Jacob's other journal

Post by **jacob** » Fri Aug 10, 2012 4:00 am

Owning costs much less than renting in this city. Chicago is one of the better areas [in the US] for dealing with peak oil and climate change, so it meets the strategic criteria.
Also, stocks are currently quite overvalued. (Profit margins are excessively high suggesting that earnings are overblown. Hence, P/E is high and can't/shouldn't go higher. The market is in the greater fool regime right now.) Thus exchanging equity for bricks-on-land seems like a prudent move especially since housing is close to the long-term trend (when the bubble is removed).
Whether to finance is primarily a question of which capital structure I prefer. This is not just a bottom line calculation but also a question of risk, in particular in terms of how the economy will develop over the next 15-30 years. Strategically, borrowing is likely a bad idea, albeit tempting in the short run.
TL;DR: Buying a house here seems like a smart move for several reasons.

Dragline · Post by **Dragline** » Fri Aug 10, 2012 9:10 pm

I might suggest that you contact this person: http://www.kimkerbis.com/home.asp
She is used to dealing with quirky people who have unusual ideas. Probably why she is married to a childhood friend of mine who acts in things like "A Klingon Christmas Carol". See http://chicagotheaterbeat.com/2011/12/0 ... re/#review
I also know a guy there (another childhood friend) who owns a small independent record label in case you ever wanted to put ERE on CD or put it to music. He's even more unusual.

jennypenny · Post by **jennypenny** » Mon Aug 13, 2012 1:01 am

That's cool. I hope you find a house you like. I think you'll be really happy when you have a place where you can dig in. We've owned our own home since we were 22yo. Never wanted to live in someone else's place.

secretwealth · Post by **secretwealth** » Mon Aug 13, 2012 2:35 am

"Also, stocks are currently quite overvalued. (Profit margins are excessively high suggesting that earnings are overblown. Hence, P/E is high and can't/shouldn't go higher. The market is in the greater fool regime right now.) Thus exchanging equity for bricks-on-land seems like a prudent move especially since housing is close to the long-term trend"
I felt like this last year when I bought my co-op, and then the market rallied at the beginning of this year when I deleveraged instead of moving into equities. I feel the fool, but I agree that equities are really ridiculous right now. I don't know if I expect a crash, but I'm waiting to get into some dividend stocks until prices go down.
jacob, I really do recommend buying if you plan on staying in Chicago for the long term. To put it in perspective, our monthly housing costs on our NYC co-op are $620/mo. (including heat and hot water, property taxes, sewage, water, and trash). Rents in the neighborhood for a comparable apartment are about $1500, so the savings on rent is pretty substantial.
True, the opportunity cost on the $100k sunk into the home is a factor, but I think of it as a potential income-yielding investment. If rented, that $100k would earn us pessimistically about $700/mo., and 7% isn't too bad. That will only go up, as rents are skyrocketing in NYC now.
The Chicago market might be different, but I think the trend is pointing to greater demand for urban space, and that trend isn't going anywhere.

Ego · Post by **Ego** » Mon Aug 13, 2012 3:23 am

Rapidly changing environments demand adaptation to survive and thrive. Flexibility is key for adaptation. Being fixed to one place is inflexible. Look at any great upheaval in history. Those fixed to place suffered most. Those who were the least encumbered did the best.
I ask myself if the pace of change will continue to accelerate or will it slow? I operate on the assumption that it will continue to accelerate. Perhaps I'm wrong. But if I'm not and the pace continues to increase, will some other factor alter the above golden-rule of resilience?
That said, I read what the guy who started Vanguard said in the times today.... yikes!
https://www.nytimes.com/2012/08/12/busi ... -rest.html

secretwealth · Post by **secretwealth** » Mon Aug 13, 2012 5:08 am

I'm not so sure paper assets will fare too well either in a "great upheaval". Are we talking a major calamity? If so, I don't think cash will be quite as useful as canned goods and guns.

karim · Post by **karim** » Mon Aug 13, 2012 7:56 pm

@Ego: thanks for the article. Interesting read.

@secretwealth: you are right, in an apocalypse, how would care about what stock you own or your now worthless paper money. Although I'd hope that guns wouldn't be needed, a system of bartering would evolve, only to be later replaced by a new currency (since bartering ultimately is inefficient).
Not sure if Jacob recommended it in one of his blog posts, but next on my reading list is: The Collapse of Complex Societies.

Ego · Post by **Ego** » Mon Aug 13, 2012 8:50 pm

By "great upheaval" I meant moments like the industrial revolution, the movement away from rural/farming and toward cities during the factory boom, the great depression, the white-flight of the 1950-60s, the lesser-depression or great-recession.... and many more. Now we've got the coming death of the exurbs, the shift away from cubicle farms, the increasing technologization of work,....
It wasn't long ago that inner cities looked like war zones. Today they are flourishing. Back when I was in college in the late 1980s I remember seeing the old folks who bought their West and North Philly places in the 1940s and never left. It was amazing to see these fine, upstanding folks somehow holding on as they were deluged by the ghetto. For one reason or another they failed to adapt, stayed stuck in place and were eventually... well, you know.
We assume we'll always be as flexible as we are right now. But flexibility / adaptability are skills that gradually decline if they are not practiced.

anomie · Post by **anomie** » Wed Sep 12, 2012 1:24 am

Hi Jacob,
I'm curious as to how the move to full-time work is treating you and if you would care to speak to that. Does it not require all of your attention and free time? Do you have any time leftover to pursue 'Renaissance' life?
Just really curious how you are balancing it all.
Regards,

anomie

Post by **jacob** » Thu Sep 13, 2012 4:47 am

Time is not limiting factor. Energy is. I spend 8-9 hours at work thinking about quant stuff and 1.5 hours commuting (reading books on the train). I find this takes away the energy to sustain more transportation (hence I work out at home instead of going places to do it) and the energy to think about "writing" (hence I don't write as much on the blog/forums/books anymore). At home I make furniture (so far a stand, bookshelves, a cabinet for DW's yarn (almost done) and a desk (almost done)) and wine (about half a dozen different kinds by now). These are the two new skills I've added this year.
In general the Renaissance way of life doesn't take more time than other kinds of living (I don't spend more time "making" than other people do "shopping"). The idea is to "work smarter, not harder". While that sounds trite, the difference really is due to a added smarts (skills). Of course that addition does take time (which other people usually spend watching TV instead) but once it's added, it doesn't require any additional input.

anomie · Post by **anomie** » Fri Sep 14, 2012 11:21 pm

@jacob -- Point taken - energy is limiting factor. I can certainly relate to that.
thank you so much for your response!

Post by **jacob** » Mon Sep 17, 2012 1:16 am

My net worth is now higher than all the money I've ever made (about 53 years worth of expenses). That's kinda funny.
The market's have been good to me this year outpacing anything I make in wages. That's kinda funny too.
Money is really turning into this abstract quantity. I'm guessing it's only going to get worse over time as the gap between the have's and the have-nots gets bigger and bigger as my peer-group ages.
We've been putting the finishing touches on a cabinet to hold DW's massive collection of yarn. It's been made with the help of friends and family. Five people have been involved in various capacities putting this together which is cool because it now has a story/memory of sorts. My parents, who visited for a week, helped carry and hold the massive plywood floorboards (got'em for free) while sawing, planing and putting it together. A friend of mine wanted to learn how to plane, so he got to make one of the slats. DW is painting it.
After this, the table top for the desk. I've decided to glue it together out of pine boards. I need to practice.
In other news, I bought a bicycle trainer (mentioned above) and have been riding about 1-1.5 hour every other day for the past couple of weeks. It's beginning to show---my legs had begun to atrophy (they were 22" when I played hockey and had gotten down to 20" from sitting on my ass for the past 9 months) and I had started putting some fat on the stomach. However, it's been fairly fast to get back what was lost. I can hold it at speeds of about 900 kcal/hour (+/-100kcal) which quickly saps blood sugar level. It's about at the speed where one should eat something every 15 minutes while doing it to avoid hitting the wall which otherwise appears after about 1.5 hours. Compare to running. In any case, it took me about 1 week to re-realize how important it is to maintain "fitness". Otherwise it kinda disappears insidiously slowly---like a frog being boiled slowly. Week by week the slow loss is not felt.
Work is currently in the "hope"-phase. I've often described research as "confusion"-"depression"-"hope"-"production". The first time (grad school), these phases are felt strongly. After that the impact is more of a been-there-done-that which allows for a certain optimism even when everything is confusing and nothing is working. In any case, we might have something as things are beginning to work as intended. There is hope.
Also fixed the shirt situation. I now have 4 identical tshirts, just in time for the cold season of course.

JohnnyH · Post by **JohnnyH** » Mon Sep 17, 2012 3:33 pm

"net worth is now higher than all the money I've ever made" That is funny... Is that pre or post tax?

J_ · Post by J_ » Mon Sep 17, 2012 7:21 pm

Interesting news about making money, maintaining health and craftmanship. Everything flows well, good to hear.

I am curious about your crafmanship training.

Scandinavian and Dutch craftmanship is also well kown for a beautiful design, especially on furniture (Alvar Aalto, Gerrit Rietveld)

The first bit you showed once was a rake. Liitle design but functional ( and a huge grin)
So I was wondering are you now also implementing some design-quality in your products already or will that you add that in a following stadium?

Post by **jacob** » Wed Sep 19, 2012 1:54 am

@JohnnyH - I just added up the gross salaries of my "career" and compared. Nothing accurate. I estimate my earnings before grad schol to be negligible and I'm somewhat over the amount anyway.
@J_ - Haha, I'd say my current stuff is somewhat more impressive than the rake I built. I still make everything out of pine framing (2x4s) which I plane flat and square. I do seem to develop a style insofar that my furniture designs kinda look alike. I expect there will be a blog post with pictures sometime later this year. Once I've "built one of each", I'll transition into nicer woods. I've generally found that my second attempt is MUCH better than my first attempt, so I don't want to drop $200 on oak for a table in order to learn.
I have a few things in mind in terms of furniture designs. I think as long as I use cheap wood like framing and plywood, I should start making medieval designs instead of random Jacob-designs. This will allow me to sell the stuff to re-enactors. For expensive wood, it would probably be best to semi-copy popular designs in order to sell those too once I tire of them.

teewonk · Post by **teewonk** » Wed Sep 19, 2012 2:25 am

"I don't want to drop $200 on oak for a table in order to learn."
What do you think of using mismatched wood? Reclaimed wood furniture is popular right now (example). I'm sure you could collect enough from beat-up furniture, doors, etc., over time to make a table.

Post by **jacob** » Fri Nov 16, 2012 3:42 am

So what's new ...
I'm still dabbling trying to establish something that pans out and becomes "what to do after trading". Hopefully that won't be an issue that needs resolving for the next N years, but it's always good to be prepared/have more than zero exits
Trying to follow the edicts of only engaging in stuff that's cheap to start and might eventually make money.
1) Bought a bike computer (it's like a speedometer with a gazillion functions so we call it a computer) which together with my trainer doubles as a proxy powermeter. I managed to snipe it on ebay for $1.5 plus shipping. Retail is north of $50. I'm making a point here.
2) Bought Chessmaster 9000 ($8 on amazon, I'm making another point) and have been practicing my game. It does wonders for my ego to be beaten by virtual 10 year olds.
Both are cheap hobbies but both are semi-useless in terms of fulfilling needs and making money.
In other news, I heard from a ghost from the past (is that the right term?). My phd supervisor contacted me about some of my old research and is willing to sponsor a free trip to Switzerland. (Here we go again. I hate traveling. I've been to 14 countries, but I've only used my own money to go to two of them. First world problems ...) We'll see how that works out.---If I still remember anything and if I can find my old codes. I notice that it didn't take long for someone else to publish papers in my previous niche. The entire research community is resilient in that manner. Individual cogs don't matter but apparently this one is worth inviting. I guess it's nice to be wanted.
(It's funny how my concerns about bridge burning seem completely unfounded. I also noticed that I was actually somewhat interested in the problem. I could have sworn I had forsworn physics forever.)
Still trading paper (not real money) at work but getting much closer to the real thing. It's funny because when I looked at the physics publications over the past few years, I couldn't help but feeling a little of that old "damn, somebody coup'ed me" when I saw "my" projects published under someone else's name. In trading it's different. Even if someone else came in first, it's still possible to do better or even if doing worse, share the rewards. In academic research first-takes-all.

secretwealth · Post by **secretwealth** » Fri Nov 16, 2012 4:25 am

jacob: go for it. Going to an academic conference when you're already out of the job treadmill is beyond liberating--it's a sublime experience. It might also be a bit sad to see all the hungry grad students who will most likely wind up academic cannon fodder.
Also make sure to stress in your talk how you're not in academia anymore and, while you're curious how future research on your topic would take shape, stress you won't be doing any of it. That'll raise some eyebrows and, if you're anything like me, put a spring in your step.

Dragline · Post by **Dragline** » Fri Nov 16, 2012 6:14 am

Yeah, I'd go if someone else is paying and you can say anything you want.
In the meantime, you might enjoy Mandelbrot's new memoir and his love/hate relationship with academia. He had the bulk of his academic success after he ditched the formal process and spent 35 years at IBM. Some of it is similar to things you have written.
As you get a little older, you may find that life is often circular when it comes to relationships, at least if you're a relatively decent human being. I've found that everyone I've known more than tangentially seems to re-appear at random intervals. (There may be a power law relationship in there somewhere.)

jennypenny · Post by **jennypenny** » Fri Nov 16, 2012 1:15 pm

"You have noticed that everything the Indian does is in a circle, and that is because the Power of the World always works in circles, and everything tries to be round. The Sky is round, and I have heard that the earth is round like a ball, and so are all the stars. The wind, in its greatest power, whirls. Birds make their nest in circles, for theirs is the same religion as ours. Even the seasons form a great circle in their changing, and always come back again to where they were. The life of a man is a circle from childhood to childhood, and so it is in everything where power moves." Black Elk