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?

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.

Spending
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.

Taxes
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.

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.

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.

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,

Should I become a Poker Geek?

One way I may be able to supplement my retirement income is by adding poker income. In my hayday (and at the peak of poker's popularity) I figured I could make around $40K a year from internet poker.

Since then my skills have declined considerably as I have been forced to actually work at a salaried job and the hobby has become illegalized by idiotic Congressmen.

However, if I figured I could make just $20K a year from poker while I was "retired" I could retire considerably earlier (probably 4 or 5 years earlier).

The rub: poker is incredibly boring when played nonstop every day in front of a computer without seeing live people. Online poker however is 1/10th the cost of casinos and you are able to play far more hands.

The other rub: the most important skill in poker is patience, working all-the-time has eroded my once easy-going personality and has caused me to lose my ability to be patient. With it has gone my poker skills, to be able to successfully supplement my income I will need to re-easyfy my personality to become the laid back kid I was in college.

I will most likely try to supplement my income with a few thousand a year from poker in retirement, but I definitely don't want to lock myself into a retirement stuck in front of a computer screen performing rote repetition.

Season Tickets: Incredible Waste of Money?

Today, I bought season tickets for my college's basketball team. The cost is $320 a seat for 15 games, since I bought two tickets that will be $640, which obviously is a significant amount of money (more than an IPhone).

This may be an incredible waste of money, but I hope that I can recoup around $300- $400 back by reselling some of my tickets. In addition, a friend of mine runs a ticket website, so hopefully he will come in handy.

Unlike other wastes of money, this waste, at least, is guaranteed to make me happy, so it has that going for it. Given what I could have blown my money on (fancy car, fancy gadgets) this purchase is more about making me happy, and less about showing off to other people.

I strongly believe in moderated frugality, where you make small little treats to yourself (according to your means) and avoid large purchases which will add little to your overall level of happiness.

Still, this purchase may have exceeded moderation, what do you think?

Lessons Learned from Investing Thus Far

So, I have only been in the investing game for a little while thus far, but, even though my stock has been tanking, I have already learned a lot of really good lessons.

The main thing I am starting to learn is to get a better picture of the investing world. Basically there are the institutional players (Wall Street) and then the rest of us (Main Street).

For any large cap stock, there is almost no way that Main Street can out-know or out-smart Wall Street, so there is usually never any type of sure thing among these stocks.

To outperform Wall Street, you have to take on a lot more risk by wading into smaller caps or options or other risky areas. However these seem like very risky waters, and I am going to be wading into them very cautiously.

The other lesson I have learned from investing is the basic mechanism of trading. Things such as never placing market orders (always place limit orders) and the other nitty gritty of how to trade.

I'm getting into the 0% Game

I've heard a lot from bloggers about how the 0% credit card offers are drying up.

After finally getting a question answered the other day, I have been able to determine the two harms that are caused by the 0% game:

1. High Debt/Credit Limit Ratio- this will be fixed as soon as I pay off 0% balance.
2. A lot of inquiries (hard credit pulls) on my account- this is counted on my record for a year, though it only makes up 10% of my credit score.

Since I don't think I will need to take a loan out for the next year, it looks like the 0% game is beckoning me.

The other concern is never missing a payment, but that is what Outlook Calendar is for.

Have you or would you ever get into the 0% game?

Lessons Learned From Tracking My Expenses

I never thought that tracking my expenses would reveal anything, and it didn't enlighten me by itself.

It was only when I started categorizing my expenses did I realize where I was spending relatively large amounts.

One Surprise Large Category: Gifts

Weddings, My wife's nieces and nephews bdays, my bday, my wife's bdays, Father's Day, Mother's Day, Get Well flowers, My Parents Birthdays, my In-Laws Birthdays, Christmas, and Baby Showers.

We spend a ton of money on getting people gifts. I am going to have to figure out what I can do to curb this spending category.

Retire Young or Enjoy Your Work?

I would rather work at a job with a high salary that allows me to retire as soon as possible than at a job I would really like working at, but that would force me to work into my late 60's.

I can see the arguments going both ways, but for me, all work, no matter how enjoyable, is going to be a lot suckier than the joy of not having to work at all.

Would you rather work someplace you enjoy working at for 40 years or work someplace you are indifferent about for 15 years?

New Use for Zecco: Selling at a Loss

My first stock has tanked since I bought it. I'm not really sure why, though there are a couple of possibilities. I still remain optimistic for the long run.

But it strikes me that it might make some sense to sell the stock at a loss right now, and then turn around and buy it again. This would cement my losses on my tax returns, but have no other effect on my bottom line.

Short term tax gains and losses are taxed at my marginal rate (33%), whereas long term gains are taxed at the capital gains rate (15%). Thus if I sell at a loss, I can deduct a higher percentage from my income, then if I waited and sold at a loss after a year.

With Zecco being so cheap to buy and sell, the transaction would cost me very little, yet result in favorable tax treatment.

Sacrificing Your Life For Your Wife

So a new study shows that if women take their social security benefits at an earlier age and men at a later age, they will increase their combined couple net income, even though the man will die at an earlier age.

The widowed wife will enjoy the benefits of the higher survivorship Social Security benefit due to the husband's waiting to draw from Social Security.

But is this trade-off fair for the shorter living husband? He will get the increased peace of mind of knowing his wife is protected if something should happen to him, but he may have to endure a lot less comfortable retirement than he might otherwise have to. Maybe he will have to work longer in order to be able to retire. Working longer may mean he dies sooner as a result.

The fairest thing would be to plan ahead, and to save up enough to use retirement savings to offset the disparity. If I have to die 5 years before my wife, I intend to have a damn good time before I kick the bucket.

How to Avoid Lifestyle Creep

Due to my insane dream of retiring young, I save roughly 40% of my pre-tax income. Sometime it can be hard justifying denying myself things I could clearly afford, especially when my friends and co-workers have them.

It is also tough with the peer pressure from family members. Everytime my mother (who hasn't earned an income in 35 years) comes to my house, she tries to convince my wife that she should get 1) a new couch, 2) all new furniture 3) a china cabinet, 4) dining room table and innumerable other things.

It can be really tough to avoid lifestyle inflation. Here's my thoughts on some tips.

1. Keep your Poorer Friends- The instinct to splurge money on all sorts of conspicuous consumption would definitely be higher if I hung around my co-workers more. The same effect would kick in if I lived in a really expensive house.
2. Get Everyone on the Same Page- My wife and I are on roughly the same page, we have the same goals though I think we have different priorities, we both want a family and to retire early.
3. Buy ourselves some nice things- It doesn't feel like we are denying ourselves too much when we both have a few expensive things to appease us. She has a house and an expensive engagement ring, and I have a Tivo. She apparently needs more expensive appeasement than I. :)
4. Don't feel the Need to Keep Up With the Jones-I don't need to waste my money in order to show how cool I am.

I know other people allocate a certain amount of their paycheck automatically to Vanguard or something, and that could definitely work, though its not for me. My investments are being spread around a number of places.

Should I Sell Out like Other PFBlogs? (Poll)

So recently I was contacted by a payday loan company wishing to advertise on my site. This caused me a giant moral problem in that payday loans are in almost every case an awful idea which trap people into cycles of debt dependency and cause human misery.

On the other hand my blog barely makes any money (2 cents a day is a good day), and writing two posts a day for 1 cent a post can be disheartening.

Other sites, like The Simple Dollar and Lazy Man and Money, and a bunch of other sites do advertise payday loans. I think sites like The Simple Dollar and LMM really sacrifice a lot of moral high ground by doing it however.

What do you guys think?

Alternate Income Streams: Betting Against Zealots

I've been exploring whether to start investing money in the political futures market, sites like Iowa Electronic Market and Intrade offer people the opportunity to "invest" in a bet which functions like a stock on certain political candidates or parties winning elections or primaries.

The great thing about these markets is that they are populated by partisan hacks of both sides, who cause tremendous inefficiencies which can be exploited for profit.

For instance, based on fundraising totals it seems pretty clear to most people that the Democratic primary will be won by either Hillary or Obama. Sure you could make an argument for Gore or Edwards, but the former seems disillusioned with politics and the latter seems hopeless, despite his popularity with the Daily Kos.

If I bet on those two candidates to win the primary (placed bets on both of them), and one of them won, I would make a 25% return on my investment. If I wanted to temper my risk by also betting on Gore, I would make a 15% profit.

Unfortunately, the same inefficiencies don't seem to exist on the GOP side, as a bet on Fred Thompson, Giuliani, and Romney would only return 16%. A bet on John McCain (whose campaign is in freefall) would return a healthy 1,983%, which despite McCain's freefall seems a bit exaggerated.

Pointy Haired Bosses Beware! A Few Tips on Constructive Criticism

So this weekend, after busting my butt drafting something for work over the last week, and after not having a day off (including weekends) since June 24th, my boss, in giving me comments on my draft, told me that I should write more like my co-worker.

Needless to say this bit of "constructive criticism" from my pointy-haired boss, really demoralized me, and caused me to work less hard and really become pissed off and depressed about my job.

Here's what he did wrong:

1. CC'ed people unnecessarily- If you are going to criticize one person by comparing them to another person, you should not cc other people, including the person whose writing I supposedly should try to emulate, and another co-worker. Being criticized in front of an audience was humiliating.
2. Not Value the Work I had done- I drafted almost the entire paper, I worked my butt off while PHB was on vacation, including working till 10:30 on Friday night and another 10 hours on Saturday.
3. Gave Generic Praise- Couching criticism by first saying something positive is a good strategy, but it can be obvious if you are going to say something phoney. This almost made things worse.
4. Not Leading By Example- He did almost nothing on this project, other than spend 2 hours looking it over, after I had spent 50 hours researching and drafting it while he was on vacation.
5. Criticizing By Email- Email is a whole lot less personal and email is really easy to misinterpret, especially with regards to tone. When you criticize someone, you need to be especially careful your tone isn't misinterpreted. Avoid email.

This whole incident has definitely caused me to give serious thought to moving up my timetable on when to quit my job.

I am a Daytrader (Apparently)

Zecco is an unbelieveable thing. On Friday, I had $20 to spare, so off the basis of some stock blog's tip I invested $19.80 into one share of ARGN- which I have no idea who they are, or what they do. The stock soared, and I was able to promptly sell the stock at $20- a 1% profit in a day.

Yes the $.20 I made is definitely not worth the extra amount of effort I created for myself in reporting that $.20 to the IRS, but I view it as a valuable learning experience.

The more experience I build up with trading, the better I will understand how I should be executing my orders. Hopefully, that $.20 will pay off big time.

The Happiest Place on Earth

http://cosmos.bcst.yahoo.com/up/player/popup/index.php?cl=3271475

Check out this video. This is the happiest place on earth, and they accomplish it with pig tusks as currency.

Actually, the video makes a valid point about the importance of community and family relations to happiness and the unimportance of money.

It's something I need to keep in mind, even as I go grubbing for as much money as I can. I'm accumulating money so that I don't have to worry or think about money, it's a means, not an end.

Gooooooals Update!

I update later than most due to my 401K taking forever after my paycheck to invest my contributions.

Here's my status towards my goals:

Debt Repayment

I was able to pay off roughly $5000 worth of bad debt off this month, and am making major progress towards paying off all of my bad debt, with roughly 47% of it paid off.

Post Tax Investments

The amount of my post-tax investments stayed the same as I allocated most of my money towards debt repayment.

This month, however, I bought my first stock, which I funded through raiding my cash reserves. The stock has since dropped 1.4%. Doh! Oh well, I'm in this puppy for the long run.

Total Investments

I don't include home equity, or the value of personal possessions or my car. It's simply my stocks, bonds and cash holdings. This month, total investments went up $2200, mostly through 401K contributions. The market's instability hurt me some, but not crushingly so.

Baby Boomers Should Be Taxed Until They Cry . . .

I'm 27, when I retire I will need more than a million dollars in order to be able to assure that I have enough. The failure of Social Security and Medicare to provide for me is absurd given how much in taxes I will be paying for these programs.

The system returns vastly worse than the market: If I pay $2500 (and my employer pays $2500) towards Social Security, but I instead invested that money in the market at an 8% return every year for 40 years, I would have an inflation adjusted $383,030, or enough for $30,000 a year in payount (i.e. about twice what Social Security would pay in this situation). Even if Social Security didnt go bankrupt, it would still be vastly inefficient and under-rewarding.

The Baby Boomers Will Bankrupt the System-the flood of baby boomers retiring will mean a lot more in withdrawals and a lot less in contributions. Young people will be stuck with the bill: either by paying more in Social Security taxes or by receiving far less in benefits.

The Baby Boomers Allowed the System to be Bankrupted-it was Baby Boomers who allowed politicians to not fix the problems and to systematically raid Social Security to pay for tax cuts, military spending, social spending and other expenditures which amounted to screw-the-next generation for an immediate reward policies. Now, that the Baby Boomers have become vastly more wealthy than the younger generations, its time for them to pay for their own problems.

Two Possible Solutions

1. Fix the Problem Now- Baby Boomers' Social Security benefits should be cut or the retirement age raised NOW. No more of this grandfathering into the previous generous benefits levels. Baby boomers should take an immediate and severe hit to their level of retirement payouts. They broke this, they shouldn't be footing younger generations with the bill.
2. Let Future Generations Chose- I should be given the choice about whether to invest the combined $10,0000 that's paid by my employer and I to Social Security in a government-run system that can't even beat 8% returns, or in the market by myself. If that causes older generations to have a funding problem, they have only themselves to blame.

One thing is clear, the fair solution is to adopt a "you broke it, you should fix it" solution. Baby Boomers and those who enabled the politicians to allow the system to go bankrupt, should now shoulder the burden of ensuring that future generations aren't vastly screwed over.

Will I be Bored in Early Retirement?

I read all of these articles about people who having worked all their lives don't know what to do in retirement. Many of them go back into the work force because they just don't know what to do with their lives. So much of who they are as a person and what they occupy themselves is about their work.

The person that they were (independent of work) has become irreperably damaged, and they have become their work selves. My dad is still working in his seventies; not because he has to, but because he wants to. I want to avoid this fate at all cost.

This will not be me. Work is a means to an end, never an end in itself. Once I achieve financial freedom, my ends will have been achieved, and work will serve no more purpose for me.

One difficulty I face: how to enjoy the work that I do, while still remembering that my work self is not me? This seems like it may be very difficult to accomplish, but possibly can be accomplished by:

1. Developing my non-work life, making friends, developing hobbies and fun things to do to the extent that my non-work life outshines any enjoyment I derive from work.
2. Not over-obsess about money, so that when I finally have enough, I will recognize that fact, and let go my obsession.
3. Realize that I should do work that I enjoy, but that the most enjoyable thing is to not have to work at all.
4. Have a family that I can love and spend time with.

It is an awful prison that shackles you, even after you have left its confines.

8 Things You Didn't Know About Me

Major thanks to One Frugal Girl for tagging me, I am a big time admirer of her great site. Here are 8 things you may not know about me:

1. Once I hit my goals on the invest-o-meter, I'm quitting my job and working for the Government. Every time I call anyone from the Government after 5 PM they've always left for the day. What a life!
2. I once won a trip to Disney World, but had to stay in my hotel room the whole time. Doh!
3. My wife is a saint for putting up with me. . . No, seriously, she is.
4. When I was 8, I fell asleep in the car, my parents woke me up to go to a Chinese restaurant for dinner. I walked in still asleep and sat down at the wrong table with the wrong family.
5. I once spent the night on a park bench in Queens.
6. I've lost two $500 poker pots in my life to people holding 2,4.
7. This blog makes aproximately $.02 a day. Gotta love Google Adsense.
8. I scored a near perfect SAT score, for whatever thats worth.

Continuing the tag love, I'm tagging:

• One Million to My Name,
• Her Every Cent Counts,
• Finance Psychology.

I would tag Blueprint to Financial Prosperity, but I doubt I'm a big enough fish to garner his attention.

Investment Newsletters- Are they Worth It?

I keep reading Motley Fool's promotional material about how their Hidden Gems newsletter has returned ridiculous profits, and it appears very tempting. I would love to read some reasons why I should NOT buy a newsletter though.

Here's what I have been able to come up with:

1. Risks- This is not free money, with the possibility of great returns comes the possibility of great risk. Any investments in their small cap value stocks could easily tank by more than 50%.
2. Cost- At $175+ you are basically paying a tremedous cost on any type of small investments. However, given the risks involved, you would be ill-advised to put too many of your assets into their reccomendations.
3. First Mover Advantage- In order to maximize your returns, you probably need to invest as soon as the recommendation comes out to get in on the reccomendation bump, this might cause you to do less research and cause you to make more mistakes.
4. Newsletter Bait and Switch- I suspect that the Motley Fool, like other newsletter companies, has newsletters that tank. They then discontinue the tanking newsletters and make it look like they are brilliant geniuses for having so many newsletters that outperform the market.
5. It could be a short-term fluctuation-It could be the types of stocks they are reccomending are on a temporary high and are headed for a crash.

Thats what I have been able to come up with, I would love to hear people's thoughts on this.

My First Stock

I wasn't planning on buying my first stock until I had paid off my student loans, my second mortgage, and also built up a stable of solid index funds to form the base of my investments, but plans change.

I stumbled across a stock that I really liked, Novartis (NVS), and the more I read, the more I liked, and I decided that all things considered it made sense to enter now. I bought 62 shares out of my Zecco account and it all went smoothly (though in retrospect I should have used a limit order, rather than a market order)

Here's my thoughts on the stock:

1. I like their business prospects- Its a global pharmaceutical company which stands poised to capitalize on the greying of the baby boomers in developed countries. While it suffers from the threats facing most pharmaceuticals (expired patents, increased competition from generics, increased lawsuits, increasingly regulatory climate) for various reasons it appears to be in a better or equal position vis-a-vis these risks than its competitors.


2. Analysts like it- It has a 5 star rating from Morningstar and S&P, and the talk on the Motley Fool's website has been pretty positive.


3. The stock doesn't seem to be overpriced- The PEG is like 1.25 and the P/E ratio and other measures don't seem to make it overpriced. Most analysts fair value of the stock is higher than the current stock price.


4. No looming problems- It seems to be dedicating a significant portion of its revenues to R&D, and doesn't seem to have a large debt problem.

Of course, this being my first stock purchase, it's very possible I don't know what I'm doing. Only time will tell.

My Identity Revealed.... Grrrr.....

Over the weekend my NYC friend revealed my blog to another friend of mine (not one of his Einstein moments). I've found that generally, the more people know something, the bigger the chance that EVERYONE knows it.

So assuming a whole bunch of my friends know about my dreams to retire young, is that a bad thing?

I guess the one area of concern for me is having my friends know my net worth. Obviously one reason I do not want them knowing this is privacy. Privacy contains some utility all of its own. I would not like everyone to see nude pictures of me, even if I never met any of the people who had seen them.

But the bigger reason is jealousy. I have always been a big believer that human nature is both good and bad, and a big laugher at the people who think that they have somehow overcome the instinct to be bad, its usually those holier-than-thou fools who are the worst sort of humans.

Its human nature to resent people who you feel are comparatively better off, and exposing my numbers to all of my friends just leaves me wide open to that kind of feeling, even though I never sought my friends to know.

So, I probably won't talk about my net worth numbers anymore, except in general terms. Its not worth losing friends over.