End of Year Clean up/Clean out

So with some of the extra holiday time we’ve had the last week, Mrs. 39Months and I have been working on cleaning out some items, doing some reorganization, and generally preparing for the new year.

It started right after Christmas. Mrs. 39 Months has been wanting to redo her closet for some time (she has a 5’ x 5’-6” walk in closet) and she had hit on a design that used a corner cabinet to “capture” some of the lost space that is in the back corner. The original layout had hanging rods there, but clothes got lost behind a bank of shelves on the side wall that stuck out 16” (i.e. the last 16” of her hanging rods were difficult to access).

So she got the corner cabinet as a gift from me, and we spent the next two days after Christmas clearing out and rebuilding.
• Emptying out all the clothes from the existing closet
• Demo of the existing shelving
• Fixing/adjusting the hanging rods so they’ll provide enough support (i.e. proper anchoring) as well as 2 short clothes rods and one long-clothes rod
• Building the corner cabinet and installing
• Purging the existing clothes and items and prepping to send excess to charity
• Identifying how to use the existing bins, baskets, etc. in the new closet cabinet
• Putting all the clothes back in the new closet

Turned out pretty nice

For me, the day before Christmas, I went and purged the bookshelves in my home office. As you know, I am an avid reader, and I’ve got a lot of books. I took the opportunity to clear out a lot of the history and fiction books that I have read and which have been sitting on the shelves for 10+ years. I now have three bags of books for our local library book sale. Hopefully, some other folks can get some benefit from them.

So we’re sailing into 2022 with better closet organization and lots of empty space on my bookshelves – for more books!

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Have a Happy New Year!

Mr. 39 Months

What is the effect of Obamacare on “The Great Resignation?”

A lot has been written recently about “The Great Resignation” and how many people have left their work for greener pastures. You also can walk/drive down the street without seeing “help wanted” or “we are hiring” banners for everything from retail to restaurants to warehouses. It seems like companies are having to deal with major hiring issues over the last year (I know my company has).

There have been a lot of theories thrown out there, including the generous benefits that were given out during COVID, a mismatch of skills vs needs, and even so far as laziness on the part of some workers (lol on that comment). However, once key item I think has been left out of the analysis, and is one that FIRE people are well aware of. I speak of the Affordable Care Act or “Obamacare.”

Before ACA, most workers got their medical benefits from their job, and to leave your job, you had to have one lined up with benefits – thus reducing the ability of people to switch. In addition, many service jobs (restaurants, retail, etc.) didn’t have medical, or had poor medical. In the end, a lot of people continued to work even at jobs they didn’t want.

With ACA, if you earn a lower wage, you can get subsidies that will dramatically reduce your medical costs. Where I live, minimum wage is $13/hour, or $26,000/year for a full-time job. With ACA subsidies, a 25 year old male would pay roughly $27/month for health insurance, or roughly 2 hours of paid labor. With that low cost, they could work sporadically, and still be covered. It also lends itself to job mobility, because if you are the one paying your healthcare (not your company) then if a better job comes along, you can jump immediately. I think this is a key reason why you are seeing folks being able to resign now.

Still, there are a lot of other reason to consider. One of the best analysis on this is the Wall Street Journal work on it (see video on it here). They go over how certain job areas saw a dramatic drop off in March 2020 (when Covid hit) and these are only just starting to recover (retail, restaurants, etc.) but some job functions (Warehousing, IT, etc.) actually grew from March 2020 on. A lot of people who got let go in retail took higher paying jobs with better benefits in warehousing (my industry). Now they’re being asked to go back to a retail job for lower pay & no benefits, and which could go away again in another pandemic. Not going to happen.

I think we are in for labor shortages for a while now – which is actually very historic for the US. For most of our history, there has not been enough labor for all the work that has been needed to get done – which is one of the reasons the US embraced the industrial revolution and immigration. People may need to get used to slower service at restaurants and retail stores not being open on Thanksgiving, Christmas and at 10pm at night.

Maybe that’s a good thing.

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Mr. 39 Months.

When do you “time the market?”

So I am not a big fan of market timing – where you try to predict where the market is going to go, and make investment decisions based on that. I am more of a “buy and hold” kinda guy, who determines his allocation of investments, and then sticks with hit, rebalancing as needed. This held me “in good stead” during the 2008 and 2020 “crashes” where I just left the money in place, and waited (in some cases over a year) for it to build back up.

In March 2020, the market dropped down, and from that low of March 17th, it has doubled since then. I didn’t lose any money, because I never sold. I’ve also talked to you about my concern of the market, especially the S&P 500, being overpriced when compared to historical P/E ratios and other metrics. I recently adjusted my allocation, due to these concerns. Still, the majority of my investment career, since the dot.com crash, has been focused on long term investing.

But what happens when you have events in your life that demand a short term view on your investments? Due to Covid, my company has instituted a vaccine mandate (before the government even mandated it) – everyone has to be vaccinated by Oct 1st. While I am not an anti-vaxer (I got the Shingles vaccine this year in March, and just got my tetanus booster) I do have concerns with the Pfizer, Moderna and J&J vaccines, based on my analysis.

I’m looking at taking the Novavax vaccine once it becomes available in the US (4th Qtr?). However, that doesn’t look like it will be done in time for my company mandate, so it appears that I may be let go in early 4th Qtr 2021. Since I am FI, it doesn’t really get me too anxious.

However, I do have a significant portion of investments in a company 401K and Deferred account. The 401K I can let sit (or just transfer over to my IRAs) and that would still match my “buy and hold’ methodology. Even if it dropped right before I left, by transferring it to my IRA and letting it sit there for a couple of years, it would move back up.

However, the Deferred money would be paid out immediately upon termination of employment. The assets would be sold, and it would be a taxable event. Since I am looking at using this money for the first couple of years of retirement, I am concerned about it dropping suddenly, right as I planned to use it.

Several issues have me concerned right now:

  • We are heading into October, and October is typically not a good month for the market (see crashes in 1929, 1987, etc.)
  • There is a lot of negative news coming out of China right now (Evergrande, bank issues, etc.) that might cause the market to hiccup
  • Supply chain issues continue to affect companies and their Black Friday sales
  • Covid continues to be a net drain on the world, with its impact still to be figured out

So in this case, I have chosen to “time the market” with this deferred account. My typical allocation was 25% S&P500, 25% International, 25% Bonds, 25% Small Cap. I’ve now gone to 100% cash with it, and I’ll probably stick with that till November, or until I get let go by my company.

We will see how that works out!

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Mr. 39 Months

Blogroll Purge IV – Aug 2021

I have written several times before about the need to clean up/purge the blogroll to the right, so that viewers can get recent, up-to-date commentary on FIRE related topics (and other areas that I’m interested in).

People stop writing in their blogs for a variety of reasons. Some folks like Cracking Retirement, just exhaust what they want to say, and decide to step away – and take the opportunity to announce it on their blogs.

Others do a “slow fade” and stop posting regularly. What I always try to do is leave them up for several months, in the hopes they will get “re-inspired” and start posting again. After 3+ months, my thought is that they will probably not be returning – so I drop them.

This gives me the space and opportunity to put up new bloggers and commenters on the blogroll, and introduce people to other ideas. Hopefully its of service to you.


Mr. 39 Months

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How Big is Your Emergency Fund?

Early Retirement Now had a post out about the continued uselessness of an emergency fund. He discussed how they kept all their funds in an equity index fund portfolio, with only $1K – $2K in a checking account. They assumed they’d use credit cards and/or Home Equity Line of Credit (HELOC) “if any larger expenses came up that exceeded my monthly cash flow, e.g., car and home repairs, medical bills, etc.”

The general comment back in 2016 was “my point here, I most definitely advocate stashing a large pile of money. I simply advocate for moving all that money into an investment with high expected returns, ideally equities, instead of letting the money languish in a money market account at 0.03% interest.”

The plan, if something went wrong, is:

  • Use credit cards, with a long “float” of interest free loan
  • Use the HELOC to pay for the credit card if the issue continues for longer
  • Only sell investments if they have to – but they’ll have had years of  positive growth to offset selling at a loss

I think this argument falls into the “sleep at night” problem. The issue here is there are so many people now investing and in the FIRE movement that weren’t very aware during the 2000 and 2008 recessions, or remember the 1970 “stagflation” period (where the market went nowhere for 10+ years).

Let’s look at some holes in the plan.

  1. Assumption that credit extended will continue to be extended: Just because you have credit cards now, doesn’t mean they will issue you new ones, or not close down your existing ones (or at least reduce what you can borrow). A HELOC can be pulled back as well. Suddenly, you’ve got no credit – and you’ve got to sell investments
  2. For this sort of credit crunch, think the 2008 recession. How was the market doing at this time? 50% drop in value, erasing everything gained back to 2000, and even before that. In 1968-1970 the market dropped 35.9%, and never regained its numbers till 1982.

I also think the creation of an emergency fund is the first step in working towards FI. It could be $500 or $1000 (the number in ERN’s checking) but by building on that, you reach the point where you can shrug off medium level issues.

In ERNs defense, he does end his article stating that folks should not leave their emergency fund in the market if they are retired, or within 2-5 years of retirement.

Earlier in the year, I pulled money out of bonds and put it in the dividend stocks – only to turn around within 30 days because I just couldn’t sleep at night. It’s a personal choice, and you need to do what makes sense for you.

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Mr. 39 Months

Should you plan for inflation in 2021?

There have been talks for the last several years about the potential for inflation, and the effects it would have on individuals spending, investments and lifestyle. The inflation rate has jumped around significantly throughout the 20th century, and it wasn’t until Reagan and Volker (in the 1980s) took the steps to “slay the inflation dragon” and get it to a more controlled level, without the wild swings in the past (it went from 4.7% in 1976 to 13.3% in 1979!).

Since the 1991, the inflation rate has stayed under 4% every year, and average around 2% for the last two decades. Whole generations have grown up without the threat of watching their purchasing power melt away over a short period of time. Some argue that the CPI (Consumer Price Index) is not measuring accurately, and that the key items for living (shelter, food, transportation, etc.) have been going up at a much higher rate than the CPI index shows. This is similar to the Monevator’s article on personal inflation rate I noted earlier in the year.

Now with the huge amount of government spending over the last year (added to the large amount of government spending since the 2008-2009 crash) has led to renewed articles on the potential for inflation in 2021 and its effects. Stocks continue to rise well above all levels of base P/E ratios, and more people are talking about a bubbles. So what can you do?

I’ve written before about having a SHTF plan and what you can do to prepare. The key is to look at the items that will increase in value, and do things to ward off the effects of rising prices.

  • Invest in stocks vs. Bonds. Bond rates typically don’t keep up with inflation rates, so you can lose buying power, while the stock price of companies tend to go up at a better rate
  • Invest in hard assets to hedge (gold, oil, etc.). As the purchasing power of a dollar goes down, these items will increase in value.
  • Real Estate: Inflation typically makes real estate values shoot up (see house prices in the 70s). They’re already on the rise now – which lends to the belief that we are already experiencing inflation

The last bit of advice I have in regards to this is the opposite of what you typically should do in times of high inflation. The base suggestion would be to take out loans (especially low interest loans) with today’s dollars, and then when the dollar inflates, you can pay the debt off with lower value dollars. My suggestion in times of high inflation is to pay off your debt – not take on more. High inflation times are uncertain times, and job losses and economic disruptions happen. Having little or no debt will help you to weather through these tough times.

My hope is that we don’t see anything major happen in the next decade or so. However, I am very concerned at the out of control spending at the federal level. It just isn’t sustainable.

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Mr. 39 Months

Stay Prepared for the Months Ahead

I’ve spoken before about the need to prepare for emergencies, and with the advent of Hurricane Season (Sep/Oct), The wildfires in the West, and the coming winter, I thought it would be good to revisit. As the Boy Scouts say “Be Prepared.” I was reading an author with some good ideas (I won’t link, because some folks might not like his politics).

Here are the “must have” items that you will need:

  • A two-month supply of your prescription medications and your over-the counter medications.
  • 20 AA and 20 AAA batteries.
  • Two good flashlights per person plus extra batteries
  • 20 Bic lighters.
  • 25 candles. 
  • Two portable radios plus extra batteries
  • 3 rolls of Duck Tape
  • 2 extra tarps.
  • 200 feet of 550 lb. paracord.
  • An everyday carry knife for each person
  • A professional bleed/trauma first aid kit
  • 2–3 bottles unscented household bleach

For this food section, the author attempted to generally balance the total calories — 50% carbs, 30% protein, and 20% fats.  Buy items that you like to eat already; avoid items that you have never tried.

  • Rice: 25 pounds total            
  • Dried Black Beans: 1- 4- or 5-pound bag
  • Dried Pinto Beans: 1- 4- or 5-pound bag
  • Dried Garbanzo Beans: 1- 4- or 5-pound bag
  • Dried Kidney Beans: 1- 4- or 5-pound bag
  • Dried Lentils: 1- 4- or 5-pound bag
  • All Purpose Flour (unbleached): 1- 10-pound bag per person
  • Yeast: 2 ounces per person
  • Rolled Oats: 10 pounds
  • Corn Bread Mix: 4 packages
  • Muffin Mix: 4 packages
  • Canned Tuna: 60 oz. total
  • Canned Pink Salmon: 36 oz. total
  • Spam or Beef Stew: 12 cans
  • Chili and Beans: 12 cans
  • Powdered Milk: 4 cups reconstituted per day per person
  • Powdered Hot Cocoa Mix: 2 cups reconstituted per day per person
  • Olive Oil: 1- 51 oz. bottle
  • Canola Oil: 1- 48 oz. bottle
  • Mayonnaise: 2- 20 oz. jars
  • Peanut Butter: 2- 48 oz. jars
  • Jam/Jelly/Honey: 3–4 large jars
  • Salt: 1- 26 oz. Morton Salt
  • Brown Sugar: 1- 32 oz. envelope
  • White Sugar: 1- 4- or 5-pound bag
  • Assorted Nuts: 1- 2.5 pound jar

Overall a good list of items. Some other points to consider:

  1. Keep your cars fueled up to at least ¾ of a tank (folks in NJ during Hurricane Sandy found that a large percentage of gas stations had no power – so no gas)
  2. Check car status (spare tire) and buy a couple of quarts of oil
  3. Fill propane tanks (can use grill to cook if needed)
  4. Check your cell phones OS and apps are updated
  5. Make sure your important papers are available and able to be moved. Maybe make a copy and send to someone you know

Stay healthy and be ready.

Mr, 39 Months

Sometimes I hate to be right…

Well, Wednesday starts after several days of the tech stocks being hammered, resulting in the S&P 500 dropping about 7% over the last three sessions. This morning Amazon, Facebook and Apple each rose about 1%, but analysts still believe that, since their way above their valuations a year ago. Amazon is up 70%, Apple 54%, and Facebook 32% vs. an overall 3% gain for the S&P over that time.

Mike Wilson of Morgan Stanley stated “We think there is more downside over the next month but eventually leads to further broadening out of the bull market.” In laymen’s terms, they think the Tech stocks may drop somewhat, while other stocks in the S&P make gains commensurate with the improving economy. We can all hope that this market rally “broadens” as opposed to being concentrated too much in Tech Stocks. Again, I remember 2000 and the dot.com bust.

For most of us, this means “steady as she goes” in our investments. Continuing to put money away, dollar cost averaging, and watching our spending for the year. Hopefully your income hasn’t been too negatively impacted by Covid-19 shutdowns. If you can do that, you can weather most any storm.

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Mr. 39 Months

Back to Square One

Well, the S&P 500, the benchmark that so many folks use to determine how well the stock market is doing, has gotten back to “even” for the year. Its taken five long months to dig out of the Mar 16th hole of $2,304.92 (a 32% drop from its Feb 10th high). If things continue along these lines, we could expect a 4% – 5% return for the year. So everyone is OK, right?

Actually, the situation is not so rosy. Yes the S&P is back, but in listening to Ric Edelman the other day, he noted that the five big tech stocks (Facebook, Apple, Amazon, Netflix, Google) were up 30% – 35%, but the other 495 stocks of the S&P were still down an average of -5%! So the market rally isn’t broad based, its concentrated in the tech stocks – and those of us around in 2000 – 2002 remember how quickly that can evaporate.

For us, we are still down a little for the year (-0.8%) primarily due t the fact that we are invested in International, Small-Cap and REITS (REITs are getting hammered with the Chinese Covid virus). Still, by diversifying, I think our recovery is a little more broad than just the folks that are in the S&P 500.

It will be an interesting time for the remainder of the year. We are starting to creep out from the lockdowns, but a significant amount of economic damage has been done, especially to small businesses, the restaurant industry, and the commercial real estate industry. I believe we’ll see  a waive of bankruptcies for the next 5 years as all of this is cleared out, and the economy won’t really start humming until these are cleared away.

Of course politics will also have a effect over the next 4 years. Going to be interesting….

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Mr. 39 Months