Articles for today

Clothes are going to cost more.

I'll do this when I'm unemployed.

Resolutions are so passé. Some advice to live by in the new year.

I think lifehacker got it down by using the word "advice" to substitute the word "resolution".

lifehacker's advice for the new year.

Most items in this list are principles and ideas I already believe in and subscribe to, but it's always nice to remind myself to have a periodic reality check.

Quote of the day: "Too often we enjoy the comfort of opinion without the discomfort of thought." – John F Kennedy. (via reddit)

Comeback soon?

Unbelievable. Two years have blown by since the last update to this blog. Two years is two whole generations, heck-- lifetimes even!-- on the highway which Al Gore paved.

During this blog's more active heyday, I'm unsure if anyone cared to read this to have missed the updates. But in case you've been hanging around for the last 2 years waiting for a peep from me, I guess I'll do my best not to disappoint.

So much has happened, but I don't know if much of it really improved my finances per se. For the most part, I've been financially doing OK over the last 2 years. Not bad, but nothing spectacular. In the next few posts, I'll catch up with you on my finances, my real estate situation, some other off-beat developments, and maybe even throw in some technological developments.

It's been a long weekend, and this is all I feel compelled to write for now. Stay tuned for my promised updates soon!

Update: I've been flipping through the virtual pages of this diary that I've buried in a time capsule called "the last 2 years". It's amazing how, in hindsight, so much of the sources of doom and gloom I've gesticulated about not only have occurred, but so have the ugly consequences they've wrought. Like with so few other insightful blogs which started before or during the housing bubble, I can't but feel "(we) told you so."

Here's one of my timeless classics. Thanks to Forbes for leaving up Ken Fisher's original article here. Anybody willing to hand over their retirement and assets portfolio over to his firm to manage?

Another classic.

And who can forget this dark and scary day?

The ultimate litmus test, not simply for financial choices, but for any choice you can make in life, is the "sleep-capability" test. If you can steal candy from babies, send your own parents into the poorhouse, and be able to dream of dancing sheep and gumdrops at night, good for you, leave your phone number in the Comments, and hang on a sec while I dial 911.

And finally, time to start introducing some fresh content. Looking through the comments responding to Celia Chen's post, one gets the sense that many have finally wakened up to the sad reality of the legendary housing bubble

Dow -777.68 points (-6.98%), S&P 500 -106.92 (-8.79%)

The biggest one-day Dow Jones Industrial Average drop in history-- coincidentally, the day I stayed home sick and witnessed the carnage, especially the intra-day 400-point, minute-to-minute swings. Wow.

Did you sleep well last night? Well you sleep well tonight?

I sure will.

As a completely passively-managed portfolio, the Retiree Portfolio has performed astoundingly well: -2.48% today; -9.2% from its *top*.

The S&P 500 last nearly as much today as it took the Retiree Portfolio almost 14 months to lose.

My Cash Position

I've been building up a larger-than-usual cash position this year, since my goal was to stockpile it. Maybe I should've converted some of it to gold bullion a while back-- or maybe guns. It guess it all depends on the stability of American society for the next few years to come.

My goal was to end CY2008 with $100K cash. This goal was not without its challenges-- the most recent being the instability of the finance industry, which is where I'm working. Also, cutting overtime pay had a profound impact, as my early trend projections accounted for the extra cash. But all during the full course of this year, I kept a steadfast mindset to be cognizant of any and all extraneous spending.

So where do I stand today? I'm about $8K off my goal at the current rate I'm going. After my trips, that takes me down to about $10K off my goal. Plus, factoring in some funds which went into miscellaneous but emergency repairs to the Texas and North Hills, CA foreclosure properties, and some equity injected into an investment, I'd say these accounted for about $5K of my $10K difference. To me, that's a reasonably acceptable amount of statistical error.

If I stay at my current pay-rate, I should be on track to save up another $60K in cash. If I get hit with a 33% pay-cut, which could happen if my existing client drops me and I pick up an industry-wide median-pay job, that $60K shrinks down significantly to anywhere from $30K-36K.

Volatility and Money Market Funds

These definitely are unprecedented, trying times, especially on our savings and retirement. And especially if not only have your equity funds or positions have had their value slashed like the Amazon jungle, but you notice even your boring, plodding money market fund is suddenly losing value today! Many money market funds are "breaking the buck"-- meaning, their dipping below their NAV of $1 / share!

http://www.bloomberg.com/apps/news?pid=20601087&sid=aLwxHK3Ygc8s&refer=home

In comes the Vanguard Prime Money Market Fund. Vanguard released this reassuring statement today about its MMF's composition and relative soundness vs. other Money Market Funds:

"
Our largest money market fund is Vanguard Prime Money Market Fund, which currently holds more than half of its assets in U.S. Treasury and federal agency securities. In addition, Prime Money Market Fund has no exposure to money market instruments issued by securities dealers, including Lehman Brothers. It also has no exposure to securities of AIG, the insurance concern that is being supported by loans from the federal government.
"

Feel free to read about it here.

The Prime Money Market Fund makes up 21.79% of the Retiree Portfolio.

Similarly, Fidelity has posted a disclosing FAQ about the security of their money-market fund as well here.

With stock market bloodbaths, are you able to sleep well at night?

Here are the variances from the 52-week high to tonight's net-asset value for various broad-market indices and ETF's:

S&P 500: -24.36%
Russell 2000: -19.01%
Dow Jones Indus. 30: -23.55%
Vanguard Total Mkt: -22.69%

So how's our own lil Retiree's well-balanced, 100% nutritious, passively-allocated portfolio doing?

-5.07%.

All with a good solid basket of passively-mnaged funds which I haven't rebalanced since I constructed it more than a year ago.

Yes, my friends, we're doing nearly 5x better than the S&P 500-- and about 4x better than the total stock market.

And to think that the tasks I've been doing as "financial planner / analyst" managing the Retiree Portfolio once I constructed it include activities like, well, logging into the investment account see how it's doing.... watching the numbers.... taking numbers and posting the rare blog article about it.... logging out of same account.... wait a few weeks... rinse... and repeat... Yup. That's iabout all I've been doing-- stress-free, minimal management, and I'm beating the silliness out of the general stock market.

So I slept well last night and every night for at least the last 9 months (except for the occasional panic attack that my side project isn't going too well), knowing my carefully-constructed portfolio would hold up nicely. Today, I did wince for about 36 seconds when I saw the NAV for the Retiree Portfolio drop over 1.75% today alone. However, I breathed a sigh of relief when I compared it to the 5% beating the S&P 500 received today.

Battle of the Netbooks: A Comparison Review of the Acer Aspire One AOA150-1750 vs. Asus EEE PC 1000H

Having used both machines on a daily basis, even side-by-side a lot of the time, over the past few days, I've compiled a logically-oriented tet-a-tet comparison of two of the more available and popular netbooks out there, the Acer Aspire One (Windows XP version) and the Asus EEE PC 1000H (Windows XP version). There are already many, many websites out there with photos, breaking down the numbers, etc., but if you want a narrative based on actual usage experience and not some 5-minute power-up/power-down filmed-on-camera unboxing which, again, many have already done that part of the hard work before me, here it is:

Review & Breakdown: Acer Aspire One vs. Asus EEE PC 1000H

Hope this helps!

Update

Yes, it's been a while, almost too long to really be worthwhile to post anything. Maybe I should just dump this and go over to Wordpress. Just maybe...

Anyhow, a quickie:

- The North Hills, CA isn't shaping up too well, which fits squarely with the real-estate timing engine that is *still* being developed (just needs a nice web front-end and we're ready to rock). MT continues to stumble by not hedging his losing positions appropriately. Frankly, I could've been the greater asshole and just dumped the property regardless of MT's significant capital loss from the down payment, but I'm too nice, even though I realized MT would have no legal recourse against me if I pulled off a sale without his consent. And the only reason I'd care for his consent was, don't know if you remember, but the down payment came out of MT's pocket. Anyway, I could've been a jerk about this whole "gentlemen's" deal is: 1) the property is fully deeded to me, and I'm the sole borrower on the loan, and 2) I know too many kickass lawyers to be messed with, and 3) I have the funds to retain such lawyers-- MT doesn't.

My biggest fear is MT, as with many other habitual overleveragers, has now run out of cash. He's attempted to assuage me by saying he's got a baby-momma moving in with him by December which would surprisingly provide a monthly income surplus for his household which should translate into tangible benefits for me. Why would I care? Well, because the renter MT found for North Hills, CA, one of his friends, is only covering *half* the debt service! Moreoever, MT's slumlord ways have royally angered the tenant, whose lease expires in 3 months. So basically, at any moment now, MT can decide to walk away from this and the $70K down payment he coughed up for the down payment, and I'd have to bear the brunt of this purchase. Do remember that this was what I now know is typically called a "straw buyer" arrangement, and I'm pretty worried that 1) I'll have to start feeding the alligator myself one day, and 2) my excellent credit profile might be compromised. I can see all of this heading towards some cataclysmic financial and relationship event horizon where everything blows up spectacularly between me, MT, and the tenant.

- North Richland Hlls, TX, continues to be rented fully, at least covering debt service. MT's dire cash position as of late has him in a bind where, well, he wants to sell off our "best" property ASAP. Problem is, our "best" property still has quite a number of issues before it's make-ready for sale. Moreover, MT prefers to sell the property at a loss in order for him to quickly liquidate. I'm not as hot on the idea.

Meanwhile, although I can only fault myself for my share of lack of due diligence, I'm resigned that MT did *not* do a complete walk-through when representing our behalf in purchasing the property. A simple mistake with which I should've known better and may cost my further down the road, but for the time being, it's fully renting, it's cheaper than comparable properties, so the renters + me are happy.

- The penny-pinching continues and all I can say is I'm happy with my fiscal progress so far this year. I'm building up my cash and booked capital positions at an aggressive rate and am close of my goal of $100K in cash this year. Knowing that my consulting practice has a high risk of uncertainty, I'm just putting it all in a money-market fund for now until I have time to sit down and flush out a strategic high dividend CRT (Canadian Royalty Trust) position.

Penny pinching examples include: Driving a stick-shift late-model $5000 Honda (saves me approximately $1000 / yr on repairs and maintenance thanks to its mechanical simplicity, $1000 on gas, $1000 on insurance), having a 100% no-dry-clean work wardrobe (spent nearly $300 on it but saving around $1500 / year), attending free or heavily-discounted entertainment venues or knowing the right people to go to the right events, and drastically curtailing all liberal shopping habits of yesteryear. I did have the urge to get myself back into an AWD car to drive in a sporting manner but after realizing I'll be spending $3K / year extra to support that drug habit, it's a decision that's difficult to go through with.

- What's with the "booked" capital position, though? Well, me being the "too-nice-of-a-guy" once again, I entered into a loan with my brother to pay off his credit card debts in exchange for returning to school and high grade marks. We entered into this agreement last September, and so far it's worked well for him. As for me, as long as he pays according to terms (subject to wage garnishments), then his loan repayment will effectively be equivalent to a 5-10% APR variable-rate annuity-of-sorts over the next 8 years-- all of it non-taxed! So far, he's been performing his end of the deal very well-- getting 4.0 at Fullerton College in Orange County.

I'm rewarding myself to this significant progress with no less than two major trips towards the end of this year, one of them already booked.

As for the Retiree MPT Portfolio, it *still* exhibits only a 4% drop from its peak asset value back in 4Q CY2007, so all things steady with that.

Some other things I'm investigating:

- Whether or not I should re-form an S-corporation for my IT consulting practice. Initially I thought my resumption of consulting in my core services should be short-term as I segued into a lower pay but more secure full-time position with more benefits, but with my core services consulting continuing this long, I can't imagine my client having any interest hiring me full-time anymore. Or, I just move onto another full-time opportunity with more decent compensation / benefits.

- Options trading. I'm currently reading up on this. As I was traveling this past weekend I'm noticing more and more people reading up on it. I'm not sure if this is a trend that may become a "bubbling" trend itself, and if so and by becoming so if it'd have negative impact on returns, I'm trying to capitalize on this before the train leaves the station without me.

- I opened up a TreasuryDirect account with the purpose of buying I-Bonds to counter the US dollar inflation risk. I haven't purchased any I-Bonds yet, though, as I'm working to reach my capital goal for the end of 2008 and then deciding how to significantly reallocate my portfolio.

- And that leads me to: beginning to reallocate my and the Retiree's portfolio. I think I'll start investigating rebalancing every 6 months, starting with the beginning of 2009. Ever since I gradually flushed out the Retiree and my retirement portfolios about 1.5 years ago I haven't rebalanced. It surely wouldn't be a bad time to buy up underpriced positions and sell off overpriced ones.

- Find out a *better* way to seamlessly deliver and communicate my various balance and portfolio movements, so that it will stop showing up all ugly in manually-inputted spreadsheet formatting.

Side Project - Predictive Real Estate Timing Website

I've decided to frantically catch up with the runaway train called Web 2.0. One way of getting up to speed is by making a project out of Web 2.0 technologies.

Although there's been a *tremendous* amount of activity in my life lately, along with an innumerable number of side projects, the very first project that I want to personally tackle, with my statistics guru-buddy, is simple: a proven, near-real-time predictive engine for real estate valuation. Basically, this will be a tool that'll help the average Joe have an idea about real estate market timing.

The core engine, which includes automated mass data feeds, modeling, and algorithms, was completed a year ago, with some incremental fine-tuning every so often. Privately, my stats buddy and I have been doing very informal validation testing of the engine, by correlating the uptrend, peak, and starting downtrend of real estate movement, and corroborated with anecdotal observations-- my own for one, by manual monitoring and correlation of median prices in Southern CA MSA's to the sale of my own condo, a few heated arguments between him and me about the viability of the Texas income property market (suffice to say, he won that argument), and news articles and blogged experiences we've been witnessing wide-eyed.

Features will include: correlation with the Case-Shiller Home Pricing Index, backtesting, forecasting and trending by ZIP code, etc.

This is significantly different from what Zillow.com attempts to portray. Zillow.com more or less is a crude quickie "online appraiser" for individual properties. Although their algorithms are also proprietary, it's safe to assume that Zillow.com may be using the 3 standard pricing approaches of real property: comparative (at what prices are other recently sold properties?), income (at what price is considered fair, given amount of rent commanded by property?), and functional replacement (to rebuild property from scratch + depreciation, how much is property worth?) estimation approaches.

Zillow's restrictions seem to include the following: no future, predictive confidence; estimates seem to be based on final sales figures (*not* repeated downwardly revised *listing* prices); and not factoring in alternative ways of property listing that sellers are employing during these tough times; no accounting for economic conditions, which may be significant factors on real estate values.

So the engine's there. What's missing, then? The web front-end! And obviously considerations for payment processing and security will be high priorities as well.

Stay tuned.