Tuesday, July 24, 2007

Did You Like the Harry Potter Ending?

I finished the Harry Potter book on Saturday night, 10 hours after I got it (would have finished it faster if only I hadn't had to eat). Overall, I really enjoyed the book, but the epilogue was a little too cutesy for me, though it did nicely resolve all the "what will happen to them now?" questions.

What did you think?

Monday, July 23, 2007

My Budget

Saving/Debt Repayment
42.8%= If you want to retire young, you have to make sacrifices, I have sacrificed buying a new car, a larger house, driving in to work, and going out to lunch among other things.

25.5%= There are areas here I could definitely cut back on, but I don't want my wife to feel like she is living under siege, so for our happiness I spend more than I need to. Roughly 59% of my spending comes from mortgages and home ownership fees.

31.6%- Despite the fact that my wife and I pretty much max out our 401K, the Government takes nearly 1/3 of my income (not including sales, gas, or other taxes). I wonder what the percentages would be if they didn't use my money on pointless wars, farm subsidies, bridges to nowhere, and a social security program I won't get to take advantage of. By my calculations, if I didn't have to pay taxes, I could retire in 5 years.

Friday, July 20, 2007

How Not to Invest in Stocks: Learn From My Stupidity

So, on Wednesday, I sold my first ever stock, Novartis. In the process, I made at least one key mistake.

The stock had tanked after its Tuesday earnings call announced that for the next year it would be having slower than expected growth. This had been somewhat expected by analysts, but regardless, the stock still dropped almost 3% on the news.

On Wednesday, the stock dropped a further 2% based on several analysts dropping its rating. Importantly, the analysts did not have any information the market didn't have on Tuesday. Their downgrade was based on the Tuesday earnings call, which the market had already reacted to.

On Wednesday, after the stock had dropped more than 5%, I sold my stock. On Thursday, the stock rebounded 1.8%, mostly because some analysts held steady on their rating while others realized that that the Wednesday analysts didn't know anything the Tuesday market hadn't already known.

The end result is: I sold at the low. I still feel like it might be 8 months before the stock starts appreciating at a decent level. I should have either sold on Tuesday after the earnings report, or I should have held onto the stock until it came back from its Wednesday's loss.

Thursday, July 19, 2007

Screw Moderation: In Praise of Immoderation

So Blueprint for Financial Prosperity had a post about how the single greatest piece of financial advice he has is to achieve balance.
I believe that balance should be balanced by a healthy amount of lack of balance.

The dream of going through their life having 2.5 kids, a house, a wife, a middle management job and a white picket fence may be for some people, but it's not for me.

For me, it's vital I sculpt and follow through on my own unique vision of what my life should be, and not be beholden of what some established wisdom says my life should be. Part of who I am and hope to be is defined by comparison to this mold.

To define myself I have to do something truly unique and this requires that I sometimes be immoderate.

Here are some immoderate things I hope to accomplish:

  1. Finish in the money at the World Series of Poker- impossible? how to know if I haven't tried?
  2. Retire Early- How early? While I'm still young enough to appreciate not having to work.
  3. Skydive- Hopefully my chute won't be full of silverware.
  4. Visit the Galapagos Islands- not really all that immoderate, but definitely not the height of moderation.
  5. Move to a Caribbean Island-or a similarly sunny island. Sunlight and warmth= happiness. Given a choice, I chose a place with a headstart on making me happy.

Wednesday, July 18, 2007

Why Owning is Almost Always Better Than Renting

This excellent article does a good job of explaining why owning your own home is almost always better in the long term than renting.

It comes down to one thing: inflation. Mortgages can't adjust for inflation, while renting can. Thus while the renter faces steadily increasing rents, the owner eventually will be paying a fraction of the original real value of the mortgage. The owner starts by paying more, but eventually pays far less.

This effect takes place even without factoring in appreciation, but if you do factor in a moderate appreciation, the effect is much more pronounced. While your house's value goes up 4% a year (even though your mortgage does not), the renter's rent goes up 3%.

Combining that with the leverage of only having to own a portion of the total equity in the house and you have a near unbeatable victory for owning versus renting. If you plan on living in a place for 5 years or more, you should strongly consider owning,