Chautauqua 2015 Reviews, 2016 registration open

Hacienda-Cusin-2

Mi lindo Ecuador

This is getting to be hard.

2016 is the fourth year we’ve been doing this and will see us present the fifth and sixth Chautauquas come November.

I’ve written several posts now talking about how wonderful these things are. And, really, how many ways can I say it?

Below I’ll run thru the past ways, and in the process give you a bit of history as to how the Chautauquas came to be. But first let’s take a look at the most recent from last October, as perhaps best told by those who were there.

One of the key things attendees experience is the chance to meet and hang out with some very interesting people like themselves.

This year three banded together to produce a short 3-minute video on their experience. It is a beautiful overview, especially of the excursions around Ecuador and the community service project that are part of the trip.

Directed by Joan @ Meister”s Balogna

Edited by Brian @ Inner Parakeet

Music by Prentice @ Sound Cloud

Chautauqua networking in action!

Frequently folks not actually on the financial freedom path view it as one of dismal deprivation focused on denial of living life today to save money for tomorrow. That’s not what I see.

Looking at this video you’ll get a glimpse of what we really look like. Happy, engaged, energetic and certainly not deprived. These are people very probably much like you, and in terms of wealth they fall all along the FI path. FI expands life and makes it better.

You don’t have to be a blogger to attend, and most are not. But a couple were, and here’s their take:

From Gwen (Fiery Millennials):

Chautauqua 2015, Gwen 1

“I might have traveled by myself on the way down to Ecuador, but on the way home I was part of one of the best groups of people I could’ve asked for.”

“You can hear the river rushing through the bottom of the valley if the birds aren’t being too noisy. We were up high enough we could see the clouds being created below us, and oftentimes around us as well.”

Chautauqua 2015: An FI Haven in Ecuador

Chautauqua 2015 Gwen 2

“He had lots of other great advice to offer as well…even if he did make fun of me for being distracted by a cow.”

“To be surrounded by such a supportive and encouraging group of people for an entire week…… I don’t know if I can describe the impact it had on me. It was literally life changing though.”

Lessons from the Chautauqua

From Julie (Millennial Boss):

Chautauqua 2015 Julie 1 MMM-chautauqua-e1453261929495-576x1024

Chautauqua 2015 julie 2 crater-cafe-ecuador-768x512

“Crazy thoughts started spinning in my brain. ‘What if we can’t find the group when we arrive?’ ‘Even worse, what if this is a scam?’”

“There is a couple who run an Airbnb, a woman who is just a few years out from retirement, a man who made his nest egg through real estate. There is a couple where one is 3 months from retirement and the other has to work a little longer. There is a guy who has been retired for years and a young woman who is just a few years ahead of us on the savings plan.”

“Everyone was at different stages along the path to financial independence and everyone was getting there or had already gotten there in a different way.”

“I was a bit insecure going into the Chautauqua that I didn’t have much knowledge to offer to the other participants versus what I would gain from them but two minutes with this group washed away that fear.”

Review of Chautauqua 2015

From Jeremy (Go Curry Cracker):

Chautauqua 2015 GCC

“…imagine spending a week of adventure filled days with people who are not only encouraging and non-judgmental, but who are of like mind; a place where you can share ideas and goals, fears and concerns, and smiling faces reply, ‘Me too.'”

“Was it valuable? Without question. Did it meet my expectations? Met and exceeded. Would I recommend it? If financial independence is a goal and you can attend in a fiscally responsibly way, then yes, yes I would.”

Chautauqua 2015, A Love Story

So that’s a taste of the Chautauquas just past. As promised, let’s take walk thru their history.

above-the-clouds-walkers

Meet me in Ecuador?

In October, 2012 I wrote the post above letting my readers know I was headed back to Ecuador to meet Cheryl and to discuss with her the possibility of creating these retreats. I didn’t yet know what to call them.

I promised to report back.

cheryl

Meet Mr. Money Mustache, JD Roth, Cheryl Reed and me for a Chautauqua in Ecuador

Four months later, in February 2013, I did in the post above. In it I introduced the concept of a Chautauqua, and that old word as the name for this new event. Also introduced were the speakers and the agenda. A month and three days later it was sold out. These days it takes about a week.

Almost immediately, I began to worry. What if the people who come hate it? Worse yet, what if they are whiny complainypants and I hate them?

Oh well, at least the revenue from it would allow Cheryl to pay to rebuild a local family’s house destroyed in an earthquake. That’s it and them and us in the picture below.

Chau-the_family-300x198

Chautauqua 2013: A week of dreams

In September 2013 in the post above I recapped the adventure. Turns out I need not have worried. That first Chautauqua, and each one since, has attracted remarkable, interesting and engaging people.

What an amazingly diverse group it was. Not just in race and sexual orientation, although we enjoyed both. But in:

  • Age – ranging from geezers like me to folks in their twenties.
  • Occupations – including a corporate lawyer, doctor, banker, a couple of CFOs, a librarian, two US Marines, entrepreneurs, a fellow blogger and IT folks just to name a few. Some already FI, some on their way. Even a Wall Street money manager and a former stock analyst.
  • Wealth – ranging from multi-millionaires to people just breaking out of the grip of debt and on their way.
  • Geography – they came from all over the US and Canada, and one from Mexico.

Since then the attendees have continued to be equally diverse and even more geographically extended. You might think such wide-ranging groups would be a recipe for conflict. You would be wrong.

By their own account, this had been one of the best weeks of their lives. Indeed, for many, the best.

Where was the magic? The activities, the speaker presentations, the one-on-one sessions, the resort or Ecuador itself? Nope, although all got rave reviews. What each attendee ranked at the very top was: “Each other.”

As one so aptly put it: “I’ve found my tribe.”

For the first time they got to spend a week hanging around with others who “get it.” That’s not something they experience in their day-to-day lives where walking this financial independence path makes you very much the odd one out.

The same has been true for each group since.

Hacienda-Cusin

Chautauqua 2014 Preview

Clearly, this wasn’t destined to be a one time thing. In February 2014 I put up the post above announcing Chatauqua #2 scheduled for August of that year.

Worrier that I am, I immediately became concerned that #1 had been a fluke and that #2 couldn’t possibly measure up.

Chautauqua 2014, jumping

Chautauqua 2014: Lighting Strikes Again

I was wrong and in September 2014 I had the happy task of reporting that lighting had indeed struck again. Looked like we were on to something here.

 With demand growing, rather than dilute our guests’ experience by expanding attendance, we decided to offer two back-to-back for 2015:

Ecuador-mi-lindo

Chautauqua October 2015: Times Two!

If you viewed the video and read the links at the beginning of this post, you know these were again a smashing success. So, again, for 2016 we are doing two back-to-back.

As before, attendance is limited to 25 so that these remain small enough to provide the chance for all of us to really engage with each other during the week. But this also means they sell out very quickly, so if you are interested you’ll want to register right now.

November 5-12, 2016

At Hacienda Cusin in Otavalo

Presenting:

November 12-19, 2016

At  El Encanto Hosteria in Los Bancos

Presenting:

Note:

While we would love to have you, please don’t come unless it is something you can easily afford. Certainly not if you are still in debt and certainly not if you’d have to borrow to do it.

Here are still other past takes on this event:

Hope to see you later this year in mi lindo Ecuador!

Unrelated items of note…

Important Resources:

  • Vanguard.com (unfortunately Vanguard doesn’t have an affiliate program)
  • Personal Capital* is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you’ll see what’s working and what you might want to change. Here’s my full review.
  • Betterment* is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • YNAB* has the best budgeting tools going and just might be the Best Place to Work Ever
  • Republic Wireless* is my $10 a month phone plan. My daughter is in South East Asia and is on the $5 a month plan. We talk whenever can and for however long we please. My RW Review tells you how.
  • Tuft & Needle helps me sleep at night. Unfortunately they are no longer an affiliate, but still a very cool company and a great product.

*These are affiliate links and should you chose to do business with them, this blog will earn a small commission.

Personal Capital special Valentine’s Day promotion: Any new user who signs up between Friday, Feb 5th and Valentine’s Day Feb 14th is eligible to win a free trip for two to Hawaii. That’s right. A free trip to Hawaii! The prize is $2000 for roundtrip airfare and $1000 for accommodations. Any new user is eligible, so long as you link an investment account. It doesn’t matter how much money you have — you just need to sign up and link.

Of course, you don’t want to do this just to enter a contest. That’s not the jlcollinsnh way! :) But if you are thinking of giving them a try anyway, now is a good time. Good luck!

More Hawaii:

Come April we are planning to meet our daughter who is serving in the Peace Corp for about a week in Hawaii. We’re coming from NH and she from SE Asia so it seemed a good choice. Plus none of us have been there before.

If you have and you have some suggestions, please fill me in. Here’s what we are looking for:

We are not tourists in that we don’t feel the need to run around and see everything. We’d be looking for a beautiful spot with few people, a beach to walk and good restaurants to settle into for ~a week. If it was completely walkable, a short Uber ride from the airport and we could skip car rental, all the better.

Also, if someone there is willing to put together a reader meet-up, I’m game!

Podcast:

Check out my latest podcast, and the first where I get to ask the questions!

Scavenger Life with Jay and Ryanne

Past Post Update, January 20, 2016:

Last October I did a post on: Stockchoker.com (not an affiliate, just cool)

Todd just added two cool new features:

  • Stock Wars: A tool that allows you to compare the performance of two stocks and/or funds.
  • Quizzes: I took both. I’m a “goat” in the first and a “coyote” in the second. You can do better. I dare ya!

Unrelated, but here’s what I’m currently or have just finished reading and enjoyed:

Turbo Capitalism

If you are interested in income inequality, this poorly titled (should have been Unfettered Capitalism – more accurate and more descriptive) book is a great discussion of the pros and cons of our current system. Luttwak clearly has his own biases, but is remarkably evenhanded in presenting both sides.

Written in the late 1990s, it is a bit of a time capsule and fun to see how the past 20 years have actually unfolded.

Leave it to Psmith

“Crime not objected to.”

One of my favorite characters from a favorite author. If you like it, here are two more:

Mike and Psmith

Psmith Journalist

Jack Reacher roams around the country carrying only a folding toothbrush. When his clothes get dirty he buys new ones. Oh, and he kills lots of bad guys. “Make Me” is the most recent in the series, but not the best. That might be this one:


First line: “People do not give it credence that a fourteen-year-old girl could leave home and go off in the wintertime to avenge her father’s blood but it did not seem so strange then, although I will say it did not happen every day.”

Last Line: “This ends my true account of how I avenged Frank Ross’s blood over in the Choctaw Nation when snow was on the ground.”

How we came to be what we are, behave the way we do and believe what we believe. My favorite in this group.

Where people who live to be 100+ live, how they live and what they eat.

Bad monkeys are Sapiens that need killing, and Jane is on the job. If you are already paranoid, you might want to skip chapter: white room (iv)

Why the future might be incredibly good. Unless the grey goo gets us.

This might be the most enlightening and entertaining take on American history I’ve yet to read.

And here are some of my all time favorites:

The book that has most influenced how I live my life.

Deceptively simple, but really all you need to know about becoming wealthy.

Very possibly my all-time favorite novel.

“The Fall of Edward Barnard” is very possibly my all-time favorite short story.

Perfect for the readers of this blog.

“Bartleby the Scrivener” is very possibly my all-time favorite novella. Don’t be put off if you struggled with Melville’s “Moby Dick.” This is a much better and easier read. Plus it will teach you the most important phrase in the English language:

“I would prefer not to.”

*If you click on the books you’ll go to Amazon, an affiliate partner. Should you choose buy them, or anything else while you there, this blog will receive a small commission. This doesn’t affect what you pay.

Posted in Chautauqua | 16 Responses

Case Study #15: The Scavenger Life — Freedom first, then Financial Independence

Jay and Ryanne

“I can’t believe that I got a college education just so I could end up selling old shoes on the internet.”

Over the past five years of writing this blog – thru the comments, reader meet-ups and the Chautauquas – I’ve had the opportunity to get to know jlcollinsnh readers pretty well. While not universal, there is a typical path that most are following.

It looks a bit like this:

Working — eliminating any debt — aggressively saving — investing — F-you Money — (Freedom!) — Financial Independence — doing what ever the hell you want

But, of course, this isn’t the only path. Especially if we realize freedom is the goal and money is only a tool. You don’t need a million dollars to have the freedom to do nothing, although it doesn’t hurt. You need the right mindset.

Time out for some definitions, and these are not universal but what I mean when I use the terms:

F-you Money: Enough money that you can go without working for some period of time. Enough to embolden you to make more aggressive choices. But not enough to never have to work for money again.

Financial Independence (FI): Having enough money invested that using the 4% rule you can comfortably pay all your bills. Enough to never have to work for money again.

Today I want to introduce you to Ryanne and Jay. Their path kinda looks like this:

Work — work? — screw this! — freelance — plus alternative business eBay — plus alternative business Real Estate — still hard work, but… — (Freedom!) — travel when we want — save — invest — accumulate F-you money – reach FI – do what ever the hell you want — oh, wait, we already are…

Ryanne and Jay produce the weekly podcast ScavengerLife, about quitting their jobs, moving to the country, making a living on eBay by living off the waste of the United States.

Using their eBay profits from the last six years, they have fixed up two houses, one for living, one for…

1airbnb farmhouse rental

…their Airbnb rental:­ LurayModern.com

They also document how they run their Airbnb business at ShampooAndBooze.

They’ve just purchased their third house, soon to be another Airbnb rental­ all from selling weird, unique stuff to strangers on the internet.

I met them a few weeks back when I noticed a flow of traffic coming here from their site.

Checking it out I found they had referenced my F-you Money post in one of their podcasts. I listened to the entire thing and was immediately captivated. Not just by their cool and engaging story, but also by their cool and engaging way of telling it.

I listened to a few more. Then I called and left them a voicemail.

I said, Thanks for the link and mention on your podcast. While I have zero personal interest in starting an eBay business or investing in Real Estate (been there, done that) I still loved listening to you guys talk about your experience.

Then they called back and said, We love your stuff too even though we are not (yet) investing in stock index funds.

Then I’m all like, You guys should do a guest post for me.

Then they’re all like, We should interview you on our Podcast. (which we did and is coming)

Then I’m all like, Wow that was great fun but while you were asking me questions I kept thinking about all the questions I wanted to ask you guys! Too bad I don’t have a Podcast.

Then they’re all like, Well we have one and we can record, edit and host it on ours.

Then I’m all like, That’s great and then I can link to it when I put up your guest post. It will be my first ever Podcast where I get to ask the questions!

And then, here we are.

And here it is:

My Podcast interview with Ryanne and Jay

So you can either listen first and then read what they wrote for us below. Or read first and then listen to what other tidbits I teased out of them.

Scavenger Life Guest Post

by Ryanne and Jay

Jay: 

Who are we? We’re arty tech nerds.

We’ve lived and worked in Boston, NYC and SF. At first we had full-time jobs, both in television production, but then worked freelance for about four years. We made good money and could have made a lot more in the future.

We decided to get out at 26 and 32.

Ryanne: 

I grew up with parents who were independent workers.

My mom is an artist, craftsperson. My dad is a carpenter, contractor. They never had office jobs my whole life. My siblings and I were always toted around to craft-shows and house painting jobs.

This helped inform our decisions to become very independent. We also had a buffer of saved money from our office jobs, that helped a bit.

Jay: 

We wanted our time because I learned that I couldn’t work full-time for someone else.

I looked over at the guy in his 50s doing what I did. He was happy enough, but I couldn’t see that for myself.

Though we loved freelancing because of the freedom of our time, we hated the stress and struggle of hustling for work. Usually we’d take on too many jobs because we were always worried work would dry up.

4tech job

Freelance

Ryanne: 

Living in urban areas, we realized that our most expensive cost was rent (and that was 2005­-2007 in NYC and SF, it’s gotten much worse since then).

For one year, we bartered with a friend who owned an apartment in an intentional community. We lived there for one year in exchange for DIY fixing up the apartment­ painting, replacing windows, redoing the kitchen.

In that same year, we met our friends, Mikey and Wendy (The Good Life Lab), who quit their NYC jobs and moved to a tiny town in New Mexico. They showed us that they could buy property for cheap and own their time.

Their money went a lot farther in a rural area.

Jay: 

This made a lot of sense to us so we decided to move to the Shenandoah Valley in Virginia and bought a foreclosure for $70k in cash.

Probably put in another $100k to add an extra building and do a total renovation. Mountains in our backyard. A river just a short walk away. Surrounded by trees. A National Park and National Forest on either side of our valley.

11930197683_4452cbf0d7_bThis is where I’ll probably die.

Ryanne: 

We bought our house in 2009 after the economy crashed.

There were a bunch of foreclosures in our area (sadly, still are), and we were unable to get a loan at the time, being first time home buyers and not having “reliable income” as freelancers. Luckily, we had both saved about $35k each from our former full time jobs, the exact amount we needed to buy this house.

It kind of worked out perfectly.

Cashing out all our savings was not intentional, but became a blessing in disguise. It helped propel our future real estate purchases because we had full equity in our primary property with no debt.

Jay: 

Too good to be true?

The rub is that there are few decent jobs in rural areas. Most of it is low paying. So property is cheap because there’s no way to make money. It’s mainly retirees with savings and local families that have survived here for generations.

And weird people like us who travel for work and sell stuff on the internet.

Ryanne: 

The beauty of rural America is that it’s possible for young people to buy property and build businesses in an affordable way.

As I write this, we have just purchased our third house, to be another vacation rental. I never would have imagined that this would be possible in Boston, NYC or SF, because frankly, it’s not possible there.

My brother lives in Manhattan, my sister in Boston. They’ll never be able to afford property there. I keep trying to convince them to move to our tiny, rural county. They laugh at us.

Jay: 

I know some folks really push for renting because of the costs of home ownership, but we wanted a home base. A place where we could keep our stuff and travel whenever we wanted.

I’ve done the numbers and we still pay way in less in property taxes/insurance than we would in rent.

Do we miss the hustle and bustle of a city? Sure. But when we crave some culture, we just take a trip to the city, eat a good meal, walk the streets, go home before the traffic and headaches. Or we’ll rent a city apartment on Airbnb for a week. All the fun of the city and none of the hassle.

Ryanne: 

We still do some freelance work in our traditional career of video production. We’re lucky in that these clients send us to jobs all around the world.

We do live in a tiny rural town, but in the last year we have traveled to Colombia, Los Angeles, Amsterdam, Paris, Barcelona, New York and San Francisco. We do more traveling than most of our friends who have office jobs in the city because we have the luxury to leave whenever we want.

3amsterdam

Amsterdam

Jay: 

Being an art nerd from a working class family, my partner, Ryanne, knew we could figure it out. First, we‘re very frugal. It feels like we live in luxury, but really we ignore all the stuff that would suck our money. New cars, fancy clothes, etc.

Ryanne: 

We like to live off the waste of this country. Thrift store clothes. No car payments. Scratch and dent grocery outlets. We grow veggies in the backyard. Craigslist and estate sales furnish our houses. We never pay retail and we find the most amazing things that people are getting rid of.

Jay: 

Ryanne saw that we could scavenge incredible items for cheap from thrift stores and sell them on eBay. No big mystery, but she showed that we could do it big and make incredible money. We treated our online selling like a business, put in the hours, and suddenly felt rich.

Ryanne: 

My mom and I started dabbling on eBay in 1999.

A friend of mine in college was obsessed with buying and selling Ninja Turtles online (I know, not the greatest investment). And I started selling some vintage film cameras, LPs and stereo equipment on eBay for extra cash. My mom started selling antiques and china.

Then, when I met Jay and moved from Boston to NYC, I sold a bunch of my clothes and art supplies. It was just always a way to clean stuff out and make some extra cash.

2scavenging

Trunk full of Treasure

Jay: 

The United States is so full of stuff, abundance, and waste that there’s just treasure lying around everywhere. Thrift stores, auctions, flea markets, yard sales. Hell, some folks just go to Target and buy the clearance items and resell those online for a profit. The US is bleeding treasure. It’s like finding $50 bills just lying on the ground.

Ryanne: 

When the economy crashed, we had been primarily making videos for NonProfits in DC. This work dried up at that time.

We happened to be shopping at our local thrift store in 2008, when I spotted a vintage 1980s Members Only jacket and thought ‘Some hipster in Brooklyn would totally buy that’. So we put a bunch of vintage clothes, which are pennies and in massive quantity here, on eBay.

Lo and behold, a hipster in Brooklyn actually did buy that jacket and our eBay business was born.

Jay: 

We also realized we could buy property using our eBay profits. Now we own an Airbnb rental (come stay! LurayModern.com) and are now renovating a second house for another vacation rental. We realized we loved renovating houses and providing hospitality. It’s fun.

Ryanne: 

We are total gluttons for punishment when it comes to houses.

We bought our house and did a total gut, added a second building for eBay storage and an office. That took 2 years and every penny we made at that time (plus blood, sweat and tears of course).

We finished in January 2011, took a short breath, then bought an 1850s solid brick farmhouse in September 2011 for renovation and eventual Airbnb rental.

This was a much more ambitious project, it took 3.5 years and every penny we made in that time as well. We started renting in February 2015 and it’s been so successful (profitable and fun!), that, again, we took a short breath and bought another house a couple weeks ago.

5keys to new rental house

Keys to still another house

Jay:

Yes, we’re making good money but that’s not the best part.

We wake up with no alarm clocks.

Seriously this is my favorite aspect of this life. I wake up and it’s always Saturday. No one tells us what to do each day. Our online store keeps selling no matter what we’re doing. People are renting our farmhouse.

This means we can follow our interests day to day while keeping on eye “Business” on our phones.

Make no mistake: we work hard but it doesn’t feel like work. Plus, we take a couple big trips every year. We’ve gone to live in Amsterdam the past couple years for 3­-4 weeks at a time. We just book an Airbnb apartment and set up a new temporary home while exploring a city we love.

Ryanne: 

I have to disagree with Jay that this doesn’t feel like work. It’s just a different kind of work than an office or a ‘grin and bear it’ freelance client.

The level of stress is much lower and the rewards of running your own business are so much greater than working for others. Hard to quantify, but sometimes when we’re traveling and working for clients, I can’t wait to get home to our much less stressful work.

Cleaning the farmhouse for renters and shipping eBay items to customers can make you tired, but there is a zen to these things that you just can’t get at an office.

Jay: 

It’s true that video clients still hire us and fly us around the world. But we now have the F-­You money to pick and choose the jobs we want. As Jim says, F-­You money gives you leverage.

Employers/clients know this and it makes us even more valuable.

I think we often get hired because we bring a calm to our work that rarely exists in environments where workers feel trapped and stressed. We’re there because we want to be, not because we have to be.

Ryanne: 

Obviously, we choose the jobs where we get to go to cool places! This year includes Dublin, Seattle, New Orleans and San Francisco (twice!). Not a bad side gig.

Jay: 

I know many here throw their money into index funds and bank on the dividends for their early retirement. That’s sounds awesome. If we have even more extra money one day, maybe we’ll try it.

For now, we’re investing all our profits locally in the community. Makes us feel safer that we can see our money at work. We’ve even thought about buying a commercial building on Main Street to help revitalize an area sucked dry of business by the Walmart on the edge of town.

It’s an open playbook. We’re making it up as we go along.

Ryanne: 

Right, that’s the next big step after getting our rentals going, to try to improve the area for the people renting our places and visiting the area.

We feel that rural America has a lot to offer young people struggling to make it in the cities. It’s like the wild west, ripe for experimentation and success.

Forget paying $3000+ a month for an apartment in the city. Pay a fraction of that and buy a house with land and start a business.

Jay: 

Yeah, maybe others might come join us. We have programmer friends who could code from anywhere. They just need an internet connection and coffee. Who knows.

Ryanne: 

I hope so.

 

jlcollinsnh Notes:

I love this story! So many cool concepts from it jumped out at me:

“…money went a lot farther in a rural area.”

“…when we crave some culture, we just take a trip to the city, eat a good meal, walk the streets…rent a city apartment on Airbnb for a week. All the fun…none of the hassle.”

“We do more traveling than most…because we have the luxury to leave whenever we want.”

“…we live in luxury, but…ignore all the stuff that would suck our money. New cars, fancy clothes…”

“We like to live off the waste of this country.”

“The US is bleeding treasure. It’s like finding $50 bills just lying on the ground.”

“…my favorite aspect of this life. I wake up and it’s always Saturday.”

“Make no mistake: We work hard but it doesn’t feel like work.”

“Cleaning the farmhouse for renters…shipping eBay items…there is a zen to these things…”

“…we often get hired because we bring a calm to our work…”

“…rural America has a lot to offer young people struggling to make it in the cities. It’s like the wild west, ripe for experimentation and success.”

If freedom is the goal, you can start way before you are financially independent. Thanks, Jay and Ryanne, for showing us your way!

Addendum I:

My first ever Podcast where I get to ask the questions! My Podcast interview with Ryanne and Jay

Addendum II:

Want to check out their eBay store? Ryanne’s Valley Vintage

Do you have questions for Ryanne and Jay I didn’t think to ask? Ask away in the comments below!

Important Resources:

  • Vanguard.com (unfortunately Vanguard doesn’t have an affiliate program)
  • Personal Capital* is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you’ll see what’s working and what you might want to change. Here’s my full review.
  • Betterment* is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • YNAB* has the best budgeting tools going and just might be the Best Place to Work Ever
  • Republic Wireless* is my $10 a month phone plan. My daughter is in South East Asia and is on the $5 a month plan. We talk whenever can and for however long we please. My RW Review tells you how.
  • Tuft & Needle helps me sleep at night. Unfortunately they are no longer an affiliate, but still a very cool company and a great product.

*These are affiliate links and should you chose to do business with them, this blog will earn a small commission.

Personal Capital special Valentine’s Day promotion: Any new user who signs up between Friday, Feb 5th and Valentine’s Day Feb 14th is eligible to win a free trip for two to Hawaii. That’s right. A free trip to Hawaii! The prize is $2000 for roundtrip airfare and $1000 for accommodations. Any new user is eligible, so long as you link an investment account. It doesn’t matter how much money you have — you just need to sign up and link.

Of course, you don’t want to do this just to enter a contest. That’s not the jlcollinsnh way! :-) But if you are thinking of giving them a try anyway, now is a good time. Good luck!

Past Post Update, January 20, 2016:

Last October I did a post on: Stockchoker.com

Todd just added two cool new features:

  • Stock Wars: A tool that allows you to compare the performance of two stocks and/or funds.
  • Quizzes: I took both. I’m a “goat” in the first and a “coyote” in the second. You can do better. I dare ya!

Unrelated, but here’s what I’m currently or have just finished reading and enjoyed:

Turbo Capitalism

If you are interested in income inequality, this poorly titled (should have been Unfettered Capitalism – more accurate and more descriptive) is a great discussion of the pros and cons of our current system. Luttwak clearly has his own biases, but is remarkable evenhanded in presenting both sides.

Written in the late 1990s, it is a bit of a time capsule and fun to see how the past 20 years have actually unfolded.

Leave it to Psmith

“Crime not objected to.”

One of my favorite characters from a favorite author. If you like it, here are two more:

Mike and Psmith

Psmith Journalist

Jack Reacher roams around the country carrying only a folding toothbrush. When his clothes get dirty he buys new ones. Oh, and he kills lots of bad guys. “Make Me” is the most recent in the series, but not the best. That might be this one:

Persuader

First line: “People do not give it credence that a fourteen-year-old girl could leave home and go off in the wintertime to avenge her father’s blood but it did not seem so strange then, although I will say it did not happen every day.”

Last Line: “This ends my true account of how I avenged Frank Ross’s blood over in the Choctaw Nation when snow was on the ground.”

How we came to be what we are, behave the way we do and believe what we believe. My favorite in this group.

Where people who live to be 100+ live, how they live and what they eat.

Bad monkeys are Sapiens that need killing, and Jane is on the job. If you are already paranoid, you might want to skip chapter: white room (iv)

Why the future might be incredibly good. Unless the grey goo gets us.

This might be the most enlightening and entertaining take on American history I’ve yet to read.

And here are some of my all time favorites:

The book that has most influenced how I live my life.

Deceptively simple, but really all you need to know about becoming wealthy.

Very possibly my all-time favorite novel.

“The Fall of Edward Barnard” is very possibly my all-time favorite short story.

Perfect for the readers of this blog.

“Bartleby the Scrivener” is very possibly my all-time favorite novella. Don’t be put off if you struggled with Melville’s “Moby Dick.” This is a much better and easier read. Plus it will teach you the most important phrase in the English language:

“I would prefer not to.”

*If you click on the books you’ll go to Amazon, an affiliate partner. Should you choose buy them, or anything else while you there, this blog will receive a small commission. This doesn’t affect what you pay.

Posted in Case Studies, Guest Posts | 29 Responses

3rd Annual (2015) Louis Rukeyser Memorial Market Prediction Contest results, and my forecast for 2016

Just about this time three years ago I published a bit of satire titled How to be a Stock Market Guru and get on MSNBC. In it I mocked the idea that anyone can predict the short-term market and laughed at those who claim they can. Just as one of my financial heroes, Louis Rukeyser, used to do on his weekly TV program Wall Street Week.

Rukeyser

Louis Rukeyser

Every January Rukeyser would have his impeccably credentialed guests predict the market’s high, low and close for the year.  I forget his exact line, but after the predictions were in he’d say something like, “…with the understanding that even these exalted experts could be wrong, there you have it.”  And he’d wink knowingly into the camera.

Come the following December 31st he’d salute those few who’d come closest and chide the many goats.

The key thing his program and its parade of guests taught me is that, at any given time, some expert is predicting any possible future that could conceivably happen.  Since all bases are covered, someone is bound to be right.  When they are, their good luck will be interpreted as wisdom and insight.  If their prediction happened to be dramatic enough, it could also lead to fame and fortune. But it is all nonsense.

Sadly, Mr. Rukeyser passed away in 2006 and the current generation of investors is left without his insights and wisdom.

But in that post, in his honor and his lighthearted spirit, I introduced the jlcollinsnh.com 1st Annual Louis Rukeyser Memorial Market Prediction Contest for the year 2013.

Then, after all this emphasizing of how silly such predictions are, I went and won the damn thing myself. At least on the high and close picks.

My predictions fell short for 2014 but were still pretty impressive for a guy who doesn’t believe predicting the market is possible. But not nearly impressive enough to win even one of our categories that year.

However, almost as if to prove how silly such predictions are, my results were truly wretched for the year just past:

S&P 500 2015:

  • High: 2131 reached on May 21st
  • Low: 1868 reached on August 25th
  • Close: 2044 on December 31st

jlcollinsnh said:

  • High: 2533, off by 402(!) points
  • Low: 1812, off by 56 points
  • Close: 2471, off by 427(!!) points

For the High and the Close it would have been pretty hard to do worse. But some of you managed and I’ll be mocking you shortly.

But first, who among my readers had the audacity to best me at my own game? Most of you it turns out. Even for the low fully 16 of you were closer than, or tied, my 56-point miss.

The best of the best are….

For the High and (!) the Close:

For the first time since I did it in the inaugural contest, we have one winner in two categories. Tom called for a High of 2145, off a scant 14 points and a Close of 2028, missing by only 16. He was wrong about the Low, being 122 points too pessimistic. But he did come spookily close to calling when his high and low would happen. Very impressive and a bit irritating as he presented his predictions so seriously:

“The high will occur early-ish in the year, and later in the year we’ll have a fairly major correction. We seem overdue for one that’s more than the usual 5-10%.

“As for the close being slightly lower than 12/31/14, I think that while our economy is in fine shape, it has risen too quickly and the currently high Shiller P/E seems to agree. There is also a sense that the Fed will increase rates in 2015, which will reduce stock prices, even if it’s only because Wall Street types get spooked.”

Yer making this prediction stuff sound plausible there, Tom.

Fortunately he was completely wrong about his call for a major correction.

So, congratulations and well done Tom! But whadaya got for us in 2016? Bet I get to mock you yet!

For runners-up on the High

While being fully 100% worse than Tom’s 14, Dollar Flipper‘s 28 was good for second place. However, his Low (216) and Close (172) were completely unimpressive, but then he did say: “I pulled them right out of my butt.”

Reepekg, off by 31, came in third. A dismal showing given his promising start last year.

His was the very first entry in the 2014 contest and he took the Low crown impressively, just 7 points off. But, even caught cheating by using owl pellets to divine his number, he promptly took to unseemly bragging:

“I’ve covered myself in glory! Victory is mine! Welcome to 2015, the year of insufferable gloating by Reepekg…”

While I can fully appreciate how winning a contest as prestigious as this one might go to one’s head, muster up a little decorum there, Reepekg.

Worse, for his performance anyway, “This year I have refined my methods considerably. Instead of pellets, the key is the owls themselves!”

In addition to being able to only deliver a third place finish, the owls had him off by 199 on the Low and 160 on the Close.

So my advice Reepekg is, go back to the shit.

Interestingly, Reepekg‘s Low and Close were also the closest to Dollar Flipper‘s. While I have no evidence that they were in collusion, he has been known to use owl poop and we can only guess what coated DF‘s numbers given where they came from. Coincidence, or conspiracy?

For runners-up on the Close

Draggon‘s 33.81 off the pace was good for second place on the close.  Off only 58.64, his High would have put him in fourth place if, you know, we acknowledged losers down to that level.

He gave us fair warning: “Much to all of you-all’s advantage, I wasn’t around to smash the competition last year. But BEWARE – for I am here now to make my prognostication!”

Still, for all his fire-breathing, he didn’t actually win anything. And, of course, his wretched 148.24 miss on the Low surely put ashes in his mouth.

Clint missed the close by 44, good for third place. He told us “…we won’t see a massive beatdown or bull run. Either way, it’ll end up being a mediocre (+/- 10%) year.”

While his high missed by 99 and his low by 159, no one gave a better verbal description for how the year actually unfolded. Well done Clint. I got my eye on you!

For the Low:

This year we had a tie, and both were only 11 points off the mark. Both also turned in miserable performances for the High and the Close. Since Krishanu was slightly less miserable, we’ll start with him.

Krishanu called his predictions “My three cents” and went on to say: “Reasoning: Looking at the market today, these 3 numbers jumped from my sub-conscious to my conscious mind before I started typing. Also known as gibberish.”

Good thing you added that line about gibberish there, Krishanu. Without it there might have been no end to my mocking.

Still the whole hyper-jump from sub-conscious to conscious was good for a win in at least the Low category, and that’s something no one else was able to do.

Other than jimcramer.

All jimcramer had to offer with his predictions was “booyah!” a transparent attempt to convince us that he is the TV personality of the same name. With his dreadful calls on the High (139) and the Close (155) it could have been possible. But with winning the Low? Not a chance.

Showing just how tough winning the Low this year was, five more entries came with 25 points:

Off by just 14.9, Darcy said:

“I’m new to the whole investing scene, so if I lose I’m chalking it up to inexperience, ignorance, and general incompetence. If I win, of course, it’s clearly due to my expert knowledge and market assessment.”

With your pathetic High off 298.6 and Close off 220.9 Darcy, it is a little of both!

Mr. FC was close behind, off by only 16. Why did he come so close? “…a bird flew by and pooped in the yard. That’s why.”

His High missed by 199: “Why? Just because.”
His Close missed by 127: “… my model says that the market has a 7% rise each year and if that happens, I’ll be a happy guy. And I like to be happy”

Listen very carefully, Mr. FC: Mr. Market doesn’t care about you being happy. Stick with the bird poop. It is a time honored strategy around here. Just ask Reepekg.

Mr. Frugalwoods missed the Low by only 18 points. In offering his prediction he said: ‘Love this!” and “…my dog has just as much chance of being right… (and even for a dog, she’s not that bright)”

Would she have been bright enough to best your misses on High (180) and Close (244)? Maybe she’d gaze into the crumbs at the bottom of her food bowl and divine the correct numbers? Better perhaps than your approach of “randomly picked reasonable sounding numbers out of thin air.”

Still, your effort certainly qualifies you “for a recurring segment on CNBC.” (See how little regard I have for those with recurring segments on CNBC?)

This year give Frugalhound a chance!

Linda missed by only 21. “My prediction for this year has been suitably toned down after my ‘half’-baked prediction for 2014.” Good move Linda! But then she “applied some serious economic analysis” and came up with a High off by 86 and a Close that missed by 140.

Mike 4 ended all his predictions with the number 44. “What can I say,” he said “I like the number 44.” Fair enough. It got him within 24 of the actual low. Of course, his High and Close were off by 313 and 300. No fours to be found. But then, I had fours and did even worse.

Across the board….

Peter Akkies said:

“I’ve been analyzing recent stock trading data for my job for the past few weeks so I must be extraordinarily qualified to make predictions for the S&P 500.”

Boy howdy, that’s just asking for abuse when you fail. Unfortunately, Peter did pretty good. His Low, an exceptionally tough category this year, was off by only 26. His High missed by 60 and only four people did better.  And while his Close was an unimpressive looking miss of 115, truth is only seven were more accurate.

So, well done Mr. Akkies. But the question is will you now cravenly avoid this contest and rest on your laurels? Or will you step up again giving me the almost certain opportunity to mock your failure come this time next year?

IndigoCZ said “Despite a long time coming correction, we’ll still end up a little. Or not.”

Well we had the (~10%) correction and finished flat, so not a bad call. And more modestly stated than Peter above. At 72 off the High, 105 off the Low and 77 off the Close, not bad numbers either.

No pressure, but we expect BIG! things from you this year, Indigo!

jkenny didn’t win anything, but his numbers (High 113 – Low 110 – Close 79) were close enough I kept noticing him on the spreadsheet.

Last time, after his dismal 2013 showing,  jkenny said: “Definitely feel like the market’s going to lose it’s head of steam by year end, but I felt that way in 2013 too. Could I have been wronger?!”

Maybe not wronger, but wrong again none-the-less, I told him.

This time a chastened jkenny said: “I’m weighing in again for this year’s collective humility exercise in market predicting.”

If he’d stuck to his “going to lose it’s head of steam by year end” theme he’d have finally been a winner. But, alas, it was not to be.

He went on to say:  “It’s fun! It’s unvarnished truth! It’s free to enter this competition! Yay!”

Mmmm. You may have given me an income idea there, jkenny.

Looking back, the mighty always fall…

After Pura Vida Nick took the honors for his prediction last year for the High, missing it by a scant 7 points, he failed to even try for 2015. His Closing prediction of 2029 was also remarkably close to the actual close of 2059. Resting on those laurels are we, PVN?

As for the Close last year we had a three-way tie and each were only 9 points off the mark. This year?

RW was a no show, cravenly avoiding the arena like PVN. 

dude missed the Close by gaping 139 points this time, and his miss on the High – 127 – was almost as bad. His 56 point miss for the Low looks pretty good until you realize 16 other players did better. Plus it matched my own miss and matching me this year is a sure fail.

At least he has the graciousness to say: “No doubt, my 2015 predictions will be wildly off!” But then, like Tom, he went on to provide some o-so-serious analysis of why he made the predictions he made, including for a Black Swan event.

Like I said last year: “Dude! Your analysis makes such perfect sense your predictions are almost sure to be wrong!”

Last year in accepting his win for the Close, Chris K said: “I am almost blushing except for the fact there as no skill involved in this prediction.” No consistency either, Chris!

He missed the Close this time by a full 180 points and was a pathetic 244 off the High. But off 47 for the Low he at least smoked the dude!

As I said at the time: “No worries Chris, your new predictions are sure to prove no skill is involved.”

For last year’s Low? How much more can we beat up on poor Reepekg?

OK, enough of that. Let’s get on with chiding the goats!

goats

Poor goats. Always on the edge.

The Big Losers…

This year about the stupidest thing you could do was to follow my lead. And, indeed, two contestants were just that stupid:

frugalfighterpilot chose his numbers “Reasoning: To be one(1) better than Mr. Collins in every category.”

This earned him the fourth worst performance on the High and the third worst on the Close. Ever hopeful, he further wanted to know: “Do ‘Price is Right’ rules apply in stock market picks too?”

Ah, no. Not that it matters for you.

forestbound admitted “I have not (emphasis mine) ONE CLUE…” Then he proved it when “…I took Jim’s numbers and upped each one by 3. Why? Because, I’m a crazy (read “lazy”) optimist!”

This bit of cluelessness earned him an even more terrible performance than frugalfighterpilot. His was the third worst for the High and the second worst for the Close.

Guys, stealing a phrase from my pal Jeremy at Go Curry Cracker:

“Think of everything you read here as being written by your unemployed Cousin Larry who wants to borrow $20”

Two years ago, Rob Diesel was our overall winner. His 2013 high came in at #3, his low at #1 and his close at #2. Very impressive and few have done better since. But last year? Last year, not so much…

For 2014 Rob was our biggest, and wrongest, optimist calling for a high off the mark by a whopping 522. He also posted the second worst performance in the closing category, off by 424. His low missed by only 110, saving him from a clean sweep in the goats’ placing. Still, it was enough to crown Rob 2014’s biggest loser!

He’s come up in the world. For 2015 his High was only second worst at 482 off and his Close, off by 317, was only less ugly than the five very worst performers. Only nine people missed the Low by more than his 133 mark.

In entering for 2015 year Rob told us:

“The *real* reason I didn’t win this year (2014) is that all you Debbie Downers artificially depressed the market. That, and some other vague things like ‘cautiously optimistic’ and ‘hedging the bets’ and ‘taking profits’. I think that should be enough that I can spin anything I say NEXT year into ‘I told you so’.”  Ah, how exactly?

He also pointed out: “…at this point I am still at 50%! Pretty impressive statistics over two years.”

And now you are at 33%, Rob. Bet I could get a jump start and begin composing how you’ll be at 25% this time next year….

Merk entered first and came in near the bottom: 331 off the High for fifth worse and 347 off the Close for fourth. Only the top five Low losers did worse than his Low, off 162. Merk told us:  “I have no idea how to predict the stock market, so I picked a range of numbers and had random.org pick the numbers for me.”

Right you are Merk, you don’t. And random.org doesn’t either. At least you didn’t follow me.

While the losers for the High and Close were frequently the same, those for the Low tended to be one offs. In descending order…

Fifth worst was george fritz hahn, off by 168 points. Refering to his prior year’s poor showing, in entering he complained: “What! I’m not the biggest loser?”

Originally posting as The New Mexico Lobo, his pessimistic predictions went on to earn him the title of biggest loser in the 2013 contest. For 2014 he was only an ordinary loser and this year a disappointing fifth.

You’re still not the biggest, george fritz hahn, but you’re a solid loser none-the-less.

Fourth, and off by 187, we have Charlie Jax. Charlie also placed fifth worst for the Close, off 332. Off 281, his High prediction was no great shakes either. A man of few words, Charlie said he: “did research and stuff.” Not enough, Charlie. Not enough.

Third worse, off 199, was Reepekg. Really. What more can we say about poor Reepekg?

Well, we can say he did better than Dollar Flipper, who came in second at 216 off.

To be the #1 worst predictor for the Low in 2015 you had to miss it by a whopping 259 points. Done by Forty done did it. In making his predictions, he said:

“I didn’t place this year (2014)…shoot. But if weekends at the roulette table have taught me anything, it is this: if you keep playing the same numbers, eventually they hit. So, let’s just take the same figures as last time around.”

Difference is, DbyF, around here those same numbers can make things even worse. This ain’t some easy walk in the park like Roulette!

But for overall worst of the worst, the prize goes to Mrs EconoWiser. Her High was off a wopping 619 and her Close by 613. In her Low, off by 131, she was embarrassingly close to Rob Diesel. Not where you want to be this year. Or last. Or likely in 2016.

She failed in 2014, although less badly, using the “stock fairy” for guidance. This time she told us she “Sent the failing stock fairy back to her family and have now consulted a magic rainbow unicorn.” Maybe it’s time to put the unicorn out to pasture and see if that fairy is still talking to you, Mrs. EW.

Odds and ends…

From those who ended in that vast grey area of not winning and not being truly wretched, let’s look for a moment as to how they arrived at their oh-so-unimpressive numbers.

Mary: “I was born in one of those years.”

Too bad you weren’t born in 2131, 1868 or 2044, Mary.

ak907: “Never made a prediction before but here it goes. Based on nothing but my feeling that this will be a weak up year, possibly with some terrorism (ISIS) and interest rate related panics…”

While it didn’t much effect the markets, you were sadly spot on regarding ISIS.

fatchance: “When I asked you to close 2 days early (for the 2014 contest), I was within a $1. I showed my 15 year old son who is taking a business class and he thought I was a genius and told his teacher I could predict the market. I felt like a winner even with the loss. Had I known bribes were an option to close the contest at that time, I would have pursued that route.”

I told fatchance bribes are absolutely an option and, looking at my predictions, clearly I absolutely control the markets. Still, no bribe was forth-coming. Instead, this year all he had to offer was:

“I am an optimist. I don’t think I would ever predict the market would go down in a given year or I would not be in it for that year.”

Danny: “Saw a lot more trading at the end of 2014 from the ‘professionals’ at where I work. However, overall it was less than 2013. Surprisingly though my company’s funds kept up again with the S&P 500 (even after expense fees). Maybe I should go ask the traders for some advice.”

Maybe not.

Seth: “I’ve got a guy.” Get another guy Seth, get another guy.

Matt V.: “I really hope I’m wrong and the market takes a tumble so I can invest at lower prices and maybe move some of my bond position into stocks.

“Here’s my tongue-in-cheek analysis: This bull market still has a bit left to run and the US economy is strong, but investors have a lot to be wary of with deflation fears in Europe, instability in Greece, and the Fed set to increase borrowing costs by raising short-term interest rates. We’ll end the year up around 6%, but it will be a bumpy ride.”

Great analysis, and even occasionally right – on the bumpy ride and (slightly) on interest rates. But, sadly, no help in your market predictions.

Matt: “Here’s your winner…I used the classic method of analyzing P/E ratios against my fantasy football success to arrive at those numbers.”

Great! But, er, where’s my winner?

Kay: “I am pretty sure that the high will be 2413, the low 1734 and 1908 will end at 1934. Or at least, I happen to like those numbers.”

Glad you like them, Kay. But they weren’t correct for 2015. I haven’t checked for 1908.

Jason R.: “Most years are good years, so that’s where I’ll base my prediction. Wouldn’t be surprised to see a much lower low or a higher high or a close anywhere on the board, but if your forcing a guess, I’ll go with around the past’s average year.”

Even after hedging all his bets, Jason still got it wrong.

Prob8: “There are many reasons for the S&P to end up in the red this year.”

“First, this bull market is getting long in the tooth. I believe this bull is in the top five, if not top three at this point. Pretty impressive, but the odds are not in favor of a lengthy continuation.

“There’s also quite a bit of unrest due to the economic and political atmosphere overseas. Oil issues will continue to be problematic and there will, no doubt, arise some new issue this year that will send the market sharply, though temporarily, lower. Valuations are also on the high side and interest rate rises will likely cause some negative market reaction.

“However, the economy seems to be improving and unemployment getting better. Also, stocks will continue to be attractive in an environment with low yields elsewhere – bonds being particularly unattractive given the possibility of interest rate hikes.”

Hedging like Jason R. Even more analysis than Matt V. Wrong like both.

Prob8 has failed miserably in the past as well, laying off the blame on batteries: “My market predictor must need new batteries. Having now replaced said batteries…” nothing changed.

Still, we love Prob8. An estate attorney he is a regular commentator around here and has become our resident death-taxes-probate-estate planning resource. He even has a guest post on the subject.

Jeremy (Go Curry Cracker): 

“I didn’t win?! wtf. This game is totally rigged!

“While my action with the SEC is underway to overturn this horrible injustice, I still find it necessary to enter again this year

“I’ve reviewd my horoscope, verified these numbers against the Fibonacci sequence and Avogadro’s number, and consulted with my deceased ancestors.

“Since I don’t want to rely solely on logical and rational methods, I’ve also studied the current micro and macro economic environment. Hiring is up, prices are deflating, companies are reaping previous years investment at sub zero interest rates, and the developing world is hungry for American products (particularly Oreos and Pop Tarts, but then again, who isn’t?!)”

No need to drag in the SEC or consult your esoteric sources, GCC. Victory can be yours. See my advice to fatchance and think Oreos!

Randellman: “Here’s my picks for 2015… Highly unprobable but just as likely. Happy New Year!”

Highly unprobable and unlikely as it turns out. But Happy New Year to you, R-man, as well!

Keylay: “Has anyone tried averaging all of the previous guesses to see where the average ended up? There’s some evidence that people are good at this type of thing.”

Later Keylay posted again: “Ok, now that I’m sober, I decided to create a little spreadsheet.”

Drunk or sober, averaging or not, spreadsheet or no; Keylay’s poor result is the same.

Frankie’s Girl: “Ha! I was pretty close for the low in 2014… not bad for someone that had absolutely no idea what this strange and scary thing we call the stock market was even a few years ago… (and I no longer find it strange and scary, so yea for me!)”

Ah, you did better when you found it strange and scary. Just sayin’, you know?

Brian: “Why the low? It’s about -6% of today’s close. Why the high? It was a long day and I’m looking forward to retiring by 44 being a reality.”

Hope that retirement doesn’t depend on your market predicting skills there, Brian.

Rockethania: “Why? who knows!”

Who indeed, Rockethania? Other than not you.

MaxTheTerrible: “All numbers above are straight from my in-house developed forecasting machine – the Future Predictor – 1000.

“My proprietary algorithm takes input from tea/coffee non-extractables sedimentation analysis, osseous tissue ballistics, quartz sphere transmission visualization and other proven future-predicting technologies…”

Impressive. Hard to believe it didn’t work Max.

brandon: “Should be easy…” But it wasn’t.

ahonnett: “Basically I tried to do some relatively simple excel modeling based on historic results.

“Then I wasted entirely too much time to continue to tweak my model until it looked reasonable and went with something that I probably should have just swagged to begin with.”

Probably.

Then there were the latecomers…

Of course, cheating as they did, these players late to the party had no chance of being awarded our fabulous prize. This didn’t keep them from trying. Or from being mocked.

randy: “All of my predictions came from my 4 year old he said these would be good numbers so I am going with these numbers. They can’t be to far off from the talking heads analysis. We will see in Dec how good his predictions are.”

His predictions probably were better than most of the talking heads. But not good enough around here. BTW, how are his being-on-time lessons coming?

Arnold: “I am assuming it will be a down market and just want to do it for the fun of it.”

Well, it was flat not down. But was it fun?

Mrs. HealthyWealth: “It took me a while to respond with the correct numbers since I had to do some serious calculations which I then showed to a psychic.”

May I assume you and your psychic are ready with the correct 2015 numbers now?

David Schmidt: “Although too late to be official, I can still be in on the fun.”

Unfortunately, too late to win too, Dave. Oh. Wait. That’s not going to be a problem, is it?

Benedicte: “Well, I am just a little be late (April!!!) which is going to allow me to be the best at this game.

“Since I am about to invest my fortune in the stock market in one big lump sum, I forecast that the market will just go downhill from there. This should prepare me mentally for that big slump that Jim has told me is gonna come one day or another, whilst at the same time allow me to win that contest!”

I warned him:

“With your late entry, I can’t in good conscience award you our extravagant prize should you win. But I will be happy to heap on the abuse should you be off the mark!”

In return he whined:

“Oh come on, I did not even know you guys existed at the time I was supposed to have given my predictions!”

Too bad you couldn’t have been on time, Benedicte. Your call on the High, off only 14 points, would have tied our winner Tom. Of course you did it with only 2/3rds of the year left.

And how did that unfair advantage help with the other categories?

Well, his Low missed by 321 and his Close, a miserable 496, would have disgraced him even further. Only the hapless Mrs. EconoWiser managed to do worse. But she did play by the rules.

Finally, Ivan chimed in during December (!) predicting some futures trades. You might want to check out some reading comprehension courses there, Ivan.

Enough of the past…

Think you can do better? Maybe, like Mrs. EconoWiser, you have stock fairies talking to you?

Here’s how it works.

In the comments below post up your predictions for the S&P 500. Tell us the high, low and where it will close come December 31, 2016. And put in a line or two as to why so I’ll have something to mock you with when you fail.

You have until the close of trading: 4 pm EST, Friday January 15th.

All in good fun, of course, and knowing this is all just so much nonsense.

That right there is the difference from us here at jlcollinsnh.com and all those TV talking heads. While we’re all making predictions, unlike them, around here we know we’re just talking out of our…

…hats.

For those of you who were wrong this year, there’s no reason you might not redeem yourself for 2015 if you’ve the courage to try once more. (Actually, there is every reason. But letting that stop you would require good sense.)

For those who did well, let’s see you do it again. I dare ya! Mocking your failure will be even sweeter!

Don’t feel bad. In all likelihood, you’ll get to mock me too. Here is my analysis and my 2016 predictions:

You would have been forgiven if you had gone to bed on January 1, 2015, slept thru the year and woke up on January 1, 2016 thinking nothing had happened during a short nap. I can’t recall a flatter year end result in the markets than this one:

  • Dow -2.2%
  • S&P -.7%

As expected, the media put on the most negative spin possible. No less than the Wall Street Journal ran this headline: US Stocks post worst annual losses since 2008 Really? This is what you come up with for an overall market loss of less than one percent?

The more accurate description? Slightly up, pancake flat:

  • S&P -.7% + dividends = up 1.4%
  • The tech heavy NASDAQ up 5.7%

But where is the fear in that?

At least they didn’t go with this one:

Nightmare on Wall Street: Will the Blood Bath Continue?

(Worth reading, along with Mr. Market’s Wild Ride, if 2016’s ugly start has you spooked)

Since we are starting 2016 almost precisely where we started 2015, here are my predictions:

  • High: 2533
  • Low: 1812
  • Dec. 31st, 2015: 2471

Astute readers will note these numbers are precisely the same as last year.

Had I been right on a strong positive close for 2015, I would now be expecting a bear during 2016. But I wasn’t. If I’m right this time, and we close up 427 points on the year, I’ll expect that bear in 2017.

We did get the correction I expected, although it came in the Fall instead of the Spring. Along the way, the market absorbed numerous body blows and the resulting volatility. But in the end it was still standing, undiminished.

I think that sets the stage for a another good year. In essence, the same one I predicted for 2015 but even more likely given how well the market has held up to the pressures.

Again, I expect a correction in the 10-15% range, most likely in the first half. In fact, we might be having it right now. (As I write this, the first four trading days have the S&P 500 down ~4.9%) But I don’t expect it will last long.

Gee, reading that it almost sounds like I know what I’m talking about and really can peer into the future. Don’t you believe it. And certainly don’t take any of this too seriously.  My crystal ball is just as cloudy as everybody else’s. My owl pellets are just as moldy. My stock fairies just as…

…well, I don’t actually have any stock fairies.

I’m certainly not changing my investment allocation and strategy based on any of this nonsense and you shouldn’t either.  As Mr. Rukeyser would gleefully point out, past results are no indication of future performance and even I can be wrong. (Oh boy, can I ever!) We’ll see come next New Year’s Eve.

Finally, thanks for your readership and support of this blog!

Happy new year

May Your 2016 be Healthy, Happy, Free and Prosperous!

And on your journey remember:

“Everything you want is on the other side of fear.”

                                                                               Jack Canfield

Note:

My profound thanks goes out to reader ael who took it upon himself to tabulate all the entries into an easy to use spreadsheet. He then graciously and without complaint custom tailored it to my finicky specifications. In doing so he removed much of the tedium and time involved in creating this results post, allowing more of my effort to focus on the mocking so dear to my heart.

But then, he made a mistake. He offered his own set of predictions, complete with this rational:

“I printed out the S&P 500 graph, drew some lines and guessed. Sort of a poor man’s simple (ie not multiple) linear regression. It’s just the market timing part that could screw up my otherwise perfect prediction, sort of like a stopped clock being right twice a day. But if I hit them all I’ll expect your full endorsement and promotion for my own, strike while the iron’s hot, rip off the public good, free market entreprenurial consultancy. (I wouldn’t worry too much about this if I were you)”

I worried about it not a whit which, as it happened was one of my better calls for 2015. The results this system of ael’s produced were nothing short of pathetic.

He missed the High by 294, the Low by 112 and the close by 296. Moron.

Oh, and ael, can I count on your help again this year my friend?

Addendum 1: Past contest posts

Past Post Update, January 20, 2016:

Last October I did a post on: Stockchoker.com

Todd just added two cool new features:

  • Stock Wars: A tool that allows you to compare the performance of two stocks and/or funds.
  • Quizzes: I took both. I’m a “goat” in the first and a “coyote” in the second. You can do better. I dare ya!

On a different note:

The Case Studies are some of my favorite posts and it is always fun when one of our subjects checks in with a follow-up. EmJay did just that this week in his comment to his Case Study from 2013.

Important Resources:

  • Vanguard.com (unfortunately Vanguard doesn’t have an affiliate program)
  • Personal Capital* is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you’ll see what’s working and what you might want to change. Here’s my full review.
  • Betterment* is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • YNAB* has the best budgeting tools going and just might be the Best Place to Work Ever
  • Republic Wireless* is my $10 a month phone plan. My daughter is in South East Asia and is on the $5 a month plan. We talk whenever can and for however long we please. My RW Review tells you how.
  • Tuft & Needle helps me sleep at night. Unfortunately they are no longer an affiliate, but still a very cool company and a great product.

*These are affiliate links and should you chose to do business with them, this blog will earn a small commission.

Unrelated, but here’s what I’m currently or have just finished reading and enjoyed:

 

Turbo Capitalism

If you are interested in income inequality, this poorly titled (should have been Unfettered Capitalism – more accurate and more descriptive) is a great discussion of the pros and cons of our current system. Luttwak clearly has his own biases, but is remarkable evenhanded in presenting both sides.

Written in the late 1990s, it is a bit of a time capsule and fun to see how the past 20 years have actually unfolded.

Leave it to Psmith

“Crime not objected to.”

One of my favorite characters from a favorite author. If you like it, here are two more:

Mike and Psmith

Psmith Journalist

Jack Reacher roams around the country carrying only a folding toothbrush. When his clothes get dirty he buys new ones. Oh, and he kills lots of bad guys. “Make Me” is the most recent in the series, but not the best. That might be this one:

Persuader

First line: “People do not give it credence that a fourteen-year-old girl could leave home and go off in the wintertime to avenge her father’s blood but it did not seem so strange then, although I will say it did not happen every day.”

Last Line: “This ends my true account of how I avenged Frank Ross’s blood over in the Choctaw Nation when snow was on the ground.”

How we came to be what we are, behave the way we do and believe what we believe. My favorite in this group.

Where people who live to be 100+ live, how they live and what they eat.

Bad monkeys are Sapiens that need killing, and Jane is on the job. If you are already paranoid, you might want to skip chapter: white room (iv)

Why the future might be incredibly good. Unless the grey goo gets us.

This might be the most enlightening and entertaining take on American history I’ve yet to read.

And here are some of my all time favorites:

The book that has most influenced how I live my life.

Deceptively simple, but really all you need to know about becoming wealthy.

Very possibly my all-time favorite novel.

“The Fall of Edward Barnard” is very possibly my all-time favorite short story.

Perfect for the readers of this blog.

“Bartleby the Scrivener” is very possibly my all-time favorite novella. Don’t be put off if you struggled with Melville’s “Moby Dick.” This is a much better and easier read. Plus it will teach you the most important phrase in the English language:

“I would prefer not to.”

*If you click on the books you’ll go to Amazon, an affiliate partner. Should you choose buy them, or anything else while you there, this blog will receive a small commission. This doesn’t affect what you pay.

Posted in Annual Louis Rukeyser Memorial Market Prediction Contest | 66 Responses

Q&A – IV: Strawberry Patch

STRAWBERRYPATCH

Strawberry Patch

An original painting by Alex Ferrar

On display at his restaurant Sobremesa, Antigua, Guatemala

In this Q&A Edition IV we talk about:

  • Setting up kids financially (and get to hear my own daughter’s take)
  • Newsweek’s article on the whistleblower v. Vanguard lawsuit
  • Explore the idea of getting a mortgage interest tax deduction by making a much larger mortgage payment before the sale of the property
  • Celebrate a reader’s victory
  • An embarrassing (to me) question from Kevin on my long-promised book
  • Take on a mini-Case Study with Tom
  • Accept Hahna’s invitation to contribute to her 41 experts post and my answer to her question: What one major limiting investing belief hindered my financial success?
  • Currencies and international bank CDs at 7-8%

All these are drawn from the Ask jlcollinsnh page. Next time in Q&A-V we’ll look at some that have cropped up on other posts throughout the blog.

This year I put up only 18 new posts. Part of the reason is that virtually everyday I answer questions in the comments here on the blog. When readers take the time to comment if they ask a question or two I very much like to be able to respond.

But buried in the comments section of whatever post they’ve chosen, our conversation is unlikely to be seen and enjoyed by other readers. In fact, when answering I can’t really even be sure the original commentator has subscribed to the comments and will see the response. It is tempting to blow off these questions and simply move on to writing new posts more readers will see.

But the calibre of most of the questions is excellent and, as I’ve often contended, the comment section on this blog has some of the best, most interesting content.

Back in the Spring of 2014 I ran a series of posts highlighting some of these questions:

Q&A I: Gaijin Shogun

 Q&A II: Salamat

Q&A III: Vamos

These posts were very well received and so, at long last, here is the fourth in this series.  As with the first three, it is named after the featured painting above. Of course these posts are only the tip of the comment/question/answer material here, so if you like reading them I encourage you to poke around in the comment sections a bit more on your own.

OK, let’s get started…

Todd asks about setting up kids financially

Posted December 5, 2015 at 11:53 am

Hi Jim Collins ~

As slightly older parents of a four year old, I am wondering how best to set the child up for her future. You’ve done well writing about your experience(s) in posts about your daughter (regardless of the misleading titles) and I am looking for your thoughts.

I’ve gleaned more useful information from you that it is a ‘given’ when I have a question, I check your blog (and MMM, GCC, MF, as well). Thank you, in advance, for being such an incredibly kind, patient and pleasant voice of genuine concern when it comes to financial matters.

Our Background:

I am self-employed & my wife is part of the company (and a stay-at-home mother). We are each funding our SD401K (index funds), receive profit sharing from the company and contribute to our Family HSA. We each have a ROTH account – many years old, and without much in them. We “might” be able to contribute to these, however we may be ineligible (yet to be determined, for certain).

We save 50 to 70% of our income monthly, and are fortunate enough to do so. This is the first year of being this “savings / investment aggressive” for us, and we feel that we can maintain these goals, all things considered.

My wife & I have worked diligently to get to where we are – and we want to instill this work ethic in our little one. We do expect that our child will have to work / struggle to fund some of her own education – however, we also want to allow her the freedom to pursue her interests.

With that said, I want to begin saving for my child, and would appreciate your suggestions. I’d like to start her path to FIRE, as well as start contributing toward her college savings. Presently, I don’t know if she will want to go to college, but it seems a wise & prudent plan to save for such, regardless.

The 529 plans have limitations as to what can be done with the monies if she chooses to forego higher education – this makes me a bit nervous. We don’t have other children, nor other “qualified individuals” to give / gift this to – and neither my wife nor I will attend college again. (Tax rate + 10% penalties on withdrawals IF not used for purpose).

I would consider a trust, if that would be a better choice? (I am not sure what the rules / tax regulations are surrounding this idea).

You have “F-You” monies set up for your child – what did you do / set up for her? What would your plan be today, if you were doing this again? The same? Something different? If so…what?

Much like you, I’ve been blessed with a little gift from God: I want to make sure I do right.

Thank You,

Todd

jlcollinsnh
Posted December 8, 2015 at 12:29 pm

Hi Todd…

Well, that’s a HUGE question. :)

It sounds like you are in a very similar situation as we were: Namely our child was born after we’d reached FI and so missed out on witnessing the effort it took. Kids, of course, learn by example.

One of the key factors in success is having grit. And just this week I finally came across this short Ted Talk that supports my opinion on this: https://www.ted.com/talks/angela_lee_duckworth_the_key_to_success_grit#t-173597

My wife and I came by our grit by facing some tough times when we were young. So the question becomes, how do we instill grit into our children who, because of our success, won’t have the benefit of their own tough times?

For that matter, is it even possible to instill grit?

Now 23, our daughter seems to have a fair share and her current life in the Peace Corp is testing it well.

I’m not sure how much any of this helped (how your kid turns out is at least in part due to the genetic lottery), but here’s some of what we did:

  • Living modestly and below our means she never really grew up “rich”
  • While we lived in a fairly wealthy town (for the school system) we never indulged her by buying brand name, fashionable stuff.
  • Unlike many of her friends, she didn’t get a car for her 16th birthday. (although we allowed her fairly liberal use of the family car)
  • While we paid for her college (tuition, books, room & board) she had to work for any extras (clothes, entertainment). She was a waitress.

So, not as tough as we had it, but much tougher than many of her peers.

Once she started working, each year I funded a Roth IRA for her.

Like you, I’m not a fan of 529 plans and never used one.

Trusts have always struck me as overly complex and expensive. Maybe if you come to see your child as immature and irresponsible the complexity and expense might be worth it. But fortunately, we don’t have that problem.

In the end, the best you can do is to love them and guide them and hope they use the benefits you are able to provide to become (rather than weaker) stronger and more successful.

And, yes, I’d do it pretty much the same way if I had it to do over.

Hope this helps!


Jessica Collins
Posted December 8, 2015 at 8:18 pm

Hi there Todd,

I was reading your question to my dad, as well as his response, and thought I could add a bit from my own experience.

While I can’t give you details behind his mastermind plans (only he knows what’s going on in his brain), I can share a bit about how he and my mom taught me about money.

When I was very little, my parents started giving me an allowance. I don’t remember exactly how old I was, or how much it was, but for as long as I can remember, they gave me an allowance, until I started working.

Anyways, when I received my allowance, my parents always encouraged me to divide my allowance into three parts: a college fund, savings and personal use. When I was very young, my parents told me how much to put in each, but once I got a bit older (maybe around middle school?) they started leaving the choice up to me. I would also do this with birthday money and Christmas money.

Now I will admit (and I ofter joke with my dad about this), at a young age I did not really understand this concept. Let’s say my allowance was $1. I would put 25 cents into my college fund and 25 cents to my savings, so I would have 50 cents for myself to spend. At the time, I didn’t realize what I was doing. I just thought I had 50 cents and the other 50 cents disappeared and I would never see it again.

Eventually, I began to understand what I was actually doing with my money was investing it in my future. Yes, I went years not understanding why my parents would give me an allowance, only to take half of it away. :)

But, by the time all this clicked, I was already in the habit of putting money aside. I was in the habit of saving. Even while I’m here in the PeaceCorps I am still putting aside money from my tiny monthly allowance every month, in hopes of saving even a small amount while here.

Another thing my parents would was to sit with me and go over my finances. I know, sounds really intense, especially for a little girl (and it was- I hated these talks!).

We would sit at the kitchen table and go over my money: how much I had saved, and how much I had personally to spend.

When I was old enough to have a bank account, we would go over my bank statements as well.

We would discuss what I had spent my money on. They never lectured me on how to spend my money but just talking about it brought to my attention what I was spending money on and how much. Over time, this helped me prioritize what I value and would prefer to spend money on.

My parents also kept me very involved in my own finances. When it was time to open a bank account, my dad took me to the bank, where I talked to the nice bank lady about my options. Of course I didn’t make the decision on my own, but being involved helped me feel more in control of my finances.

Sorry to ramble on, just wanted to share my side!

I think as long as you keep your child involved in their own finances (whatever that may look like), then they will be ok. They may not enjoy it and they may push against it ( I know I did!) but they will come around.

It’s better to start them young and have to kind of force them; at least when they realize it’s importance, they will be prepared with the necessary tools.

I think the thing that made understanding money so difficult for me, was that, in order to understand money, one must have life experience. Most little kids don’t have life experience.

However, it’s once those life experiences start to come, those things start to clink into place. And although they may not understand right away, they will remember.

Hope this helps!

pc_track_net_worth300x2501

 December 6, 2015 at 7:27 pm

I have read about Vanguard being at risk of losing upcoming state and federal lawsuits about its tax-free status. Vanguard would then owe billions in back taxes.

I assume the expense ratio for the funds would skyrocket.

What will happen immediately to the value of Vanguard ETFs if Vanguard loses these lawsuits?

Are the ETF values tied to the market, or can Vanguard choose to devalue its ETFs in order to raise money to pay back taxes?

If the value of my Vanguard ETFs is at risk, should I sell out before the lawsuits are decided?

jlcollinsnh

December 8, 2015 at 12:49 pm

Hi Chris…

Thanks for bring this to my attention.

So everyone else is up to speed, here is the article:

http://www.newsweek.com/vanguard-whistleblower-tax-dodge-complaint-400901

I reached out to my Vanguard contact and here is her response:

“Hi James.

“I understand why your readers are concerned about the highly speculative Newsweek article. We have not issued a public statement on the article, but let me give you some background so that you can get your arms around the issue.

“First, the New York Supreme Court dismissed the suit in question last month. The Court agreed with Vanguard’s position that the former employee violated attorney-client privilege and New York state ethics rules in bringing the claim. We are not aware of any other lawsuits on these issues.

“Second, there have been many inaccuracies in news accounts on this matter and pure conjecture about payments and the potential for rising expense ratios. The tax payment we have paid to Texas—the result of a routine, unrelated audit—will not change any fund’s expense ratio or performance, nor the account balance or tax obligation of any client.

“The Newsweek article also speculates about the potential for higher fees for Vanguard clients. Given our strong cash inflows and solid financial markets, we expect to continue to lower the cost of investing for our clients.

“Finally, we remain confident in our approach to paying our fair and appropriate amount of taxes.

“Let me know if you or your readers have further questions.”

Here’s my take:

This sounds to me like a despicable money grab on the part of this “whistleblower” and the idea of punishing a company (Vanguard) for doing right by their customers is outrageous. I would have been stunned if this suit had been successful.

But even if it had, the worst outcome I can imagine is that Vanguard would be forced to raise their expense ratios to the level of the rest of the other fund companies. Initially this cash flow would be used to pay any back taxes and penalties. After that it would flow back to us shareholders because, thru owning the funds, we are the owners of Vanguard.
http://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/

This might then be taxable income to us which, while not ideal, is hardly the end of the world. 😉

In short, even in the worst case scenario (which is not happening), there is nothing here that would cause me to sell.

Hope this helps!

Jian
December 2, 2015 at 1:04 pm

Hi Mr. Collins,

It’s so good to have you back and laboring on the blog again! I have a tax-related question and hope to hear what you think.

I’ve decided to sell my rental property which has doubled its value since I bought it in 2011 (crazy area that I live in!), but wonder if I can take full advantage of the mortgage interest tax deduction by making a much larger mortgage payment before the sale?

It seems like a tax gimmick to me, but also perfectly legal after some google research. You are way knowledgeable in our depressingly convoluted tax rules, and mentioned in previous posts that you volunteer with VITA each year, so I’m really hoping to hear your thoughts on my tax loophole “scheme”. Thanks again for keeping up this wonderful, sometimes life-changing blog!

 jlcollinsnh
December 2, 2015 at 10:44 pm
Hi Jian…
Always a pleasure to hear from you!

I think your question actually has more to do with how mortgages work than taxes.

Any mortgage interest paid is deductible in the year you pay it, assuming you itemize your deductions.

But if you pay extra on your mortgage, that money would go to paying down your principle. But you wouldn’t owe any more interest with the extra payment, so nothing deductible would happen. Just like when you sell and pay off the mortgage, interest stops accruing.

This is really not an area of expertise for me, but that’s my take!

Hope it helps!

Jian

December 2, 2015 at 11:01 pm

Dear sir,
You are right, again and of course. I actually knew extra payments would count against principle rather than interests; somehow, wishful thinking came over me! :)

In my defense, lots have happened and I just made “the leap” of getting myself unemployed LOL. Now selling the condo, debating where to travel to in my new found freedom, what volunteer work/”do-gooder” stuff I can attempt, …, it’s all a bit too much to handle at once. Anyways, that’s my excuse for coming up with stupid schemes!

Again, I can’t thank you enough for this blog and your always cool-headed advice. I can’t say I’d never have done it without your wonderful blog, but am sure it would have taken me much longer and more detours. So, thank you again from my heart!!

Jian
December 4, 2015 at 8:46 pm

Dear Mr. Collins,

I’ve been meaning to write and tell you my small victory, while still basking in the afterglow of saying goodbye to the 9-to-5 life :).

There’s nothing extraordinary here, just a somewhat independent and contrarian disposition, distaste for wastefulness and mindless consumption, a few lucky breaks, plus wise advice from bloggers like you and MMM.

The only thing that might stand out is I’m an immigrant who only came to the US in my late 20s. After getting an MBA, I worked as a software engineer/project manager for 12 years at rather modest salary (under $100k/year, VERY modest by Bay Area standard :D). Took a break for a year and half, then came back and worked another 2 years.

Basically after ~15 years of working decent but not really high-paying jobs, I’ve accumulated enough (according to the 4% rule) to no longer having to depend on regular pay checks. I didn’t even save that hard to be honest, with the biggest savings being maxing out 401k contributions. Also made plenty of mistakes along the way, picking individual stocks, buying a brand new VW sedan AND a 3-bedroom 2.5 -bath townhouse (all for one-person household!).

If I, overall a pretty average person, can do it, everyone can if they choose to. Everyone who’s got a decent education, average intelligence, and a bit of luck, that is.

Of course I’m also a bit terrified! The stock market is very much over-valued, so is my net worth naturally. But obviously I’m not going to be dogmatic about the 4% rule and will adapt. I could always free-lance for supplemental income. There are a few ideas I’ve been tossing around in my head that have to do with promoting local businesses, building communities, etc., etc. Geographic arbitrage will also play a role.

Anyways, I’m probably in a too excited state to write intelligently; except that I truly want to thank you for your excellent blog, your unfailing patience and sage advice! It’s rather lonely to be financially intelligent, oddly enough, as the Bay Area is full of super smart people. I’m so glad I can always count on you, MMM, GCC, and Mad Fientist for a sense of community and fellowship. So thank you again and looking forward to your next post.

Yours ever-grateful,
Jian

jlcollinsnh
December 4, 2015 at 11:50 pm

Hi Jian…

Anybody referring to my “excellent blog, unfailing patience and sage advice” is clearly writing intelligently. 😉

Congratulations on reaching FI! I’m deeply honored to hear my blog has played some small roll.

Well played.

Well deserved.

You are right: Financial intelligence is rare and the path to FI is lonely. That fact is always brought home to me at our Chautauquas where attendees invariably report that the best part is finally being sounded by like-minded people.

Enjoy your new found freedom!

Warm Regards

Kevin
 December 1, 2015 at 9:24 pm

Book update?

When will it be available and what can you tell us about it?

I was hoping it would be released by now so I could send it as Xmas gifts to family and friends.

Thanks.

 jlcollinsnh
December 1, 2015 at 10:45 pm
Thanks for your interest, Kevin!

Unfortunately for both of us, it won’t be out in time for Christmas.

I got burned out on the project over the summer, my editor entered a monastery and it has been sitting since then.

The good news is the manuscript is nearly done, but I gather there is a lot more to do after that before it gets published.

Sigh!

Some call for a fairly extensive review and are like mini Case Studies
Tom
December 1, 2015 at 11:01 am

Hi Jim,

Hope your enjoyed your time in Ecuador. This is a reposting from Oct., sorry about that. I’m trying to get an opinion on what to do.

Recently my wife was laid off of her job after 18 years.. She has a chance of continuing to work for them but would have to move which we do not want to do at this time.

Anyway, we have 310K in a 401k, 170k in a pension which will pay approx, $1500 a month for 20 years starting at 65 years of age, and finally 70k in the government TSP.

At this time I thought about rolling everything over to Vanguard VTSAX in a IRA. The 401k is limited Vanguard funds, the annuity is something I’m not a fan of. I like the idea of having control of our money and being able to help the kids out later.

The TSP is 80% C and 20% S funds. And I’m just letting it sit there until 701/2 years of age.

My wife plans to retire at 66, but since losing her position her income and benefits have dropped dramatically. And who knows when she will be able to find permanent work. Regardless of what anyone says, when your in your late 50″s, jobs are harder to find.

Right now she’s working temp jobs on a regular basis. I retired after 32 years with the Federal government. I have some serious spine issues so I’m limited in what I can do.

Right now we have 300k in equity of a 400K home. My idea is to sell the home and buy something for cash, then use the money saved to continue to invest in the 401k.

It’s not going to be anyway near possible for my wife to get the same pay or benefits she was getting before. Were trying to be realistic at this point.

Once she reaches age 66, we will move to a more affordable city and closer to family. I have a pension of 30k per year, and my wife SS will be approx 27-30K per year.

Bottom line, is it a good idea to roll over everything to VSTAX, or because my wife is not investment savvy, I would consider using Betterment, which would make it maybe easier for her to understand and get help when I pass on.

My first and foremost concern is too make sure she will be ok. Thanks for your help.

December 8, 2015 at 5:26 pm

Hey jlcollinsnh,

I’ve been following your blog for a few years now after first being introduced to it by Mr. Money Mustache and, as a result, I have achieved a six-figure investment portfolio and net worth using your advice.

I’m creating an expert roundup post for my blog, hahnakane.com. My mission is to interview financially successful people and share their knowledge with college-educated millennials to help them master their money, so that they can achieve the lifestyle they truly desire. I would love to include your insights on the following topic:

What was one major limiting belief that hindered your success with investing and how did you overcome it?

There’s no maximum limitation on the length of your answer, but a minimum of 50–100 words on this topic would be fantastic.

Several influential bloggers have also contributed like Financial Samurai, Healthy Wealthy Income, Money After Graduation and many others!

Deadline for submissions is December 19th, 2015 – hope you are able to participate.

Keep being awesome!

Cheers,

Hahna

 

 

Note: I am aware of and apologize for the formatting glitches in this post. My guess is they hitchhiked on in as I cut and pasted the comments. Clearly I’ve been unable to correct these but, after hours of trying, it is what it is!

Important Resources:

  • Vanguard.com (unfortunately Vanguard doesn’t have an affiliate program)
  • Personal Capital* is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you’ll see what’s working and what you might want to change. Here’s my full review.
  • Betterment* is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • YNAB* has the best budgeting tools going and just might be the Best Place to Work Ever
  • Republic Wireless* is my $10 a month phone plan. My daughter is in South East Asia and is on the $5 a month plan. We talk whenever can and for however long we please. My RW Review tells you how.
  • Tuft & Needle helps me sleep at night. Unfortunately they are no longer an affiliate, but still a very cool company and a great product.

*These are affiliate links and should you chose to do business with them, this blog will earn a small commission.

Unrelated, but here’s what I’m currently or have just finished reading and enjoyed:

Leave it to Psmith

“Crime not objected to.”

One of my favorite characters from a favorite author. If you like it, here are two more:

Mike and Psmith

Psmith Journalist

Jack Reacher roams around the country carrying only a folding toothbrush. When his clothes get dirty he buys new ones. Oh, and he kills lots of bad guys. “Make Me” is the most recent in the series, but not the best. That might be this one:

Persuader

First line: “People do not give it credence that a fourteen-year-old girl could leave home and go off in the wintertime to avenge her father’s blood but it did not seem so strange then, although I will say it did not happen every day.”

Last Line: “This ends my true account of how I avenged Frank Ross’s blood over in the Choctaw Nation when snow was on the ground.”

How we came to be what we are, behave the way we do and believe what we believe. My favorite in this group.

Where people who live to be 100+ live, how they live and what they eat.

Bad monkeys are Sapiens that need killing, and Jane is on the job. If you are already paranoid, you might want to skip chapter: white room (iv)

Why the future might be incredibly good. Unless the grey goo gets us.

This might be the most enlightening and entertaining take on American history I’ve yet to read.

And here are some of my all time favorites:

The book that has most influenced how I live my life.

Deceptively simple, but really all you need to know about becoming wealthy.

Very possibly my all-time favorite novel.

“The Fall of Edward Barnard” is very possibly my all-time favorite short story.

Perfect for the readers of this blog.

“Bartleby the Scrivener” is very possibly my all-time favorite novella. Don’t be put off if you struggled with Melville’s “Moby Dick.” This is a much better and easier read. Plus it will teach you the most important phrase in the English language:

“I would prefer not to.”

*If you click on the books you’ll go to Amazon, an affiliate partner. Should you choose buy them, or anything else while you there, this blog will receive a small commission. This doesn’t affect what you pay.

Here’s to a

Happy, Healthy and Prosperous New Year!

Posted in Q&A Posts | 25 Responses

Seasons Greetings! and other cool stuff

Merry Christmas card odd original

Others like this one

To my readers:

Have a

Wonderful Holiday Season

and here’s to a

Healthy, Happy and Prosperous New Year!

And for your amusement in between the celebrations….

shiprock-3[6]

Shiprock

After graduating college it took me two years to land my first “professional” job. To make ends meet I worked for Ernie as a landscaper. Basically that meant doing whatever yard work jobs he could scrounge up.

Ernie also worked as the janitor for several apartment buildings, and he had several different “wives” and many children scattered about. Although he might spend a few days and pass on some cash as he could, he didn’t live with any of his “families”. Instead, in many of the building basements he had put together basic living quarters for himself tucked away in the corners. Rent free and secret places of escape.

Kinda like these:

custodian lair

Custodian Lairs

india old man

Old man in India

Photo Courtesy of Kyle Hale

Never forget how strange this all is

tree-church

New Zealand Tree Church

This is how my friends over at Go Curry Cracker did it:

GCC jr

How we saved multi-millions

….and here’s how it worked for MP:

To Dream the Impossible Dream

india girls

Little girls in India

india boys

Boys in India

Photos Courtesy of Kyle Hale

Worth reading:

Everyday the media bombards us with reasons to be worried about the future.

In ‘Abundance’ the authors make the optimistic case.

‘Sapiens’ is one of the best written, most eye-opening books I’ve read in a long time.

It is the story of where we came from and why we believe what we believe and live as we do.

If you think you already know, you are likely to have your beliefs challenged. I did.

And having our beliefs challenged by someone as clear thinking as Mr. Harari is always a good thing.

At any given time I’m usually working my way thru two or more books at the same time. As it happened, these two I read that way. If your reading approach is the same, you might consider doing so as well. I found them especially well matched.

This might be the most enlightening and entertaining take on American history I’ve yet to read.

Tom's france

Leaving France, and words to live by

cliff restuarant

Cliff Restaurant and other cool places you’ve never been to.

Mustachian

Mustachian

Indonisian troops

Troops prepare for a demonstration on October 3, 2015 for the 70th-anniversary celebration of the Indonesian Armed Forces.

HutMandanChief.jpg.CROP.original-original

19th Century Portraits of Native Americans

four-agreements-3-728

The Four Agreements Book

Wine & woman

The Strangely Simple Rules of Life

Korea Life in Busan in the early 1950s (26)

Life in Busan

train

Trains

find your gift

States 38

More interesting US maps

Fact- background radiation

Facts- dying cells facts Atoms

boy meditating under tree

Seven Months meditating under a tree. And counting.

“The mind is a machine that is constantly asking: What would I prefer?”

Azimove quote

More like this post: Random cool posts

Important Resources:

  • Vanguard.com (unfortunately Vanguard doesn’t have an affiliate program)
  • Personal Capital* is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you’ll see what’s working and what you might want to change. Here’s my full review.
  • Betterment* is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • YNAB* has the best budgeting tools going and just might be the Best Place to Work Ever
  • Republic Wireless* is my $10 a month phone plan. My daughter is in South East Asia and is on the $5 a month plan. We talk whenever can and for however long we please. My RW Review tells you how.
  • Tuft & Needle helps me sleep at night. Unfortunately they are no longer an affiliate, but still a very cool company and a great product.

*These are affiliate links and should you chose to do business with them, this blog will earn a small commission.

If you are looking for some holiday reading, here’s what is or recently has been mine:

Leave it to Psmith

“Crime not objected to.”

One of my favorite characters from a favorite author. If you like it, here are two more:

Mike and Psmith

Psmith Journalist

Jack Reacher roams around the country carrying only a folding toothbrush. When his clothes get dirty he buys new ones. Oh, and he kills lots of bad guys along the way. “Make Me” is the most recent in the series, but not the best. That might be this one:

Persuader

First line: “People do not give it credence that a fourteen-year-old girl could leave home and go off in the wintertime to avenge her father’s blood but it did not seem so strange then, although I will say it did not happen every day.”

Last Line: “This ends my true account of how I avenged Frank Ross’s blood over in the Choctaw Nation when snow was on the ground.”

Where people who live to be 100+ live, how they live and what they eat.

Bad monkeys are Sapiens that need killing, and Jane is on the job. If you are already paranoid, you might want to skip chapter: white room (iv)

And here are some of my all time favorites:

The book that has most influenced how I live my life.

Deceptively simple, but really all you need to know about becoming wealthy.

Very possibly my all-time favorite novel.

“The Fall of Edward Barnard” is very possibly my all-time favorite short story.

Perfect for the readers of this blog.

“Bartleby the Scrivener” is very possibly my all-time favorite novella. Don’t be put off if you struggled with Melville’s “Moby Dick.” This is a much better and easier read. Plus it will teach you the most important phrase in the English language:

“I would prefer not to.”

*If you click on the books you’ll go to Amazon, an affiliate partner. Should you choose buy them, or anything else while you there, this blog will receive a small commission. This doesn’t affect what you pay.

Posted in Random cool things that catch my eye | 23 Responses

Personal Capital; and how to unload your unwanted stocks and funds

personal capital

Personal Capital

If you have come here, read thru the Stock Series and decided the simple low-cost approach described makes sense, you are now faced with the problem of how do you get from where you are to where you want to be. That is, what do you do with all the investments you already have? How, exactly, do you move from point “A” to point “B”?

If you are like many readers, you’ve come to this blog having already spent years, maybe even decades, investing. You very likely have a wide range of stocks and/or funds that seemed like a good idea at the time but now, maybe not so much.

The first order of business is to get a grasp on exactly what you currently own, what it is costing you in fees and how/if it might fit into your new and future plans.

You may already have this well organized and at your fingertips. If so, well done and you can skip ahead to Part 2.

Part 1: Personal Capital

If not you’ll probably want to use one of the free tools out there, and Personal Capital is the coolest I’ve seen and one of the easiest. It is the one I recommend and it is the newest affiliate here on the blog. What that means is, if you choose to use it, this blog will earn a commission.

To use Personal Capital‘s free tools, click on the link and log in. Next you’ll enter your investments and bank accounts. While I don’t use Mint, some of my FI friends tell me entering your data into PC is even easier.

Once your info is entered, you’ll be able to keep track of all your accounts and the data will be updated automatically. You can even enter any paintings, antiques, jewelry and/or any other valuables you might own. Of course with those you’ll have to decide on their value and it won’t be automatically updated.

Your PC dashboard then automates your net worth calculation and updates every time you log in on your desktop, phone or tablet.

Once you are done, assuming you’ve entered everything correctly, you’ll have complete handle on your financial situation:

Net Worth

PC net worth

Fees on your funds

PC fees

PC retirement fees

Your current allocations

PC allocation_large

Cash Flow

PC cash flow

Retirement Planning

PC retirement

Note: The above illustrations are all courtesy of Personal Capital, from their website and are not from an actual client account.

At a glance now you’ll see what’s working and what you might want to change. As I say, very cool.

So what’s the catch?

Skeptic that you are (or should be) right about now you’re thinking:

“If this is all free, how do they make their money?”

Boy howdy! You sound like me!

This is a lot of cool and sophisticated stuff to provide for free and around here we know even we can be conned. When offered free stuff, it always pays to understand how the money flows. While my pals had already filled me in, this still was one of the key questions I had when I met with them at FinCon (see Sidebar below). Nothing like hearing it personally.

Turns out they are also financial advisors and several buttons on their site will direct you to this service. So what is happening here is, by offering these tools, they are also collecting data and in the process cultivating a very clean prospect list for their services. If your assets are large enough they will reach out to you and offer to sign you up.

My independent sources who have experienced this assure me it is very low key and low pressure. They don’t want to alienate anyone. The thinking is that as people get used to using their tools over the years, should they ever decide to engage professional guidance, Personal Capital will be the first in mind and the “go to” place. Seems a smart approach to me.

Meanwhile you can happily use the free tools and ignore the advisory service for as long as you like.

So should you use their advisory service?

Well, the the annual fees are:

.89% for portfolios up to $1 million and then…

  • .79% for the first $3 million
  • .69% for the next $2 million
  • .59% for the next $5 million
  • .49% over $10 million

Let’s look at it this way:

  1. If you are coming from a traditional advisor and paying upwards of 1% a year, Personal Capital looks very good and is worth your serious consideration. Especially if you find value in personal attention.
  2. If you just want some guidance setting your asset allocation and rebalancing it automatically, Betterment is a less expensive option.
  3. If you have read the Stock Series here and are comfortable with what you’ve learned, you should be able to handle this yourself. Go directly to Vanguard and their low-cost index funds. This is your least expensive option and at a million plus invested you’ll even qualify for their Flagship Service and some personal guidance.

Part 2: How to unload your unwanted stocks and funds

OK, now that you have the tools in place to assess what you own…

…once you do you might not like what you see.

But before dumping everything and moving on to better choices, you’ll want to think about some important considerations, mostly around the tax implications of selling an investment. But also how and where you want your assets invested going forward. Ideally you want to get this set up right and then, other than occasionally rebalancing, leave it alone.

First you’ll want to decide what your asset allocation should be. Selecting your asset allocation discusses ways to approach this and in it I share what we do personally.

When thinking about your allocation, think across all your investments and, if you are married, across all your investments for the both of you. For instance, our personal allocation to bonds is 25% and I hold our bond fund in my IRA. We could just as easily hold it in my wife’s IRA. Either way, it is 25% of our total holdings and keeping it in one place makes rebalancing easier.

Once you’ve decided where you want your investments to be, it is time to figure out how to move them around.

I link to lots of stuff; basically anything I see that I think might be useful, interesting or entertaining to you the reader. A few of these links are affiliates and these, along with the AdSense ads at the top and imbedded in some posts, pay the bills around here.

Personal Capital (PC) is the most recent of these and one of only six I have accepted. If you are curious immediately below is a list of the others.

PC first came to my attention ~10 months ago when a couple of financial bloggers I deeply respect suggested it would be a good fit here.

While impressed with what I saw, I waited until this past FinCon (financial bloggers conference) where I had a chance to spend an hour+ face-to-face with Michael the Director of Marketing, quizzing him closely and getting my questions answered.

While the affiliates here are companies and products I have personally vetted, those in the AdSense ads are not. Please see: Disclaimers

Important Resources:

  • Vanguard.com (unfortunately Vanguard doesn’t have an affiliate program)
  • Personal Capital* is a free tool to manage and evaluate your investments. With it’s great visuals  you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you’ll see what’s working and what you might want to change.
  • Betterment* is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • YNAB* has the best budgeting tools going and just might be the Best Place to Work Ever
  • Republic Wireless* is my $10 a month phone plan. My daughter is in South East Asia and is on the $5 a month plan. We talk whenever can and for ever long we please. My RW Review tells you how.
  • Tuft & Needle* helps me sleep at night. A very cool company and a great product.

*These are affiliate links and should you chose to do business with them, this blog will earn a small commission.

Unrelated, but here’s what I’m currently or have just finished reading and enjoyed*:

First line: “People do not give it credence that a fourteen-year-old girl could leave home and go off in the wintertime to avenge her father’s blood but it did not seem so strange then, although I will say it did not happen every day.”

Last Line: “This ends my true account of how I avenged Frank Ross’s blood over in the Choctaw Nation when snow was on the ground.”

How we came to be what we are, behave the way we do and believe what we believe. My favorite in this group.

Where people who live to be 100+ live, how they live and what they eat.

Bad monkeys are Sapiens that need killing, and Jane is on the job. If you are already paranoid, you might want to skip chapter: white room (iv)

Why the future might be incredibly good. Unless the grey goo gets us.

This might be the most enlightening and entertaining take on American history I’ve yet to read.

And here are three of my all time favorites:

The book that has most influenced how I live my life.

Deceptively simple, but really all you need to know about becoming wealthy.

Very possibly my all-time favorite novel.

*If you click on the books you’ll go to Amazon, an affiliate partner. Should you choose buy them, or anything else while you there, this blog will receive a small commission. This doesn’t affect what you pay.

Posted in Money | 24 Responses

Stockchoker: A look back at what your investment might have been

stockchokerOG

Back in February Mr. 1500 Days invited me to participate in his 10 Questions and a Pizza Place interview series. It was fun to do, readers seemed to enjoy it and the 1500 Days are cool folks. So of course I’ve been planning to steal the idea ever since.

When I came across Todd Froemling and his newly created Stockchoker.com, I knew the time had come.

I love simple and this tool couldn’t be more simple. Enter three data points — a stock or fund, a date and the amount invested — and it spits out how you would have done. Along with a snarky comment.

The next time your broker, advisor, brother-in-law (not all the same person, I trust) or your drunk and bankrupt…

Mature man w/glass of beer

Uncle Dick tells you:

“Index Funds? Those are for weenies. Put your money in XYZ stock or my secret high-fee star manager fund. That’s what all the smart money does!”

…you’ll be able to pull out your (Stockchoker) tool and see just how many used Honda Civics you could have bought with your losses.

My thanks to my pal Kathryn who brought Stockchoker to my attention when she profiled Todd on her wonderful MSB Cheatsheet. You’ll find a link to it in the interview.

But now, let’s put Todd under the bright light and interrogate him…

First, let’s talk about Stockchoker:

What is Stockchoker?

Stockchoker is a simple new web tool that answers a fundamental question: What would a past investment be worth today?

You get to pick the company or fund, the investment date and the investment amount. Once you’ve done that, Stockchoker tells you how much the investment would be worth today and provides some other useful information, such as the annual rate of return, the net gain (or loss) and the number of tacos you could order at Jack in the Box with that much money.

Where did the cool name come from and what’s the meaning of the “choker” part?

I love puns and I wanted the site to have an easy-to-remember name. There isn’t really another word I can think of that rhymes with “broker” and makes sense given the content of the site.

Joker was already taken, plus it might’ve cast doubt on the accuracy of the data. So that leaves croaker, poker, soaker, toker…

…toker would’ve been kind of funny, now that I think about it.

What prompted you to create the site?

I was discussing investment strategies with my parents several months ago. They compete against each other with their respective Roth IRAs to see who can do better, which seems like amazing fun (even though it’s probably a bit dangerous if you’re over-competitive).

At one point, the topic turned to Apple stock. If their Roth IRA competition is a game, Apple stock is my dad’s cheat code. He mentioned a friend who’d sold several hundred shares in the early 2000s and then started trying to calculate the size of the fortune that was lost.

I hopped online, assuming there was a popular tool that answers these sorts of questions. As it turns out, there wasn’t. That’s when I decided to build Stockchoker.

What makes it great?

Its simplicity. On most financial sites, you’re bombarded with charts, graphs and other statistics that are tough for non-finance people to comprehend. Stockchoker’s data should make sense to anyone with a fourth-grade education, but it’s also sophisticated enough to use as a legitimate comparison tool.

Kathryn Cicoletti

Kathryn Cicoletti, horseshit

Kathryn Cicoletti

…the mastermind behind the MSB Cheat Sheet, suggested using the site as a quick and easy way to evaluate funds that a financial advisor might try to sell you. Using Stockchoker, it’s incredibly easy to compare the funds they peddle to lower-cost index funds over any period of time. If the index funds have a better return, you’d probably be better off going that route.

Where does the data come from?

Yahoo! Finance is kind enough to provide current and historic stock data to programmers.

Do the results include stock splits and dividends reinvested?

Yup. To quote Yahoo! Finance:

“Data is adjusted using appropriate split and dividend multipliers, adhering to Center for Research in Security Prices (CRSP) standards.”

How are ERs (expense ratios) accounted for in the results?

These are baked into the data Yahoo! provides. As an example, compare VTSMX and VTSAX. Those funds have identical holdings, but VTSAX has a slightly lower ER (because it requires a larger minimum investment). You’ll notice VTSAX always comes out a little ahead thanks to the lower ER.

How about fees paid to advisors and sales loads (commissions)?

You’ll have to account for these yourself. It’s not possible to factor in any financial advisor fees since those would vary from person to person. Don’t overlook these; they can add up fast.

I love the gratuitous, free smart-ass comments that come with each result. What’s up with those?

smart ass

I wanted to soften the blow for users when they see how much they could’ve made on an investment by converting the dollar amount to something goofy. For instance, losing out on a private Toto concert doesn’t sound nearly as bad as losing out on a couple hundred thousand dollars. Well, that’s just my opinion.

I got lazy and ended up using a lot of items I’ve purchased throughout my life so I didn’t have to spend too much time looking up prices. So there’s a lot of Lord of the Rings, Harry Potter and Nintendo references. I’m super cool, BTW.

Your site doesn’t provide much data – can you rely on it to make smart decisions?

It’s great for comparing long-term investments – particularly when looking at mutual funds. Just make sure you go back far enough.

Looking at short-term returns can be extremely misleading. Take Nintendo stock (NTDOY); It’s up 50 percent from a year ago. Must be a great stock, huh? Well, not if you back up five years. It’s down nearly 40 percent.

I wouldn’t base a major financial decision only off of Stockchoker, but it’s an excellent place to start.

Are you planning to add to the site?

There are several improvements I’m planning to make when time allows. For instance, right now you can only go back 20 years. I’d like to extend that for companies and funds that have a longer history.

A blog is also in the works. I’d like to think I’m a reasonably smart dude, but in spite of that, I’ve made some really dumb investing mistakes in the past year. Luckily, it’s kind of balanced out with a handful of good moves (thanks, Under Armour).

It might be helpful for newer investors to read about the missteps and why I thought they seemed like smart moves at the time. Hopefully, they avoid similar mistakes.

Personally, I’d love to be able to compare stocks/funds side-by-side. Any plans to make that possible?

I’ll add it to the to-do list. Thanks for the suggestion!

OK, now tell us about Todd!

Most readers of my blog are at or are pursuing FI (financial independence). Is this a goal of yours?

Forrest-Gump-Wave-on-Boat

I always think of a line from Forrest Gump when I hear this sort of question. It’s when Forrest finds out part of his shrimpin’ fortune was used to start Apple Computer, Inc:

“Lieutenant Dan got me invested in some kind of fruit company. So then I got a call from him, saying we don’t have to worry about money no more. And I said, that’s good! One less thing.”

That last part sort of sums up my feelings perfectly. My desire to invest well isn’t motivated by extravagant things I want to purchase down the road. As a person who craves simplicity, my goal is to reach a point (in a couple decades) where I never have to think about finances again.

Do you have an investing background?

No, not at all. My wife and I bought a house recently, so we transitioned from saving-for-a-house mode to saving-for-retirement mode. I’ve always had a strange obsession with stats and numbers, so stocks and investing naturally became my favorite thing to read about.

So you own rather than rent? Explain yourself!

Yeah. For one, my wife and I both hate moving, so a sense of permanence was very appealing. Throw in super-low interest rates and a housing market that’s still not fully recovered from the Great Recession and it seemed like an ideal time to buy.

How have you learned what you’ve learned about investing?

Lots of reading and, unfortunately, a little bit of trial and error. The tricky part is you can’t trust a lot of what you read.

For instance, you could hop online right now and find five articles that explain why the energy sector is going to continue its crash. Then you could find some other articles explaining why it’s set to make a huge rebound at any moment. Who’s right?

Most of my mess-ups have occurred when when I try to time the market based on something I’ve read. When Carl Icahn insisted back in May that Apple shares were worth nearly double what they were selling for, it seemed like a great time to buy. Since that point, Apple stock is down double digits. Whoops.

My advice today would be this: automate, diversify and self-regulate. My wife and I set up our Vanguard accounts to automatically invest in our Roth IRAs each week as well as Vanguard’s most diversified index fund. That’s a much better and healthier approach than what I was doing initially – trying to manually buy at low points in the hope that I was catching the bottom.

I’ve done well with the handful of individual stocks I’ve purchased, but it’s a dangerous game to play (imagine the poor people who bought Volkswagen stock last week). That’s where the self-regulation comes in. I won’t ever be more invested in individual stocks than index funds, as tempting as it might be at times.

What’s been your worst mistake?

That time last fall when I thought energy was about to rebound so I bought some VGENX (Vanguard’s energy fund).

genie

If a magic genie gave you 1,000,000 tax free dollars, what would you do?

I’d add a zero to the weekly amount my wife and I auto-deposit into Vanguard’s total stock market index fund (VTSAX). I’d also go to Chipotle a lot more.

What’s your day job?

I’m a software engineer at Motorola Solutions. I specialize in web-based user interfaces.

What’s your all-time favorite job?

I lived with my brother in San Francisco for a couple summers. One of those summers, I worked at Bubba Gump Shrimp Co. as a host (that’s probably why I have every line of the movie memorized).

My job a lot of days was to talk to visitors during the minute or two before they were seated. There were a ton of international visitors, so I’d try to guess what country they were from. I was always blown away by how nice everyone was, even when my guesses were completely wrong.

The biggest perk, though – shrimp meals every day. It might’ve gotten old, but it was glorious for the two months I was there.

Favorite music?

I’m a little all over the place. The Beatles are at the top of my list. My other favorites, in no particular order, are David Bowie, Elton John, Lady Gaga and Billy Joel. Since I grew up in a St. Louis suburb, Nelly has to be on the list, too.

When I’m coding, I can’t do music with words; it’s too distracting. In those cases, I’m all about Lord of the Rings music and the Interstellar soundtrack. I think I inherited that behavior from my brother, who’s the most brilliant programmer I know.

In what region of the country do you live?

I’m in the Midwest, about an hour west of Chicago. On a related note, I’ve heard that Midwesterners are the only people who use minutes rather than miles to explain distances between two places. I’m not sure if that’s true or not.

If I could live anywhere in the world I’d be in…

The Caribbean, on a small tropical island with high-speed internet and a Chipotle. It would also need to have an airport with direct flights to and from Chicago, St. Louis and San Francisco. Could I buy that with $1 million? I might need to change my earlier answer.

What kind of car do you drive?

A nine-year-old Honda Civic (if you were wondering – yes, that’s one of the “you could’ve bought” items that appear on Stockchoker periodically). My beloved 1998 Toyota Camry died last year. #neverforget

If I could meet anyone in history, I’d be sitting down with…

Abe Lincoln

Abe Lincoln

And the first question I’d ask would be…

How close was Daniel Day-Lewis? Did he deserve the Oscar?

Lincoln-Daniel

Daniel Day-Lewis

In 50 years (maybe tomorrow  we’ll all look back and ask: What the hell were we thinking when we…

Let the Kardashians have TV shows. They’re useless.

The biggest threat to the human race is…

The Interview 2, if someone ever decides to make that movie.

Who inspires you?

My family.

(JL: Here he clearly misses the opportunity to herald jlcollinsnh.com)

So those are the questions I wanted answered. Got some of your own? Ask in the comments and we’ll keep Todd under the bright lights till he responds.

Update January 20, 2016:

Todd just added two cool new features:

  • Stock Wars: A tool that allows you to compare the performance of two stocks and/or funds.
  • Quizzes: I took both. I’m a “goat” in the first and a “coyote” in the second. You can do better. I dare ya!

Addendum 1:

Want more? Here’s Kathryn’s video interview with Todd

 

Important Resources:

  • Vanguard.com (unfortunately Vanguard doesn’t have an affiliate program)
  • Personal Capital* is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you’ll see what’s working and what you might want to change. Here’s my full review.
  • Betterment* is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • YNAB* has the best budgeting tools going and just might be the Best Place to Work Ever
  • Republic Wireless* is my $10 a month phone plan. My daughter is in South East Asia and is on the $5 a month plan. We talk whenever can and for however long we please. My RW Review tells you how.
  • Tuft & Needle helps me sleep at night. Unfortunately they are no longer an affiliate, but still a very cool company and a great product.

*These are affiliate links and should you chose to do business with them, this blog will earn a small commission.

Unrelated, but here’s what I’m currently or have just finished reading and enjoyed:

Turbo Capitalism

If you are interested in income inequality, this poorly titled (should have been Unfettered Capitalism – more accurate and more descriptive) is a great discussion of the pros and cons of our current system. Luttwak clearly has his own biases, but is remarkable evenhanded in presenting both sides.

Written in the late 1990s, it is a bit of a time capsule and fun to see how the past 20 years have actually unfolded.

Leave it to Psmith

“Crime not objected to.”

One of my favorite characters from a favorite author. If you like it, here are two more:

Mike and Psmith

Psmith Journalist

Jack Reacher roams around the country carrying only a folding toothbrush. When his clothes get dirty he buys new ones. Oh, and he kills lots of bad guys. “Make Me” is the most recent in the series, but not the best. That might be this one:


First line: “People do not give it credence that a fourteen-year-old girl could leave home and go off in the wintertime to avenge her father’s blood but it did not seem so strange then, although I will say it did not happen every day.”

Last Line: “This ends my true account of how I avenged Frank Ross’s blood over in the Choctaw Nation when snow was on the ground.”

How we came to be what we are, behave the way we do and believe what we believe. My favorite in this group.

Where people who live to be 100+ live, how they live and what they eat.

Bad monkeys are Sapiens that need killing, and Jane is on the job. If you are already paranoid, you might want to skip chapter: white room (iv)

Why the future might be incredibly good. Unless the grey goo gets us.

This might be the most enlightening and entertaining take on American history I’ve yet to read.

And here are some of my all time favorites:

The book that has most influenced how I live my life.

Deceptively simple, but really all you need to know about becoming wealthy.

Very possibly my all-time favorite novel.

“The Fall of Edward Barnard” is very possibly my all-time favorite short story.

Perfect for the readers of this blog.

“Bartleby the Scrivener” is very possibly my all-time favorite novella. Don’t be put off if you struggled with Melville’s “Moby Dick.” This is a much better and easier read. Plus it will teach you the most important phrase in the English language:

“I would prefer not to.”

*If you click on the books you’ll go to Amazon, an affiliate partner. Should you choose buy them, or anything else while you there, this blog will receive a small commission. This doesn’t affect what you pay.

 

Posted in Money, Random cool things that catch my eye, Stuff I recommend | 14 Responses

Case Study #14: To Dream the Impossible Dream (and then realize it)

Cinque Terre sunset

Cinque Terre

“Impossible!”

That’s one of the less ugly responses you can expect from the typical American if you are bold enough to suggest that financial independence (FI) and early retirement is a realistic goal.

Push a little further and you might get a grudging: “Well maybe. If you lead a perfectly smooth life and always earn a high salary. But not in my messy real world of fits and starts.”

I’ve been writing this blog for over four years now and I’ve heard from numerous people who’ve achieved FI or who are well on their way. Not a single time that I can recall were their paths smooth.

We all live in the messy real world of fits and starts.

Today’s Case Study is unique in that MP wrote not to seek guidance, but rather to share her story.

At the end of her first note she apologized for writing a “tome.” Not a tome, I replied, but a post if you are willing. Fortunately, she was.

It is a tale of low-paying jobs, low saving rates, divorce, building a career, wandering in the investment wilderness, high savings rates, charity, retiring right into the teeth of the 2008 collapse, a money draining (if beautiful) house, reaching FI and a life of traveling light to be followed with a life of giving back.

I find it a compelling, inspiring story and one that gives me way too much credit. Maybe you will too.

nice-france-10

Nice, France

Dear Mr. Collins,

I’m writing to thank you for your educational blog, especially your Stock Series. But really, almost every post you’ve written has been helpful to me.

I found your blog (through MMM, I think) a couple of years ago, and it has guided me in some important financial decisions, and ultimately life decisions. Please let me bore you with the details.

By the time I found you, I was no slouch in the savings & living-below-my-means department. And all of my taxable investments were already in Vanguard’s stock index funds.

I should really start from the beginning…

In college I came across a newspaper article about the power of compounding, so when I got my first real job in 1989, I maxed out on 401(k) and chose stock mutual funds that did well in prior 10 years.

I had no other savings because…

  • I was making an entry-level job salary of around $25,000
  • I was married to someone who earned less than I
  • My husband’s financial motto was, “If you don’t owe, you don’t own.”

He was no dead-beat, but he was perfectly comfortable living from paycheck to paycheck.

I was in that low-paying job for 10 years, and in that time, my husband and I bought a modest house by borrowing the 20% down payment from my 401(k). Also, my husband started his own business and earned even less money.

In short, we didn’t save beyond my 401(k).

Then in 2000, I got another job (with a 50% increase in salary–going from $40,000 to $65,000) and divorced my husband. He got the house, I got the 401(k) worth under $100,000 with the loan already paid off.

Florence

Florence

A friend let me stay in a spare bedroom for free until I could find an apartment to rent. But rentals were hot in 2000 in the Washington, DC area and became too expensive for my budget, so I bought a tiny house whose mortgage I could afford.

Then my salary started climbing. In 2001, I found another job paying $88,000. In 2002, I jumped to another firm at $120,000. In 2004, another company recruited me at $140,000. In 2007, I went to another firm that paid $190,000.

Even though my salary kept rising, I continued to live modestly–not buying a car, electronic goods, fancy furnishings, or lots of clothes.

From 2002-2006, I tracked my spending meticulously, relishing in lowering my expenses as much as possible. In addition to maxing out my 401(k), I saved 50-60% of my take-home pay and plowed the savings into Vanguard stock index funds, divided among large cap, medium cap, small cap, emerging cap, international, REIT. And in 2005 when the real estate market got hot, I sold the house for a profit, plowed $170,000 into Vanguard funds, and moved into a cheap apartment.

By October 2007, my net worth reached $1,000,000—70% of it in taxable accounts. My annual expenses were under $35,000, so I quit my job and retired. But by the end of 2008, my net worth had plunged to $600,000 because of the market crash. However, I did not pull out one single cent from Vanguard or change anything in my IRAs. (emphasis mine, jlcollins)

In May 2009, a former boss recruited me back to full-time employment for $135,000 a year. I was still living in a modest apartment and maxing out my 401(k), but this time was saving only 40-50% take-home pay. Worse, I didn’t add the savings to my Vanguard taxable funds, but kept it in a high-interest checking account.

I started taking my eye off the ball.

One morning I woke up and decided to buy a waterfront house on the Chesapeake. Two months later in July 2012, I bought a $480,000 house with 25% down and a 10-year mortgage at 2.75%.

I went from paying $1,250 for a one-bedroom apartment with $25/month electric bill to paying $3,185 for a 3-bedroom, 2.5 bath house with $150/month electric bill–not to mention home & flood insurance, property tax, and quadrupled furnishings. But, “It’s my dream to live on the water!”

My savings rate plummeted.

In March 2013, I met your blog, learned that a house is a terrible investment (oops) and which Vanguard index funds to own. I slowly sold REIT, international, and emerging funds–the ones that didn’t make money; I didn’t sell the other funds because of tax implications. My net worth then was $1,200,000, thanks to the bull market.

I wasn’t psychologically ready to sell the house yet, but your blog put me back on track, so I aimed to retire in 2020 with $2,000,000 (or $1,500,000 if the market didn’t cooperate). The market cooperated big time. By Thanksgiving 2014, my net worth shot up to $1,575,000. I decided that it was enough to retire earlier than planned.

By Christmas 2014, I started getting the house ready for the spring 2015 market. In June 2015, I sold the house for $515,000 and quit my job. After paying off the loan and expenses, I had $200,000 in cash–40% went into VTI, and 60% went into Vanguard’s Prime Money Market Fund, waiting for a crash and buy more VTI. I’m still waiting!

With the house sale, I sold or donated all of my furniture and other furnishings, most of my clothes, and the 16-year-old car. The remaining things–1 small box of important papers/documents, 1 small box of miscellaneous items, and 4 office-sized boxes of clothes/shoes/boots–are stored in my mother’s spare bedroom closet.

In mid-July 2015, with 1 carry-on suitcase and 1 under-the-seat suitcase, I boarded the plane and headed for Europe for 3 months, booking VRBO apartments as I went.

So far it’s been 2 weeks in Paris, 1 week in Nice, 1 week in Venice, 9 days in Florence, 1 week in Cinque Terre, 9 days in Rome, and now 1 week in the Amalfi Coast.

Venice

Venice. As good a place as any to ditch stuff.

In Venice I ditched the carry-on suitcase and one useless skirt, and packed everything in the under-the-seat suitcase. In Florence I shipped 1/2 of my clothes back to Mom.

In Cinque Terre, I shipped more clothes back to Mom.

Later when I get back to Mom in Texas at Thanksgiving, I will transfer my travel belongings into a nylon 25-liter backpack (size of a day pack) and continue with my world travels–combining expensive and cheap locations to keep my yearly expenses under $40,000 (2.5% withdrawal rate).

Once briefly my net worth shot up to $1.700,000 but these days it hovers around $1,570,000. Nothing the market does bothers me. I use your withdrawal advice as a guide (thank you again!), and I try to understand Go Curry Cracker’s posts regarding tax strategies.

Thank you. You’ve given me knowledge, courage, and confidence. I have referred many people to your site.

When I quit work, some of my colleagues asked how I retired early, so I gave them a dumbed down PowerPoint presentation, which included links to your site’s various pages.

I tried to send them links only, but the twenty and thirty-somethings said they didn’t want to read – they just wanted to be shown. And since marketing was my profession, I gave them slides with lots of pictures and few words.

One woman my age said it was too late for her to start, because she and her husband were used to living from paycheck to paycheck. I told her to impart this information to her children instead.

As a single woman, I used to fear being homeless and destitute with no safety net. Today, with my F.U. money, I feel empowered and prefer to be homeless!

A year ago I had a waterfront house with enviable views, but it came with high costs–upkeep labor, maintenance expenses, taxes, insurances, utilities, etc.

Today, I’m enjoying a water view of the…

amalfi_coast

 …Amalfi Coast from the terrace of a house I’m renting.

It’s Sunday, and I’m not worrying about raking the leaves, mowing the lawn, or preparing for the work week ahead.

Hmmm, I guess I’ve written you a tome. I just want you to really know how much of a difference you’ve made, at least to one person’s life.

I’ve read every single post you’ve written, and some of them many times over. I’m always sad when you pause writing for the summer! Now that I have more time, I’ll try to participate in the comments.

Again, thank you!

Warmest regards,

MP

In my reply I observed that she seemed to have done just fine before ever finding jlcollinsnh and said, “I love your story, the victories, challenges, set-backs and recoveries. With your permission, I’d like to make this into a case study post.”

After a few days, I received her reply:

Hi Mr. Collins,

I was without wifi for a couple of days. Finally it’s back and I can respond to you.

Thanks for your words of confidence. Actually, your blog did make a difference to me–it guided my decision to sell the house, even though I had just bought it, giving me “permission” (for lack of a better word) to cut my losses and put the equity to better use (buy stocks).

Most important, your words gave me confidence (and thus, peace of mind) about some of my past financial decisions (buying only index funds, using Vanguard, eschewing financial advisers–one guy I interviewed said his “fee” was 1% of his client’s investment portfolio!)

I think probably the only place we differed was that I never held any bond funds – it’s either stock funds or cash, and I intend to keep it that way even in retirement. Anyway, when it comes to financial matters, peace of mind is gold to me.

How I conducted my financial affairs was a culmination of gathered information from many sources over many years. I didn’t really know if I was doing it “right”…until you came along and wrote your stock series – now my financial bible, and I felt that your posts blessed my financial decisions up to then, except for the house buying mistake.

By the way, my favorite line of all your writings is this: “Avoid fiscally irresponsible people. Never marry one or otherwise give him access to your money.” I put that as bonus advice (and credited it to your blog) in my PowerPoint slides I give to others.

My ex-husband and I are still very good friends, and he now says that he’d never be able to afford the house he’s in now if it wasn’t for my income when we were married, and that if I had stayed married to him, I would not be as well off as I am now.

If you think my story could be of use to others, especially women, I would be happy to share it.

The idea of making my story public caused me to double-check my figures and years listed. I know how critical people can be.

Speaking of critical people…

Because I was writing for your eyes only, I didn’t think to mention that over the years, even when I was being super frugal, I’d always given thousands of dollars away every year – one year as high as $30,000 – to family, friends, and charity. I mention it now, because once the story goes public, some people will say they don’t want to be frugal if it means they have to be a Scrooge. My situation is proof that one can be generous to others and still do well for oneself.

However, I don’t want to list the money I gave away, because family and friends who received money will be wondering who got more than they did – people are funny that way. I don’t mind bragging privately to you, though, that sharing is my top value and I try to live up to it by being generous.

As for my current plans, after 2 years of travel, I intend to return to working on projects involving orphans and senior citizens in a developing country where I had done vacation-volunteer work before.

I mention this last part because a couple of friends were worried that I’d be idle and eating bon-bons for the rest of my life. I guess some people think that retiring young means a life of drifting uselessness.

Respectfully yours,

MP

Well, MP… While I can imagine a lot, I can’t imagine you in a life of drifting uselessness. I am honored my site has helped. But it sure sounds like you’d have been just fine without it.

Ordinarily, I follow these case studies, with my advice. But in your case, no advice is needed. I’ll just say, “Well played!” and hope that somewhere out there our paths cross and we can linger over a coffee in some picturesque plaza.

BTW, last I heard, she’s here:

 barcelona_02_big

Barcelona

Addendum 1:

Want to track how close you are to your own personal financial freedom? An affiliate of this blog offers a great free tool: Personal Capital

Addendum 2:

In replying to a comment below, MP had the occasion to share her mother’s equally amazing tale…

My mother came to the USA at 30, widowed, with 3 young children 8 years old & under, an elderly mother, $250 ($50 per head given to us by the United States government), and no other assets.

She started work with minimum wage as a nurse’s aid. Our family was on welfare for 3 years, after which she was too proud to continue applying for federal assistance. I still remember the moment she made that decision.

We lived in the cheapest neighborhood in the city. My grandmother had a garden, producing so much vegetables we had to give some away. We never ate out or bought new clothes.

After 7 years of renting, my mother bought us a tiny 2-bedroom house for $5,000 (yes, five thousand dollars) in cash in the fall of 1982. That property had another house—a standalone studio apartment—that she rented out for something like $100 a month.

By then she worked in housekeeping at a nuclear plant. Even though she didn’t have even a first-grade education, her children went to college on scholarships/grants/loans. When the last of them went to university in a big city, she sold the property/houses (for $5,000) and moved to the big city too.

She rented a studio apartment and found work in housekeeping at a large department store, and then for the state government.

Eventually she bought (on mortgage) a property with 2 very modest houses—larger one to live in, smaller one to rent out. She got the landlord bug and bought a nicer house in the next town to rent out. Eventually, she sold the property with the 2 houses in the big city, moved into the nicer house in the next town and paid it off before she retired at 67 in 2012.

According to her Social Security reports, the most she’s ever earned in one year was $22,000+, and in the few lean years when she was laid off, she earned almost nothing.

And yet, she has accumulated hundreds of thousands of dollars (she won’t tell me exactly how much!), which she puts in a regular savings account. (She doesn’t believe in stocks, saying she doesn’t want to put money into what she doesn’t understand.)

Many times she has given loans to her 3 children—to help with mortgage down payments, etc., once as high as $120,000.

In retirement, she receives monthly Social Security checks and pensions, totaling more than her monthly wages before she retired. (Funny story—one of those pensions had to hunt her down to get her address because she had moved away; she didn’t know she had a pension!)

Even now, because she doesn’t spend all of her income (probably not even half of it), she continues to save toward her nest egg.

So, if a young widow—with 3 young children and an elderly mother, no education, limited English in a foreign country, working as a housekeeper, earning minimum wage (or less in lean years), doesn’t touch stocks or bonds—can achieve FI in 37 years, so can the average and below average American in a shorter time if they desire.

As the saying goes, FI is not so much about what you earn, but about what you save. And my mother is the perfect poster child for this saying.

Important Resources:

  • Vanguard.com (unfortunately Vanguard doesn’t have an affiliate program)
  • Personal Capital* is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you’ll see what’s working and what you might want to change. Here’s my full review.
  • Betterment* is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • YNAB* has the best budgeting tools going and just might be the Best Place to Work Ever
  • Republic Wireless* is my $10 a month phone plan. My daughter is in South East Asia and is on the $5 a month plan. We talk whenever can and for however long we please. My RW Review tells you how.
  • Tuft & Needle helps me sleep at night. Unfortunately they are no longer an affiliate, but still a very cool company and a great product.

*These are affiliate links and should you chose to do business with them, this blog will earn a small commission.

Unrelated, but here’s what I’m currently or have just finished reading and enjoyed:

Turbo Capitalism

If you are interested in income inequality, this poorly titled (should have been Unfettered Capitalism – more accurate and more descriptive) is a great discussion of the pros and cons of our current system. Luttwak clearly has his own biases, but is remarkable evenhanded in presenting both sides.

Written in the late 1990s, it is a bit of a time capsule and fun to see how the past 20 years have actually unfolded.

Leave it to Psmith

“Crime not objected to.”

One of my favorite characters from a favorite author. If you like it, here are two more:

Mike and Psmith

Psmith Journalist

Jack Reacher roams around the country carrying only a folding toothbrush. When his clothes get dirty he buys new ones. Oh, and he kills lots of bad guys. “Make Me” is the most recent in the series, but not the best. That might be this one:


First line: “People do not give it credence that a fourteen-year-old girl could leave home and go off in the wintertime to avenge her father’s blood but it did not seem so strange then, although I will say it did not happen every day.”

Last Line: “This ends my true account of how I avenged Frank Ross’s blood over in the Choctaw Nation when snow was on the ground.”

How we came to be what we are, behave the way we do and believe what we believe. My favorite in this group.

Where people who live to be 100+ live, how they live and what they eat.

Bad monkeys are Sapiens that need killing, and Jane is on the job. If you are already paranoid, you might want to skip chapter: white room (iv)

Why the future might be incredibly good. Unless the grey goo gets us.

This might be the most enlightening and entertaining take on American history I’ve yet to read.

And here are some of my all time favorites:

The book that has most influenced how I live my life.

Deceptively simple, but really all you need to know about becoming wealthy.

Very possibly my all-time favorite novel.

“The Fall of Edward Barnard” is very possibly my all-time favorite short story.

Perfect for the readers of this blog.

“Bartleby the Scrivener” is very possibly my all-time favorite novella. Don’t be put off if you struggled with Melville’s “Moby Dick.” This is a much better and easier read. Plus it will teach you the most important phrase in the English language:

“I would prefer not to.”

*If you click on the books you’ll go to Amazon, an affiliate partner. Should you choose buy them, or anything else while you there, this blog will receive a small commission. This doesn’t affect what you pay.

 

Posted in Case Studies | 73 Responses

Hotel Living

Wentworth-5601

I have always loved staying in hotels. Not all hotels all the time of course. But when they are done right I love just about everything about them. Business travel was always a regular feature of my working life and between that and our personal travels, over the years I’ve stayed in a lot of them. Often I sleep better in hotels, even now with my wonderful Tuft & Needle mattress.

My guess is this is because staying in hotels is so completely stress free. Strange expensive sounding noise? Not something I have to worry about fixing. Loud neighbors move in next door? A call to management gets results or a move to a new room, usually with a free upgrade. Violent storm outside? I can relax and enjoy the show.

Every now and again I’d come across a movie where some character or another actually lives in a hotel. This always seemed the height of sophistication as they prepared to sally forth on some grand adventure.

But it also seemed something unobtainable, the stuff of fantasy. Too expensive, for starters.

At one point early in my career I was traveling so much around the US I considered buying and living full time in an RV. But those are cumbersome, require upkeep and are not cheap. Plus the enabling technology of laptops and cell phones hadn’t been invented yet. Keeping my apartment and returning to it each weekend was just easier. And living in hotels felt out of reach.

I failed to challenge my assumptions and continued living in the conventional way.

A few years ago I came across the homeless billionaire:

Nicholas Bergguen

Nicolas Berggruen, the richest minimalist on the planet

Here was a guy living a life I’d dreamed about. He travels the world. He speaks three languages. His contacts are such that each day he has lunch and/or dinner with some intriguing acquaintance; be they a business associate, world leader, artist or author (maybe me if I ever get my book published!).

After living the typical billionaire life – owning multiple lavishly furnished homes, an art collection and a private island – he sold it all. He concluded:

“I am not that attached to material things. I have very few possessions…you don’t need much… a few papers, a couple of books, and a few shirts, jackets, sweaters.

“It fits in a little thing, in a paper bag, so it’s very easy.”

Everything he now owns fits in a suitcase or two: A couple of suits, some jeans and ­handmade shirts ­monogrammed with his initials that he then wears “until they fall apart.” My guess is, as the shirts wear, he demotes them to casual service with his jeans. Just like I used to do in my business days with my not-handmade dress shirts. It’s like we’re brothers.

Other than the Gulfstream IV private jet he kept to get from hotel to hotel and a couple billion dollars. Sadly, I am not a billionaire.

Still, here was a model of what my ideal life might look like if I were.

Again, I failed to challenge my assumptions and continued living in the conventional way.

But my mind was slowly being pried open.

In late August we returned from our summer of wandering around the midwest visiting old friends, exploring new spots and a delightful three week stretch at Shamba, the beach house on the shores of Lake Michigan in Wisconsin owned by my in-laws who graciously make it available to us.

JD Roth and me

We even had JD Roth and his lovely companion Kim join us for a few days.

It was our own experiment in hotel living homelessness.

We’d been in and had enjoyed our loft apartment for the last two years. We’d always wanted to live in a loft. High ceilings, brick walls, exposed ductwork: The whole chic industrial vibe. But when the lease expired, we were ready for a change.

Not only has renting proved to be far less expensive and far less hassle for us than owning our house, it provides far more flexibility. That’s one of the beauties of renting: It facilitates our restless spirits.

On June 30th the movers came, loaded up our worldly goods and packed them into storage. Homeless, we hit the road and gave them not a thought. Until August 24th, eight weeks later.

That morning the movers retrieved our stuff and delivered it to our new apartment where the furniture is now in roughly the right places and the boxes are stacked up in mostly the right rooms.

We certainly have far less now than when we owned the house and this move was much easier than the last. Plus as we settle in, still more stuff will be jettisoned making the next move easier still.

We are thrilled with our new place and the view out our 8th floor windows across the river to the setting sun is spectacular. But we are faced with the prospect of settling in.

As I wade thru and toss the accumulated junk mail, I reflect on our hotel living summer experience. It was pretty sweet. There are few hassles, everything is made up and ready when you check in, settling in is a breeze, and you stay as long as you like and move on without a second thought.

In trading emails with my pal Akaisha of Retire Early Lifestyle she wrote:

“If people knew how great it is to live in a place like one of the above — why own a home? Why own a car? I realize some people want their own places, their gardens, workshops, music rooms and pets and such… but these places are super and they are basically stress free.”

She is exactly right. Both on how great this life can be, and how completely unappealing it will be to many. That’s fine. Roots v. Wings.

But is it affordable? Well Akaisha and her husband Billy have found it so, and they’ve been doing it over 20 years.

Jeremy and Winnie of Go Curry Cracker have been on the move for the last few years, most recently in a furnished apartment in Taiwan for 18 months or so. Of course, they just had a baby and as you’d expect things are going to change for them. They’ll be back on the road soon and plan more frequent stops and shorter stays at each. They spend no more each month than we do.

Meanwhile, the Mad Fientist is out wandering the world implementing his 3-6-3 plan.

And here’s what I wish I had read back when I was doing all that business travel on the company dime: Save Money Living in Hotels (Even though author Plibby very likely wasn’t born yet)

What I’m beginning to understand is that, as Plibby explains, so many costs fall away when you jettison most of your possessions what looks expensive ($100 per night over a month is $3000 after all) isn’t quite that bad.

Several modern things enable this. The key ones it seems to me are:

1. Laptops. Never before has it been easier to be location independent and yet connected.

2. Cell Phones. Same as with laptops. And if you choose right, incredibly inexpensive.

Here’s an example. Our daughter is in South East Asia with the Peace Corp. We talk on the phone often. Mostly it is as clear as if she’s in the room with us. Her monthly charge: $5. I pay $10.

Her $5 a month buys unlimited phone, text and data; provided she has wifi. With wifi she can call any US based phone number from anywhere in the world.

My $10 a month gives me that and a seamless transfer to cell service when wifi isn’t available. When we were on the road, I stepped it up to the $25 plan for 3G and GPS. Now back, I dropped it down again. I can change like this twice a month. And (with wifi) I can receive her call anywhere in the world even if I’m in, say, Ecuador.

For someone old enough to remember when international long distance cost $10 a minute, this remains a little stunning. For more, here’s my post on Republic Wireless.

3. Rewards programs. Our longest stay at any one hotel this trip was 10 days. It was free. We used rewards points from various credit card, airline and hotel rewards programs. (Don’t ask me which, Mrs. jlcollinsnh is the brains in this outfit) Of course our biggest annual expense, rent, gets paid by check and earns no (horror!) points. But if instead of rent, we had only hotel bills each charged to our current favorite rewards card, imagine the points. And the free nights!

Still, my guess is hotel living would prove more expensive. Since I obsessively track costs and spending, after a year or two I’ll know for sure. (YNAB has great tools for this and is maybe The Best Place to Work Ever. Plus since employees there are location independent, you can live in hotels!)

If it proves too expensive, or should we just get bored with it, change is as easy as checking out.

For now, we’ll continue unpacking and settling in to the new place. But a year, or two, passes quickly. As I look around at our stuff, we’ve mostly pared it down to only those things we really enjoy having around. Still, never once in all my travels have I ever missed any of it. Or even thought about it.

 

Important Resources:

  • Vanguard.com (unfortunately Vanguard doesn’t have an affiliate program)
  • Personal Capital* is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you’ll see what’s working and what you might want to change. Here’s my full review.
  • Betterment* is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • YNAB* has the best budgeting tools going and just might be the Best Place to Work Ever
  • Republic Wireless* is my $10 a month phone plan. My daughter is in South East Asia and is on the $5 a month plan. We talk whenever can and for however long we please. My RW Review tells you how.
  • Tuft & Needle helps me sleep at night. Unfortunately they are no longer an affiliate, but still a very cool company and a great product.

*These are affiliate links and should you chose to do business with them, this blog will earn a small commission.

Past Post Update, January 20, 2016:

Last October I did a post on: Stockchoker.com (not an affiliate, just cool)

Todd just added two cool new features:

  • Stock Wars: A tool that allows you to compare the performance of two stocks and/or funds.
  • Quizzes: I took both. I’m a “goat” in the first and a “coyote” in the second. You can do better. I dare ya!

Unrelated, but here’s what I’m currently or have just finished reading and enjoyed:

Turbo Capitalism

If you are interested in income inequality, this poorly titled (should have been Unfettered Capitalism – more accurate and more descriptive) is a great discussion of the pros and cons of our current system. Luttwak clearly has his own biases, but is remarkable evenhanded in presenting both sides.

Written in the late 1990s, it is a bit of a time capsule and fun to see how the past 20 years have actually unfolded.

Leave it to Psmith

“Crime not objected to.”

One of my favorite characters from a favorite author. If you like it, here are two more:

Mike and Psmith

Psmith Journalist

Jack Reacher roams around the country carrying only a folding toothbrush. When his clothes get dirty he buys new ones. Oh, and he kills lots of bad guys. “Make Me” is the most recent in the series, but not the best. That might be this one:


First line: “People do not give it credence that a fourteen-year-old girl could leave home and go off in the wintertime to avenge her father’s blood but it did not seem so strange then, although I will say it did not happen every day.”

Last Line: “This ends my true account of how I avenged Frank Ross’s blood over in the Choctaw Nation when snow was on the ground.”

How we came to be what we are, behave the way we do and believe what we believe. My favorite in this group.

Where people who live to be 100+ live, how they live and what they eat.

Bad monkeys are Sapiens that need killing, and Jane is on the job. If you are already paranoid, you might want to skip chapter: white room (iv)

Why the future might be incredibly good. Unless the grey goo gets us.

This might be the most enlightening and entertaining take on American history I’ve yet to read.

And here are some of my all time favorites:

The book that has most influenced how I live my life.

Deceptively simple, but really all you need to know about becoming wealthy.

Very possibly my all-time favorite novel.

“The Fall of Edward Barnard” is very possibly my all-time favorite short story.

Perfect for the readers of this blog.

“Bartleby the Scrivener” is very possibly my all-time favorite novella. Don’t be put off if you struggled with Melville’s “Moby Dick.” This is a much better and easier read. Plus it will teach you the most important phrase in the English language:

“I would prefer not to.”

*If you click on the books you’ll go to Amazon, an affiliate partner. Should you choose buy them, or anything else while you there, this blog will receive a small commission. This doesn’t affect what you pay.

 

Posted in Homeownership, Life, Travels | 43 Responses

Mr. Market’s Wild Ride

Mom

Bad Market!

Bad, bad, bad Market!

Can’t I even go on a little vacation without you tearing up the place while I’m gone?

I turn my back for one second (well, OK, maybe two months) and you start sliding?

And then that 1000 point drop? What’s up with that? Yes, yes, I know. It was only about 5% and not anywhere near your worst behavior. But still. You knew full well that 1000 figure would drive the pundits bananas!

Since I’ve been gone, you’ve managed an ~11% decline from your record close back in May. Just over the 10% needed to be called a correction. Happy now?

At least you’ve given the media something to obsess about other than Donald’s latest remark or Hillary’s email server.

And now I’m back and you’re up ~2%?* You think this makes the mess you left me OK??

I’ve got readers asking what my take on your bad behavior is, and I’m still just moved in to the new place yesterday and haven’t even begun to unpack. Bad Market!

OK. Here’s my take:

yawn_by_uzlo-d61oai3

Yawn by Uzlo

Yawn

Wake me up when it’s down 25%+ and it’s worth doing a little rebalancing to buy more stock

I have no idea what the market is going to do next. Nobody does. Not even (especially not!) those “experts” popping up all over telling you they do. The principles of Investing in a Raging Bull apply equally to investing in a Raging Bear.

As we’ve discussed through the Stock Series, Mr. Market always does the right thing over time. But he’s a drama queen and an attention whore. Periodically he’s going to have these hissy fits. And as with any temper-tantrum throwing little monster, we can just ignore him till he settles back down. No matter how long and loud he wails, settle back down he ultimately will.

Or, we can take advantage of him.

If you are in the Wealth Building Stage we introduced in Part VI and talk about throughout the Stock Series, you are already aggressively saving and investing on your path to financial freedom. Your regular investments, which hopefully you have automated, will have you buying on these pull backs. Anyone in this Stage should be rooting for corrections. You’ll be taking advantage automatically.

If you are in the Wealth Preservation Stage you can take advantage simply by rebalancing your portfolio. But I wouldn’t bother unless we get more of a pull-back.

Personally, that’s what I’m rooting for: A nice fat plunge.

I’ve always regretted not taking advantage of the crash in 2008 to move to all stocks. I’ve never really liked holding bonds all that much and in these days of low interest rates I see them as pretty risky. I’ve kept them for three reasons:

  1. They smooth the volatile ride of stocks.
  2. They provide a pool of money to draw on to buy stocks on market dips.
  3. They provide interest income.

My pal Go Curry Cracker has a plan to unwind his bond postion and move into 100% stocks which I rather like and might well follow:

“If a 25% drop happens, then I’ll move 1/2 of our bond position into VTI**. If the market drops another 25%, I’ll move the other 1/2”

**VTI is the ETF version of VTSAX, both hold the Vanguard Total Stock Market Index portfolio.

How would this effect my three points above?

1. The volatility of the stock market really doesn’t bother me anymore. Those who’ve read my Stock Series won’t be surprised at this. Partially this is attitude, partially that I’ve been thru enough plunges not to be fazed and largely because even a major crash would have little effect our lifestyle.

We live well below our means and are flexible in our spending. Plus the prospect of geographic arbitrage (moving to a less expensive part of the world) would be an adventure rather than a hardship.

2. While this pool would be gone, it would be gone buying stocks at a 25-50% price discount. Mission Accomplished.

3. VBTLX is currently paying 2.46% interest. So I’m not giving up all that much income.

So, come on Mr. Market. Show me what ya got!

Meanwhile I’ve got boxes to unpack and pictures to hang.

*Oh, so now just to spite me, you’re going to close down today 1.35%? So that how it’s gonna be…

Addendum 1:

If after reading this you are still agonizing over the drop in your holdings, think of it this way. Last I checked Warren Buffett was worth ~72 Billion. So in this 10% correction he has “lost” $7,200,000,000.00

I’d still trade net worths with him.

Addendum II: Or get yourself some Exposure Therapy

Addendum III: Or take solace in the fact you can be the worst market timer ever and still make money. (Thanks to Elephant Eater in the comments below for this link)

Addendum IV: From just about a year ago… Nightmare on Wall Street

Posted in Life, Money | 84 Responses