Blog

Short blog posts, journal entries, and random thoughts. Topics include a mix of personal and the world at large.

Be a player

In the capitalist economic system such as ours, it is very important to have capital (duh). That’s how it works. You literally cannot survive without it. We trade our labor, working a job for money in return, just so we don’t starve and sleep on the streets. Equally important then is to avoid squandering all of the capital we toiled so hard for. Having adequate savings is how we thrive.

It’s incredibly calming to know that you’ve got enough money in the bank to cover any surprises. I cannot imagine the stress of living paycheck to paycheck. A sudden, unplanned cash event can turn into a downward debt spiral. A Sisyphean hole that you keep shoveling stuff in, but never fills completely.

If anyone were to accuse me of being privileged to not have to live paycheck to paycheck: get the French out of here. My parents of a combined $2,000 income - for a household of four - managed to save enough to buy me a brand new car when I graduated from high school. I’ve read enough Reddit posts to know that lots of people out there - of all income levels - have a spending problem. No matter how much you make, you should spend less than that. It’s not a value judgement, it’s math.

Because our surplus money can then be used to participate in the capitalist system: by investing it. That money becomes capital for others to turn a profit - by serving the needs of the customer. The return on our investment gets continuously reinvested towards other ventures, thereby compounding the growth. That is how we thrive in this economic system.

Don’t hate the game; be a player.

Xmas is cancelled

The U.S. stock markets saw a 3% drop in each of the past two trading days and everyone is of course going nuts. After hovering at all-time highs for the past few weeks, the ever expanding threat of the coronavirus has finally spooked the markets into a mild drawdown. As I written about it briefly last week, the economic impact of the coronavirus is a huge lagging indicator, and we’re just starting the see the beginning signs that everything is not going to business as usual.

Being a relatively young person, I am immensely long on the stock market, so the past few day’s drops don’t materially affect me at all. I can’t even pull money out or put more money into my ROTH IRA: the former is restricted by definition, and the latter is restricted under the federal guidelines of $5,500 per year maximum. But it’s fun to watch, isn’t it? I certainly had a good laugh commiserating with workmates about how much money we pseudo hypothetically lost in the past 48 hours. That is, unless you have individual positions in Zoom or Campbell Soup: you’re actually up!

It’ll be interesting to see how President Trump reacts to this slump in the market, especially if it continues on (as of writing we are on pace for a third consecutive day of red). Trump sees the stock market as a de-facto referendum on his presidency, so any significant decline - like the ones we saw in the 4th quarter of 2018 - triggers him into irrational action. I’m sure Federal Reserve chair Jerome Powell is already hearing from our President to do something about this latest contraction; to continue lowering the borrowing rate and increase the Fed’s balance sheet.

Meanwhile, more so than fears of losses in the market, the coronavirus issue seems to still be proliferating, with bad news continuing to come out day after day. A friend of a friend has cancelled his wedding in South Korea because of the travel issues for attendees, and surely they’re just one of many couples in Asia that had their wedding dates affected, through no fault of their own. Yesterday, San Francisco Mayor declared a local emergency so the city can allocate resources in preparation should the virus spreads to our area. It appears we - the United States - are steeling ourselves for that eventuality, and not for a matter of if.

My first ever CD have expired

A few days ago I received a surprise cheque in the mail (we like those!). Sadly, it wasn’t some rich benefactor wanting to support me in my creative endeavors (please support my Patreon - just kidding); rather it was from TIAA bank. My first ever CD account - a 5-year CD - has come due, and the final cheque signifies the account closing. Five years have indeed gone by already.

And what a difference five years make: my expired CD carried an interest rate of 1.90%, which was the absolute best one can do in risk-free account, at a time when savings accounts were only giving out 0.70%. Fast forward to today, I’m comfortably getting 2.2% from Ally, and long-term CDs are into the 3s. Shout-out to the Federal Reserve for finally raising the base borrowing rate these past few years.

You’d half expect me to go on some cliché tangent about how five years have gone by in a blink of an eye, and that it seems like only yesterday that I’ve just opened the CD account, but that is the completely opposite of what I’m feeling right now. What an absolute slog the five years have been; I went through an intense period of transformation, from my mid-twenties of still finding my place in this world, to now in my thirties, wiser yet still massively unlearned, and seeking to improve every single day. When you start to look at every single day as its own challenge and reward, your reference of time slows down significantly.

I think time goes by quickly when you’re directionless and bored. It contradicts somewhat the popular saying of “time flies when you’re having fun”, but I can only speak from my experience. When days are filled with salient tasks and good habits, the time well spent acts as a defense against pangs of emptiness and waste. You think time have gone by fast precisely because you regret not having done more during that particular timeframe. I actively fight against that.

Anyways, with interest rates at somewhat healthy levels, I’ve no plans to roll the money from the closed CD to another 5-year term. I prefer as much liquidity as possible (outside of retirement accounts), and not having to chase better rates frees up extra money to be funneled into my other investment vehicles.

Cheers to the next five years. May that end date also creep up on me unsuspectingly, but in the best possible way.

S&P hits all time high

The S&P 500 index hit all time highs yesterday, and we’re officially in the longest bull market in history. This should be great news for those of us with skin in the equities game, but it seems everybody is busy steeling themselves for the eventual correction to come. This bull run indeed won’t last forever but suffice it to say none of us can predict when the downturn will occur. Chances are equally good that if you take money out of stocks now, you’ll forgo any gains that may still come.

Of course, everyone wants the gains and can't bear to lose a penny. Perhaps I was taught differently: the money I’ve got in the stock market is money that if it completely disappears tomorrow, I’d be completely okay. Capital I’d otherwise fret losing is secured in my savings account, insured by the government. When the bear market does arrive I will not be selling any of my funds: my investment horizon is measured in decades, not years. The market will eventually climb back up just like it did from the 'Great Recession'.

I’m relatively young so obviously I can risk the cyclical whims of the equities market, unlike the soon-to-be retiree counting on his nest-egg to live out the rest of his life (like my parents). But that person shouldn’t have any money in the stock market anyways, given the supremely low risk tolerance at his stage in life. The impending correction shouldn’t affect him at all.

There’s some rumblings regarding the yield-curve and how an inversion of it is a solid indicator of a looming recession. It’s mainly food for investors trying to time the market, but for regular folks like me, I think it’s largely noise. Even if the yield-curve were to invert, the bull market can still go on for many more months before correction happens. Again, none of us can predict the fall.

My investments are quite sound (if I do say so myself) so I’m ready to ride out whatever is to come. Money that I'd absolutely need within the next few years is either in savings or have been moved to it already. Have to say, I’m thoroughly liking the recent increases of the interest rate: after many years of sub 1% returns it's nice to be at least competitive with inflation.

You've lost me on cars as investments

Perhaps it’s my wealth level's (or lack thereof) inability to provide the proper perspective, but I don't understand people that treat cars as investments.

Obviously I’m referring to the ultra rich that buy super expensive cars and then park them in climate-controlled garages, all in hopes of gaining significant profit some times in the future. The common Honda Accord us plebs buy is not an investment ever.

I am speaking to the sort of well-heeled car enthusiasts that buy a limited-edition Porsche 911R for around $250K then promptly garage it. And why wouldn’t they? A delivery-mileage sample fetches $500K now; no telling how much that’ll go up given enough years. Naturally-aspirated 911s with a stick are a dying breed.

My contention with cars as investment isn’t that it’s driving up prices: capitalism is the best economic system ever and the price anything rightfully ought to be what the market will bear. I complain about the same mechanism going on in housing speculation but unlike houses where you can always build more, there’s only so many Toyota 2000GTs rolling around.

The issue I have is the utter lack of driving these cars. The point of ownership is completely lost to me once these investors lock them up to preserve miles. Can these people even call themselves car enthusiasts? A car isn’t a car unless I can drive it, and often.

I respect the heck out of enthusiasts like Nick Mason who continues to drive his unobtanium Ferrari 250 GTO even though it’s worth deep into the eight figures. Car guys like Jay Leno who’s got a large collection but he drives each and every one, irrespective of what it’ll sell for down the road.

If you're going to buy a car and just park it, why not invest in paintings or sculptures instead? At least those items would be serving its innate function. An automobile's innate function is to be driven and be on the open road.

Congratulations, Tinder: you've made OkCupid embrace casual hookup sex.

Retirement savings goals

Yesterday I saw this tweet of jean Chatzky's:

By the time you’re 30, aim to have 1x your annual income set aside for retirement. At 40, 3x; at 50, 6x; at 60, 8x; and by retirement, 10x.
— Jean Chatzky (@JeanChatzky) November 1, 2017

Upon reading the tweet, I actually felt pretty good. I turn 30 next month, and in solid humble-brag fashion I can say the goal of having 1x annual income saved for retirement is of no issue. Ramit Sethi's book on personal finance taught me the ropes back when I started working full-time. Saving for retirement isn't a chore - it became automatic. I don't think about it at all.

However, judging by the replies to the tweet, I guess I'm an uncommon case amongst my peers? The responses were full of millennials lamenting their financial misfortunes, being burdened with the likes of student loans, outrageous housing costs, and stagnant wages. Plenty of avocado toasts and 10 dollar lattes jokes were mixed in there as well. Lots of excuses given on why people don't have the appropriate amount of retirement savings, if at all.

While I don't doubt the veracity of these people's situations, I question their defeatist/victim attitude.

Let's all agree that saving for retirement is important, no? Barring any natural disasters or nuclear holocausts, our generation should live quite a long time beyond the current 65 year retirement age. Having enough money to sustain a suitable lifestyle is going to take some time accumulating, and people should start as early as possible.

For sure external circumstances have made it difficult for millennials to find jobs and save. However, complaining about the situation - as in the tweet's replies - isn't going to do anything positive. Is the government (or some other macro entity) going to suddenly forgive all student loan debt, build massive amounts of affordable housing, and provide people a better paying job? Of course not. It's all up to you, the individual person, to fight for what you desire, and in doing so save for retirement.

Don't we often joke that Social Security won't be there by the time us millennials reach our autumn years? People can say how unrealistic those goals set by Chatzky are, but the fact remains you still have to save. If my family of four can do it on $1,500 per month income way back when, so can you.