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:

Price vs 15-year average
Price-to-earnings ratio vs. 15-year average
Dividend yield vs. 15-year average
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

Good Post at Brave Saver about being realistic in your pursuit of FI

Don’t Live a Financial Fantasy: Manage Money Based On Reality

Frugal win – doing your own minor home repairs

Well Mrs. 39 Months is out for week (she is doing a craft-related project with friends up in Vermont with my brother and his wife). So I’m a bachelor for the week. My grocery shopping consisted of a cart full of meat (steak, pork, chicken) and ice cream. I did purchase some fruit and broccoli as well, so I’m not a complete nut. The pets have been a little traumatized – they are used to me being gone for the week on business, but not my wife. Still, things are going OK.

When we remodeled the house ten years ago, we added a half-story to our rancher to make it sort of a “cape cod” kind of house. Our bedroom is now on the second floor, and we have a separate heating and cooling unit for it. Unfortunately, our AC guy, for some reason, thought water flowed uphill, so in the summer when we cranked up the AC (about 5 months after construction was done) it started leaking over our ceiling (the AC unit is in the attic). Ruined some drywall.

The construction guys came back in, fixed the AC issue, and put in drywall, but only put on the mud coat. Never came back (we were already occupying the bedroom, and it was difficult scheduling all of it). So for the last ten years, we have been living with a plain sheet of drywall over the bed, with its mud coat alone – and un-sanded. The problem has been that we were never in a situation where we could clear out the bedroom and do the work – Mrs. 39 Months didn’t like the idea of setting up temporarily somewhere else in the house.

Well, now that she is gone, I’ve decided to do the work, which consists of:

Clearing out the existing space (Mon)
Putting down tarps and protecting other surfaces (Mon)
Sanding/scraping the old drywall compound (Mon)
Priming the surfaces (Tue)
Putting on 2 coats of paint (Wed)

Its not work that I (or most other people) enjoy. Still, I had the chance, and rather than spend money to have someone else do the work, I chose to tackle it myself. I’ve already got a lot of the tools (rollers, scrapers, brushes, etc.). About $70 for some of the materials (paint, spackle, primer) and I was ready to go. Moved everything out (I have been sleeping on the ground in our family room) got it setup and off we go.

Doing a ceiling is a little rough on the arms, but not too bad. As of last night, I was done, and checking in this morning it appeared the ceiling was fairly close to the existing color. I knew I couldn’t get it perfect, but I’m pretty happy with where we are. Hopefully Mrs. 39 Months will like it we she gets back Friday night.

Mr. 39 Months

Spreadsheet Software to do financial calculations

Many of us in the FI community are numbers “nerds” who revel is using spreadsheets, software and programs to review and manipulate data. We love to plan on future value of our investments, timing for FI date, and the amount of savings we have to make in order to hit our goals. Its fun and informative for us.

There is also a host of financial programs and software available (look at the side bar for a few of the calculators). Still, sometimes its nice to know how to do some calculations for yourself, using simple formulas put into your spreadsheet software (like MS Excel). I thought I’d share of few of these with you, in case you would like to use them yourself.

Calculating Future Value: What would the future value of money be if you deposited a certain amount (say $1000) for a specific period (say, 5 years) at a certain interest rate (say 10%). To do this, you would type in the following formula into your spreadsheet software:
- =FV(rate, period, amount per period, amount you start with)
- =FV(.10,5,-1000,0)
- =$15,937.42
Calculating Present Value: What amount must you invest today, in order to have a certain amount (say $50,000) within a certain time frame (10 years from now) at a certain interest rate (say, 8%). To do this, you type the following formula into your spreadsheet software:
- =PV(rate, periods, payment, future value amount type)
- =PV(.08,10,0,-50000)
- =$23,159.67

Microsoft Excel has a host of these type of calculations (55 different ones). To find them, just open up a blank workbook, type in “FV” in the search function and look for “financial” under the search. By clicking on one of the 55 different ones, you are bound to find one which will meet your needs.

By using these, as opposed to just using some pre-set software, I feel you will have a better understanding of the core concepts behind the calculations, and be better able to map your path to Financial Independence.

Good luck on your journey!

Mr. 39 Months

The Journey/Struggle is half the fun….

The other day I was going into a local BJ’s store (a mass marketing store that is membership only – you can buy items in bulk for significant savings). It turned out it was time to “re-up” our membership, so I had to take out my membership card to get a number in order to do it. In looking at it, I was struck by the picture on the back. There, grinning back at my was my early 30’s self, with a big shock of dark hair, and not too many lines on his face.

I thought about my life at that time (recently left the military, just starting out in logistics job, a home and mortgage that was almost 4x my take home pay, etc.) There were going to be a lot of struggles ahead, a lot of stress and tension, and a lot of decisions that, for good or ill, were going to shape my life. How interesting to look at that face, and know now, what I didn’t know then. How much better would I have done if I had adopted some of those lessons (especially FIRE lessons) back in the early 1990s.

Recently I’ve learned that one of my nieces is in a lot of debt. I have thought about assisting (with the approval of her Mom, beforehand) but I’m holding back. Part of it is the knowledge that if we just give funds, she’ll wind up in the same spot. Part of it is the notes above – the journey /struggle in life is part of the purpose. There are lessons to be learned, experiences to be had, and things to do that, if someone steps in, you might not gain. These may end up biting you on the butt later on.

One of the benefits of the FIRE community is the sharing that folks do, the lessons they’ve learned that they want others to benefit from. I do a lot of reading, both online and through books, just to try to gain the lessons from others. Still, in the grand scheme of things, I don’t think I would trade any of the lesson’s I’ve learned in – they have made me who I am. If I had to tell my younger self anything, it would be that “It’s all going to work out OK, in the end.”

I hope its working out well for all of you

Mr. 39 Months

Slow and Steady winds the race – Update for Aug 1, 2019

The standard story of the tortoise and the hare talks about “slow and steady wins the race.” In it, the hare runs fast, but then takes a lot of sleep breaks, while the tortoise just keeps plugging away. For the financial markets, the comment most often made is “Its not market timing, its time in the market.” The idea behind this is that you shouldn’t wait for the best time to invest, you should just invest.

There has been a lot of talk of an impending recession and market correction. We’ve been hearing that now for 6-8 years, and other than the slight “bump” in December 2018 (which the market has already moved beyond) we seem to be moving forward. My intention, like so many other folks in the FIRE community, is to stick with the plan and not deviate just because some “chicken littles” claim the sky is falling.

July was an OK month, with my investments going up 0.64% for the month (equivalent of 7.68% for the year). For the year, I’m up 13.77% overall, and this with 30% of my investments in bonds! I’m pleased overall. Down to eleven months before my FI date, if I don’t include Social Security. If I added in Social Security, we would already be at FI

Retirement Accounts: Remember, my allocation for these is:

30% Bond Index Fund
17.5% S&P500 Index Fund
17.5% International Index Fund
17.5% Small Cap Index Fund
17.5% REIT Index Fund

For the month, I am up about +0.5%, slow and steady. International investments took a pounding, and bonds didn’t really move, but the REITS, S&P5000 and small caps did well. Remember that in June, International was up a lot, so its balancing out.

S&P500: +1.4%
Small Cap: +1.3%
International: -1.9%
Bonds: +0.2%
REITs: +1.6%

My 401K/Deferred account at work is up a similar amount, with similar returns

Dividend Income Account: Allocation:

25% Dividend Stocks
25% REITs
50% Bond Index Funds

This is up 0.6%, so it was similar to my other investments. Some of my dividend stocks (Chevron, Verizon) were down a little, but overall not bad. I posted a study earlier where I compared my dividend portfolio vs. my vanguard IRA – and the dividend portfolio did better over the last 3 years. I’ll keep track and keep posting on the comparison, so folks can compare.

Value Investing Account: My value investing portfolio is up around 1.0% for July, probably because it doesn’t have any bonds in it. My new ETF, Pawz, is doing about that. I’ve got 55 shares, and expect to get another 25 in August.

Again, I’m up 13.77% for the year, which equals about $133K in returns – for just the first seven months. Its more than Mrs. 39 Months and I made in salary for the first seven months, which is a good sign. We are on track and moving forward – as I hope all of you are.

Mr. 39 Months

Purging your Blogroll – Aug 2019

I’ve written before about “purging your blogroll”. As I noted then, one of the things which has always brought me a lot of pleasure is reading other FIRE blogs and seeing the different facets of the subject. It seems each blogger has a topic which motivates them, and they concentrate a great deal of energy on that topic. The result is some excellent reading and the opportunity to learn in-depth of a wide variety of topics.

It’s a sad thing that as people seem to hit FI, they take off and the level of blogging activity seems to drop. I’ve heard it said that many bloggers (and podcasters) don’t make it past six months. They say what they need to say, and then run out of ideas. When this happens, we often lose an interesting voice and set of thoughts. One of the reasons I enjoy the Post-FI blogs (near the top of the blogroll) is to see what life is like once folks hit the magic number/date.

What is nice is that there are always new people joining our community, and I want to make sure that I can include those in my blogroll (at right) so others can link to and see what they are saying. So I typically every 6-12 months do a blogroll “purge” where I clear out those blogs who haven’t updated stuff over the last 3+ months, and this frees up space for newer bloggers. So today, I’ll be doing my blogroll “purge” and trying to identify new and interesting folks for you to see.

Enjoy, and I hope you enjoy my writing and the writing of those I point out. Enjoy the rest of summer!

Mr. 39 Months

Jefferson’s Ten rules

Thomas Jefferson, one of the founding fathers of the US and the writer of the Declaration of Independence, lived a long and fruitful life. He was the first Secretary of State for the US, and the 3^rd President of the US. Both he and his peer (and President #2) John Adams dies on the same day, July 4^th, 1826 – 50 years after the publication of the Declaration of Independence. Exactly 50 years after!

Jefferson was known for giving advice to his family, friends, and associates. In 1825, one year before his death, he wrote down his “Ten Rules” and abbreviation of his “Canons for the Conduct of Life.” They have gone down through the years and been reprinted numerous times. I happened across them while on vacation last week, at one of the historical sites we visited, and thought I’d reprint them. Many of them would make their way into an instruction book for FI.

Never put off till tomorrow what you can do to-day.
Never trouble another for what you can do yourself.
Never spend your money before you have it.
Never buy what you do not want, because it is cheap; it will be dear to you.
Pride costs us more than hunger, thirst and cold.
We never repent of having eaten too little.
Nothing is troublesome that we do willingly.
How much pain have cost us the evils which have never happened!
Take things always by their smooth handle.
When angry, count ten, before you speak; if very angry, an hundred.

So what words of Wisdom do you live by?

Mr. 39 Months

How a 4-day weekend affected my views on FIRE

In the United States, we celebrate our independence day on July 4^th, with parades, bands, fireworks, etc. Its typically a pretty big celebration, especially in my part of the US (I live close to Philadelphia, where the Declaration of Independence was written and signed). Most folks have off (some stores and food places stay open) and we have barbeques and family/friends get together.

This year, July 4^th fell on a Thursday, so my company (and many others) also had Friday off , for a 4-day weekend! We had friends over to barbecue on Thursday the 4^th, went to a movie on Friday the 5^th, and worked around the house and did some house maintenance on Saturday the 5^th. However, by day four (Sunday) we were starting to be at a loss for what to do. We ended up just “bumming” around the house, and then finished up with our Sunday evening “get ready for the workweek” tasks.

It was that evening that it hit me. This would be what retirement would be like if we didn’t focus on what we wanted to do once we hit FI and stepped away from regular work. I’ve written numerous times on the need to have hobbies, and to find ways to keep yourself occupied once you decide to retire. This just drove that point home!

So I thought through my hobbies and plans for retirement, and did some additional brainstorming, and here is where I am at right now, as far as plans once we retire:

Hobby: woodworking (may turn this into a minor $ generator)
Hobby: backpacking/complete the Appalachian Trail
Travel: 1-2 big trips a year, plus minor ones
Work: Temp/seasonal work, to keep my mind in use and to have some interaction
Volunteer: Build homes with Habitat for Humanity
Volunteer: Continue to work with my professional society and outdoor club
Volunteer: Looking for ways to take my professional and financial skills and help people with them
Teach: Either my hobbies or my professional skills

It could keep me busy, but I’m still concerned. It will be something that I will be keeping a close eye on in the years ahead.

So what are your plans for once you “retire?”

Mr. 39 Months

Another travel hack completed

I’ve written before about how I’m a “roady” for my wife when she is doing the dulcimer thing. Well, we’ve got another trip coming up in October, down to North Carolina, which could be expensive. However, travel hacking to the rescue!

The trip will consist of a week traveling down to Tennessee (to see my family) and North Carolina (for Dulcimer). We will need air travel, a hotel (for five days), and a rental car.

Air: Since we know the dates well in advance, I was able to get the tickets with a minimum of air miles from our stock of American Airlines miles (Southwest doesn’t fly into Knoxville, TN, where my family is). Cost of two round-trip tickets at this time is $506 each or $1,012. For mileage, we got a deal for 12,500 miles each, or 25,000 miles. So we ended up spending roughly 25 miles per $ on this. Not as good as when we went to California last year, but not too shabby. Savings of $1,012.
Rental car: One week of rental, but had to use $ (not points). Used the Chase travel link to rent with Budget (mid-size car for $376.14. Will use Chase card to get the points on it.
Hotel: We’ve got a lot of Hilton points, so I was able to get 5-days within 10 minutes of the Dulcimer Festival for 160,000 points (40,000 per day, with 5^th day free). A little pricey for the hotel, but the convenience is worth it. Total savings of $740.
Food, Gas, other: Couldn’t use points on these, but again, was able to use the charges on my Chase card

Similar savings to our trip last year to California, and we’ll get the opportunity to visit another national park (Smokey Mountain National Park) and see family. Not too bad.