta, pasta sauce, salad dressing — we buy it all on sale before we need it. We pay close attention to the “Best by” dates and don’t buy anything that we don’t think we’ll use before it “expires.”

What we don’t do is buy things we don’t like or won’t need just because it’s on sale. Mike’s a good example — often, I can buy a gallon of milk for just a bit more than I’d pay for a quart. But there’s no way I’ll use a gallon of milk before it goes bad and I’m not interested in freezing it (as some people do). I also don’t believe in throwing food away. If you buy something you don’t like or don’t use, you’re throwing your money away.

The Lure of Costco and Sam’s Club

Ever notice that if you go into a Costco or Sam’s Club you’re lucky to get out of there without spending at least $200? Ever wonder about that? Ever wonder if you’re really saving money?

I’ve been avoiding these places unless I know for sure that there’s something there I need that’s cheaper there than anywhere else. I firmly believe that I can get better prices on an item in my local supermarket when it’s on sale than I can in a Costco. Best of all, I don’t have to buy a case of it.

Costco NutsMy husband — well, he’s still sucked in. He buys cases of canned corn and canned chicken broth. He buys huge plastic jars of nuts and garlic powder and peppercorns. He buys buffet plates full of smoked salmon and styrofoam trays of flank steaks. He buys a lot of junk we don’t need. He freezes things that are better not frozen. We eventually do eat or use most of what he buys, but we also throw some of it out. I don’t like that.

My thoughts on these warehouse stores is that unless you’re shopping for a large family or group — or a restaurant — you probably shouldn’t be shopping in there. Sure, the strawberries are a great price per pound, but do you really think you can eat 10 lbs of them before they go bad? What are you going to do with 12 giant fresh-baked muffins? Got room in your freezer for that 10-lb bag of flash-frozen chicken breast? Are you even going to get them home before they start defrosting? And where are you going to store those 24 rolls of toilet paper and eight boxes of Kleenex? And you do realize that even canned food doesn’t have an infinite shelf life, right?

Shop with a Calculator

Buying bigger isn’t always cheaper. Don’t get conned into buying the jumbo size just because you’re too lazy to do the math.

I know this sounds dorky, but if you have trouble comparing prices of items because they’re sold in different quantities, use a calculator. 12 ounces for $2.39 is cheaper than 20 ounces for $5.29. Most supermarkets will help you by posting the per ounce (or other unit) price for each item on the shelf.

Going back to my coffee example, my supermarket also sells Eight O’Clock coffee in a larger bag. I think it’s 2 pounds. But a comparison of the per ounce price clearly shows which bag is a better deal; when the small bags are on sale, they’re almost always cheaper per ounce.

A calculator and a cheat sheet with supermarket prices would certainly help me prove my theory about Costco. But that brings me back to my original point: I’m not a shopper. I just buy the things I want or need in reasonable quantity when I find them at a good price.

Vote…

…for change.

For the past six or more years, I’ve been watching my country — and my town — deteriorate as the result of bad decisions by our leaders.

We go to war in Iraq, spending $341.4 million per day. Thousands of people die — our soldiers and Iraqi civilians — and many thousands more are permanently maimed with lost limbs and worse. We lose the respect of many nations because of our arrogance and stubborn refusal to “lose” a War we can’t win and probably never should have started in the first place.

Our country is in financial meltdown because of bad lending practices and other policies of greedy financial institutions. The “flip this house” mentality has caused thousands of people to invest in properties now worth far less than they paid. Rather than pay mortgages they can’t afford, they’ve been mailing their keys to the mortgage holders, leaving them with properties they have to maintain and sell in a market they’re not willing to lend to.

Businesses have sent thousands of manufacturing and support jobs overseas, leaving fewer job opportunities at home for Americans. With the economy tanking, thousands of people are losing their jobs every month. People without jobs don’t have money to spend on the goods and services still offered in this country, so they’re not buying. Less revenue for U.S. businesses forces them to cut staff even further. It’s a vicious circle.

The country has split into two factions: conservatives, who strive to force their values on everyone, and liberals, who want the true freedom this country promises. Among those freedoms are the freedom of speech, so recently misunderstood by a vice presidential candidate. Yet when we speak out about what’s wrong with this country, we’re labeled as unpatriotic traitors.

Clearly, the country is sick and needs a cure.

I’m voting tomorrow and I urge every U.S. citizen reading this to do the same. It’s only by voting that we can make a difference in our country. Vote for a change. Vote to make things better. Vote because it’s your right and your responsibility.

And don’t let the polls con you into staying home. Your candidate needs your support.

Get out and vote.

Bail Out

So much for bail out.

Got this this morning from my friend Ray, who probably picked it up elsewhere on the ‘Net.

Back in 1990, the Government seized the Mustang Ranch brothel in Nevada for tax evasion and, as required by law, tried to run it.

They failed and it closed.

Now we are trusting the economy of our country to a pack of nit-wits who couldn’t make money running a whore house and selling booze?

If this is yours and it’s copyright protected, let me know and I’ll pull it immediately.

"Don’t Panic!" Footnote

I’m not the only one saying this.

A quick footnote to my “Don’t Panic!” post earlier today. I was reading the NYTimes online and stumbled upon an article by Alex Berenson titled “Those With a Sense of History May Find It’s Time to Invest.”

Not only does he refer to the tech stock bubble burst of 2000-2001 (as I do), but he claims:

Now investors have again convinced themselves that this time is different, that the credit crisis will push economies worldwide into the deepest recession since the Depression. Fear runs even deeper today than greed did a decade ago.

But in their panic, investors are ignoring 60 years of history. Since the Depression, governments have become far more aggressive about intervening when credit markets seize up or economies struggle. And those interventions have generally succeeded. The recessions since World War II, while hardly easy, have been far less painful than the Depression.

Read the article. It cites experts:

“I think in years to come — I wouldn’t say months to come — we will perceive this as being a great value-buying opportunity,” said David P. Stowell, a finance professor at Northwestern and a former managing director at JPMorgan Chase. “Two and three years from now, it will seem very smart.”

Don’t panic. It might just be the time to go bargain hunting on Wall Street.

Don’t Panic!

Understanding how your investment transactions affect the market.

I really didn’t think a post like this was necessary, but after speaking with two different people about portfolio management in these troubled economic times, I realized that the average investor doesn’t have a clue about what a mutual fund is and how it works.

A Transfer is not Just a Transfer

Conversation One went like this:

Him: I’m thinking about transferring my Fidelity balances to bonds or t-bills.

Me: Don’t sell when the market is low.

Him: I’m not selling. Fidelity has bond and t-bill funds. I’m just transferring. When the market starts coming back, I’ll transfer back.

Conversation Two was remarkably similar:

Her: This week, I transfered all my mutual funds to a money market account.

Me: You sold your mutual funds? Now? When the market is in the toilet?

Her: No, I didn’t sell them. I just transferred them from one Putnam account to another. When the stock market starts going back up, I’ll just transfer the money back.

What followed was my attempt to explain that the “transfer” was, in reality, the sale of one mutual fund for the purchase of another. In both instances, my loved ones — yes, they are both related to me — were selling shares in a mostly stock-based mutual fund that had taken a beating with the Dow’s plunge and using the meager proceeds to invest in a different mutual fund based on less volatile (or more conservative) investment types with the same investment firm.

They didn’t see it this way because they mistakenly think that they are invested in the investment company: Fidelity, Putnam, Janus, Dreyfus, etc. They don’t understand that each mutual fund really consists of huge investments in regular publicly traded companies like GM, Washington Mutual, AIG, and countless other firms that have yet to hit the news. When they sell shares of a mutual fund that includes investments in, for example, GM, they are effectively selling GM stock. If everyone is selling, the price goes down.

Panic Feeding the Decline

Clearly, investors are the ones causing the stock market decline. Their panic sales are what’s driving down the prices, thus feeding the panic. The worse the prices get, the more people panic. Every one who cashes out — even by transferring stock based mutual funds to money market funds — is making the situation worse.

Take, for example, GM. On october 12, 2007, its shares were selling for $42.64 each. Although share prices declined slowly throughout the year, the panic of this past week really hit home. On Friday, GM shares closed at $4.89. You can see the decline in this chart:

GM.jpg

Let’s look at the reality of this. According to market valuation of GM stock, GM lost nearly 89% of its value in a year. What happened? Did a UFO hover over a few GM plants and suck them into the sky, leaving a gaping hole? Did GM inventory get spirited away by pixies in the middle of the night? Were all of GM’s cash reserves shredded for some kid’s hamster cage? Were GMs huge asset investments in equipment scrapped for their recycling value?

Of course not. GM’s company value is not just 11% of what it was this time last year. While the original stock price may have been inflated — I can’t say because I’m not an analyst and have not studied GM’s financial statements — there’s no way in hell that the company can be worth a tenth of what it was twelve months ago.

But do investors believe that GM’s total value has declined by 89% in a year? I don’t think so. I believe they’re just panicking, trying desperately to save their finances by cutting their losses. They’re running — screaming that the sky is falling — away from stocks and the declining mutual funds that are based upon their values. As a result, they’re causing much of the mayhem.

More About Mutual Funds

My personal portfolio has declined in value by at least 40% in the past year. I can’t tell you the exact amount. I haven’t looked since Monday. I’m afraid to.

My portfolio includes my retirement funds. And yes, most of them are mutual funds. Most of them were doing very well — one was posting consistent gains of 25% a year and had doubled in value in five years. Like most Americans, I’m a lazy investor. Why do all my homework to handpick investments and then watch them from day to day when an investment firm has experts who can do that for me?

But at least I have an idea of what’s in my mutual funds. Fund names often have a clue. For example an S&P 500 fund is directly tied to the securities that make up the S&P 500. If the S&P 500 goes down 5 points, so does my fund. Pretty simple, right? Another fund name might include the words “Small Market Cap.” That fund is invested in stocks of small market capitalization companies.

Let’s say, for example, that Maria’s Big Cap Fund includes investments in 10 stocks named A – J. (In reality, it would likely include investments in far more securities, but this is a simple example.) Let’s also say that 1 share of Maria’s Big Cap Fund consists of one share each of companies A – J. When I sell a share of Maria’s Big Cap Fund, I’m selling 10 shares of stock — one each in companies A – J. If I have 500 shares of Maria’s Big Cap Fund and I “transfer” my investment to Maria’s Great Money Market Fund, I’m really selling 500 shares each of companies A – J and buying the equivalent dollar value investment in a money market.

Now say that Maria’s Big Cap Fund is really popular and there are 50,000,000 shares of it held with investors. As those investors panic and “transfer” or sell their shares in Maria’s Big Cap Fund, they’re really selling lots and lots of stock. As stock is unloaded in bulk, its value decreases. As value decreases, its price goes down.

This is part of what’s making the stock market so screwed up right now.

No Loss Until Sold

But what’s worse is that many investors are unnecessarily taking losses on their investments. They bought at one price and, as prices drop, they may be selling at a lower (or much lower) price. That’s a loss.

But if they held onto their investments and didn’t sell (or “transfer”), they wouldn’t have a loss — at least not yet. Sure, it would look horrible on their account statements or in Quicken or on whatever online service they might use to track investment value. But until the stock is sold, there is no loss.

I need to say that again, in some different words for those who might not have understood the previous words:

If you do not sell your stock, you do not lose any money.

You can argue this all day long but you will not win. A loss is only on paper until the sale is made. Paper losses aren’t worth the paper they’re printed on. (Pun intended.)

Remember “Black Monday” in 1987? At the time, it was the largest one-day percentage decline in stock market history. Remember when the dot-com bubble burst? Wikipedia even has an exact date for it: March 10, 2000. How about the market right after September 11, 2001? These are just three examples of disaster in the stock market.

But guess what? In each case, the market rebounded. Sure, a bunch of companies were shaken out of existence — primarily after about 50% of the dot-com startups were revealed to be based on ideas that couldn’t generate enough revenue to warrant their market values. But the market that emerged after these disasters was stronger. Values for most “good investments” came back.

I’ve been actively investing in the stock market, through both individual stock purchases via an online brokerage firm and mutual funds. As I mentioned earlier, my entire retirement portfolio is in a variety of diversified mutual funds. I survived as an investor through the dot-com bubble burst — my investments recovered their value within two years. And I fully expect to survive as an investor from the current market madness.

Why? Because I’m not going to sell.

I’m lucky, in a way. Although I’m not a kid, I’m still 15 years away from minimum retirement age. I have time to let my portfolio recover.

Not everyone is that lucky. Some people are just getting ready to retire. Other people — like my mm and stepdad — are already retired and tapping into that investment nest egg to meet their financial needs every day. These people are pretty much screwed — unless the stock market rebounds in a hurry.

And the stock market simply won’t rebound if everyone panics and keeps selling.