Day tour to Chichen-Itza

This is a follow-up on the Cancun trip report posted previously and details the only organized day-tour we participated in. Chichen Itza has been on our radar ever since it received limelight by becoming one of the new Seven Wonders of the World following the worldwide voting initiative organized by the Swiss based New7Wonders foundation. Chichen Itza tours are offered by various groups. We opted for the Chichen Itza Plus tour offered by the Chichen Itza Tour company. This choice was dictated mainly by the fact that the tour guides of the Chichen Itza Plus Tour are accredited by the Mexican National Institute of Anthropology and History and also that refreshments were part of the deal. Tickets can be purchased from their site, other sites, or directly at tour booking counters in the hotel zone or downtown. The company offers other specialized tours of Chichen Itza such as the premier tour which includes a detour through the historic Spanish colonial town of Valladolid established in 1543, the light and sounds tour which includes both the bus tour of Valladolid and a light and sounds movie show in the evening (one late lunch buffet but no drinks or breakfast), and the VIP tour which is a more private version. Prices vary between $65 and $109 (lower for children) for the plus tour and can go all the way up to $200 for the VIP tour. Our reservation was done through CancunFunTours.com which was priced at $65 and $59 for adults and children respectively in the December timeframe (roughly six months before the date). We did not see better pricing since then.

The Plus Tour is a well organized ten-hour tour that picks guests up from the hotel around 7:30 AM. Feeder buses pick guests up from hotels, drop them off at a meeting point near the airport and from there the tourists board their respective tour buses. This process takes about an hour and the actual tour starts around 8:30 AM. The tour is managed by four people – the driver, a bilingual head tour guide, a Spanish only tour guide, and a service person. The air-conditioned bus was comfortable for the purpose. Our head tour guide Raymundo engaged us with informational talk. On the two-hour bus ride, he held two sessions educating us about the Mayans, the local flora/fauna, and other things. The roads are devoid of traffic and the landscape itself is very barren – the entire state of Quintana Roo was sparsely populated until development for tourism started in the ‘70s. Even now, the state’s population is less than 1.5 million with the majority living in Cancun city and its vicinity. The infertile landscape is primarily because Quintana Roo and the adjacent state of Yucatan is a limestone slab with a very shallow layer of soil covering it.

The first stop was at the archeological park Cenote Ik-Kil – a sinkhole with access from the surface via steps built on the limestone slab. Cenotes are common in the Yucatan peninsula as the limestone slab just beneath the ground seeps all the water above ground to form underground water bodies. This explains the complete absence of surface water in the whole peninsula. Instead, the area reveals water bodies, caves, caverns, or cenote’s when the limestone is breached due to the dissolution of the rock. Many Cenote’s are tourist attractions. Cenote Ik-Kil is commercialized, complete with two gift shops, rental facility for swimmers, and restrooms all in a beautiful setting. The water is very deep (50 meters or so) and definitely not appropriate for novices. The tour guide suggested two unique gift ideas – a Mayan calendar inscribed with a date and name in Mayan paper (a thick brownish paper with a leathery texture) and a silver pendant with a name inscription in gold – the former is around $12 while the latter can trend upwards of $30 depending on the number of letters inscribed.

Next we stopped for the buffet lunch (included except for drinks) at the restaurant Hacienda Xaybe'h. The menu included chicken and fish (Mahi-Mahi) choices along with Mexican fare and pastas. A Mayan dance presentation was also included. The dancers in colorful outfits provided entertainment for about 10-15 minutes.

We arrived at the Chichen Itza entrance around 1:45 PM. Local artisans displayed their ware in the array of shops at the entrance while street sellers crowded the steps hawking an assortment of stuff for a few dollars. However, we did not find them aggressive. Entrance fees were included in our package – our tickets said 51 Pesos. Our tour group was split into two – Raymundo catered to the group who spoke English while the other guide led those who preferred Spanish. He spent a good hour walking with us and educating us on the history and relevance of significant structures. Some of the more amazing things he explained include:

1. The most imposing structure in the whole area is El Castillo, a structure shaped like a pyramid with the top cut-off which stands 25 meters tall. It represents a Mayan calendar. The total number steps add up to the number of days in a year (365) and each façade has 52 flat panels representing the 52 months of the Mayan calendar. The most amazing aspect of the structure is the appearance of a shadow shaped like a serpent on the first day of Spring and Fall in mid-afternoon. During the Equinox sun rays hit the structure all at the right angles creating the shadow effect which lasts for about three hours. Another shadow effect is when the serpent’s head at the bottom of the pyramid appears to point to the Sacred Cenote (Cenote Sagrado).
2. The ball court, the largest in Mesoamerica, is another impressive structure with an intriguing story. The game is played with a solid rubber ball, and the objective is to get the ball through a tiny circular opening high up on either side of the court. The rules, the size of the ball, and the size of the court varied. The game has religious connotations and culminated with a human sacrifice. It is not clear whether the winning captain or the losing captain got sacrificed. The current belief tends to the winning captain as the Mayans believed the winning privilege allowed for a direct ticket to heaven. Modern science is yet to solve the mystery regarding the acoustics of the ball court– directly beneath the ends of the ball court feature a “temple” structure, where a whisper can be heard at the other end 500 feet away.

Several other structures exist in the area and it is estimated that as many as 50,000 people resided in the surrounding area at one time. The extremely hot sun bearing down with little relief made it a little hard on the kids. We were ready to board the bus for the return trip to Cancun as soon as they opened the door at 3:20. Plenty of cold drinks were on offer. The trip back was uneventful and we were dropped off at the hotel door-step around 6:30 PM. All in all, a great tour and we recommend this tour to anyone without any reservations.


Related Posts:

1. Cancun Trip Report.
2. Day tour to Chichen-Itza.
3. Vacationing in Cancun - Gotchas to avoid for frugal travelers.

Last Updated: 09/2011.

401K & Retirement Accounts Performance – 2009 Mid-Year Update

The total return YTD (year-to-date) as of 7/23/2009 was 15.70%. The performance compare well with the returns of S&P 500 index & the DJIA which were up 8% and 3.5% respectively over the same period. Only the technology laden Nasdaq composite index delivered better performance at over 24%.

We started the year with an allocation of 40-43-17 among Domestic, International, and Bond Funds respectively. As the stock market bottomed in early March, we did a minor reallocation to reach our target allocation of 40-45-15 over the same asset classes. As the stock market rallied during the second-half of this period, we did two other allocation shifts (one in mid May and the other in early June) to reach an allocation of 40-33-27. If the rally continues, we will continue to reduce risk by increasing our bond allocation and vice-versa. Conservative recommendations on bond allocations in retirement portfolios call for that percentage to be the same as your age and so we have further room to go there.

Within our bond portfolio, the allocations are concentrated in two funds – a TIPS (Treasury Inflation Protected Securities) investment in Fidelity Inflation Protected Securities (VIPSX) which accounts for close to 30%, and an investment in PIMCO Total Return Fund (PTTRX) which account for close to 60%. The International allocation is globally diversified – 22% in emerging markets through our investment in Vanguard Emerging Markets ETF (VWO), 14% in Vanguard Pacific Stock Index (VPACX), and the rest in two diversified international funds (FDIVX – 54%, and WBIGX – 9%) focused on large-caps and with heavy concentration in North American & European stocks. The small-cap exposure in the International area is very limited and this is an area for improvement – we are limited by the fact that most of the funds are tied in employer sponsored plans which have only a very limited set of funds to choose from. The domestic stock allocation is somewhat diversified over small, mid, and large cap stocks – 33% in Small Cap Stock Funds through investments in ABF Small Cap Value (AVFIX – ~34%) , Fidelity Small Cap Stock Fund (FSLCX – ~36%), and Fidelity Small Cap Growth Fund (FCPGX – ~30%) , 15% in Mid Cap Stock Funds through investments in Fidelity Low Priced Stock Fund (FLPSX - ~60%) and Artisan Mid Cap Value Fund (ARTMX - ~40%), and the rest in a portfolio of large-cap stock & index funds.

As indicated in our previous update, we also moved out of several smaller funds following the Madoff scare.

Below is our updated portfolio:

Symbol	% of Portfolio	Fund Fees	Fund Return 2009 YTD (After Fees)	Comments
ABF Small Cap Value (AVFIX)	4.67	0.82	13.76
Artisan Mid Cap Value Fund (ARTMX)	2.32	1.21	31.39
Dodge & Cox Stock Fund (DODGX)	6.45	0.52	12.52	A Large cap value fund with a history of outperforming the S&P500 index. Has very low turnover ratio. The fund is very big (~70B) and so outperformance may be harder to come by going forward.
Fidelity Diversified International Fund (FDIVX)	18.00	1.00	15.11	Diversified large-cap International growth fund.
Fidelity Small Cap Stock Fund (FSLCX)	4.98	0.95	32.04
Fidelity Low Priced Stock Fund (FLPSX)	3.50	0.83	19.59	None.
PIMCO Total Return Fund (PTTRX)	15.14	0.52	7.39	Intermediate Term Bond Fund.
Vanguard Institutional Index Fund (VINIX)	2.60	0.05	9.80	Attempts to replicate S&P 500 index performance.
Miscellaneous Cash/Money Market	0.30	0.00	0.00	None.
Calomos Growth A (CVGRX)	2.96	1.22	34.50	A 12B large cap growth fund. The top 10 holdings represent about 27% of assets.
Schwab S&P500 Index (SWPIX)	2.49	0.36	15.80	An index fund that tracks the performance of the S&P500 index benchmark.
William Blair International Growth (WBIGX)	2.91	1.67	32.70	A 5B large cap international fund with between 10 and 25% exposure to emerging markets.
Vanguard Index Trust 500 Index (VFINX)	2.95	0.18	9.74	An index fund that tracks the performance of the S&P500 index benchmark.
Vanguard Pacific Stock Index (VPACX)	4.43	0.27	10.49	An index fund that tracks the performance of the MSCI Pacific index benchmark.
Vanguard Inflation Protected Securities (VIPSX)	7.27	0.20	4.99	Invests in inflation indexed bonds (primarily US) with maturities between 7 and 20 years.
Vanguard Emerging Market ETF (VWO)	7.18	0.25	48.00	None.
Fidelity International Real Estate Stock Fund (FIREX)	0.93	0.96	21.00	None.
Fidelity Small Cap Growth Fund (FCPGX)	3.51	1.09	23.00	None.
Fidelity Select Technology (FSPTX)	1.79	0.88	56.00	A sector specific fund focused on large cap technology stocks with about 2B in assets under management. Top 10 holdings account for 45% of total assets.
Fidelity Select Health Care (FSPHX)	2.03	0.87	12.12	A sector specific fund focused on large cap healthcare stocks with about 2B in assets under management. Top 10 holdings account for 38% of total assets.
Pension Plan	3.60	0	3.70	Company Fully Vested Cash Balance Pension Plan.

Related Posts:

1. 401K/IRA Account 2007 Performance Summary - 01/08.
2. 401K/IRA Account – Asset Allocation for 2008 – Part 1.
3. 401K/IRA Account – Asset Allocation for 2008 – Part 2.
4. Retirement Portfolio – Mid Year Update.
5. Asset Allocation Adjustments to Retirement Portfolio in the face of market correction – 10/08.
6. 401K/IRA/Retirement Account 2008 Performance Summary - 01/09.
7. 401K/IRA/Retirement Account 2009 Reallocations - 01/09.
8. 401K & Retirement Accounts Performance - Mid Year 2009 Update - 07/09.

Argentina Stamps Profile

Argentina is the second largest country in South America after Brazil. Its land area is over one-million square miles and has a population of around 40M making it a scarcely populated country compared to world figures which are over three times that number. The per-capita GDP is over $14,000 making it an upper-middle-income country – it benefits from abundant natural resources, a highly productive export-oriented agricultural sector, and a diversified industrial sector. On the flip-side, Argentina experienced an economic collapse in 2002 as they defaulted on their debt, mainly due to mismanagement & corruption.

The first stamps of Argentina were released in 1858 and show a symbolical of the Argentine Confederation. They were single-colored designs of 5c, 10c, and 15c denominations in Red, Green, and Blue respectively. Due to the crude early production methods, several varieties exist. Mint copies of these stamps are plentiful, with only the highest denominated 15c Blue commanding a significant catalog value at around $15. Used copies are rare and command a premium of ten to twenty times the value for a corresponding Mint copy. Counterfeits abound and collectors need to be very careful before paying up. Copies of these stamps on cover are very rare and catalogs for a few hundred dollars. Diagonal half or one-third of the two higher denominations on cover are even rarer and those catalog for a few thousand dollars each. A Seal of the Republic design followed in 1862 (Scott #5 to #7 and several varieties). The most valuable Argentine issue is an unused copy of a tete beche pair of the 15c denomination in blue of which only one copy is known. The catalog value is in the $55000 range.

Great Men of Argentina dominated the theme for the early stamps of Argentina till 1891. Many of these stamps catalog in the tens of dollars and some fetch a few hundred dollars. The most prominent among them is the 1864 issue which depicts Bernardino Rivadavia, the first president of Argentina (Scott #8 to #18). They have a wide range of catalog values – For example, a used copy of Scott #20 catalogs for just a dollar while Scott #15a (10c Green) catalog for $4000 either MNH or Used. Other prominent issues include the short-set of five stamps of 1873 (Scott #22 to #26) and the long-set of thirteen stamps of 1888 (Scott #57 to #67 and a couple of varieties) – the former set catalogs for over $200 MNH and just 10% of that for Used while the latter catalogs for under $400 MNH and around $50 used. The 1891 short-set of four stamps (Scott #85 to #88) is another interesting set because of its odd vertical orientation. They are pretty valuable at around $700 MNH and around $100 used.

A philatelic exhibition was held in Buenos Aires from October 17-24, 1935. A souvenir sheet of four imperforate stamps depicting San Martin, the liberator of Argentina was issued to commemorate the event. The stamps were sold during the eight days of exhibition only. The sheet catalogs for around $75 MNH and $35 Used. The best known stamps of Argentina are the ones that depict Eva Peron, the very popular second wife of President Juan Peron who died of cancer in 1952 at a young age of 33. The first stamps were definitives issued in a set of 12 (two different designs of her portrait) on August 26 1952 (Scott #599 to #610). The set catalogs for just $5 MNH and less than that for Used. A sister set in the same design (Scott #611 to #618) catalogs somewhat higher. The 2nd anniversary issue of 1954 (Scott #626 and #627) shows a beautiful design of Eva Peron’s portrait in car rose – the stamps differ only in their watermarks and value – the former catalogs for under $5 MNH and under $1 used while the latter catalogs at over $250 MNH and one-fifth that for Used.

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Last Updated: 07/2011.

Economy, Business, Credit, and Debit at the Roundup #9

Welcome to the July 22, 2009 edition of Economy, Business, Credit, and Debit at the Roundup.

KCLau presents What is the best investment? posted at KCLau's Money Tips, saying, "The best investment comes in many forms. I was frequently asked this same question over and over again. Let’s see how some successful people answer the same question"

Simon Stapleton presents Freelancers: How To Increase Your Rates, Annually posted at Career & Personal Development for CIOs, Technical Professionals and Self-Professed Geeks, saying, "One of the hotly debated topics between freelancer and customer is the issue of rate escalation. Customers don’t want to pay more; they’re savvy enough to know that if you provide services year-on-year, you haven’t been subjected to marketing costs to land the gig. Nevertheless, your costs go up with inflation. What do you do?"

forex trading system presents FOREX TRAINING COURSE – How to earn extra money from home posted at Money Saving Tips, Consumer Finance, Expert, Advice and Help | Talk Money Blog, saying, "There has been a real buzz generated by my Monday blog about the Forex Training Course which I am attending. It seems that we all want to know how to make an extra income as well as money saving advice and tips. Many people are finding themselves unemployed or they have been made redundant and have some savings and want to take control of their own lives through a new business venture."

Chris McClelland presents Stocks to Retire On posted at Lucrative Investing.

kathryn presents Major Banks? Debt Relief Hotlines Revealed! posted at Out of Debt Christian, saying, "To help you make your loans more affordable, we tracked down the direct contact information for the loan modification departments at major U.S. banks"

stephen todd presents Investing - day trading systems posted at Currency Trading.

Debbie Ducker presents Correct Web Site Colors Can Increase Sales posted at Ducker Promotion Ezine.

Tushar Mathur presents Can't Control the Markets? Try controlling the Costs posted at Everything Finance, saying, "As 2008 proved, the financial markets are prone to unpredictable periods of turbulence. That can make investing feel a bit like a roller-coaster ride. The disappointing results that many mutual funds posted in 2008 and at the outset of 2009 may have left you feeling concerned over your financial future. You're not alone."

Oliver Kennett presents Getting paid gigs posted at Star spray, saying, "Playing live music, if you can is a great way of making money. Luckily at the age of eighteen me and a friend went down to the cross roads and sold our souls to one of Beelzebub’s fiends for the ability to play guitar. Well that’s not quite true, up one discovering that our souls were already tarnished we had to pay the balance in potato waffles and BMX bikes."

CreditCardAssist.com presents What's the Difference Between a Soft and Hard Credit Inquiry? posted at Credit Card Assist.

Debt Freedom Fighter presents How Can I Figure Out My Credit Score posted at Discover Debt Freedom!.

Savings Toolbox presents A Six Step Plan for Shopping for Life Insurance posted at Savings Toolbox.

Christopher X. Gerber presents Making Money with a Blog posted at Experiment: Gerbus.

Ace presents Discover 5 Proven Techniques To Quickly Get More Targeted Traffic posted at Internet Marketing Ace.

Dave presents Make Money Loading iPods posted at Cheapo Groovo.

Health Fitness How To presents $200 Article Writing Contest posted at Health Fitness Article Directory, saying, "Winner will get $200 (paid through paypal). Contest is open to anyone who is willing to write a health, fitness or nutrition related article."

Ross presents Mercury Fillings & Mercury Amalgam Removal? The Answers! posted at Energise for Life, saying, "I have absolutely no doubt that having mercury fillings in your mouth is a very bad idea, but having them removed properly is an absolute must."

debt kid presents Meet Real Estate Kid: $37,865.94 in Unsecured Debt posted at DebtKid.

Ben presents Credit Report Disputes posted at Money Smart Life.

Debbie Foster presents How to Ramp Up Your Blog Traffic posted at Internet Income - The Journey.

Dan Miller presents Student Loan posted at Student Consolidation, saying, "Student loan consolidation is a great way to get a lower interest rate, as a reputable consolidation company will buy each loan off of the original lenders, lump it into one loan and offer lower interest and even deferment plans. Consolidate student loans to get them paid off more quickly with financial advice from a guidance counselor in this free video on student loans"

Justin Hall presents How to Walk Your Own Road posted at Justin Hall.

Olivia Hamilton Montgomery presents Internet Advertising: Keeping It In Context posted at eCommerceGal's Blog, saying, "eCommerceGal.com - Your best Internet marketing resource. Thousands of great articles for your Internet business success!"

All Others

jim presents Print Postage Online posted at Blueprint for Financial Prosperity.

Raj Patel presents Foreclosures Unabated posted at DebtGoal, saying, "How to handle a mortgage modification"

nissim ziv presents Best EBay business ideas for home based business posted at eBay Business Guide, saying, "EBay is a premier online business portal for all those who want to set up their own internet home based business. To take a step closer to your dreams, this article reviews some top business ideas for starting an eBay business."

JJ presents Understanding Risk and Investments posted at Investing and your Future, saying, "Risk with investments is less cut and dry than you may think."

Silver Investor presents Debt Doesn?t Always Mean Inflation: Remember Japan posted at Gold Investing Info, saying, "The mammoth amount of government debt about to be issued does not guarantee inflation is inevitable."

Jessica Thurber presents There's a new kid on the block posted at Nebo Studio: It's not just about the design..

Mike Mitchell presents Website Promotion; Google Optimization services,SEO improve your websites search engine optimization position get free traffic posted at SEO Services - Search Engine Optimization, saying, "Discover why website promotion works, learn about Google Optimization services, SEO, web promotion articles and lots more"

Steven Chang presents The Truth About Money - Money Blog - Money Making Tips and Money Management posted at Money Making Tips and Money Management, saying, "I hope this short blog post about wealth getting and preservation will benefit your readers."

Toni Graybill presents tonig.net: Welcome to My World of Wealth posted at tonig.net Wealth, saying, "Understanding the nature of wealth."

Matthew Overstreet presents Is Primerica A Scam? posted at My Road to Financial Freedom.

Kevin Blank presents Should I Buy an Existing Business posted at Integrity First Associates, Inc Blog, saying, "Integrity First Associates, Inc. Pittsburgh Business Brokers."

Daniel Drew presents Line of Credit posted at My Business is doing well should I choose an SBA Loan?, saying, "At Line of credit are generally paid off by opting for a permanent source of financing. In case of commercial property line of credit, the sale of the old property may help repay the line of credit."

josh andreson presents All Boxed Up: Types of Flash Media Packaging posted at Flash Media Packaging.

Martin Russell presents “Conspiracy of the Rich”- A Review posted at Word of Mouth Marketing.

BrandonLaughridge presents 5 Reasons Why the Million Dollar Home Market Will Not Recover Soon posted at Mortgage Loan Place Blog, saying, "Some interesting insights on why the million dollar home market won't recover anytime soon."

Carlos Sera presents A Tale of Duty - "Common Sense, The Least Common of the Senses" posted at Financial Tales, saying, "My father-in-law was a wise old Yankee from Massachusetts when I met him at the ripe old age of 63. He was 17 years older than my mother-in-law and since he had spent most of his career as a State Department diplomat, I would listen closely to what he had to say since his world and perspective was so alien to the one I knew. He was born in 1915 and like many of his generation his thinking was shaped by the events of the Great Depression and then World War II. His formal education was cut short due to financial hardship but that didn’t mean he stopped learning."

Four Pillars presents Keep Your Emergency Fund In A High Interest Savings Account posted at Quest For Four Pillars, saying, "Some suggestions on the best places to store your emergency fund."

FMF presents How You Grow Your Income by 10% or More a Year posted at Free Money Finance, saying, "One way to become financially independent is to grow your income rapidly. Here's an illustration of how this can be done."

Ray presents Making Money From Balance Transfer Credit Cards posted at Money Blue Book.

Gem-Publishing presents Zeitgeist Videos posted at The Freeedom Report, saying, "Zeitgeist, The Movie’ and ‘Zeitgeist: Addendum’ were created as Not-for-Profit expressions to communicate what the author felt were highly important social understandings which most humans are generally not aware of. The first film focuses on suppressed historical & modern information about currently dominant social institutions, while also exploring what could be in store for humanity if the power structures at large continue their patterns of self-interest, corruption, and consolidation."

Sun presents What Can You Expect to See on Your Credit Reports? posted at The Sun’s Financial Diary.

Kathleen Gaga presents Do this one thing to generate more abundance and prosperity posted at Daily Awareness, saying, "With over three decades of studying how the law of energy works, I now know that most limitations are simply a matter of our thinking."

That concludes this edition. Submit your blog article to the next edition of
road to financial independence
using our
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Past posts and future hosts can be found on our

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road to financial independence, blog carnival.

Carnival of road to financial independence #9

Welcome to the July 21, 2009 edition of road to financial independence.

Beating Inflation

John Mellem presents Survival Stew: Survival 101 - Preparing For The Future: Financial Moves That Need Immediate Consideration posted at Survival Stew, saying, "Hyper inflation could be right around the corner with all of the current fiat currency being printed. This is the time to act to avoid catastrophic losses in the next few months."

Wenchypoo presents Buying Houses at Price-Per-Unit posted at Wisdom From Wenchypoo's Mental Wastebasket.

Banker Saver presents Is The Inflation Protected Certificate of Deposit Still Around? posted at Banker Saver, saying, "Thanks!"

Frugal Living

MoneyNing presents How to Be a Millionaire posted at Money Ning, saying, "Several ways to become a millionaire is given but more importantly, one way is guaranteed to work (no pun intended)."

Joshua presents Re-Using For The Family Budget posted at Family and Parenting, saying, "Recycling is not only good for the environment but also good for your family finances."

Patrick @ Cash Money Life presents Debit Card Versus Credit Card – Which Is Better? posted at Cash Money Life, saying, "Which is better - using credit cards or debit cards? Credit cards offer better protections and cash rewards, but also come with the temptation to overspend."

nickel presents Quit Shopping, Save Money posted at fivecentnickel.com.

Gregory E. Rouse presents Frugal Business posted at Frugal-Living-Skills Blog, saying, "First, we don’t know how to do math today… People will often spend money to save money (which is a paradox) or spend money to make money. We seem to forget that every penny spent has to be earned back."

The Smarter Wallet presents How To Consolidate Debt: Ways To Reduce Your Debt Load posted at The Smarter Wallet, saying, "Thanks!"

oneadvice presents IVA Bank Accounts posted at One Advice, saying, "Been accepted for an IVA but worried that you cannot get a bank account? Need to move away from a bank that you are in debt too? You CAN get a bank account! Find out how..."

Woman Tribune presents 5 Tricks to Get a Handle on Unnecessary Spending posted at Woman Tribune.

Passive Income

Peter OBrien presents 5 Ways Niche Review Templates Can Make You More Affiliate Income posted at Free Internet Marketing Tips, saying, "A great way to make more affiliate income is to increase your chances by promoting more than one affiliate product. With Niche Review Templates, you"

BankMan presents Top high yield savings account rates posted at High Yield Savings Accounts, saying, "The top high yield savings accounts offer customers a good way to earn interest on their savings while their money is in the bank."

Praveen presents From a Business Perspective, What's So Great About Twitter, Anyway? posted at My Simple Trading System.

lifestyles presents The Path of Least Resistance posted at Lifestyles Unlimited Real Estate Investing and Mentoring, saying, "An article about choosing the path of least resistance when finding a vehicle to financial freedom."

Mark Ashbridge presents Think And Grow Rich Has A Power Principle posted at globalmastermindnetwork.com, saying, "Study And MasterMind The Proven Philosophies Of The Think And Grow Rich And Earn Thousands Of Dollars In Residual Income Giving Away FREE MasterMinds"

Darwin presents Haverhill Home Staging Course - Have You Been Had? posted at Darwin's Finance, saying, "This article highlights a rapidly growing and heavily advertised "income opportunity" that you should consider further before forking over your money."

Luke Grand presents Becoming A Millionaire Not Required posted at Cash Out Life.

Reducing Expenses

Credit Shout presents Good Debt vs Bad Debt posted at CreditShout.

Noload Bonds presents Bond Mutual Fund Fees posted at Bond Market Index Funds, saying, "Simply put, if you pay higher bond mutual fund fees, then these bond management expenses tend just to be a deadweight loss to you. The best bond fund buying strategy is to pick only very low-cost no load bond funds."

Save Money presents Save Money By Increasing Your FSA Contributions posted at How I Save Money.net.

Ishan @ ILoveFreeSoftware presents How to Setup Virtual Fax Machine for Free posted at I Love Free Software, saying, "Having a regular fax machine is expensive. The best alternative is to use Online fax services. However, most of the fax services come with a monthly fee. In this article I explain how to setup your own free online fax service completely free. No registration fee, no monthly fee, no setup charges. Totally Free."

Bouch presents Alex and his family earn a decent living, but are drowning in over a half a million dollars in debt. See his first update where $11,000 has been paid off in one month. posted at MoneyStance - Money Making Opportunity Reviews, saying, "Alex and his family earn a decent living, but are drowning in over a half a million dollars in debt. See his first update where $11,000 has been paid off in one month."

Tyler Tervooren presents Save $550 a Year by Hypermiling posted at Frugally Green, saying, "If you want to green your life and save money doing it, start with the low-hanging fruit. A few simple changes to your driving habits can net you impressive fuel savings that you can apply to other areas of your life."

Smart Unemployment presents Individual Health Insurance: How To Lower Your Premiums In Three Steps posted at Smart Unemployment, saying, "Three ways to lower the cost of your health insurance premium while keeping your same health coverage."

Dan at Everydayfinance presents How to Get a Mortgage Rate Under 4% posted at Everyday Finance, saying, "This article highlights means by which home buyers can attain a sub-4% mortgage rate by playing their cards right."

Len Penzo presents Ten Essential Negotiating Tactics Everyone Should Know posted at Len Penzo . Com, saying, "One of the most important life skills you need to know is the art of negotiating. Here are ten essential tactics to help you master the art."

Miss Bankrupt presents Personal Budget Cuts and My Options posted at Miss Bankrupt.

Stock Investments

Susan Saverton presents 9- Efficiency of Personal Investing Strategies posted at Pasadena Financial Planner, saying, "When pursuing optimal financial planning and investing strategies and controlling your costs and capital gains taxes, you also need to establish a time-efficient system to monitor, adjust, and adhere to your financial plan. You need to control and limit the time that you spend on your financial planning, and you need to focus your planning efforts on the most effective activities."

ABC presents Different Types of Stock Market Indexes posted at ABCs of Investing, saying, "How different types of stock market indexes work."

Big Cajun Man presents Eating Your Own Dog Food? posted at Canadian Personal Finance Blog, saying, "Does your financial advisor follow their own advice?"

Saj Karsan presents Screening For Value posted at Barel Karsan, saying, "The article discusses how to find and identify cheap stocks, and some of the pitfalls of such methods."

Silicon Valley Blogger presents Online Discount Brokers: SmartMoney Broker Survey posted at The Digerati Life, saying, "Thanks!"

Investing Toolkit presents The Successful Stock Investor: Do You Have These Attributes? posted at Investing Toolkit.

That concludes this edition. Submit your blog article to the next edition of
road to financial independence
using our
carnival submission form.
Past posts and future hosts can be found on our

blog carnival index page.

Technorati tags:

road to financial independence, blog carnival.

Stock Portfolio Update – Sold ClickSoftware (CKSW)

As we twittered previously, we sold our ClickSoftware (CKSW) holdings on 7/1/2009 at $6.85. The shares were purchased on 11/9/2007 at $4.61. The net gain on the transaction was around 50%. With this sale, the cash position has gone above 30%.

Direxion Financial 3x Bull (FAS) and Bear (FAZ) saw a 5 to 1 and 10 to 1 reverse splits respectively on July 9th. This is interesting because the action seems to discourage small investors actively trade these shares and options on it – it gets much more expensive to purchase a few 100 shares to be able to write covered calls and similarly it is much more expensive to write cash covered puts as cash for a few 100 shares will get tied up.

Below is our updated portfolio – it is more than 20% in the red:

Stock	Buy Date	Buy Price	Current Price	Current % Of Portfolio	Unrealized % Return	Yield as % of Portfolio Value
Altria (MO)	Various	16.69	17.22	3.59	3.20	0.38
Philip Morris International (PM)	1/4/2005	32.19	43.28	8.86	34.44	0.45
Kraft Foods (KFT)	Various	24.03	27.40	3.80	14	0.23
Pfizer (PFE)	Various	24.37	14.95	5.19	(38.63)	0.30
ICICI Bank (IBN)	5/18/2006 and 08/01/2008	25.28	33.03	11.46	30.68	0.30
Advantage Energy Fund (AAV)	11/2/2006	11.22	5.01	1.74	(55.36)	0.17
Central Europe & Russia Fund (CEE)	Various	39.23	24.21	5.88	(38.28)	0.03
Patni Computers (PTI)	8/10/2007	20.85	12.19	4.23	(41.58)	0.08
Itron Inc. (ITRI)	11/07/2007	85.01	54.61	3.79	(35.84)	None
Anthracite (AHR)	11/09/2007	7.97	0.63	0.22	(92.03)	0.00
Harvest Energy (HTE)	11/28/2007	21.01	5.27	1.46	(74.92)	0.22
iRobot (IRBT)	12/18/2007	18.65	13.17	3.66	(28.78)	None
LDK Solar (LDK)	01/22/2008	30.49	9.68	2.02	(68.26)	None
Aegon N.V. (AEG)	04/28/2008	15.99	6.56	1.37	(58.97)	0.00
TD Ameritrade (AMTD)	05/21/2008	17.68	17.69	4.91	0.03	None
Costco (COST)	08/01/2008	62.28	47.51	3.30	(23.71)	0.07
Frontline Limited (FRO)	10/06/2008	36.95	21.87	2.28	(40.80)	0.17
DryShips Incorporated (DRYS)	02/09/2009	6.96	5.93	2.88	(14.85)	0.00
Cash				32.22
Total Portfolio					(21.37)	2.54

• For Altria and Philip Morris International, assumed spin-off ratio of 30.83:69.17. Altria is yet to supply the cost-basis info

Below is a summary of transactions during the year:

Stock	Buy Date	Buy Price	Sell Date	Sell Price	% Gain (Loss)	% Portfolio Return*
DryShips (DRYS)	Various	11.66	01/29/2009	8.96	(23.29)	(1.39)
DryShips Feb 15 Calls (OOCBC)	01/29/2009	0.20	01/16/2009	2.50	922	0.58
Companhia Siderugica Nacional (SID)	Various	11.03	01/29/2009	16.01	44.86	1.73
Taiwan Semi Feb 7.5 Calls (TSMBU)	Expired	NA	01/09/2009	0.90	NA	0.77
Taiwan Semi (TSM)	7/27/2006	8.70	03/03/2009	7.76	NA	(0.78)
Direxion Financial Bull 3X Shares (FAS)	03/16/2009	5.09	03/19/2009	6.53	28.31	1.26
Direxion Financial Bull 3X Shares (FAS)	03/23/2009	5.94	03/23/2009	6.22	4.63	0.19
Direxion Financial Bull 3X Shares (FAS)	03/24/2009	6.45	03/24/2009	7.12	10.30	0.44
Direxion Financial Bear 3X Shares (FAZ)	03/26/2009	19.67	03/27/2009	19.91	1.22	0.05
Direxion Financial Bull 3X Shares (FAS)	03/30/2009	5.49	03/31/2009	5.20	(5.35)	(0.23)
Direxion Financial Bear 3X Shares (FAZ)	04/09/2009	10.47	04/13/2009	11.03	5.40	0.22
RQCDU – Ericsson April 7.5 Calls	1/21/2009	NA	04/18/2009	7.50	NA	0.65
Ericsson ADR (ERIC)	5/5/2008	11.83	04/18/2009	7.48	(36.80)	(3.04)
FASEB – May 10 calls on FAS	4/27/2009	0.58	04/22/2009	0.90	NA	0.14
FASEJ – May 8 calls on FAS	5/01/2009	0.93	04/30/2009	1.47	NA	0.14
Direxion Financial Bull 3X (FAS)	4/13/2009	9.86	06/18/2009	8.78	(10.95)	(0.47)
FASFI – June 9 calls on FAS	6/18/2009	0.28	05/18/2009	1.52	NA	0.54
Trina Solar (TSL)	Various	24.90	6/20/2009	22.50	(9.65)	(1.05)
TSLFX – June 22.5 calls on TSL	6/20/2009	0	05/27/2009	2.77	NA	1.21
CKSW	11/09/2007	4.61	07/01/2009	6.84	48.37	1.95
Realized Gain/(Loss) YTD	-	-	-	-	-	3.30

• % Gain/Loss Relative to Portfolio Value at Beginning of Year + Deposits
• The table assumes realization of profits associated with selling options only after the option is exercised or expiry.

Anguilla Stamps Profile

Anguilla is a British Overseas Territory in the West Indies, south-east of Puerto Rico. The main island is Anguilla and the territory consists of a few other minor islands. The total land area is only around 100 square kilometers and the population is just over 13000. Industry is dominated by tourism. Anguilla was colonized by the English starting in 1650. In the early twentieth century, the British classified Anguilla along with St. Kitts & Nevis as a single overseas territory – the people of Anguilla was really opposed to this characterization and wanted it to be separate from St. Kitts & Nevis. It became a separate British territory in 1980 following two rebellions in 1967 and 1968 along with a period of self-declared independence between 1969 and 1971.

The first stamps of Anguilla are overprints on St. Kitts & Nevis stamps of 1963 in two designs issued in September 1967– lighthouse in Sombrero, a very small island in the northern tip of Anguilla with a total acreage of less than 100 and loading sugar cane. The stamps are very valuable especially in higher denominations – the total catalog value of the first 16 stamps MNH exceeds $15000 while the used set catalogs for under $4000 (Scott #1 to #16). The overprint reads “Independent Anguilla”. Counterfeits are aplenty as the St. Kitts & Nevis stamps without the overprints (Scott #145 to #160) catalog for less than $20 MNH and around $10 used.

The first original designs were a set of 15 stamps depicting local scenes (Scott #17 to #31) and prominent structures in Valley, the capital city. This is a definitive set and catalogs for around $20 MNH or used. The designs in this beautiful set are: Sombrero Lighthouse, St. Mary;s Church, Police Station, Old Plantation Hous Mt. Fortune, Post Office, Methodist Church, Airport, Plane sitting on sandy Anguillan terrain, Island Harbor, Map, Hermit crab & starfish, Hibiscus, Coconut harvesting, and the spiny lobster. The butterfly set of 1971 is another beautiful short-set of four stamps (Scott #123 to #126). They are also pretty affordable at around $10 MNH and about half that for used.


Separation issues of 1980 were the next significant issues. These came in two sets. One interesting aspect of the first set is that the designs came from different previous sets with “SEPARATION 1980” overprint. It is a long-set of 22 stamps (Scott #402 to #423) overprinted on the following previous issues – Scott #275, #278, and 280-290 from the beautiful varied scenes set of 1977-78 (Scott #275 to #290), Scott #344 serenade scene from the Christmas set () of 1978-79 (Scott #325 to #330 and Scott #331 to #336), and Scott #400 and #401 from the birds set of 1980 (Scott #398 to #401). The other separation set is an original design with separation related themes (Scott #424 to #428). Both are fairly affordable with the first set cataloging for around $30 for MNH or used and the second set cataloging at less than $2 either MNH or used.

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Last Updated: 07/2011.

Cancun Trip Report

We kicked off this year’s summer break with a 4-day vacation to Cancun in the 3rd week of June. The package was reserved six month’s in advance through Expedia after comparison shopping at many sites. An overnight flight aboard Mexicana Airways and a 3-night stay in the Hotel Zone came to around $1500 for the four of us. We complimented ourselves on the deal and on our timing, only to find the same deal offered in Expedia for a brief period in mid-February for around $1350 – between the time we reserved (around 6 months before the trip) through late May, the pricing fluctuated between $1350 to as high as $2200. Lesson learnt patience can be a virtue.

The flight was uneventful and the very short break in Mexico City was (less than two hours) was not a hassle. Mexicana service was fairly good – a boxed lunch (small sandwich and snacks) with drinks was offered on all the flights. A peculiarity we noticed at both the Mexico City and Cancun airports were janitors offering trivial services with the expectation of a tip. At Cancun airport the porters hustle you along without waiting for your consent. Quickly getting about one’s business and presenting a token tip for any services that you “caught on the way” is the best option as the other alternative is in one way or the other unpleasant.

Orientation at the Hotel zone is straightforward – Kukulcán Boulevard is the main road running the length. The hotel zone commences at Km zero just outside Cancun city and covers an area shaped like the number seven, with the short-end starting at Km 0 and terminating at Km 21 near the airport at the long end of the seven. The seven enclose a lagoon and a duo of bridges at the ends of the seven connects the tourist area to the rest of Cancun. The area surrounding seven is a fully-planned exclusive tourist facility complete with around 150 hotels, shopping centers, and entertainment options. Public transportation is the best option to get around and they operate very frequently (every few minutes). Each bus ride is 75 pesos per trip per person including children independent of distance traveled. Navigating the place via bus is simple once the bearings are in place.

Our hotel was not an all-inclusive resort, although there were three restaurants on-site. Since we had plans in place for sightseeing during the morning hours, this perfectly met our requirements. The facility and the staff were great. Cancun hotels can have several caveats one needs to be aware of:

1. Time-share sales pitches – many hotels are sites were timeshare sales representatives "camp" (sometimes disguised as concierge) pitching their line. Our experience was to the contrary - the solitary solicitation was a phone call from the Expedia desk at the hotel asking us to stop by their counter for tour coupons. We did not avail of that option. Of the three towers at the hotel one is the Royal Tower featuring suites with terraces and related luxury features - could be that the sales personnel focused on guests in these rooms.
2. Strict prohibition of outside food – since it is not an all-inclusive resort, this restriction makes one feel dining at one of the three restaurants at the hotel is imposed. During check-in, it was mentioned that we had to sign something that said outside food was not allowed. But, the staff made it clear that outside personnel were curbed from delivering food to rooms for security reasons. We did not encounter any problem whatsoever in bringing in food purchased from outside the hotel.
3. “Nickel and Diming” and expecting a tip for everything – our experience was comparable to any US or international hotel (3-stars or above). Availing of bell service is the norm and since our room was at the tower removed from the main building, we were only too glad to let them handle the luggage and to have them escort us in the tram, and point out the various facilities and features of the place. None of the staff displayed any suggestions indicating a tip is warranted, and for us it is only common courtesy to tip for the service provided. We were asked to sign a waiver if we choose not to use the locker at $2 per day. We did avail of this option. Like most international hotels, pre-authorization using a credit card will take care of incidentals. For us, the pre-authorization was for 2000 pesos (less than $200). The charges incurred were for room-service and restaurant dining.

Our reservation was at the tower called the premium tower which had newer rooms with a small balcony overlooking the great ocean. Watching the ships sail by in the horizon was delightful.

Half a km away from the hotel, we found medium priced familiar chains as Bubba Gump. Though the pricing at this seafood restaurant in the Forrest Gump movie theme is comparable to its US counterparts, the service was a little better. The closest shopping plaza was the Flamingo Plaza - one of the smaller shopping malls that dot the entire stretch of the 20 and odd km of the hotel zone. The plaza itself was devoid of customers in the mid-afternoon hour we visited and the shop-keepers vaguely interested, a far-cry from the “aggressive” nature we were warned of prior to the trip. The pools were fairly crowded in the afternoon-hours, but plenty of beds and sofa parlors were available to stretch out. The pool was lovely and we had a wonderful time there. The private beach-front is excellent when not windy.

The hotel zone has options for activities at various levels. For those interested in the Mayan ruins, the El Rey ruins (37 pesos – roughly US $3 for adults and children are free) are located at at Km 18.5 on Kukulcán. Playa Delfines (Kukulcán, Km 18 near punta nizuc) the highest point in the hotel zone and provides a very good view of the area. Visitors inclined to hone their bargaining skills can find an outlet at the Mercados (similar to flea markets in the US with bargaining being the norm). The one on Kukulcán at Km 9.5 called Coral Negro and three more in Cancun proper – Mercado 28, Mercado 23, and Ki Huic Market are the more popular ones. Route 1 or Route 2 bus from the Ocean side will get one to Cancun downtown from the hotel zone. For Mercado 28 (the most popular one), choose Route 2 and alight at the first stop after the bus passes Avenida Tulum – the driver usually points out this spot, but even otherwise it is hard to miss as it is mass exodus at this point. Route 15 and Route 27 are minor routes that also serve the hotel zone. Buses that say "zona hoteleres" in the front all lead to the hotel zone.

For traditional shopping there are six shopping malls in the hotel zone between Km 8.5 and Km 13. These shopping malls combine both restaurants and entertainment options. The La Isla shopping center (Km 12.5) features an interactive aquarium and the place mimics Venice with bridges and canals in Las Vegas style. Kukulcán Plaza (Km 13), the largest of the malls on the other hand, incorporates movie theaters and bowling alleys in addition to 300-odd shops and restaurants. Flamingo Plaza (Km 11.5), Forum-by-the-sea (Km 9.5), and Plaza Maya Fair (Km 8.5) are smaller malls, but still with their own entertainment options – the Plaza Maya Fair is themed around a rainforest and offers nightly Mayan dance and other music shows while Forum-by-the-sea highlight is a multi-level structure with a large common area in the middle where there are options for rock climbing and other make-shift performances. The mall also features the Rainforest Café on the 2nd floor. The third-floor is a budget food-court – a reasonable dining option for frugal minded travelers. Plaza Caracol (Km 8.5) is on the other end of the spectrum with high-end shops and galleries.

In a nutshell, Cancun delivers for a tourist vacationing in a tropical resort – wonderful beaches, food choices galore, excellent public transportation, organized tours to nearby attractions, and not to mention a large hotel zone completely planned out as a tourist Mecca. Although many would consider a three-night vacation “too short”, for our lifestyle this was wonderfully right on time. Our highlight of the trip was the visit to Chichen Itza, a Mayan ruin which is now one of the Seven Wonders of the World – a review of our experience is forthcoming…

Related Posts:

1. Cancun Trip Report.
2. Day tour to Chichen-Itza.
3. Vacationing in Cancun - Gotchas to avoid for frugal travelers.

Last Updated: 02/2011.

Southwest Airlines (LUV) – Stock Analysis

As blogged previously, SWA’s personality identifies with our frugal consumer lifestyle. In the last fifteen years we have flown domestically 3-4 times annually and more than 90% of the time Southwest has been our airline of choice. Patience and flexibility help the “Wanna get away” fares go further. Southwest’s policy of generally staying away from the main airports in major cities works in our favor as that essentially reduces airport hassles. It also helps that we are a hop, skip, and a jump away from the Oakland airport, one of the top-10 secondary airports served by Southwest. Flight delays or missed baggage has not been our lot so far. However, the minimal catering fare is not commendable especially on coast-to-coast trips, usually in the same flight with one or more stopovers.

Airline industry is an extremely tough business with razor thin margins constantly squeezed and sandwiched between huge fixed costs and heavy regulation. Also with ticket pricing not regulated the formula is carved for an industry with companies competing their way into bankruptcy! Southwest Airlines sports a unique appeal as they were profitable for more than 35 continuous years. This achievement is especially significant considering they are a low-cost airline and as yet not a big player in the more lucrative business travel market.

Business Issues:

Southwest strives for a completely optimized smooth operation. A key factor behind that philosophy is employee productivity and is the distinguishing dynamic even when comparing SWA with other up-and-coming airlines emulating their business model. Specifically, Southwest’s unwritten rule of minimizing layoffs along with significant employee ownership has enabled them to nurture the industry’s most productive employees. It is remarkable that the philosophy stood the test of airline crisis following September 11, 2001. Southwest's strength compared to legacy airlines boil down to:

• Liquidity: Southwest have been able to maintain a high level of liquidity while legacy carriers have long struggled to maintain profitability and have found it hard to raise capital in a low-cost fashion. Indirectly, this results in a combative relationship between the management and the labor unions as management’s effort to decrease costs by reducing salaries/benefits conflicts entirely with the interests of the labor unions, and
• Solid Employee Relationship: Again, SWA has an admirable turnaround of aircraft at the terminal resulting from its highly cohesive relationship among employees in different silos. This is a tall order for legacy airlines as historically, the very rigid line among employees in different capacities make it hard to achieve shared goals.

Even so, there is a downside to Southwest’s strategy. Employee per aircraft, a key metric for performance measurement has varied between the high 60’s and the high 80’s – that number is better low. In a downturn, should the company decide to reduce fleet size, it is inevitable for this number to go high and in extreme cases can spin out of control.

Some well-known business optimization skills pioneered by Southwest that have successfully been adopted by other airlines include:

1. Point-to-point short-haul network of flights instead of the hub-and-spoke method. Historically, hub-and-spoke was considered the most profitable method of running an airline as it allowed for concentrating maintenance staff in one location as well as consolidation of flights thus permitting for market share gains at the hubs which paves way for increased pricing power. Southwest blew away this concept by optimizing for quick turnarounds of aircraft at the gate. Even though, Southwest’s costs per aircraft per minute at the terminal is high, by minimizing the time at the terminal, Southwest proved that costs can be contained to be below hub-and-spoke operators. Further, hub-and-spoke is limited by airport capacity. Southwest’s passenger load factor (a measure of how much of an airlines passenger carrying capacity is used) is stuck in the low 70s and this is one area they can focus to improve.
2. Use of a single aircraft type: Southwest exclusively employs Boeing 737 series aircraft for all its flights. This allows them to streamline operations and reduce cost.

Southwest maintains a fleet of 537 Boeing 737’s with an average age of slightly over 10 years. Of these, 210 (almost 40%) planes are aged over 17 years and the remaining 327 (more than 60%) are around 5 years. Effort is underway to replace some of the older fleet with new ones. In fact, their committed aircraft orders stand at 104 and the total including options and purchase rights add up to 220 over the next 5 years, remarkably close to the number of Southwest airplanes aged over 15 years. It can be deduced that Southwest does not anticipate fleet growth in the foreseeable future.

In keeping with the spirit of a low-cost no-frills airline, Southwest ran a highly successful no-hidden fees marketing campaign. This was especially successful because the timing of the campaign was precisely when competition increasingly started charging fees for almost everything not nailed on - additional baggage, ticket change, booking etc. Southwest has managed to keep add-on fees to a minimum although nominal fees for certain things were introduced recently for –

• From the 3rd checked-in baggage onwards, and
• Unaccompanied minors and for pets.

Other minor business decisions that directly affect the Southwest customer experience include:

• Single ticket class. There is no first-class or business class or elite class on Southwest flights. Recently, they introduced Business select, a glorified regular ticket with preferential seating privilege.
• Tickets are almost exclusively purchased directly from the airline (phone or website) thus eliminating middle-men (travel agents and other travel sites).
• No seat assignments: The boarding pass does not have a seat number assigned and one can choose a seat as long as it is unoccupied. Boarding first is critical and Southwest introduced a new boarding process last year in an attempt to minimize the time customers spent in line. Basically, passengers are assigned to one of three boarding groups depending on check-in time. Online check-in 24-hours in advance is available and if boarding first is a priority, early online check-in is recommended.

These initiatives help create a unique experience for Southwest’s customers and most tend to become loyal. There is a level of resistance among customers that have flown on other airlines to switch to Southwest – the oft cited excuses include lack of service in their “home” airports, and frequent flyer benefits customers wanting to take advantage of, etc. This is a challenge for Southwest as they have not focused enough on the business customer. Southwest’s focus on servicing from secondary airports has slowed its ability to service business customers who prefer main airports despite the consequences. SWA effort to play this market is proving to be a painfully slow process – many of the primary airports are operating at capacity and making the entry tough as costs can quickly become prohibitive. Philadelphia and Denver are success stories and New York should soon follow suit with Southwest’s successful bidding for the 14 take-off and landing slots in La Guardia from ATA airlines, a code-share partner that went bankrupt last year. Minneapolis is another location expected to be served starting March 2009. For Southwest to grow at a healthy rate they need to carve a niche in this area and it is imperative for them to revamp the business model to serve this customer base in a satisfactory manner. The top-three Southwest airports are Las Vegas, Chicago (Midway), and Phoenix. It is expected to remain this way as Southwest cannot afford to lose market share in these routes while attempting to expand in other areas. Southwest’s commitment to existing locations is evident in its support for the extensive plan to revamp the Love Field airport in Dallas, Southwest’s home base.

Another critical route that Southwest has not chartered yet but will need to for growth is International operations. So far, focus has been on local flights but given the size of the airline and the expected stagnation in the domestic market, Southwest will have to tackle the international market sooner than later. Their forays into this space have been modest with a couple of code-share agreements with airlines serving Canada and Mexico - West Jet of Canada and Volaris of Mexico. This could be especially challenging as many of the business strategies that worked well to optimize the domestic area will not apply when the horizon broadens and in certain cases can be counter-productive. For example, Southwest will not have the luxury to work with a single type of airline as it will not be suitable for transcontinental flights.

Financials:

The year over year (yoy) revenue growth for Southwest stood at a respectable 11.8% at the end of 2008. Net income was down 72.4%. Below is a consolidated look at their financials over the last four years:

Year	2008	2007	2006	2005
Operating Revenue	$11.02B	$9.86B	$9.09B	$7.58B
Operating Expenses	$10.57B	$9.07B	$8.15B	$6.86B
Net Income	$178M	$645M	$499M	$484M
Net Margin	1.6%	6.5%	5.5%	6.4%
Fleet Size	537	520	481	445

Revenue went up almost 50% over the last four years. Fleet size increased around 20% over the same period. Net income was all over the place as it stayed steady in the 2nd year, showed a growth of almost 30% in the 3rd year followed by a decline of over 70% last year, clearly demonstrating the cyclic nature of the business.

The company finished 2008 with 1.8B in cash. In a tough credit environment, this is an achievement in itself. $891M was generated in fourth quarter of 2008 by tapping the revolving credit facility and the loan market – these are comparatively expensive loans at an interest rate of over 10%. Additionally, 346M was generated through sale and lease back transactions of ten of its Boeing 737-700 aircrafts. The company still owns about 83% of its aircraft fleet and the non-mortgaged aircraft market value stood at $8-$9B giving a Debt to Capital ratio of 45 % at EOY 2008. As Southwest demonstrated, using sale-and-lease back is a good option that the company can tap in tight credit environments.

Southwest’s hedging strategy accounts for its outstanding performance relative to other airlines in the last few years. When fuel price fluctuated between $35 and $150 last year, Southwest’s hedges at $51 came in real handy and helped it remain profitable. Southwest guessed right that fuel prices were artificially low in the 2003 timeframe by purchasing forward contracts at low fixed prices. As fuel prices rose over the last few years, these contracts rose in value thereby offsetting a substantial portion of its expenses to purchase fuel at higher prices. This is going to be hard to replicate moving forward. As of the end of last year, Southwest participated in 85% of the fall in energy price as they significantly reduced fuel hedges through 2013. As of March 2009, Southwest has started to become more active as they have hedged 29% and 27% of its estimated fuel needs for 2009 and 2010 respectively, primarily using call options at $66. Below is a look at fuel price as percentage of total operating expenses for the last four years:

Year	Cost	Average Cost Per Gallon	Percent of Operating Expenses
2008	$3.71B	$2.44	35.1%
2007	$2.69B	$1.80	29.7%
2006	$2.28B	$1.64	28.0%
2005	$1.47B	$1.13	21.4%

The estimated consumption is roughly 1.5B gallons per year. Thus, a 1c change in price results in 15M change to bottom-line.

Summary:

Southwest is the golden kid of the domestic airline industry as it has managed to stay profitable consistently over the last 35 years, a feat that has never been accomplished by any other domestic airline. Outstanding management and their ability to innovate and optimize Southwest’s operations are directly responsible for this performance. As such, investors should be willing to pay a premium for Southwest shares. Growth prospects in the domestic market are limited but Management has shown a willingness to cautiously enter other potential growth areas such as expansion in the business market and international operations. Given the company’s outstanding performance in the last three decades, timing is right to bet on Southwest growing in new areas in the near future.

Southwest is valued very close to book value. Forward PE is in the 20s as the combination of higher fuel prices and lower demand due to the recession should result in earnings in the low double digits for 2009. As the economy recovers, Southwest’s earnings prospects should improve but it is anybody’s guess as to when exactly it will happen. As such, an investment in Southwest is a gamble on the eventual recovery of the US economy.

Related Posts:

1. Southwest Airlines - An Experience.