Recent Money-Saving Acts

- Frustrated with my printer, I almost dumped it. A bit of tinkering and a phone call later, I solved the issue of the printer telling me it had a paper jam, when it clearly didn't. $400 saved (I have an awesome Brother MFC).

- Returned portable A/C to Home Depot. It flat-out didn't work 50% of the time. $520 back.

- I'm in the act of switching online brokers from TD Ameritrade to thinkorswim.com. This saves me $10 per round-trip transaction. I know what most of you are thinking-- despite me shouting for proper asset allocation from my pulpit, I'm a hypocrite for day-trading. And so I am-- but I'm only using a very limited amount of funds to do so.

- I didn't intend this to turn out the way I'm about to describe it, but my buddy invited me to stay over for a night in Vegas with his brother + his gf. I benefited from having one of the best views of the Strip-- across from my buddy's room was the full, complete view of the Bellagio facade and the water show. No little corner of the next hotel over cutting off, say, the leftmost part of the show or anything. An unblocked view of it all-- and of the Eiffel Tower replica, even. Dazzling! And he refused to accept any money from me to cover my share of the stay. I was fighting him as he tried to cover for my Bellagio buffet dinner the night I arrived, but I lost that fight. I sat in the window just staring out at the fountain like a cat would do for hours.

- I'm whittling down my closet even more, of trendy clothes. Less space = less clothes to dryclean, wash and dry, and to worry about in general. I'm going standard-issue and boring with clothes.

- I go out nowadays in bigger groups, more authentic entrees vs overpriced, chi-chi designer "where's-the-beef?!" trendiness. Weekend entertainment now consists of insanely low house games w/ $5 buy-ins, cooking together, hanging out, attending local community concerts, contributing to local community efforts, and just overall, good company, good fun. One weekend it'll be tennis all day followed by movie night at friend's, next will be dinner followed by a group broomball event, next will be a night of Bomber-man.

What amazes me is the quality of the company: an aspiring school-board politician having been a successful entrepreneur in his young life, a couple of nationwide commercial real-estate developers, Ivy League architects, lawyers, a shopper-turned-wholesale enterpreneur, even more Ph.D's, and then there's me, a lowly IT dude. I'm sure they bring home big bacon. And yet-- everyone's just so damn humble, modest, and easy to befriend. I mean, here we are, having a good time just hanging out, having a few brewski's, and playing Nintendo Wii.

All these elements promote a very easy and automatic way to save lots of money, despite having to pay rent in LA and a car note. Most importantly, these elements do help foster a generally increased sense of well-being and memorable good times-- without having to break the wallet too badly.

Car and Cash-Flow Update

I jumped the gun, thinking I'd be able to get rid of the Subaru very soon, and move forward with purchasing a less costly vehicle. However, the buyers-to-be spooked, and I'm left with very little cash right now after I fully paid the car off to have the title handy to make for an easy sale.

Good thing my financier is flexible enough to "re-finance" the car again, giving me the same terms, same interest rate, same balance. Hopefully this is completed by week-end so that I can use my cash for something that I want to write about soon.

I recently applied for an unsecured loan from Prosper.com to temporarily ease my own personal cash crunch (that coincided with this summer's global credit crunch) from paying off the car in full, and my own 5-digit loan to my brother to buy down the rates of his revolving accounts. The way Prosper.com operates today facilitates the borrowing of money; it's quite easy. Lending, however, can be as perplexing as creating models to forecasting real estate cycles. The process of loaning people money is mechanically simple enough. Calculating risks and identifying hedging strategies is the pain.

Anyhow, the reception from lenders for my "loan application" was overwhelming. I suppose my now sky-high credit score, low running expense balance, and very low DTI ratio fueled the clamor from lenders.

What'll exacerbate my Prosper.com lenders is the fact that, once my old auto financier comes online with my old car loan, I'll drop Prosper.com like it's totally faux pas. I'm sure I was the Holy Grail of a borrower to my Prosper.com lenders, but oh well.

Once I have my auto loan, I'll have nearly $25K on-hand-- that I already have plans for. Come back soon, and see what I have planned for it! I think many of you will be shocked.

Retiree Portfolio Update

As of today, the total NAV for the Retiree Portfolio has exceeded the 10% CAGR (compound annual growth rate) that was my goal for this year. I nearly can't contain the excitement over reaching this goal early. Come to think of it, this was achieved despite the following:

- Not all of the Retiree's assets were fully allocated to their targets. 8% of total assets are still parked in our temporary "holding" fund, Wellington, which has returned 9.27% YTD-- not shabby at all for a lil' 60/40 well-blended, almost-no-cost fund. 21% of the portfolio sits in very un-sexy, low-class money market funds.

- By the same token, the above funds were to be used to fill out the remaining portions of the ideal asset allocation mix. I'd accomplish this by completing the Int'l funds allocation. Unfortunately, Int'l has climbed since I last checked in and decided to buy in next time a day crash happens. No crash has happened since this point in time, while Asia and Europe have both been zooming upwards.

- Almost 2% of the gain to 10% CAGR came in the form of a decent-sized chunk of corporate dividends.

- Bond funds have *really* kicked into high gear these past couple of months, while equities have tempered a bit.

Obviously, there's another quarter left before all this is over, and a good portion of these gains could vanish from a freak October market crash, or something equally bad. It remains to be seen by year-end what the final CAGR is. I'm surprised, if anything, because I firmly believed it would be a very challenging and difficult goal to reach.

Cars...

Of all excesses I've reduced from the highest mountain of excesses I accumulated in recent years, the one remaining "excess" I keep dear to my heart are cars. Yes, I've downgraded to a compromise car, which is a powerful, relatively reliable 4-door, AWD handling car. But perhaps I can go one step further.

After I finally received my refund check, I've been noticing people have been offering to buy my car for virtually the same net value that I bought it for 4 months ago! If I decide I'm crazy enough to go through this hopefully last car dance, and pull off selling it for pretty much what I bought it for, this essentially means I've been driving it "free"! Well, there's also the $400 interest that my bank has added to my loan). So let's call it $100 / mo and call it even.

Somehow I get the feeling this current car's rate of depreciation may pick up speed again, though.

So, as a replacement, I believe I may actually come completely full circle, and get into a 2001 Camry-- with V6! And which means disc brakes on all wheels! For a whopping $7500. This was basically the Camry one generation newer than my first, personally owned car, a '96 Camry, and the Camry that I'd wished I bought instead of my old Camry. Although they're both essentially the same hardware underneath, the '97-'01 Camry's had a ton of nice refinements to it.

For $7500, I don't mind losing a stick (probably for good, for my life-- until I pick up a DSG or SMG-type driven car in the future), having absolute peace of mind with a car that has a completely predictable maintanance pattern, with costs all figured out, and a widespread network of support nationwide.

I think I'm completely done being halfway OCD with cars and taking them to specialty and/or enthusiast shops. I've discovering I have far too little precious time to waste on low-ROI activities like shop visits, and wish to dedicate that to studying, investing, etc.

People have asked if I'll miss the "performance handling" aspect of driving. I might-- but, frankly, right now, comparing a Subaru to a V6 Camry, I'll be losing anywhere from $1500-$2000 / year. In the grand scheme of my income, that's a very small percentage of my income-- but, like time, it's enough to matter how irrecuperable it is.

Thank you, Subaru

Last night, I received my rebate check of 1,023.65! I'm surprised that, once I was on them pretty hard, that they issued me this rebate so quickly.

I should just sock it away somewhere where it'll grow enough to pay for the inevitable clutch job of ~$1,200 that'll come, one of these days...

September 2007 Net Worth

After searching high and low for that ideal personal finance broadcasting tool which can seamlessly integrate to all asset, investment, and credit accounts, produce summary and detailed-level snapshots with intelligent aggregation, have web publishing capabilities topped off with relative ease-of-use, I've found the perfect tool-- for now. It's called the spreadsheet. Some surprise there.

I've discovered I really don't spend significantly much more time simply plopping account totals and updating it on a monthly basis.

So here it is, in all its glory-- my first ever actual Net Worth Summary Sheet:

New Micro-Investment

While considering my current short-term investment options, I was inspired by a couple of things, especially the existence of the micro-lending market, to come up with a plan with my younger brother. This plan would benefit us both if everything works out in both our favors.

The plan is this: My brother decided to go back to school for the first time in years, and small signs exist around that demonstrates his initial commitment. And although, he's also swimming in insurmountable debt, he's also beginning to demonstrate a bit of fiscal responsibility to be on his way to financially fitness again.

His biggest revolving account balance is $7K, and here's the kicker: with a *35%* APR! Even more frightening is that the monthly periodic interest as shown on the statement seems lower than what it should actually be-- and we have no idea if, in the future, that gives the creditor the ability or right to really screw my brother big-time or what else. Well, we decided we don't care to find out.

Here were the terms of the agreement: I help pay off the $7K today. He agrees to pay me back at a 5%-10% annualized rate, depending on factors, including: 1) demonstration of being more fiscally disciplined with his own budget and ability to pay off two other substantially smaller revolving credit accounts and another relative, and 2) proof of very positive status updates and proof from classes-- nothing less than a B+-- on full course load as defined by his school district. (Cognitively speaking, he's smarter than I am. Everyone knows he can do it. He's just lazy. Even he realizes this.)

If none of these terms are met, then at minimum, he owes me the principal back + 10% annual.

If he doesn't pay me back 6 months after the mutually-agreed initial pay-back period, I'll pursue wage garnishment / debt collection against him. There is no way I will not ask for this money back this time around; it's made clear to him; and he understands. If it ever gets to that point, I'll be nice: I'll only ask back principal + 10% + lost wages in pursuing him. :)

Meanwhile, I've just found a great way to secure a 10% annual investment without worrying about market volatility.

Even at the 10% interest rate for $7K, I'll be saving him $1750 a year. Unbelievable.

Personally, the worst that could happen is that I end up with a 5% return, which is equivalent to money-market / 10-year note rates. But I do end up helping out someone in need.

UPDATE:

Loan balance is now at $10K since we added a 2nd, and final, charge account that had a 28% killer APR.

Obviously, giving my brother this loan means, to some, I fail to meet this year's short-term cash reserve goal of being in the $40K-$50K range. However, if I consider this loan as an unsecured, promissory note, just as I already do with about $2K that MT owes me personally, then in another sense, I can count it as part of my net worth. It's a compromise that seems reasonable-- it's not like I just took $10K and dropped it on a fancy international vacation or an always-depreciating and unneeded new sports car.

A Quick, Summarized Update

If you're one of the few that have been trying to follow this blog and lost hope from my lack of updates, my apologies! After speaking with one of my colleagues last night, I've decided I need to recommit to periodically post updates in some way, shape or form.

Just a real, quick 64,000 ft view of my personal fiscal updates:

- Just as everyone else has, the Retiree Portfolio has taken a beating from this past month's worth of market freefall. The great benefit of proper asset allocation, however, is the percentage loss of the Retiree Portfolio is nearly half that of the broad market indices. This comes at a time where Portfolio construction is about 80% complete, and therefore a bit bond-heavier from its final composition.

- I stopped thinking with my ego, my brain took over, and changed auto insurance coverage. This immediately saved me $1K / year.

When I got a substantial raise and moved away from the folks' nest 3 years ago, the first thing I did was buy a $50,000+ performance car. Then, I went ahead and bought my own insurance coverage from Wawanesa. Granted, Wawanesa is one of the most affordable providers out there, but after a couple of accidents and moving traffic violations, my insurance bill nearly doubled to $4K / year. Now, a couple years of playing nice and repairing my record, with two cars being covered (my own and my mother's) the premium has now dwindled by a third or so. Imagine my surprise when, for kicks and laughs, I called my parents' auto insurance provider who estimated that I could save yet another $1K! I couldn't resist the offer.

- When I purchased my latest car, something far more dependable than anything I've owned over the last few years because it's Japanese, for one thing, it still had an extended warranty that the previous owner had added on when he purchased the car new. The extended warranty was definitely the work of actuaries, as it excluded so many things with a higher likelihood of failure of which costs could easily add up, and covered few big-ticket items that, due to today's state of automotive advances, are very unlikely to fail. I didn't see the warranty as something necessary. I've been keeping tabs on Subaru to refund the pro-rated, unused portion of the coverage, which should be coming in next week. Amount = $1K. It's less than what I'd previously projected, but I'll take it.

- Still on the subject of my car, I decided to refinance my own car from Capital One Auto Finance to my own local bank. My monthly savings is $70 / month due to the new arrangement being .5% lower and the term stretched out to 72 vs. 60 months. From memory, the cost of extra 12 months of financing was something along the lines of $500-$700.

- My new job has been flying me out of town a lot. Although traveling has its consequences, one upside is the cost savings for having meals and travel expenses covered either by my company or our client. I estimate cost savings / month can range anywhere from $300-$600 / month.

- Since drycleaning expenses are around $100-$150 / month for my business casual clothes, I decided to take one month's worth of drycleaning expense money and buy super-cheap, admittedly lower-quality clothes for business-- from Costco. The shirts are <$20 apiece, machine-washable, and, contrary to the clothes that I usually take to drylceaning, I won't be having a panic attack if anything happens to the clothes. Burn spot? Discoloration? No problem! Chuck it away, and buy another $14.99 Kenneth Cole Reaction or Kirkland shirt from Costco. Bonus: My ironing skills are improving!

- My business banking account had $3K in it which I couldn't touch, while the bank was charging me a $15 / mo. maintenance fee, until I shut down my consulting incorporation as of a week ago. Today, I'm $3K "richer."

- I'm every-so-slowly cutting down the amount of clutter in my room. Psychologically, my mind feels calmer and more at ease, and there's absolutely no price you can get from that.

- Including all the short-term, real equity owed to me out there (roughly $3K from Marvell for one real estate transaction I provided assistance), I'm looking at a short-term cash reserve of $35K. What surprises me is that by adopting aggressive cost-cutting and income-saving practices, I really am within earshot of accumulating anywhere from $45K-$50K by year-end!

Future considerations:

- I'm still contemplating legally moving out to an income-tax-free state, such as Texas or Oregon. Fiscally, I could've done this already, quite easily. What's got me running into a mental impasse over this issue is whether the headache of maintaining a home out there while frequently flying back to LA is worth saving 10% of my gross income.

- Moving back home with the folks. Taking some of my savings and pay for expanding their home to make space for me while significantly increasing the value of their home, pushing it to exceed $1 million.

- I need to further analyze the practicality of owning rental income real estate vs. other passive income methods, such as owning a small business. For now, I'm sidelining rental income research.

- I want to obtain a certification that my employer said will provide me a 10% immediate raise ASAP. Come to think of it, if I pass that certification, each month I'll net additional money equal to the net amount / month that the existing rental income property that MT and I co-own brings in. So, why not get certified?

I really need to ramp up on the following:

- Find personal finance software for consolidated views of my finance and publish them here.

- Get together with colleague to put together financial modeling and reporting blog.

- Research small business ideas.

I know there are many, many topics I haven't touched upon that I promised to do. I'll work on them in the upcoming days.

Weekly Update

One of the things that I found absolutely intriguing about life is observing the trials and tribulations of myself and my buddies, and to basically see them (or myself, in some cases) take a step back and logically and emotionally assess themselves.

Take the behavioral impact that an aggressively increasing pool of cash, or significantly increased salaries, has on the average Joe's psyche. Perhaps because my association with my friends says a lot about our common psychology, I've only seen very few of them be able to manage largess increases in stride.

MT, JP, and I are guilty of going out and blowing it on "relatively" expensive toys such as nice cars, namely.

When one meets SK from Chicago for the first time, he looks like he's ready to start a bar fight at any second. You may or may not expect him to be frugal when it comes to his daily living expenses and assets, but you probably wouldn't expect him to be extremely philanthropic with whatever he's saved up to his family relatives and other "friends", who 1) he's already not on good terms with, to begin with, and 2) always end up screwing up their payments back to him. This has been going on for two years now, yet he still keeps getting into these personal loans while fueling is ever-growing hatred for them. ("Helping family out" is one thing, but helping out vainly + hating them more through the process is unnecessary.)

Financially speaking, my financial acumen is sometimes a bit more honed and advanced than sometimes those with more capital than I currently have. However, there are definitely those around me who are even savvier than I am, with less means than I have.

There are acquaintances and friends few and far between that have been low-key with their newly-found "micro-wealth". However, when I observe them and compare them against me, or SK, or MT, for example, anecdotally speaking, at least within my own circle of acquaintances, I think we've involuntarily proven the ol' saying, "Money does change people."

What's really changed, isn't our morals, as one would expect. What's changed is our perception of money, and far it travels. We start thinking in terms of $1000's vs. $100's. We're waiving $1000 fees, quickly assessing, in the most inaccurate way possible, our time we take to avoid this $1000 fee multiplied by my hourly rate ends up costing us more than simply taking the $1000 fee hit. What's changed is that we now earn more than our parents could've dreamed of earning, and that we adopt the whole "think rich, grow rich" philosophy.

That's not to say that those "think rich, grow rich" books are baseless. Their content probably delves much more into exactly how to "think rich" properly. Unfortunately, what I did was take the words "think rich" at literal, face value, and turn it into a personal finance disaster for the last 3 years.

Like I said, our morals haven't changed, for the most part. Seeing that I was drowning myself deeper and deeper in financial morass, I took drastic actions by eliminating the expensive car out of my life. Next was selling off the Pine Ave. condo. Both were both timely and timeless choices, especially the condo. Immediately after I listed it for 3 weeks and sold it at my staggering asking price, the market collapsed in the Long Beach area.

In parallel, I noticed that my career path was on the fast track of domestic extinction. Opportunity presented itself to still actually earn a very decent salary, although the pay was significantly reduced from my senior level consulting position, and yet acquire a whole new set of financial analysis skills-- to be paid quite well to learn and train, while usually people pay to acquire new skills out of their own pockets. By taking advantage of that, I realized that the budget squeeze would tighten even more so that I first imagined.

So, now, I'm back to realizing that the intrinsic value of an item or event relative its absolute dollar value really depends on the scope and context of the situation at hand. Factors include actual billable work-hours lost or gained, leisure hours lost or gained, opportunity cost or advantage, budget and financial impact on reaching goals and milestones, internal rate of returns, among other factors based on individual scenarios.

For example, if a favorable California real estate deal presented itself to me and I was interested in financing, then there's no sense in haggling over even $10,000 or $20,000 most of the time. I'd easily turn a blind eye and deaf ear to plasma TV / included new appliances incentives.

But, I'm willing to exert the effort to save $500 / year on auto insurance. Why pay more?

Meanwhile, I'm now not willing to shell out $1500 to an attorney for document review when the document contains only the minimally required legalese on it on rather insignificant issues. I've learned that, although it's recommended that one consults an attorney to review legal documents, it shouldn't be taken literally as to review *every* legal document, even if it's part of, say, a real estate deal. Attorneys charge per hour. Have them review what's necessary, anything that could cause an issue to waffle towards litigation. It cost me nearly one year's worth of Roth IRA contributions, $3000+, to realize this fact.

So, my cash flow is doing incrementally better nowadays.

SK's case was one where, even though he's been a mortgage lender / broker for the past few years, the first few years involved him trying to sell us on the ideas of ARM's and interest-only's and other exotic animals. SK was basically acting as a salesman whose main interest was pushing volume in order to increase his bottom line. Quite frankly, though, I don't think he sold these products knowing the long-term ill-effects they'd have. Despite all that SK told me, I had my personal reservations about these vehicles.

Fast-forward two years. My conclusions have been firmly villified. SK's outlook has changed accordingly. As if in step with this change, I've noticed that he's far more budget-oriented and financially analytical, maybe even slightly more so than I am. For example, I presented a foreclosure opportunity to him, because I saw a $4K-$5K margin from it. However, SK felt that if any unforeseen closing costs were added to our industry average estimates, it'd immediately eat into the net margin. Immediately, it dashed our pursuit. Furthermore, at that moment, it dawned on me that I could purchase a newly built home in a far more favorable area, even though at 2x the cost, through conventional RE processes, that exhibited greater resale and rental income potential. Why not?

MT, on the other hand, has acquired a significant amount of wealth, Unfortunately, his recent decisions may end up to be his cash flow's worst enemy.

How to be Happily Married Happier

It's common knowledge for a while now that wedding industry players have practically brain-washed the public with their ideal projection of the wedding process.

I was surprised that, today, the following article appeared on Yahoo! Finance's front page, though:

Consider that the much-publicized cost of the average wedding -- $28,000 -- comes from a study conducted by Conde Nast Bridal Group, publisher of three wedding magazines and a web site. The study's respondents are those who had answered an online survey, responded to a magazine promotion, or attended a bridal show. Not exactly the population of brides at large.

"If a bride has been told, repeatedly, that it costs nearly $28,000 to have a wedding, then she starts to think that spending $28,000 on a wedding is just one of those things a person has to do, like writing a rent check every month," Mead writes.

Mead looks behind the wedding-industrial complex, including the Chinese seamstress who earns 40 cents for sewing the skirt on a $1,000 gown; the Cinderella coach and other trappings of Disney's "Fairy Tale Wedding Department"; and the videographer who encourages peers at an industry conference to double their prices, because "parents want the best for their children."

...

Mead also investigates a number of wedding "traditions" that turn out not to be time-honored rituals at all, but creations of the bridal industry. "The engagement ring was invented by [diamond producer] De Beers in the 1930s and 1940s," she says. "The so-called traditional bridesmaid luncheon, rehearsal dinner, pre-wedding barbecue, and post-wedding brunch don't have a basis in history. It's easier to say no to things like that if you understand that it's not wrong to not do them."

The funniest chapter in "One Perfect Day" is about the demand for contemporary vows from ministers-for-hire in a nation where 40 percent of people have no religious affiliation. Mead probes the origin of an Apache Indian prayer popular in wedding ceremonies -- and discovers that it was actually written by a screenwriter for a Jimmy Stewart western in 1950. While not authentic, it was apparently good copy, as the screenplay won an Academy Award.

When I asked Mead which wedding expense is the biggest waste of money, she demurred. "I'm not dictating to other people what to do," she says. "What I do point out is the ways in which different parts of the industry promote themselves as essential when they're not. They're very clever at playing on people's emotions."

Lo and behold, my stance on weddings jive with this article on the dot. In fact, I will adamantly refuse to pay big buckaroos if I ever plan on "walking down the aisle" and using the money are far more entertaining or more practical things, like a very nice, extended honeymoon, or a new business, or property, etc.

Update

Back on 6/26/2007, I swapped another $2,000 from Vanguard Prime Money Market Fund into VTSMX for Retiree Portfolio I. For now, it seems adequately-timed as markets have generally increased since then.

That puts us a mere $4,000 left to flesh out the retiree's complete VTSMX position. Dare I say I cannot wait.

Being a new Yelp fledgling, I sauntered over to reviews of a venture I had an opportunity to participate (exclusive SF cafe) but circumstantially didn't. I couldn't believe that the drama I'd heard about via the grapevine had boiled onto the public scene. What's totally ironic is how the business has been closed down for many months, and even so, a fire broke out in that same complex a couple months ago, with my clinically insane friend's dreams of riches literally going up in flames.

I've been toying around with the thought of paying off one of my car loans early. Kind of siding towards the Subaru.

Speaking of which, I'll need to follow up with my request for a refund of the Gold Plus Warranty that the previous Subaru owner transferred to me. I could net an extra $2K if it's approved.

To make a rather drawn-out, boring story short and sweet, MT and I attempted to pick up 2 Southern CA foreclosure properties, but ultimately ended up having just one.

Winder Court seems to have escaped the extensive Texan flooding that had ravaged MT's Pearblossom property. Sometimes I wonder why we're having such good luck with Winder Court-- not that I care not to continue like this.

One of the reasons I've been insanely busy is because a Chicago buddy stayed for a couple of weeks to coincide with some of my absence here. I believe we did a tremendous amount of sightseeing and touristy stuff. Preliminarily, it appears I might've spent somewhere between $500-$700-- which is usually the amount spent in one wild night of partying in Hollywood!

There might be a couple other opportunities that would force me to revive my S-corp that I thought I'd kill off by year-end. Should they occur, developments will transpire in the next couple of weeks.

Update

I know, I know. You all miss me so very much. Once again, my sad, default excuse is simply, I've been insanely busy, training has been quite a pain (but productive beyond belief!), and I've been traveling and flying all over the place.

I'll work backwards a bit, by starting with my weekend project, which is to make my recently-acquired second-hand Subaru Legacy GT (which is my 1998 BMW M3 sedan replacement, which was essentially my 1989 BMW 325i sedan replacement, which is essentially my 1996 Toyota Camry replacement) more fuel-efficient.

Doing so requires actions and equipment that looks like I'm taking a page out of the movie series that I always love mocking, "The Fast and the Furious". Yup-- notebook computer in the driver's seat with a cable hooked up to the car's OBD-II port, a spectrum of colored graphs and charts and what-nots flashing up and down on the screen as I engage and disengage logging.

After spending the latter half of yesterday and the first half of today performing regression-testing of data validity on my notebook computer, I'm now about to fill 'er up with a full bladder of juice, hit up Portola Parkway to find some nice stretches of open road to do 3rd-gear pulls, and record data.

In the middle of all of this, I'll do the most critical part of my efforts: modifying the engine control unit (ECU) to reflect a more civilized, gas-sipping behavior.

All this will be done in my quest to attempt to save anywhere from 20-30% in gas consumption.

Stay tuned!

Weekly Update

Within the last 2 weeks, I spent $600 outside of my monthly budgeting. $150 of it is deemed necessary; the remaining $450 were potential savings opportunities, as ironic as that may sound. Can you blame me for spending $350 (and saving roughly the same amount from retail prices) to buy 2 complete suits from designer labels, when years ago, I easily dropped $500 on a house-brand suit?

The remaining $100 was spent on a very compact, silent, DeLonghi HEPA purifier bundle (unit + filters) which fits within my tiny, mixed-use bedroom / office, silent enough to sleep with it on, and frees up my larger, much noisier existing Hamilton Beach HEPA purifier for our living room. On any surface in my bedroom, I'm noticing copious layers upon layers of particles and dust perhaps from all the remodeling that happened before we moved into the unit. It got so bad my computer keyboard felt sandy and gritty every time I used it.

I'm still working on extensively learning how to use Excel as it's intended to be used. The more I work with Excel, the more I can see the widening differences between Google Spreadsheet (which is a modified, web-ified version of OpenOffice) and Excel. It's cool stuff.

For the Retiree Portfolio, I used some money market funds to purchase the following equity position:

"
VISVX - 5% - 100% (5% allocation of total portfolio) into the traditional IRA account.
"

I'd like to build up the rest of the Total US Stock Market and Total International Market positions but my market-timing alter-ego that I *should be ignoring* is reluctant to take the jump.

I'm going to keep my eye on VTSMX, VGTSX, and VGSIX for entry opportunities to flush out the following, remaining positions:

VTSMX - 25% - 100% (9% unallocated portion of total portfolio ) into the taxable account.
VGTSX - 25% - 60% (15% allocation of total portfolio) into the taxable account, 20% (5% allocation of total portfolio) into the Roth IRA account, the remainder 20% (5% allocation of total portfolio) in the traditional IRA account.
REIT - 5% (I *might* eliminate. Need further analysis.) - 100% (5% allocation of total portfolio) into the traditional IRA account.


I've sold off the 1998 BMW M3-- I'm putting a stop to the Teutonic maintenance hemorrhaging bill. I'm stepping up efforts to find a replacement for my own, personal car ASAP so I can give up the SUV I'm "borrowing" from my mother so we can ween her off her 20-year old Volvo. And put a stop to me burning up her warranty.

Our Winder Court property apparently has collected significantly lower-than-market median rental rates since we acquired it a year ago. Now after a year of trouble-free ownership, my business partner and I have decided we've been rather gracious landlords long enough and have decided to raise the rent-- *to slightly-below-median local rental rates.* Much to my surprise, this means we'll net a total of $800 / month based on full occupancy (before tax refunds). Even if we experience 25% vacancy with our new rates, we'll still net $100 / month-- which is $100 more than we're raking in now. I can't foresee Winder Court doing much worse than that. To still gain $100 / mo. even while experiencing a 25% occupancy is well worth the risk to me. There are barely any rental units in the area, there's some "path-of-progress" effect underway, and there's some breathing room for upward rate adjustment. So far, it's almost as ideal of a rental income property as any small fry like us could envision owning.

My business partner did discuss going into other different types of investments. Although I momentarily have insufficient capital, I have brainshare, and we've been working hard on planning and analysis to come up with some streamlined process model. There are a couple other things in the works as well.

If my business partner wishes to become as liquid as possible for his new ventures, we've already preliminary discussed my potential purchase of either his share of Winder Court, or equal partnership in his other property.

So, in contrast with some other real estate doomsday blogs, we're actually doing quite well with ours. This is probably the first time in my life that strategic execution has been in my favor. Chalk it up to being open-minded and finally having some luck on my side.

I really need to look into MS Money or Quicken to upload my budgets up here.

Personal Monthly Cash-flow Update

About 2 months ago, I created a high-level "back-of-the-napkin" monthly cash-flow spreadsheet. I forget if I've ever published it here.

While revisiting it just now, I noticed that the May 2007 short-term asset amount on this cash-flow spreadsheet is actually significantly lower than my current short-term checking account balances. However, after adjusting for a one-time event occurred that gave my current short-term checking account balance a big boost, my gigantic tax refund, I am actually $5K *under* my target bank account balance at this point in time.

What happened?

- I dumped another $1K worth of work into my car that I'm hopefully selling this Sunday when a prospective buyer is flying into down from Sacramento. If a BMW from 1998 requires $4K worth of work since I bought it in December 2006, I can't imagine the maintenance cost on the ol' 2004 E46 silver M3 when its 8 year-old anniversary rolls around.

- Around $1500 was spent in Dallas when I went for training. I'll see the vast majority of that money come back to me as work-related expenses, though.

- Trip out to Chicago, Valentine's Day, and plenty of other people's farewell dinners contributed to a lot of eating out, going out, and burning lots of cash quickly. Total equals nearly $1500 as it is.

- I don't have a firm grasp of my new job's monthly take-home pay. Today, I just saw my April take-home pay.

I started the 2nd week of April, 2007. However, if they had paid me for the whole month of April, then the take-home pay is significantly less than even my most conservative estimates-- anywhere from $300-$700 less, per month.

If the April 2007 take-home pay reflects the 3 weeks I was employed in April, vs. a total of 4, then the full monthly take-home pay is significantly than I'd anticipated-- anywhere from $500-$1000 more. Believe me, I could really use the extra cash-- not necessarily to spend, but to create a budget cushion.

- This doesn't account for car maintenance or end-of-year flurry of holiday activities. Maybe I'll just stay put this year.

Additionally, another $800-$1000 of short-term obligations will need to be paid off. soon This was for trip expenses while visiting my college buddy down in San Diego, a few suits I bought on sale, along with some new computer hardware components to replace existing components. I haven't had a new suit since early college days, and the hardware components, I feel, are vital, considering it'd minimize exposure to extremely expensive and time-wasting data catastrophes, like the one that happened last year where I essentially lost around 50% of my vital data.

Most Recent "Money-Saving" Acts

In the past few days, I've purchased the following:

1. NEW COMPUTER HARDWARE - $130

I purchased a new, cutting-edge 500GB hard drive for my computer "server" at home. Those of you may remember my catastrophic data failure that occurred last year and which this month marks the one-year anniversary of that disaster. And, boy does time fly, or what! It seemed just like yesterday I was on the floor of my home office in my overpriced condo, breaking down the parts of my server, and about to break down myself from losing so much data. The event claimed the lives of 3 high-capacity hard drives.

Unfortunately, there wasn't a true identifiable cause, even if the timing of the failures was simply uncanny and coincidental. Not only did I lose my primary storage solution, but my secondary and even my tertiary backups failed.

To top of all off, my core processor fried, and ended up melting the motherboard away.

The cost of the failure, to lil ol' me, was immeasurable. The true casualty count will never be known. Countless logs, emails, contacts, pictures, legit media and software were forever lost. I even vainly attempted data recovery services which ran in the thousands of dollars. Only 1/2 of the multimedia was recovered-- the rest of the Outlook backups and anything else, gone.

Since that incident, I've sworn I will over-aggressively replaced significant portions of my computer storage on an annual basis.

Therefore, the brand new 500GB HD I bought for $130 is the first step for adopting this new mantra. I wanted to buy another 500GB'er, but that can wait a couple of months. (Strangely, that's what I kept saying to myself the months leading up to my computer failure last year.)


2. NEW AIR PURIFIER - $60

I capitalized on a deal for a very compact-sized well-rated DeLonghi HEPA purifier from newegg.com. $60 for the unit + something like 6 or 12 filters, regular price $100!

This is sorely needed as I moved the noisier HEPA purifier out into the living room but still need something smaller and quieter to suck up all this whitewall / post-construction dust that strangely keeps settling everywhere in my bedroom. Not only will it help my breathing, but it'd prevent that gunk from settling into my computer server.

Now, all I need to do is find a small cool-mist humidifier for myself.

3. 2 OR POSSIBLY 3 NEW SUITS - $350-$500

These aren't your Downtown LA pimp-style $199-for-2-street-deal suits in canary yellow and playa-purple. I cinched these from the Macy's Semi-Annual sale that occurred this past weekend. The Perry Ellis suit, if it fits right (online order only), totals less than $100. The Alfani gray suit totaled less than $190. But the real *steal* was the Michael Kors complete suit for <$150, online, *and* in my actual size of 42L! I've always thought good men's suits cost a premium, >$500 per suit. To actually be able to own *3* suits for the price I've previously thought of buying 1 suit with is a huge eye-opener, without shirking on quality settling on those Downtown LA garment district suits.

ALSO:

Today, I was invited to some automotive, moderated survey panel to be held May 8th, 6-8pm, and paying *me* $100 (no tax withholding! :D) to attend! It'll be in Orange County, so I figure I'll just swing by there on my way to my folks'.

Apparently, they're targeting current or previous enthusiast or exotic car owners. They've asked me to spread the word to fellow BMW, Porsche, Italian cars, and even high-end Japanese rally / sport car colleagues and friends.

Renting vs. Owning-- My personal experience

Here lies a really quick spreadsheet that I whipped up today, just to show what I've been working on. It is by no means complete or even accurate.




And if your eyes need a rest from that eyesore, speculativebubble.com tongue-in-cheeked the current housing bubble by blending it with a bit of fun in this video-game rollercoaster representation of historical price appreciation. Click here to view (Whee!).

Weekly Update

-- not that I've been making good periodically posting weekly updates, but anyhow:

It seems like I made a friend for life when M.T. and I worked together for a total of *almost* 6 months. We truly came from similar upbringings and backgrounds, and shared similar visions and objectives. He was the first person to inspire me to explore real estate as an investment vehicle. And, based on the wise ol' teachings of M.T., my first big splash investing in real estate netted me largest tax refund checks I've ever seen by far-- nearly $14K worth!

Unfortunately, as it usually happens with anyone with any comparably significant sum of cash coming in, I may not have much of an opportunity to enjoy it.

First of all, as of two weeks ago, I finally accomplished what I'd set out to do as somewhat of an informal New Year's Resolution: to pay off nearly $30,000 of short-term debt. Nearly all of this were balances on various credit lines and accounts under my consulting S-corporation. So, I am officially SHORT-TERM DEBT FREE! (except for my auto loans)

However, I paid it off using the S-corp's gross receipts. What this means is, unfortunately, that $30K of money the S-corp earned and was ultimately used to pay off those credit cards need to have taxes paid on them. Keep in mind this isn't a W-2 situation, so no tax withholdings happened.

I'm guesstimating that the S-corp owes maybe somewhere around $10K in taxes up to this point in time, and likely no more than that. Why?

Since the end of March, all S-corp business has been terminated. Now, my source of income was through a W-2 job (but it's even questionable whether I actually do have this job-- long story...) that I accepted with which I'm taking a significant paycut of anywhere between 25% to 33%.

The amount I currently have in my S-corp bank account is something around $4K. Being conservative in guesstimating that I owe $10K in S-corp taxes, I'll need to grab $6K *somewhere* to cover the tax gap, which means I may end up covering it from my own personal assets.

Oh, well.

So, yeah, I got a new job. Paycut is big, yes. Was I nuts making this decision to take such a huge paycut? We'll see. I'm actually *slightly* changing my career path, somewhat, getting out of one industry hemorrhaging from stiff low-wage competition, leveraging my existing skillset and corporate experience, and getting into something else that, for all intents and purposes, can be regarded as in a growth state.

I'm still working on selling off my used '98 BMW M3 sedan (demand isn't as great as my previous BMW cars were when I sold them), and replacing it with something hopefully more reliable (e.g. Japanese), definitely more modern-- and yet still provide some edge in performance that I'll now permanently need to experience during daily driving, thanks to my race-track excursions.

My new boss and I talked about the prestige cars bring to their owners and remarked how generally people treated him nicer, with more respect, after he started scooting around in his new BMW. I agreed with him regarding my experiences when I had my own brand new BMW as well. But, I think I'm not so concerned with displays of vanity now. I just want something to reliably and cost-effectively transport me around, has ample pick-up, and above-average handling.

Regarding the Retiree Portfolio, it's not doing bad at all. Unfortunately, I scoped out the asset location only after the markets were well on their path to recovery from the February 2007 downturn, so I feel like I missed the boat on finalizing the equity portion of the portfolio. Even so, with the equity portion partway implemented, the retiree did capture gains as the market climbed back up to pre-downturn levels, if not higher.

The fixed-income portion of the portfolio was already implemented; to date, they've returned 0%.

I really need to figure out a way to automatically send portfolio updates in the form of charts or itemized breakdowns, or something similarly pretty, onto this blog.

A second retiree has expressed interest in the financial ways I've been helping out with the current retiree. Both have wondered if I'm interested in pursuing a career path in doing stuff like this for others. Unfortunately, I think there's more than plenty of "financial planners" and "financial advisors" out there, marketing their improperly allocated, unnecessarily risky portfolio offerings, making my method that I've adopted from others sound simply "second-rate" in comparison. Everyone wants to finish like a rockstar; no one cares for second-rate. Unfortunately, the majority of the people, including me before, don't realize we might unknowingly finish nowhere even near top- or even third-rate. Even so, their marketing muscle far outflexes mine. Who'd want to hire lil ol' me, especially with my unproven track record? Just because I've read more financial books than the average Joe doesn't make me a suitable advisor.

Back to the topic of me:

ETF's have been performing nicely. I believe Europe is up a whopping 10% since Feb. '07. The black sheep is the REIT, which black-eyes with -4%. All were purchased in late January '07. (Once again, a dynamically, real-time portfolio link here would would suit my lazy self right about now.) The following spreadsheet that I manually prepared will do for now:




MT and I discussed a possible scenario of me purchasing an equal-partner equity share in one of his other properties, on Pearblossom Ave. I think it's either in Euless or Denton. I don't remember-- we visited it very quickly when we were both in Dallas / Ft. Worth, months ago.

I think MT is pushing me to take more management duties for Winder Court and playing a more active liaison role with the management company. MT and I agreed to analyze rental rate increase feasibility for our Winder Court property. I feel as if he's leaving it up to me to be the decision-maker on rental rate increases, tenant feedback and concerns, and cash-flow planning and vacancy costs. Winder Court is MT's diamond in the rough: it's the only 100%-occupied property in his portfolio ever since he 1031-exchanged out to Dallas.

Winder Court rents have been well below comparable rental rates in the area, by as much as $100-$200 / unit, since purchased. Initially, we were interested in increasing rents upon purchasing it, but were concerned about not understanding renter's rights in TX. Well, it's been a year now. I plan on contacting the management company tomorrow to discuss courses of action.

I might either buy half of Pearblossom or completely buy out Winder Court pending further analysis. MT's lured into some property flipping activities and may wind up wanting to becoming liquid enough to have the capability to seize opportunities at a moment's notice. Between our joint efforts and his capital, along with the assistance of 2 attorneys and an assistant in Dallas, we're pilot-testing this scheme with one property whose outcome in June will define the feasibility, cost-effectiveness, and profitability potential of the plan.

Oh, yes, Dorothy, we're in for the ride of our lives...

From a housing blog's April 11th, 2007 entry:

In a conversation with a City Councilman from a city in Riverside County, I was told the following:

New home permits (and associated fees) are down by 64% this year.
Sales tax revenues are down 6% - 8% this year.
As a result, the City is going to slash its budget by 10% which will likely result in layoffs.
It’s different in Riverside County, you know. What is going on there?

IMO, the drop in new home permits is just a sign of the deepening crisis in the housing market. Where is the spring rally? What about all the foot traffic we have been hearing about? If the builders were anticipating renewed strength in the housing market, wouldn’t they be starting on new homes?

IMO, the 6%-8% decline in sales tax revenue is even more alarming. If unemployment is low and everyone is working, why would consumer spending fall off so dramatically? Were the builders and sub-contractors activities accounting for that much of they local economy? What role does the decline in mortgage equity withdrawal have in this decline? Is everyone tapped out? Many of the housing bears have stated the economy is too dependent on real estate and continued Ponzi Scheme borrowing and it is due for a crash. Are they right? A 10% drop in economic activity sounds like a pretty hard landing to me.

Lord Almighty.

A Rant about Pro-Rating

I think we all can agree at this point that individual health insurance in the United States feels like a scam, among other business practices and industries.

Well, check this out. Just now, I went ahead to cancel my Health Net PPO too add another chink to my recent big ol' "cancellation spree" that I'm on. The real reason, actually, is that I'm done with solo consulting, and have taken up a W2 job (with a slight paycut) with benefits, one of them being the usual medical coverage. Sidenote: I'm still a very single guy with no responsibilities, meaning no kids-- trust me, when consulting, I saw W2 as being that greener stretch of grass.

Anyway, back to topic, the one thing that operator said that just completely left-jabbed me: unlike all other cancellations I've been doing, and this being really the early part of April, and with me having already paid the April 01 to May 01 period in full to Health Net, Health Net will *NOT* issue a pro-rated refund to me.

My cancellation, at earliest, would be effective May 1, 2007.

Of all things I've cancelled, I was completely fine with, say, cancelling my GL & PL business insurance early even though I had a few more days to work because, frankly, I felt everything was even keel enough during my last few days at my last contract that nothing completely stupid and awry should occur. Sure, this was a risky move, in case I was sacked for something like a $2 million lawsuit for a database I accidentally dropped.

Now with health insurance, I was deliberately going out of my way *not* to have *any* insurance coverage gap *at all.* If I'd cancelled on the last day of March, I wouldn't have *any medical coverage* for 9 days, since my start date was April 9th. Anything could happen to me in 9 days. Meanwhile, it's silly to even think of asking my new employer to start my medical coverage early despite me officially not being part of their payroll for 9 days. But, I *want* to be covered for the 9-day gap.

How does Health Net reward me? By "stealing" $122 from me, that I have absolutely, positively no chance of using, at all.

Weekend Update

As of now, I am now only about $3000 away from being short-term consumer debt-free. "Freedom!"

Also, you cannot imagine how ecstatic I am about my hefty 2006 income tax refund-- and how old or outmoded I feel for being more excited spending Friday night deriving how my CPA (or, rather, her software) ended up fetching me such a handsome sum of >$10K! My mortgages' interest were the largest contributors. It took me 3 years to finally believe what M kept trying to tell me about his real estate investments...

(I'm eager to completely revise and recalculate my "rent vs. owning in Socal today" scenario, now that I finally have all relevant net costs and figures for ownership.)

Unfortunately, the flip side is I can just see the majority of it vanish into thin air. Although I'm patting myself on the back for being completely aggressive with paying down my consumer debt, somehow I have to figure out how and when to address catching up paying my 2007 S-corporation owed taxes. I figure there's roughly $10K I owe there.

Back to better news, we've been receiving solicitations for Winder Court with significant appreciation. M, my business partner, has decided he has sufficient trust in me that he's given me the authority to make the final decision in holding on or capitalizing our value appreciation.

Adam, my finance-guru ex-coworker, provided guidance by advising I should make the decision by comparing it to putting our down payment into a 5%/annum fixed-income asset or annuity.

Whether we sell it off and collect the gains, or hang onto it for a while, it's a win-win situation for us. In our first year of a 30-year fixed mortgage, the equity paid by our tenants added up to almost being equivalent to the hypothetical gains from our down payment sitting in the above fixed-income asset. This only increase in later years, provided we continue experiencing similar optimal rental levels.

M is convinced that we should 1031 any liquidated funds into a couple more SFR's in the Dallas area after my fact-finding mission was inspired by a seminar that we both attended in his neighbor's garage. Apparently, there are brokers out there who are willing to service the wealth of Californians into properties in Texas and eliminate the legwork we SoCalers would usually have to exert.

To wrap this entry up, of all things, I'm giving serious consideration to "legally move myself to Texas"-- meaning, buy an SFR there, execute address changes for all my accounts to this new SFR there, even change my driver license and car registration to be over there, yet have my employer subsidize my room/board/per diem expenses as I still spend the majority of my time physically located in SoCal.

BOO BOO ON IRA's

My colleague and his friend had asked me about IRA limits for our age and salary levels sometime last week, IIRC. They'd read that the maximum contribution limit between both a traditional and Roth IRA was $4000 annually. I'd read that it was $4000 for *each* type of IRA account.

Man, I was completely wrong! My colleague was right! This is how the IRA formula *should be*:

Annual Roth IRA contribution + Annual Traditional IRA contribution = $4000.

Also, it appears that only those making < $95,000 may legally contribute to Roth IRA's! I really need to read more about this, but what seems to hurt married couples is 1) AMT @ roughly ~$161,000 or so, and 2) apparently married couples can't Roth-IRA-contribute if joint income is around that $160,000 mark.

This whole IRA quagmire is becoming much more complicated than I originally imagined it to be.

Need major sleep. Hopefully, I'll have a better understanding of all this in the next few days.

-------------------------------

OK, one quick thought: How the heck is any average young worker in the US supposed to retire on the $4000 - $5000 / year retirement contribution, even over 30 years? That's only a total of $150K of principal! And, that's not even $150K that had 30 years' worth of investment growth opportunity, either-- only *after* 30 years, is one able to save away $150K.

If a ~10%-interest account was,say, opened with a ~$150K deposit, which then had ~30 years to grow, even so, that's only at most $650K total value after 30 years. This is the best case scenario.

Seldom will be the case that a complete working stiff has $150K to start with, with 30 years of asset appreciation ahead of them, and with the consistent fortitude of earning 10% / year.

The Retiree Portfolio - Location Review

One slight problem with the previous allocation is that the retiree historically prefers making, at minimum, an annual contribution into the Roth IRA account. Now, ideally, the next best place for contribution is the traditional IRA, but it seldom occurs. Whatever fund I put into the Roth IRA must be one whose allocation in the total Retiree Portfolio can increase, even slightly skewed from the original percentages, without veering too far from the general objective for the portfolio.

REIT would not be a good choice-- REIT's are recommended to only occupy 10% of the *equity* portion of an S&D portfolio.

VISVX (small value) could be a good choice-- for someone much younger than the retiree, like, say, me for instance. Inflating VISVX's share in the portfolio introduces more volatility risk.

Which leads me to the next best two choices: VTSMX (total US market) or VGTSX (total international). To me, VGTSX seems to be the better of the two choices. Why? I don't doubt that the ratio of international equities will increase in the face of US domestic equities considering the free market international trade occurring nowadays. Short of world courts coming down hard on alleged unfair Chinese government subsidization of imports and reversing the ballooning trade deficit (the largest single-country deficit ever in US history), curtailing dollar devaluation, and the like, international will only grow in proportion, with possible temporary hiccups, for the coming years.

Without further ado, here's the updated equity allocation scenario:

VTSMX - 25% - 100% (25% allocation of total portfolio) into the taxable account.
VISVX - 5% - 100% (5% allocation of total portfolio) into the traditional IRA account.
VGTSX - 25% - 60% (15% allocation of total portfolio) into the taxable account, 20% (5% allocation of total portfolio) into the Roth IRA account, the remainder 20% (5% allocation of total portfolio) in the traditional IRA account.
REIT - 5% (I *might* eliminate. Need further analysis.) - 100% (5% allocation of total portfolio) into the traditional IRA account.

The Retiree Portfolio- Execution

Today, in the traditional IRA account, I displaced VWELX positions to build up the fixed-income allocations for the Retiree Portfolio:

VBMFX - 13.3%
VFSTX - 13.3%
VBISX - 13.3%

As of today, VTSMX position is now up to 16% in the taxable mutual fund account.

Retiree Portfolio Next Step: Location

The Retiree whose Retiree Portfolio I'm helping construct owns the following types of long-term investment accounts:

56% of the assets are in a traditional IRA account.
4% of the assets are in a 2006-contributed Roth IRA.
The remaining 40% of ther assets are in a taxable account.

With that being said, the Retiree Portfolio's asset location is envisioned as follows:

VTSMX - 25% - 100% (25% allocation of total portfolio) into the taxable account.
VISVX - 5% - 100% (5% allocation of total portfolio) into the traditional IRA account.
VGTSX - 25% - 60% (15% allocation of total portfolio) into the trad. IRA account, the remaining 40% (10% allocation of total portfolio) into the taxable account.
REIT - 5% (I *might* eliminate. Need further analysis.) - 100% (5% allocation of total portfolio) into the Roth IRA account.

The majority of fixed-income assets will be placed in the traditional IRA account.
VBMFX - 13.3%
VFSTX - 13.3%
VBISX - 13.3%

-------------------------------------------------------------------

Last night, in the Retiree Portfolio's taxable account, I executed yet another order to exchange from the Prime Money Market Fund into VTSMX, further advancing their eventual VTSMX position defined above by 20%. To date, that means 16% of the total Retiree Portfolio is now in VTSMX. I'll continue flushing out the remaining 9% VTSMX position very soon.

-------------------------------------------------------------------

After some thinking, here's an asset location update for The Retiree Portfolio:

VTSMX - 25% - 100% (25% allocation of total portfolio) into the taxable account.
VISVX - 5% - 100% (5% allocation of total portfolio) into the traditional IRA account.
VGTSX - 25% - 60% (15% allocation of total portfolio) into the trad. IRA account, the remaining 40% (10% allocation of total portfolio) into the taxable account.
REIT - 5% (I *might* eliminate. Need further analysis.) - 100% (5% allocation of total portfolio) into the Roth IRA account.

The majority of fixed-income assets will be placed in the traditional IRA account.
VBMFX - 13.3%
VFSTX - 13.3%
VBISX - 13.3%

Mixing Passive- and Active-Managed Funds

My coworker posed the following question today:

"If one already owns a total market fund, why buy Wellington?"

OK-- this question might be completely oversimplistic. We need to understand what sometimes turns out to be a complex web of circumstances that would whittle this question down and give it more relevancy.

So, first of all: colleague and I had began reading up on various investment strategies and, at one point in time, I thought we were largely on the same page. Lately, I've noticed he's focusing questions on stock picks, which, I have to be honest with you, Dear Colleauge, it's already challenging enough defining our own core portfolio, let alone be worried about something that's infinitely more complex than asset allocation (with few exceptions).

We were relatively debt-ridden at the time. Now, what are we taught to correctly do with debt? Yes, pay it down first before anything else. We've been dealing with that ever since.

Colleague is starting their savings from scratch. Colleague is in their late-20's to early 30's.

Colleague has previously expressed keeping their core portfolio simple, containing at most 2-3 core funds. These would include a total market fund, a fixed-income fund, and something else. Hopefully, Colleague sticks with this.

Now, Colleague and I have previously reviewed various Vanguard funds, one such being Wellington. Wellington's attraction stems from its built-in equity to fixed-income ratio (roughly 60/40), its value tilt, a factor which has commanded a return premium over the years, its proven ability to ride out the most recent bear market, 2000-2002, without significant value decreases, its high dividend rate for investors interested in and income fund, its classification as a balanced fund, and, most importantly, its extremely low expense ratio, practically unheard of for being an active-managed mutual fund.

Wellington sounds like it *might* be for an aggressive retiree due to its aggressive value tilt, equity allocation, while providing income in the form of dividends.

If someone *only* owned a Total Market fund in their portfolio, they're viewed as very young, with many years of life and career (which will mean a long series of contributions ahead of them), and very aggressive, without the need for dividends.

I had the Retiree Portfolio often discussed in this blog temporarily park a significant portion of assets in the Wellington fund when I was unable to expeditiously define the asset allocation because of the following characteristics: its one-stop solution, its AA mix, its blend, along with its superior handling of market downturns.

A hypothetical 50/50 mix of Total Market fund / Wellington would exhibit the following characteristics:

Stock Style Diversification

31 31 20
5 4 4
2 2 2


0 100 0
0 0 0
0 0 0

Considering this mix, the only issue I see is that the portfolio's equity portion seems tilted towards large-cap with little exposure to mid and small-cap positions for an early saver. Also, there doesn't seem to be much diversification with the fixed-income portion: it's 100% intermediate-term. However, everything else seems OK: it's balanced, it's blended, and the fixed-income durations don't go beyond intermediate-terms.

So, not a bad mix, depending on an individual's needs and goals.

RETIREE PORTFOLIO DRAFT #2

After some consideration, Draft #1 was seen as "a bit too aggressive" for a portfolio aimed to generate and maintain income, quell volatility, reduce risk, and introduce value stabilization by *some* S&D and diversification (yet not be aggressively eager about this), while simultaneously being SIMPLE and ELEGANT.

In fact, I'm shifting the focus of the porfolio composition from a multi-asset S&D (slice and dice) makeup into a portfolio that consists of 3 core holdings, with some smaller side dishes. The 3 core holdings are VTSMX, VGTSX, and... um, fixed-income positions of some form.

The 60/40 equity/fixed-income makeup is still maintained.

I still plan to divide the equity allocation into 50/50 domestic/international. Here's where I disagree with critics of my portfolio, who believe that I'm internationally over-weighted. My rationale is I want my portfolio to reflect the WAP (world allocation portfolio) and the global economic integration that's steadily increased over the past many years.

To address all these points, I might eliminate the following assets:

- REITs
- Int'l small-cap stocks
- Emerging market stocks

I'm also reducing positions in the following:
- Domestic value stocks
- Possibly the high-yield corporate bonds

When taking into account all of these factors, here's Draft #2, showing the direction the retiree's portfolio is heading:


VTSMX - 25%
VISVX - 5%
VGTSX - 25% (Total International Fund)
REIT - 5% (Again, I *might* eliminate. Need further analysis.)

VBMFX - 13.3%
VFSTX - 13.3%
VBISX - 13.3%

Morningstar's X-Ray provided the following asset breakdown for the Draft #2 portfolio:

Asset Allocation

Portfolio
Cash 3.04
U.S. Stocks 34.70
Foreign Stocks 24.35
Bonds 37.20
Other 0.71
Not Classified 0.00


Stock Style Diversification



25 26 19
10 7 4
5 3 1

Not Classified 0.00%



65 35 0
0 0 0
0 0 0

Not Classified 0.00%

RETIREE PORTFOLIO DRAFT #01

I can breathe a *BIG* sigh of relief now that I've roughly hammered a crude version of The Retiree Portfolio. It's like a 6-month long project finally seeing the light of day! Pretty exciting. Yup, I ditched bar-hopping in Hollywood for this-- and it was, well, *almost* worth it, I guess.

The characteristics of this portfolio include the following:

- It contains a 60/40 equity/fixed-income ratio overall asset allocation. Equity = stocks. Fixed-income = bonds and other safe stuff. Every asset, however, is in the form of funds.

- The portfolio has a value tilt to it, meaning, I emphasize value funds over growth funds.

- The portfolio has a small-cap tilt in the US portion of equities.

- The equity portion is split 50/50 between US and International. You'll find that within International there's a small-cap tilt-- for now.

- I want to introduce a value tilt internationally speaking. I may revise the portfolio by replacing the small-cap International asset with a value International fund.

- The portfolio is reasonably sliced and diced. Honestly, it's probably S&D'ed a *taaaad* more than I'd like it to be. Every asset listed does provide some diversification benefit in some way, whether it's in the form of higher returns or reduced risk.

- According to Morningstar, none of the below bonds are long-term, which is exactly what I wanted.

Without further ado, in %-ages, here, finally, in rough-hewn form, I bring you Retiree Portfolio, Rough Draft #1!

Total Market VTSMX 7.5
US large-value stocks VIVAX 7.5
US small stocks NAESX 3.75
US small-value stocks VISVX 5.6
REITs VGSIX 5.6

Pac Rim-large - Vanguard Pac Stock Index - VPACX - 7.5
Europe-large - Vanguard European Stock Index - VEURX - 7.5
Small cap - Vanguard Int'l Explorer Fund - VINEX - 7.5
Vanguard Emerging Markets Stock Index Fund Investor Shares (VEIEX) 7.5

Vanguard Total Bond Market Index Fund Investor Shares (VBMFX) 13.3
Vanguard High-Yield Corporate Fund Investor Shares (VWEHX) 13.3
Vanguard Short-Term Investment-Grade Fund Investor Shares (VFSTX) 13.3

Being as it is, the above portfolio's asset allocation looks like this:
Cash 2.65%
US Stocks 29.75%
Foreign Stocks 28.85%
Bonds 37.65%
Other 1.11%

Also, the heaviest valuations are Large Value and Large Blend / Core, by far.

The above portfolio has a superior expense ratio of only *0.26%*. Other comparable portfolios have an expense ratio of *1.36%*.

I think I'm pretty happy with my first shot at this. I'll spend the next couple of days finalizing the actual target assets and begin the next phase of this effort: planning the execution of it all.

Stay tuned.

Disspelling Warren Buffett

Here's an excerpt from Larry Swedroe about his thoughts regarding WB and BRK:

This is from my second book, What Wall Street Doesnt Want You to Know, published in 2000
Buffettology or Mythology?
I think it safe to say that if individual investors were asked to name the one money manager they would want to manage their assets, the overwhelming majority would choose Warren Buffett. Buffett clearly has earned his reputation by delivering superior returns over a very long time frame. Whenever I discuss the superior performance of passive investing over active management, the question that I am most asked is: “If that is true, how do you account for Warren Buffett (and/or Peter Lynch)?” In fact, I happened to be asked that question during a phone call on the morning of March 1, 2000. In responding, I try to be very careful because even questioning the possibility that Buffett was lucky is almost sacrilegious. The following is a summary of my usual response.

·First: it is certainly possible, if not likely, that given the length of his superior performance Buffett is fully deserving of his guru status.
·Second: we only know that Warren Buffett “won” after the fact. If skill is truly involved, with so many thousands of active managers trying to win, how come far fewer won than would be randomly expected? In mathematical terms, the following analogy is appropriate. If there were as many monkeys playing the game as there were active managers trying to outperform, how come we end up with more monkeys winning than active managers winning? In other words, the distribution of the performance of active managers falls to the left of what a random (bell curve) distribution looks like. Yes, some monkeys win, and some active managers win. But how do we know ahead of time which will be the winners? Just as important, how do we know that the past performance of the winning active managers is a predictor of future performance? Certainly, we can agree that the monkeys’ past performance would have no value as a predictor. In the case of active managers, all the evidence suggests that past performance is also a very poor predictor. Even Morningstar admits that their 4-star and 5-star funds underperform, after they are designated as superior performers. So how do we know for sure if Buffett was lucky or a true guru? As you will see, it may be harder to tell than you thought, and you will have to decide for yourself.
·Third: another possible explanation for Buffett’s superior performance may come from the fact that he is not like other money managers. Typically, Buffett does not just buy stock in a company and take a passive position. His more usual involvement is as an active investor. He often takes an influential management role, including a seat on the board of directors, in a company in which he invests. It is certainly possible that it is Buffett’s superior business skills that account for the superior performance of his investment portfolio. The recognition of his superior business management skills may also account for why Berkshire Hathaway’s stock (the vehicle investors have for investing the Buffett way) has often traded at a large premium to the underlying net asset value (NAV) of its portfolio. This would not be the case if Berkshire Hathaway were an open-ended mutual fund that would always trade at its NAV. Investors must believe that Buffett’s influence in the company will enhance their performance and investment returns.

At the end of this explanation I typically offer my own conclusion, which is that I am somewhat of an agnostic on the issue. Clearly you cannot ignore his superior track record. However, my own inclination is that the answer probably is some combination of all 3 possibilities. It is very hard to prove the guru or luck story. Mathematics might suggest luck, but logic might provide another answer. And I have learned you are not likely to ever convince people who have already come to a conclusion that they should change their mind. The best you can hope to do is to get them to consider another possibility.

After concluding my March 1 phone call, I remembered that whenever someone presents something that is stated as “generally accepted wisdom,” it pays to check the facts, or, as I like to say: “go to the videotape.” Out of pure curiosity I decided to check the performance of Berkshire Hathaway’s stock. I made the random decision to check its performance from the beginning of the 1990s right through the previous night’s close, February 29, 2000. That seemed to me to be a reasonable time frame for a couple of reasons. First, as I stated, you only “know” an active manager is great after he or she has delivered superior performance for some reasonable length of time. So we need to have some length of time to observe Berkshire’s performance before choosing Buffett as our standard-bearer. Second, I think that most people would consider that a decade is a sufficiently long time to consider (although I might suggest that the longer the better). Finally, the vast majority of money that is invested in the market today has come in since 1990. The result is that very few investment dollars benefited from any experience prior to 1990. (This is not to suggest in any way that returns prior to that should be ignored.)

Given the “generally accepted wisdom,” I fully expected that I would find that the performance of Berkshire’s stock would have far outperformed the S & P 500 Index (a good benchmark as most of Buffett’s investments have been large-cap stocks). Remember that we have chosen with hindsight not just a great investor but possibly the single greatest investor. The decade of the 1990s began with Berkshire’s stock at 8,675. It closed on February 29, 2000, at 44,000, an incredible gain of 407%. The compound growth rate was 17.3%. To my surprise, however, while that performance did allow the Buffett “faithful” to outperform the S & P 500 Index, it was just by 0.2% per annum. Certainly, 17.3% per annum returns were great and he did beat the Index, although not by much. Again, this slight outperformance comes from the one manager whom we know only with hindsight is considered by most to have been the single greatest investor. Most investors who placed their faith in other gurus fared far worse.

I tried some other time frames, admittedly performing a bit of intentional “data mining” (intentionally choosing specific data points to “prove” your point) in one case. It is important to note, however, that some investors in all likelihood actually experienced the returns shown in the following examples. We can certainly imagine the following scenario occurring. An individual investor comes into a large sum of money in June 1998 (through an inheritance, sale of a company, exercise of stock options, etc.). Lured by the sirens of superior performance, the investor decides to choose the active management approach. One logical candidate is Berkshire Hathaway, which has gone from 8,675 at the beginning of the decade to hit its all-time high of 80,900 (June 19, 1998). An investor unlikely (and unlucky) enough to invest on that particular date would have seen the value of his or her portfolio fall 46% between then and February 29, 2000. During the same period, the S & P 500 ran up from 1,101 to 1,366, an increase of 24%, not counting dividends. That would have been a very painful experience, possibly testing the individual’s faith in Buffett’s guru status. Some might begin to wonder if he had lost his “touch” or even question now was it luck in the first place. If you decided that you don’t want to invest with Buffett any longer, now what paradigm do you follow? Do you try again to find that great guru based on past performance, having just seen that “fail” miserably? Or do you switch to passive investing? If you decide to stay with Buffett and he continues to underperform, when do you know it is time to “throw in the towel?” What will your criteria be for making that decision? You can see the dilemma. Again, I admit, I created a carefully chosen example, but one probably experienced by some investors.

I went back for a somewhat longer and less biased look, again, covering a period that was probably experienced by many investors. If you look at the 4-year period 1996–1999, Berkshire rose from 32,100 to 56,100. Every dollar invested grew by about 75%. The only problem was that every dollar invested in the S & P 500 Index grew by about 155%. Again, I want to make clear that neither this example, nor the other two, prove the Buffettology or Mythology case. It does, however, at least in my mind, open the issue to questioning. Only time can provide the answer. Even then we may very well be left to speculate.

Retiree Portfolio Update

Now that I've made, or at least set into motion, a few pivotal decisions, finally have I found a smidgen of time to resume constructing "The Retiree Portfolio."

Meanwhile, while I was slammed with other, more pressing life obligations, to stave off any issues of having the portfolio lose out on any market gains, while simultaneously softening any disastrous blows that could come from sharp market declines, here's what I did:

The total portfolio is split roughly 50/50 between a traditional IRA account and a regular mutual fund account.

As of March, 2007, the retiree also contributed into a new Roth IRA account.

(Speaking of Roth IRA's, one significant mistake we'd made months ago was, in our mad frenzy to consolidate all of the retiree's Roth accounts, more than 5 total accounts-- and I lost count, we'd pulled all Roth IRA funds out and held it in the retiree's usual bank checking account. This was withdrawn without penalty. Even so, HUGE mistake. What we should've instead done was taken the time to combine all of several Roth IRA accounts into simply one Roth IRA account. Oh, well.)

The default, universal rule was to let all of the assets, regardless of account or intention, sit in the highest-yield, least-riskiest fund by default. That default was Vanguard's Prime Money Market Fund (VMMXX) with a yield of 5.09% (IIRC). Being a California resident, we calculated the tax equivalent yield between the California Tax-Exempt Money Market Fund offered (which is exempt from federal *and* state income tax) and the Prime Money Market. We found the Prime Money Market offered superior returns, for the retiree's tax bracket.

For the traditional IRA, 100% of the amount has been sitting in a blend fund, the Vanguard Wellington Fund (VWELX). Here's a rundown of the fund's strategy and policy:

Investment strategy

The fund invests 60% to 70% of its assets in dividend-paying, and, to a lesser extent, non-dividend-paying common stocks of established medium-size and large companies. In choosing these companies, the advisor seeks those that appear to be undervalued but to have prospects for improvement. These stocks are commonly referred to as value stocks. The remaining 30% to 40% of fund assets are invested mainly in investment-grade corporate bonds, with some exposure to U.S. Treasury and government agency bonds, as well as mortgage-backed securities.


Investment policy

Although the fund typically does not make significant investments in foreign securities, it reserves the right to invest up to 20% of its assets this way. Such securities are subject to country and currency risks.
The fund may invest in securities that are convertible into common stocks, as well as invest modestly in collateralized mortgage obligations (CMOs).
The fund may invest, to a very limited extent, in derivatives. The fund will not use derivatives for speculative purposes or as leveraged investments for the purpose of magnifying losses or gains.

What I like about this fund as a temporary stopgap because I was very short on time, but high on responsibility, for constructing the portfolio is that its makeup contains most of the vital characteristics that form the foundation of my future portfolio:

- It contains a roughly 60/40 ratio of equity and fixed income.
- Its expense ratio is very low for an actively managed fund: Expense ratio as of 11/30/2006 0.30%.
- It seems to focus on value equity.
- VWELX performed remarkably well, essentially experiencing minimal value depreciation, during the years 2000-2002 bear market.

For the regular mutual fund portion of the retiree portfolio, 20% of this portion was invested in VWELX as well. Another 20% was used to purchase Vanguard Total Stock Market Index Fund (VTSMX) on 2/23/2007. On 3/2/2007, after the recent significant 1-day stock market correction, I used another 2% of this portion to purchase more VTSMX shares.

The remainder of the regular mutual fund portion sits in VMMXX.

Now, what does my ultimate composition for the retiree portfolio look like? I don't have the final answers yet as I (hopefully) wrap up the final breakdown by this weekend, but it'll have the following characteristics:

- It will attempt to achieve a 60/40 equity/fixed-income ratio.
- It will be value tilted, but not as significantly as some other portfolios I've seen on the 'Net.
- It will loosely comply with the total world allocation portfolio, which breaks down the whole world's equity worth by country. Very roughly, I believe that ratio is close to a 50/50 US/Int'l ratio. What this means is I want the eventual portfolio to try to achieve a 50/50 US/Int'l equity ratio as closely as possible.
- I hope ultimately I'll be able to slice-and-dice the international equity portion of the portfolio.
- The fixed-income portion will contain no bonds > 5 years in maturation.
- The portfolio will be sliced-and-diced as much as reasonably possible.
- The portfolio will only be rebalanced once annually.
- Equity index funds will go into the taxable account, whereas fixed-income / bonds will reside in the IRA.
- REIT's will compose at most 10% of the whole portfolio.
- I'm still debating whether to include commodities or not.

So, for now, what does the retiree portfolio, constructed in the laziest of ways, look like overall?

Short-term reserves: 34.9%
Bonds: 19.6%
Stocks: 45.5%

The basic asset allocation isn't actually too far off from what I ultimately want to achieve. Not too shabby for, say, 30 minutes' worth of work, 2 months ago.

How has it done? Anecdotally and generally speaking:

- After the market correction @ the beginning of March 2007, I believe the portfolio only decreased by half the percentage that the S&P500 declined by.

Not bad at all. All that's left is to fine-tune percentages, pick the ideal funds, define an entrance strategy (shotgun, DCA, or VA?), and execute.

To be continued...

Damage of a Full-Service Broker

Here's an article about why the traditional "full-service broker" can be your retirement's worst enemy:

Bad Broker!

Political Investments

The following articles intrigued me as the public spotlight on political figures cast a glance at their investment savviness.

Check out Barack Obama's investments here.

And how about Chief Justice John Roberts' portfolio quagmire as discussed here?

I'm trying to find another Justice's portfolio, I believe that of Antonin Scalia, who was judged (pun intended) to have a sound, well-diversified low-cost asset allocated portfolio.

Just Plain Deluged Lately (plus some Retiree's Portfolio Update)

I've been utterly swamped lately, thus the lack of updates.

But, interesting how just when all the so-called analysts and experts exclaimed that stability had returned to the markets, the markets oh-so-subtly continue their plunge.

*Very* quick rundown because I'm severely lacking sleep:

1) As of today, my personal debt decreased from 5 to 4 digits. Right on schedule, and a "good job" to me!

2) The day after the first 4% market plunge of 2007, I took advantage of the situation to help The Retiree purchase $1K of VTSMX from their money market fund.

3) Similarly, today, after market close, I exchanged another $1K from the money market fund into VTSMX. This activity reflects a mix of DCA (dollar-cost averaging), or even value-averaging, plus that evil investing thing called "market timing." Nothing wrong with buying on the down, though.

4) Considering selling off current car because repair / maintenance cost projections make absolutely no sense at all, and have been shopping around for what I hope turns into the ultimate replacement-- the ultimate compromise car (according to my criteria). I chalk up my lessons learned here to simply not trusting my once-trustworthy BMW mechanic anymore. I view my situation partly as a result of being lied to, and partly as my lack of utmost due diligence by not getting a second PPI performed by a different certified BMW technician. Water under the bridge now.


I'm still very far from developing a hard strategy for constructing the retiree's portfolio, let alone defining methods of entry into their positions. Meanwhile, I feel it's safe to say that their eventual total stock market equity position is far off as well-- so these recent purchases shouldn't cause issue with their eventual asset allocation.

That's all for now.

Bye bye bye, Sub Prime.

The Beginning of the End of Subprime Lending.

Anyone old enough to read and understand this stuff remembers well enough the junk bond fiasco of the late 80's, and the technology bubble of the late 90's.

We're just about near the late 2000's, and here we are again, with "junk" loans.

This is the beginning of the end. This is exciting times. I can't wait for the bloodshed to ensue.

Of course, I only say this after having gotten out of the market myself.

What's the highest rate CD you've seen?

This weekend, I and my parents capitalized on a special CD offer from Wescom, a NCUA-backed credit union based in Southern California. The terms are a maximum deposit of $7000, with a 7% APY, for a term of 7 months. That's basically a gain of $285.83 due on term.

Although Wescom probably promoted this as a marketing scheme to lure customers in, I won't complain about receiving 7% even if there are limits on the deposit, even though it's in a fully taxable account. That money was earmarked for short-term cash reserves anyway, and has no effect on my long-term investment asset allocation.

Unfortunately, the deal ended with Wescom's month-long promotion of expanding branch hours to 5pm on Saturdays, and open on *Sundays from 10am - 4pm.*

Other developments:

I'm very close to gathering all my docs and numbers for my CPA, after doing bookkeeping all last week, and finally meeting up with her yesterday afternoon. For my S-corp, the situation doesn't look too dandy. However, for me as an individual, I stand to potentially score a pretty fat refund check. If this is the case, I'm going to have to modify some models of homeownership benefits vs. consequences. Hey, forgive me, I'm new to all this, so live and learn for me.

Overall, I might've not done too badly last year. Once I reconcile the last bit of statements and figures with my CPA, I'm eager to receive the refund check.

If the refund check falls within my expected amount range, it could be my 6-month emergency cash reserve right there. Then, I'll simply invest and accumulate aggressively with the remainder of my short-term reserve. I can finally see the light at the end of the dark tunnel of 2006.

Additionally, I've begun shopping for what I hope shapes up to be my last car swap for years-- hopefully *tens* of years. I realized that my usual BMW shop is, ultimately (pun intended), a business, and its interest is in keeping the business open and profitable. It took me a while to realize this, as I kept tossing around various incidents, contradictions, and moments of frustration around in my head. So, I'm interested in selling off my newly acquired 1998 BMW M3 sedan already-- after only a little more than 2 months' of ownership.

Its replacement seems to possibly be a 2005 Subaru Legacy GT, a great compromise car. This car has all the salient features-- great handling, ample power, 4-doors, lightweight, cream of the crop of safety ratings, all around, no bells and whistles (such as sunroof, or power / heated seats) but replete with sufficient modern-day comforts-- along with the bonus of being newer, under warranty, much lower mileage, projected significantly lesser maintenance / repair costs because it's from a reputable JAPANESE brand, and already experiencing hefty residual reduction, thus lowering my cost to entry. Because the intent is to own the car for a very, very long-term, value depreciation doesn't concern me much.

I'll update with a cost-benefit comparative analysis between keeping my current car and going for the Subie as, at the least, I'll benefit from the clarity in the numbers.

Market Post-Mortem

I realize I haven't posted in a while, but year-end corporate bookkeeping, work, and some personal affairs consumed a lot of my time. Being occupied can numb the stress, the pain some.

A lot has happened, including that freak 2-10% global equity market drop. Fun times! My recent entrance into index ETF's ensued with a drop, losing the 2-5% gains I'd made since early January. Also, I began building my portfolio's core by using a portion of cash reserves to purchase a total market index fund-- *two* days before the drop. Yowzers. Talk about bad timing.

Anyhow, I'm waiting for the market volatility to play itself out before I further slip into my eventual asset allocation.

I made one *huge*, unintended mistake lately. When buying my mom's luxury SUV with my corporate discount, I rushed my judgment at the bank which funded the loan and made a sizable down payment.

We've all heard that paying down short-term debt aggressively leads one on a road to that ever-greater credit score, and freeing up cash for potential future investments.

However, I feel I've reined in and have a handle on my monthly expense budgeting, so I know how much I'm projected to spend every month in 2007. With that being said, I could've taken advantage of the pro's of having an auto loan (disciplined leveraging) without being bit by the con's (spiraling, out-of-control expenditures from lack of disciplined budgeting).

What a mistake. By doing so, I negated nearly $7,000 worth of potential short-term cash reserve I would've had at the end of 2007. That hurts.

Investment Professional Opines about ETF's

One of the few financial professionals I genuinely respect, Rick Ferri, gave Maria Bartiroma same face time on CNBC. Click here for his take on the recent ETF explosion.

Aside: I interviewed at Dimensional Fund Advisors (DFA) today. Strange how everything seems to be a series of coincidence: I've commonly read about them in my research. DFA is only one of a handful of firms where the remainder of the elite group of financial professionals and scholars I truly admire formed and are currently changing the way investing should happen (they only manage some of the largest pension funds in the US-- which are far larger than any individual mutual funds and other offerings). I only wished my recruiter didn't pressure me to go in while I was still suffering from my cold because my first impression wasn't definitely the best. I guess we'll see what happens next week.

MSN Article "The High Life at Low Cost"

Click here for the jump.

Some examples from my own life:

Drive The Hottest Car In The Hood: I have a '98 4-door M3. It *is* the hottest rod in my apartment complex filled with Toyota Corolla's and Camry's. I thirsted for similar handling characteristics of my "old" 2004 BMW but needed a 4-door due to practicality. Plus, it's one good gas sipper. So far, it's been a great, cheap, daily driver / daily thriller rolled up in one!

Gamble Like A High Roller: I really only know how to play BJ so I'm safe, according to the guideline. The only other 2 games I'm interested in are craps (touche!) and some form of poker.

Start The Ultimate Wine Cellar: I'm a bevmo.com frequent flier, when time and energy permits I'll choose Trader Joe's-- I'm unsure nowadays but there was a time couple years ago where superb wine could be had for <$10 easily, plus there's wine.woot.com. Oh, and my friend discovered a local hidden joint that dispenses severely discounted, severely exotic wine.

Collect Rare Art: I don't buy art for the sake of fame behind it. I acquire whatever suits my taste, and find it pointless spending more than $200 on anything hoistable by stretching my arms out. Also, I'd never consider art as "investments", as Cary of Christie's would. There's some works out there I want to bag, but for $300-$500 a pop, I'd rather dump it on, say, restoring parts of my 98 BMW or putting into a money market account.

Wow Her With Cheap Flowers: If the discounter's label is on the wrapping, *take the wrapping off and leave it that way or replace with a blank one.*

Eat At Five-Star Restaurants: chowhound.com and yelp.com are fine-- but brace yourself because consensus opinion doesn't always agree with that thing called your tongue-- even if you think you've established correlation between consensus vs. your tongue. Surprises are always fun.

Throw The Party Of The Year: I've thrown, 1 party? Ever? But I like the MSN ideas.

Convert Your Home Into A Castle: I like MSN's idea. I've had a couple of thoughts-- inspirations taken from elsewhere. One lighting idea might be pretty darn neat and even simply worth trying since it costs less than $30.

Build Your Own Home Theater: How about simply "hold off on big screen TV" purchases? If the urge to splurge is too much, buying bleeding edge on cheap means buying, say, a true 1080p flat panel, 42", for $1499 with free shipping and a 30-day 100% refund guarantee including shipping charges-- *plus* it was a highly rated off-brand unit on avsforums.com. All costs, other than simply the item's price, needs consideration. That's what I did last year.

Sometimes you can luck out with a Maxent or Vizio but often times their specs don't have longevity, thus the discount.

Also, I'd rather splurge on video before audio.

Love the mail-order movie-rental and trade ideas.

Aside: Considering my years of musical background, I was hard-pressed to justify hearing $25K worth of quality sound coming from a buddy's reference audio system in his small apartment in Westwood. I *think* I did end up hearing the quality-- but I was straining as if in constipation.

Vacation Like A Celebrity: Good advice-- but recommending vacationing in Venezuela with their rising anti-American sentiment, political socialization, and potential currency disruption might raise many eyebrows. Well, I suppose this is fine for most people-- but I'd check http://travel.state.gov/travel/cis_pa_tw/tw/tw_1764.html. Venezuela isn't listed there, however. Caveat emptor.