Community Supported Agriculture (CSA) Basics

Question: What enables you to both eat healthy and be a good steward of your community? 

Answer: Buy a share membership to your local Community Supported Agriculture (CSA). Through a CSA membership, you are buying seasonal food directly from a local farmer. In a CSA, the farmer offers a set number of "shares" to the public. A share consists of a box of farm produce. You purchase a share up front at the beginning of the year and in return, you receive a box of seasonal produce each week throughout the season. Information about CSAs and how to find one in your community can be found at http://www.localharvest.org/

Advantages for the Farmer

• Market your produce prior to the growing season
• Receive payment early in the season, which provides cash flow
• Connect with those who will be consuming your produce

Advantages for You

• Fresh food, packed with flavor and vitamins as they will be consumed or frozen very soon after they are harvested
• Exposure to new fruits and vegetables and new ways to prepare them keeps you from getting bored with eating healthy options
• Good for the environment as you have a lower carbon footprint when there is a shorter distance from field to table

Consideration

• CSA will not meet 100% of your fruit and vegetable needs. For example, depending on the CSA, they may focus only on vegetables. You probably will find that you need to supplement your CSA share
• Eating seasonally is an adjustment. If you are not accustomed to eating seasonally, it may take you some time to transition from eating whatever is at the grocery store to a focus as to what is in season from the current week’s CSA box.  Many CSAs provide a list of what produce to expect and when
• Quantity varies. Farmers try to provide a variety of items in a reasonable quantity on a weekly basis. An important question to ask before you sign up with your local CSA is how much produce to expect to be delivered weekly as well as the expected variances throughout the full season
• Policies vary. For example, learn what arrangements can be made if you are out of town for a week; What does it mean for you if there is a bunker crop or low productions due to influences from Mother Nature

All in all, buying a share in a CSA provides you a way to invest both in your local community and in your own health, as well as it helps keep your environment healthy. Bon Appetite!

‘Like'-ing IPOs

So you want to buy shares of Facebook with their Initial Public Offering (IPO)? Good luck. An IPO is where a private company or closely held company, like Facebook, offers shares to the general public for the first time and that stock is then traded on a stock exchange. Friday’s ‘All Things Considered’ on National Public Radio did a great job of explaining how IPOs work and why companies go public in their article “Facebook’s IPO and the Average Investor.”

When a company goes public, it works with an investment bank to price shares of its soon-to-be issued stock and to decide how many shares to issue. The initial price is a combination of science and art. The science is calculating the value of the company including potential future income (part art), and the real art is forecasting what investors will pay for the stock.

Investment banks will sell large blocks of stock from the IPO to its best customers. These are usually large institutional investors and their high dollar customers. The average person can only purchase shares when intuitional investors and high dollar customers start trading their shares in a stock exchange. This means we have to wait until after the IPO to purchase shares.

Most companies go public with an IPO to raise money for expansion and growth. The company could also go public to cash in on the company’s value and distribute it to the shareholders. It is estimated that that the valuation of Facebook will be in the neighborhood of $100 billion and according to the Washington Post, expects to raise as much as $5 billion in the IPO. This means that Mark Zuckerberg, founder and CEO of Facebook could hold as much as $28.4 billion of Facebook stock after the IPO.

Facebook is almost forced to go public because of Security and Exchange (SEC) rules on how many stokeholds (500 shareholders of record) a company can have before it has to issue disclosures as a public company. Facebook is at that point where it has to issue these reports and since they have to issue reports, they may as well go public.

What will Facebook do with the $5 billion it raises? Only time will tell- $5 billion is an incredible amount of seed money. We also wonder if Zuckerberg will change his Facebook status from 'Private' to 'Public' at the time of the IPO.

The Stock Market Thriller

“Make sure your seatbelt is securely fastened and keep your hands and feet inside the vehicle at all times.” 

This is what you hear as you get on an amusement park roller coaster. Maybe your stock broker or financial advisor should also say this when you begin to invest in the stock market. In the spirit of full disclosure, should we formally address the stock market by its thrill ride name?

There is Disney’s The Twilight Zone Tower of Terror, Kings Island’s The Beast, Six Flags Great Adventure’s Kingda Ka, the Stratosphere Hotel and Casino in Las Vegas has Insanity, and the king of amusement park roller-coasters, Cedar Point in Sandusky, Ohio has Disaster Transport, Iron Dragon, Maverick, Mean Streak, Millennium Force, Raptor, Top Thrill Dragster and Wicked Twister. Any one of these names fit the gyrations, the ups and downs of the stock market.

Even with your seat belt securely fastened, it is a good time to reassess your risk tolerance and which investment options best fit your personal goals and ‘ride’ tolerance. Monday’s Wall Street Journal (11.7.11) has an entire section titled Investing In Funds which examines mutual fund investing and different opportunities. How to Rest Easy in a Crazy Market provides seven tips to help you “enjoy” the ride and make sure your portfolio stays on the tracks. Here are the seven points:

1. Get real about your tolerance for pain. We have all heard “the higher the risk, the higher the potential return” but we don’t hear “the higher the potential for loss.” Risk involves the ups and downs, and if we are in risky investments, we better be prepared for the downs and possible total loss of our investments.

2. Favor funds that cast a wider net. Spread your risk out by being diversified in your holdings or in funds that are more diversified. In other words, don’t put all your eggs in one basket, but diversify in different baskets composed of different eggs.

3. Hire a pilot who charts a smoother ride. All of the funds are going to have their ups and downs, but look at funds managers who reduce volatility to smooth out the ups and downs. Unless you like the ups and downs, make sure you have on your shoulder belts and HANS devise.

4. Don’t try to wager on where stocks are headed. Face it, you can’t time the market for peaks and valleys. Be a continuous investor, putting money in the market monthly where you don’t have to worry about the highs and lows and trying to time the market. Also rebalance your portfolio periodically to make sure you stay on track.

5. Fine-tune your cash stash to your family’s needs. With any investment, you need to think about when you will need to convert it to cash. Would you need to cash in your investments if you were to lose a job, buy a car, down payment for a house or pay for college? Everyone’s circumstances are different, but money that you will need with a short time horizon should not be in volatile investments.

6. Don’t assume that a stock-free portfolio is risk-free. Bonds, precious metals, commodities, houses, pork bellies as investments all carry risk. Know the risk of the investment and your investment objective before investing, not after the investment has declined in value and it is too late.

7. Don’t be ashamed to seek help. Investments are complicated and if you need help, there are personal finance classes offered at your local colleges and universities as well as financial advisers and planners that can help you determine and reach your financial goals. This is not to say that you don’t need to be concerned with your investments. No one is going to be more concerned about your investments and wellbeing than you. Be financially knowledgeable, financially literate, and monitor your progress towards achieving your goal.

You have the decision whether you are on one of the top 10 thrill masters or want to go for an easy ride in the park. Be knowledgeable, make wise decisions, go for your goals and enjoy the ride.

What is your favorite roller coaster name to best describe the stock market? We invite you to post your response in the comments.

Making Sense of Occupy Wall Street

As a business professor I am torn about the Occupy Wall Street protest (OWS).  On one hand, the capitalism and free market economy enable people to “pull themselves up from their bootstraps” and become wealthy by inventing, creating, developing and delivering new and creative products and services that meet a need.  Doing this at a price consumers will pay while making money is an art and science.  For those who have this talent and gift, should they not be compensated for taking risks?  Isn’t that what makes American business great?  This is the land of opportunity….right?  Just look at what the late Steve Jobs did to help make your life better.  We didn’t have to buy an overpriced MP3 player, but Jobs had the gift to make the i-anything what we as Americans wanted to buy.

On the other hand, I read about executive compensation in the millions while the business is laying off workers or not giving them a raise and I wonder how many line jobs those millions of dollars to one person could pay for. I wonder what is “fair” compensation for CEOs who run corporations.  Is anyone worth $1 million a year, $5 million a year, $30 million a year or even $4 billion a year? Does greed cause us to “bend” the rules, influence decision that our more about us and not so much for the greater good?  Is it the corporation that should be concerned with the greater good?  I can argue with myself all night long about these issues and not come to a clear conclusion. 

Maybe that is what I am struggling with the OWS protest, I don’t know exactly what they want and when they will be satisfied enough to unoccupy Wall Street.  I don’t know if they have clearly stated what they want to see changed. 

From my desk, here are my suggestions for clarity of goals:

1.      Deal with executive compensation and fair pay. Limit executive compensation to a times average salary.  Whole Food touts CEO John Mackey’s salary and cash bonus to no more than 14 time the average worker’s salary.  This should also include stock options and differed compensation.  If the people on top want a raise, everyone should get a raise. This may develop a sense of teamwork, community and doing good for everyone.

2.      Limit the amount of contributions to political campaigns, politicians, and political organization.  Isn’t America to be governed for the people, by the people?  Take the all corporations out of politics and limit individual contributions so no one can buy influence.

3.      Make the tax code fair.  When Warren Buffett is saying it is not fair that he pays less in taxes as a percentage of income than his secretary, things need to be changes.  We need to simplify the tax code by getting rid of loop holes to where anyone can do their own income tax.

I know that these three things take time to work through and have to be done through corporate boards and acts of congress. Maybe the Occupy Wall Street protest will grab the attention of the civil unrest in this nation and steps can be taken to save our democracy and do good for the greater good.

Less-Stress Investing

“New Bank Rules Sink Stocks”, “Turn at the Capitol Rocks the Market”, “Stocks Set to Bounce” -The stock market and individual stocks are susceptible to headliners, rumors and speculation. Daily monitoring of the ups and downs can be disheartening or exhilarating. Remind yourself that stock market fluctuations are relatively short-run and investment in stocks should be for the long haul. Historically, prices recover over time. If volatile stock investments are too stressful for you, consider growing your investment portfolio through low-cost index funds (i.e. check out Vanguard 500 Index at Vanguard.com). Index funds reduce the effects of individual stock fluctuation by diversifying your portfolio and have performed comparably well.

In order for your savings to outpace inflation; you will need to take on a certain amount of risk with your investments. Low-cost index funds are an option for the road-weary.