Saturday Linkage

August 15, 2020

  1. Is it a smart idea to pay off rental property (Route to Retire); goes through the numbers on making this decision
  2. What will you do all day in retirement? (ESI Money); Review of an interesting book with good advice on what  you need to do to set yourself up once you’ve retired.
  3. Work Less (Zen habits); The benefits of shorter lengths of “more focused” work
  4. Why you shouldn’t ignore “active” income (The Fioneers); How even small amounts of income from a part-time job will help you achieve your goals quicker
  5. Money Mistakes in your 20s to avoid (Simple Dollar); some of these are very obvious, but people still make them.
  6. Why chasing returns is sure way to lose (physician Philosopher); Good analysis with numbers to show how many folks chase the hot “item” but lose out, because its already peaked and on its downslope when it becomes “hot.”
  7. Median Income for the middle class mass affluent (financial Samurai); For the 80% to 99%, its not as high as you think.
  8. Why real estate will always be more desirable than stocks (Financial Samurai)
  9. Is this the last hurrah for bonds? (retirement field guide); maybe not right now, but its coming close. The Fed keeps rates low to battle deflation, and its killing bond rates.
  10. The sweet spot (Mr. Money Mustache) how to reach that point where you can work as you want on stuff you want to do, and enjoy your lifestyle.

Saturday Linkage

6/6/2020

  1. Best 50-day rally ever (LPL Financial); Review of 2020, its up & downs and the surprising climb for the last 50 days.
  2. Why is the market doing well lately? (oblivious investor); “The value of the stock market at any given time is essentially the market’s consensus as to the present value of the expected future earnings of publicly traded companies”.
  3. What happens if everyone starts saving more? (Simple dollar); Critique of article in CNN business warning of economic fallout if people stop spending and start saving.
  4. How personal finance blogs make money(Retire before Dad); Ever wonder how the finance blogs make money? Good article explains how
  5. Three Months to retirement: Are my global travel plans changing? (A purple life); Maybe….the virus and economy may change plans to travel immediately after retirement.
  6. Adventures in retitling our real estate and other assets (Costa Rica Fire); Updating estate plans, wills, trusts,  etc. and its effect on asset titles.
  7. Stop listening to “Them” (Freedom is Groovy); We are constantly being asked to believe in credentialed “experts” who seem to be more and more wrong every time, from housing design, to choice of schools, a lot of the conventional wisdom of the last 40+ years is wrong.
  8. What I’ve learned from two years of retirement (Retirement Manifesto); Two years of lessons, including “Retirement is fluid – embrace the fluidity”
  9. How I created a profitable website in 9 months (Four pillar finance); step-by-step how he did it, including writing plan, content plan, traffic growth, etc.
  10. Holidaying at home (Just baggage enough); taking a week off while under quarantine at home.

What are you thinking of doing with your stimulus check?

          

The US Federal Government is looking to send out checks to US citizens as part of their stimulus package for the Chinese Corona Virus, and the effect it has had on the economy. The objective of these checks is to assist individuals who have been laid out, or who are having difficulties with their bills. The hope is that individuals will spend this money and keep the economy going, rather than having it “seize up” with folks saving and holding off spending.

If you think about it, a lot of folks (mostly non-FIRE folks) live paycheck-to-paycheck, and use debt to help fund their lifestyle. If you shut off their paycheck for even a week, they’re hurting – and they aren’t spending money on food, clothes, etc. If it kept up, then even folks with decent finances will find themselves hurting, because their businesses will have lost too much revenue.

Retire by 40 had a good article on this, in which he discusses the stimulus checks, unemployment insurance, and potential ways he is planning on spending it (some of it he actual intends to potentially use to help his tenants if they are in need).  

How much will you get?

  • $1,200 for single tax filers that make less than $75,00 adjusted gross income. It will be reduced if you make more, up to $99,000
  • $2,400 for married, filing jointless, up to $150,000 AGI. If you make over $198,000 AGI, no stimulus
  • $500 for each qualifying child.

Unfortunately, we did a $50K Roth conversion last year, so our AGI is around $188,000. This pushed us almost up to the max. Based on a calculator available from Kiplinger’s, it looks like we’ll only be getting $500 for the two of us. Still, its useful money to help stimulate the economy, and I’d prefer the money got spent on folks in worse financial straights than we are.

We’re already doing what we can while in self-quaranteen at home (everyone in New Jersey has been asked to stay home unless in essential industries). Both of us can do our jobs from home, so “no skin off either of our noses.” We are ordering takeout from our favorite restaurants, to try to help them stay in business. We continue to grocery shop, and we are helping out where we can (just gave $1,000 to our local Southern New Jersey food bank). Trying to help where we can, while staying out of trouble and not contributing to the sickness/panic.

Hopefully everyone is healthy and contributing where they can!

Mr. 39 Month

Starting Something New

As part of my plan to transition to FI, and to pursue what I want to versus working the rat race, I’ve decided to start working on my side hustles and researching to eventually move into a different field. As many folks have stated in their FIRE journey’s, its not that they want to stop working, its that they want to work in something that they love. That is what I’m going to do, and I’ll try and chart some of my progress here.

One of the areas I want to work at is in starting up and running a business, even a small, side-hustle one. My thought is to start in a small one centered around one of my favorite hobbies, woodworking. My plan would be to make items for sale at craft fairs and online. I also wanted to go through some of the thoughts and work here, including the numbers, so people could get an idea of the process (and offer advice & counsel on what I’m doing, if it fits them).

In reading through the book Street Smarts, written by two individuals who have helped guide entrepreneurs for decades, the first question they ask at the beginning of potential entrepreneurs is “why do you want to create and build this business?” Along those lines, I laid out the reasons why I wanted to start up this business:

  1. Learn how to work business numbers and run a business by them (P&L statements, Expenses, budgets, Capital spending, etc.)
  2. Improve my woodworking skills
  3. Learn to develop website
  4. Develop my marketing skills

Adding/improving these skills would help me move onto the next business I was planning on moving to (more on that at a later date). So what steps do I think I need to start with here?

  • Create a list of potential items I could make and sell, both online and at craft fairs
  • Determine material costs for those items
  • Determine Tools/Jigs necessary to build those items
  • Determine time in would take to manufacture those items

From that, I would at least have some idea of my material costs, and be better able to build a budget. My list of potential items to start is:

  • Photo Holder
  • Picture Frame
  • Cutting Board
  • Tea box
  • Fast boxes
  • Shaker carry box
  • Campaign collapsible bookshelf
  • Craftsman bookshelf

So the next step for me is to work out the other three items for each piece I want to produce. We’ll see how it goes.

Mr. 39 Months

Timing the Market – Update for Aug 2019

Back two years ago, I reviewed Ben Stein’s & Phil DeMuth’s book “Yes You can time the Market” in which they discussed ways  to time the market over the long term, using various signals signs to determine the long term (15 year trend) of the market. They definitely did not believe in short-term timing, but they did present a good case for how to look at the current state and make long-term determinations.

I followed up with several other posts in which I looked at short-term timing, and at what Stein/DeMuth’s strategy would have resulted if I had followed it since graduating college in 1986 (answer, I would have been 5% – 10% richer over a 30 year period, including the dot.com crash).

I thought I’d provide a slight update to folks in case they were interested.

If you remember, Stein/DeMuth had four key measurements to determine the long-term direction of the market:

  1. Price vs 15-year average
  2. Price-to-earnings ratio vs. 15-year average
  3. Dividend yield vs. 15-year average
  4. Bond yeld vs Dividend yield

For Jan 1, 2018, the numbers showed:

  • Price (adjusted for inflation) of $2,883 vs 15 year avg of $1,789 – don’t buy stock
  • P/E ratio: 24.97 vs 15-year average of 23.2 – don’t buy stock
  • Dividend Yield: 1.83% vs. 15-year average of 1.99% – don’t buy stock
  • Earnings Yield (inverse of P/E) vs. AAA bond yield: 4.0% vs 3.5% – buy stock

So three out of the four metrics said don’t buy. The S&P 500 for 2018 was down -6.2% (source CNBC). A lot of folks paid money for stocks that were overpriced at the beginning of 2018.

So what did Jan 2019 look like?

  • Price (adjusted for inflation) of $2,654 vs 15 year avg of $1,862 – don’t buy stock
  • P/E ratio: 19.6 vs 15-year average of 23.0 – Buy Stock
  • Dividend Yield: 2.14% vs. 15-year average of 2.03% – Buy Stock
  • Earnings Yield (inverse of P/E) vs. AAA bond yield: 5.1% vs 3.98% – Buy Stock

So three out of the four metrics say “buy stocks” – and the market is up 15.23% year-to-date

Does this prove that Ben Stein and Phil DeMuth’s market timing strategy is still valid. It appears to be still going well.

Anybody out there with an interesting market timing strategy?

Mr. 39 months