Damn it Feels Good to be a Gangsta

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Bankai
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Re: Damn it Feels Good to be a Gangsta

Post by Bankai »

Would you really though? Most people freak out after a big drop and not many are brave enough to put all their money in right when all the news are about impending doom. Also, your initial 50% drop could turn into 90% like in 29' and your 5% swr could suddenly become 20% not so save wr.

ertyu
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Re: Damn it Feels Good to be a Gangsta

Post by ertyu »

Heh ... we're arguing in j+g's journal which we probably shouldn't, but you're completely right @Bankai. OK, I hereby swear and promise: if the SPY corrects to 170 and I have 20 JAFIs, I shall pull the plug

In the plunge protection team we trust

jacob
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Re: Damn it Feels Good to be a Gangsta

Post by jacob »

To quench the speculation/rumors, I wrote a long post about the numbers of my actual retirement process a few years ago:
jacob wrote:
Wed Jun 22, 2016 6:53 pm
At the time (March 2009, S&P500 bottom), my NW was 150k most of which was "good money" in taxable accounts. I was spending under $7000/year out of which $1500 were "wants" (martial arts training). At the time, I had a 9(*) year history/experience of spending under $7k/year. Half of this time (2000-2004) living as a single and half of it being married/living with another person with the same budget. I also had the established ability to make somewhere between $500-1000/month, scalable at will, by working some 4-8 hours per week [doing copy-editing]. I knew that the market was at least fairly valued if not slightly undervalued lending some confidence in the 4% rule. I was also involved with a non-profit being one of the founders.
That would make me "needs-WR"<5500/150000 = 3.67% and my "wants-WR"<7000/150000=4.67% with a side-income (copy-editing). W/o copy-editing I could just quit MA (concentrating on hockey, sailing, and cycling) and stay under 4%.

IIRC, the market bottomed in the last week of March 2009 and CAPE10 valuations were at their historical averages. Hence, I did not have the valuation concerns I would today.

As described in the post, I already had a long history of keeping that budget. This number was internally and morally (tertiary Fi) motivated by maintaining a sustainable equitable solution (if everybody lived on 1 JAFI($), the world would not exceed its carrying capacity) and I saw no reason and I still see no reason to exceed it. To me it would be immoral so it simply feels wrong to do it. That makes it pretty easy because higher spending concerns are Fi-eliminated.

($) The actual 2019 number is $6750/person/year.
jacob wrote:
Wed Jun 22, 2016 6:53 pm
Currently, I don't have any alternative at-will sources of income. Does this mean they won't happen next year? I don't know. However, like in 2009, I still don't need them... but I also still find it hard to imagine me not making another cent from any Renaissance interests and serendipitous opportunities either.
3.5 years later after writing that post, I still do not have a side-income. It's getting easier to imagine not making another cent in the sense that it's no longer inconceivable. WR is currently 0.8% and I've starting giving my money away instead instead of trying to make more. CAPE10 valuations are currently around twice their historic values.

ertyu
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Re: Damn it Feels Good to be a Gangsta

Post by ertyu »

@jacob, out of curiosity, if you had to eyeball, at how many JAFIs would you pull the plug right now at these valuations?

Also, thank you for the clarification. Your explanation cleared up a lot for me.

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Re: Damn it Feels Good to be a Gangsta

Post by jacob »

With no side-income and given the way I invest (SWAN income widow-style), I would currently pull the plug at (1/0.03)/0.75 = 44 JAFI. The 3% is from the guidelines in the ERE book (and I pick 3% because no side-income) and the 75% is from viewtopic.php?p=203721#p203721

(This presumes no social security. In reality, I could start pulling ~1.5 JAFI in social security 18 years from now, so technically 18 JAFI in TIPS would do it. Recall that I am getting rather "old" :-P )

Given how different these numbers (18 and 44) are, my answer is practically useless. The actual number really depends on a specific plan. Will note that I've never struggled with trying to find a minmax solution to this problem. I've always worked too many years treating FIRE money money like FU money with a serious backstop. So for me the actual number would be as soon as 1) I hate my job && 2) The income from all other sources including responsible investments(*) exceed 1 JAFI. If I don't hate my work I would continue. This leads to a surplus from the moment that a 100% savings rate (relative to the primary job) is achieved which eventually leads to a runaway networth. I've been lucky enough to already be FI whenever I've grown tired of any of the jobs I've held. Recall, that I was motivated by ERE and not FIRE.

(*) So no cheating like buying a mortgage REIT with a 10% yield on margin.

ertyu
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Re: Damn it Feels Good to be a Gangsta

Post by ertyu »

Good enough for me as I've got no social security, so this helps. Ideas much appreciated. Thanks

Jin+Guice
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Re: Damn it Feels Good to be a Gangsta

Post by Jin+Guice »

jacob wrote:
Fri Jan 24, 2020 9:15 am
I've always worked too many years treating FIRE money money like FU money with a serious backstop. So for me the actual number would be as soon as 1) I hate my job && 2) The income from all other sources including responsible investments(*) exceed 1 JAFI. If I don't hate my work I would continue.
I had a job I liked once. It was fucking great, if I'd known about/ thought of FIRE or ERE in those years, I would've just stuck it out until I hit my number. But I didn't. Since then I've had jobs that range from, eh o.k., to outright hatred. So I had to come up with an alternative method.

My three FIRE inspirations (Jacob, MMM and MadFIentist) all liked the jobs they retired from. IIRC, all three of them worked for a time, at their original day jobs, after they hit their FIRE numbers. "Liked" is of course relative, but there is a definite line under which you do not like your job. A lot of people drawn to FIRE start out from day 1 under this line.

My strategy is to use part-time work (or mini-retirements or a combo of both) to save money while also experiencing some of the desired freedom now. The health risks of consistent stress, commuting, sitting in one place all day, social isolation and depression are well documented. These are risks faced every day at a job and amplified greatly by unpleasant (as defined by the jobholder) employment. It's just the prison we've all collectively accepted. When someone works a stressful job they don't like they take these risks daily to hedge against the perceived risks of an unknowable future. ERE/ FIRE gives a financial pathway to freedom from paid employment forever. However, once one starts down the path of lower expenses/ fat stacks in the bank, optionality today is also increased.

I think I'm actually one of the more pro-employment (or self-employment by small business) people on this forum. I think a system that motivates/ rewards people into working for/ with each other in such a coordinated fashion is amazing. I think there are a lot of benefits to going to a predefined place, to do a predefined task, with other people towards some greater goal, even if that goal is not the thing that you would do if your time was 100% self-directed*. I don't think that paid employment is the only way to do this, but it is the way we've all been socialized to accept and the easiest method that is currently available to us. Our culture squanders the amazing system it's developed with the belief that we collectively live in a world of economic poverty, that all (important) problems are economic in nature and that all problems would be solved if only we had more. The struggle is to not let this belief handicap us at the individual level.


*Though the closer you can get your working for/ with others to resemble something you'd like to do the more pleasant/ beneficial it is likely to be.

7Wannabe5
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Re: Damn it Feels Good to be a Gangsta

Post by 7Wannabe5 »

Is there any job that an ENTP would like to work for 40 hours/week for 5 years or more? INTJs are more into serial mastery ('cause they got more "killer" in their nature :lol: ), so MMV.

classical_Liberal
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Re: Damn it Feels Good to be a Gangsta

Post by classical_Liberal »

Jin+Guice wrote:
Fri Jan 24, 2020 11:26 am
"Liked" is of course relative, but there is a definite line under which you do not like your job. A lot of people drawn to FIRE start out from day 1 under this line.
This is an important issue that doesn't get addressed enough, starting points matter. I think a lot of people who think that FIRE is for them, really just need better jobs. Or maybe less total time spent working. Or a combination of the two. I also think that the ultra-savers here, those who keep upping the goal, will probably never be comfortable drawing down their assets, this is easy to avoid with semi-ERE and doesn't require a sub 3%WR to get started. I have some of both these archetypes in me.
jacob wrote:
Fri Jan 24, 2020 9:15 am
the 75% is from viewtopic.php?p=203721#p203721
aargh, again... If someone believes the present value of their portfolio to be 75% of it's salable value, they should sell it. Not save 33% more money in that portfolio! If someone believes their future returns will be 3% instead of a previously anticipated 4.5%. Then they should save more money or invest differently, or fill the hole some other way. I believe this to be a huge difference, requiring different mindsets and actions. Dragelines "do both" does not apply here, it's way to conservative inside an already conservative 3%WR.

I believe talk like this only serves to frustrate or encourage (depending on their "weakness") a lot of people in the above two categories. Meaning less people will end up satisfied with low consumption decisions because they can't realistically reach goals in the five year time frame they were sold (or a reasonable time frame). Meaning ERE impacts less people in totality and less dramatically on an individual basis.

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Re: Damn it Feels Good to be a Gangsta

Post by jacob »

@cL - From a mathematical perspective, saying something is overvalued (relative to a historical mean) is the same as expecting mean-reverting returns to be lower. These are not different things. There are multiple future paths to the same result with the extremes being a huge drop followed by a recovery back to flat, a persistent trading range, or even a further increase followed by an even greater drop. Add any level of volatility around those alternatives.

In practice there are a few reasons not to sell. Some value may be imputed by taxes and leaving it unsold allows one to defer these taxes. Slop is therefore an issue. More importantly, for investment success it matters not what I think the market should be worth but what the market thinks it's worth. We buy and sell prices ... not values.

3% WR is not conservative ... it's the historic global mean economic growth rate---and therefore the rent that a diligent investor could get. You're not gonna find this in the US financial markets currently. The best US market portfolio I can construct in 2020 is overvalued by 1/0.75=>33% which necessarily means paying more if one wants invest in the secondary markets. In the book I claimed that a diligent person can find 3% somewhere (even if it's trading in pork). If one doesn't want to overpay, then it's time to get learn investing in something else. This is one reason I did not give a simple path in the book because I knew that no simple path survives contact with reality for more than a decade or two (see the most recommended investment in YMOYL over the versions) and I did not want to add another 300 pages of "how to invest" when such knowledge can be found in so many other books.

As for the second paragraph, I am definitely not one to change my math just because the results currently send a discouraging message and I'm not gonna brightside things just to keep the customers happy. There's a system in place for playing the game and right now the cards dealt are not the same as they were ten years ago---they are in fact more like the cards dealt 20 years ago when I started saving---and that necessarily calls for a different playing style.

The 2010 bull market has created a large number of FIRE specialists because high engineering wages and large ROIs have made it possible to neglect and punt on other renaissance skills. If people want to remain FIRE specialists in the 2020s then it stands to reason that this one-dimensional strategy gets more and more expensive the more overvalued the market gets. I can't really do anything about the market's current price or people's preference for simply saving more instead of diversifying their renaissance capital.

classical_Liberal
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Re: Damn it Feels Good to be a Gangsta

Post by classical_Liberal »

jacob wrote:
Fri Jan 24, 2020 4:25 pm
From a mathematical perspective, saying something is overvalued (relative to a historical mean) is the same as expecting mean-reverting returns to be lower. These are not different things.
Right, they are the same thing, but how the overvaluation materializes can be many different things. If you are adjusting your portfolio down 75% to mean revert, then it's fair to say if that mean reversion takes place, you'll not have to downsize future returns. Assuming 3% real returns over a given period of time is already making the assumption of much lower than historical returns. Maybe the greeks saw a different capital yield in 210BC? I don't know. I'm only playing with numbers across the world post-industrial revolution, which are the relevant ones, IMO. If you assume both lower asset value and lower than normal returns, you're double dipping your pessimism. Which is fine for you personally, you can afford to financially and in the fact your pretty satisfied with your current life. However, you speak for your movement as well, so I think you should acknowledge this double dip pessimism, hence that the added level of security may not be worth the price some may have to pay to reach it. 44X expenses is not a reasonable goal to encourage people towards, IMO.
jacob wrote:
Fri Jan 24, 2020 4:25 pm
In practice there are a few reasons not to sell. Some value may be imputed by taxes and leaving it unsold allows one to defer these taxes. Slop is therefore an issue. More importantly, for investment success it matters not what I think the market should be worth but what the market thinks it's worth. We buy and sell prices ... not values.
Right, so why wouldn't you sell when prices are above the value you believe to be true? Taxes are the only legit reason. However, this isn't an issue for people who have, what has been so cutely referred to around here as "bad money". This is an example where over-pessimism, ie the need to have paid taxes on all $'s, actually costed you. Because I could come very close to selling all my holdings with zero tax liability tomorrow, thanks to my "bad money". It's more than the 44 Jacobs. I don't want to, because I don't think all assets of various classes will all magically mean revert at the same time. Capital has to flow somewhere. But I could if I wanted to (like you do?), because I didn't take an overly pessimistic view of these deferred/sheltered accounts. I actually have more liquidity than you from "bad money", not less. It must seem like wine from water?
jacob wrote:
Fri Jan 24, 2020 4:25 pm
As for the second paragraph, I am definitely not one to change my math just because the results currently send a discouraging message and I'm not gonna brightside things just to keep the customers happy.
You're "math" is heavily influenced by pessimism. You hide behind the word "math", but really we are talking about your opinion of future returns based on your opinion of the future. I can produce equally convincing math to show that returns for almost all capital investments have been above 3% real in the US for quite some time. I think my numbers are more likely to reflect the future, because I think the future of the US will be more like the last 100 years here, than it will be like preindustrial Europe or Asia minor under monarchical rule.

I highly doubt anyone would ever accuse you of being an optimist or looking on the brightside. Seriously though, has anyone...ever? I'd hate to meet that poor, suicidal bastard.

You get to choose the message you send. I wouldn't want to be in your shoes, but people look up to your opinions. They do so for good reason, putting together ERE is an amazing thing. As J+G has pointed out, it's not really even the most amazing thing you've done. Maybe I'm just not giving everyone enough credit for analyzing your statements themselves. However, I do think the large scale pessimism around here needs an occasional nudge towards center. That's all I'm trying to do with this particular issue, because I also know what I'm talking about here, and I firmly believe there is harm to be done with massive pessimism wrt the topic of "enough" savings. There is also a lot of potential gain to taking a more moderate, with a optimistic tilt, view of the future.

Feel free to take a fireback comment, I may deserve it for this rant. I do thank you for this forum in which I get to express this opinion.

ertyu
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Re: Damn it Feels Good to be a Gangsta

Post by ertyu »

i ranted then i deleted it, ignore

--ok, now that i've chilled let me try to make my point in a mature, non-ranty fashion:

@cl:

1. If one's honest, informed, educated opinion causes one to be skeptical, then expressing anything other than said skepticism is irresponsible.

2. We are all thinking, mature adults here. We each know our values, risk tolerance, and situation best. We also know that nothing said on this forum, by anyone, should be considered investment advice. Just because someone has an opinion - Jacob, ERN, whoever - doesn't mean that the people reading said opinion have no critical thought and will automatically implement said opinion.

3. It is condescending of you to:

3a: Assuming that people are dumb and don't think for themselves and will automatically and thoughtlessly follow anything they read,

3b: Assume that the standards and values according to which you run your life are superior than the standards and values according to which they run theirs

3c: 3a, b apply even if people are actually dumb. You call yourself liberal, but you don't seem to have much respect for people's ability or right to make decisions about their own life. Respect for this right trumps all - even if you think people make wrong or suboptimal decisions. It is not on you to declare anyone else's life choices right or wrong. It is for them to choose and to learn from / live with the consequences of their actions. No one gets to decide anyone else's life. And no one gets to tell people to censor their opinions because said opinions might lead others to make choices that do not validate what you personally have chosen.

4. This meant in a fully non-attacking fashion: what's going on around this for you dude? I mean this in all sincerity. You had a very strong reaction to ERN's gold post, and a very strong reaction to the discussion here. To me, this reaction seems disproportional. What do you have riding on this? Idk, just to throw shit out in the air, do you feel you need praise and validation for your particular path and you're not getting it? Is it that on some level you feel guilt or doubt or idek about your own choice so you rail against people who stick with an option you didn't choose? Or do you feel like people are on some level implicitly criticizing you or something?? Idk, that's for you to know and introspect, but it seems to me your reaction is disproportional. What's this intense emotion about??

___

Some thoughts:

- Jacob did not give advice, he described his situation and gave an opinion. To me, that was responsible and well-handled.

- the appropriate JAFI multiple will vary by individual. Here is a non-exhaustive list of any and all things that might matter:

1. Nature, extent and fundedness of one's country's social security. Access to said social security. Age structure of target country population pyramid. Age of EREr.

2. Does one expect to need to provide for any family members? E.g. if one is young and expects to provide for self + elderly parents, the appropriate multiple rises. Children, too.

3. What growth/inflation trends can be expected in the near term (10 yrs) in the country one is retired to and in the country whose stock mkt one's investments are mostly in? This is crucial as it is the first 10-15 yrs that make or break a retirement portfolio.

4. Tax situation + access to tax-free retirement accounts y/n?

5. For all you muricans who are insane and who have still for some reason not run away from that country: cost and access to health care?

6. How far along is the EREr in terms of pre-existing ERE skill and ability to deploy it immediately? Someone who currently lacks skills and time/opportunity to accumulate them and plans to build those after one pulls the plug on full time employment should save more JAFIs than someone who is already a pro at diy, fixit, hustling, and self-employment. Recommending that someone with no skills pull the plug on less than adequate savings is the irresponsible road, even if one's overarching belief is that this skill development is paramount and should be centered in one's life design

7. Current stock market valuations / state of world economy + business cycle. You may think 3% is too conservative, but dr. wade phau has done research that suggests even lower swrs for other countries. Also, google that chart where interest rates rise and peak in the 70s and have kept falling since, reaching a historical min. You argue that the recent performance of the US stock mkt should be used to benchmark one's risk aversion - but this performance might be exceptional both because of this interest rate trend and because the recent performance of the US coincided with its rise to prominence as a world power. Can you argue this will continue? Is this situation applicable to people from other countries who weigh their own home markets more?

....

I mean, I've written a bunch here, and i'm not necessarily looking to start a debate around 1-7, but it is clear the JAFI multiple appropriate to people at different age, skill level, location, etcetera would be different. In my case, given valuations, citizenship, tax situation, skill level, nature and availability of part-time work in target country, dependents (2 parents: I am the oldest son, and the only unmarried child - guess who will pay), etc etc etc, a 44x might not be conservative _enough_. In your case, 25x might be plenty. Why is this an issue? Why does it evoke such strong emotions in you?
Last edited by ertyu on Sat Jan 25, 2020 5:46 am, edited 1 time in total.

Fish
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Re: Damn it Feels Good to be a Gangsta

Post by Fish »

classical_Liberal wrote:
Sat Jan 25, 2020 1:38 am
44X expenses is not a reasonable goal to encourage people towards, IMO.
This seems reasonable to me presuming we are talking about someone age <35 who wants to 1) retire to a lifetime of non-remunerative pursuits and 2) be assured of maintaining current standard of living throughout.

While conservative, it is the responsible thing for Jacob to say as one of the movement’s figureheads because there will be humans at the low end of the CCCCCC-spectrum following his advice to the letter. Those who get it can reduce the safety margin to get there faster... at their own risk. Then the risk-taking is done by those who are aware of the consequences instead of by those who are ignorant.

IOW, Jacob’s advice of 44x is not for you. It’s for the uninformed lurker who gets here via google search and sees it out of context.
jacob wrote:
Fri Jan 24, 2020 4:25 pm
There's a system in place for playing the game and right now the cards dealt are not the same as they were ten years ago---they are in fact more like the cards dealt 20 years ago when I started saving---and that necessarily calls for a different playing style.
I see semi-ERE as a response to current market valuations where the strategy has shifted to remaining semi-employed in retirement (or at least being flexible wrt paid work/activities) to bring the required multiple down from ~30x (the current consensus in the movement per ERN’s SWR research?) to 20-25x or even lower. Yield from financial capital is expensive so labor is being substituted.

Smashter
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Re: Damn it Feels Good to be a Gangsta

Post by Smashter »

As part of the peanut gallery, I'm getting a lot from both sides of this discussion and I really appreciate all the effort people put into laying out their arguments. As someone with pessimistic leanings, I do think it's important and valuable for the c_L's and J&G's and 7W's of the world to illuminate a different path that doesn't involve 44x savings.

And @ertyu, I think this is off base:
ertyu wrote:
Sat Jan 25, 2020 1:47 am

3. It is condescending of you to....
I've been around since c_L joined and read a ton of his posts. I would describe him as the opposite of condescending and intensely emotional. He's opinionated and passionate sure, but always in a way that tries to give the benefit of the doubt while exploring a topic from all angles.

All I see in this thread is him trying to grapple with a difficult issue in a reasoned and thoughtful way.

I wouldn't go all psychoanalyst on him. It's not that deep, as the kids say :P

7Wannabe5
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Re: Damn it Feels Good to be a Gangsta

Post by 7Wannabe5 »

The 3% historical average vs. much higher average over last 100 years is due to differences in primary energy sources combined with approximately 1/3 contribution to growth by means of human ingenuity. This article may help to explain:

http://www.forestresearchgroup.com/News ... /V2No3.pdf

I have been greatly frustrated by what I perceive to be a wide moat between pessimists who assign almost all post-industrial era growth to one time exploitation of fossil fuel reserves vs. optimists who assign almost all growth to human ingenuity. Based on my extensive and highly rigorous :lol: research into the matter, I am now ready to offer bold pronouncement that approximately 2/3 of economic growth over last 100 years should be assigned to one time exploitation of fossil fuel reserves and 1/3 should be assigned to advances due to pure human ingenuity. As you can see, my bold theory is well-supported by the ratio of average biological growth of timber (roughly 2%) to historical interest rate (3%.) IOW, this reflects the rational basis for investing your extra cash in a human's enterprise vs. a tree's enterprise.

I hope by providing this information, I have done my small part in making that which was previously murky more like unto the clarity of reflection found by the Canada Geese in the surface of a midwinter rain-upon-ice-upon-rain pond in post-climate change Michigan.

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Re: Damn it Feels Good to be a Gangsta

Post by jacob »

@cL - I don't think, say, the 4% (or some lower SWR number as calculated by Pfau and others for the 21st century or ex-US countries) is incompatible with the way I calculate expected returns (which is pretty much adopting Hussman's methods). Keep in mind that I'd have used the same calculations in 2009 when the results would have looked much more promising, so it's not like my calculation is inherently pessimistic. It's just that the current numbers don't look good. If the market dropped 66% over the next few months (pulling another credit crisis), my calculations would actually look pretty good suggesting that "15 years" would be a reasonable number. Would that make me an optimist?

I think the way to resolve is simply to realize that I calculate the number (the 44 years) with the expectation of providing a perpetual inflation-adjusted income (so good for 50-60-70 years or longer). Whereas the "4%-rule" calculates the number with the expectation that the worst total drawdown over a period of 30 years will not lead to bankruptcy.

This means that I have much more stringent conditions from the outset compared to the 4%-rule advice. It's apples and oranges. 4%-people are willing to accept a small but finite risk of running out of money completely within 30 years. This risk is usually accepted (at least among FIRE bloggers) under the assumption that they can always find another job or reduce expenses. I agree with the job thing although growing older or perhaps just richer has somewhat attenuated my enthusiasm of 10 years ago but I also know that I would have a hard time to reduce my expenses further since they're already pretty efficient. I don't want to be Joe Dominguez in terms of investment strategy but I think that's where a lot of current 4%ers will end up. What happened there was that one strategy was chosen (100% TLT in modern vernacular) based on very reasonable historical experience at that time. In 2020 dollars, his FIRE numbers was roughly a 500k networth with 20k/expenses. However, over the next 30 years he had to figure out how to become increasingly more frugal because by the time of his death he was down to 12k/year (in 2020 dollars) because of the strategy. [I think this is why the second edition of YMOYL has a lot of discussion of why inflation doesn't matter.]

The way to reconcile the two frameworks (my calculation and the historical Trinity Monte Carlo simulation) is simply that out of all the future paths possible, someone retiring on the 4% rule w/o reducing the expenses or w/o finding a job at some point will likely take one of the worst paths ending with close to $0 after 30 years (or less if the statistics isn't stationary<-- that is the ONLY place where the pessimism enters). Conversely, the worst that can happen under my assumptions/calculation is that one will end up not getting richer in real terms. Perhaps these two cases bracket a more useful strategy for those who are currently tired of work.

In terms of optimism/pessimism bias, I think I've stated earlier that my strategy (and therefore the bias underlying the entire ERE system) is generally not to "win" but rather it is to "not lose". This is also why ERE is more robust than FIRE. I can easily find and argue a more pessimistic outlook, but I don't think those are entirely justified. This is why I'm not arguing for (100-your_age) years of TIPS or a homestead using the Alpha strategy.

7Wannabe5
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Re: Damn it Feels Good to be a Gangsta

Post by 7Wannabe5 »

Isn't arguing for lifestyle spend 25% as expensive as average within bounds of given economy in effect the same as arguing for 75% Alpha/self-sufficient strategy? I think that is why those who suggest you can just go ahead and quit and punt once your spending is that low are not being entirely reckless.

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Re: Damn it Feels Good to be a Gangsta

Post by jacob »

If I understand you correctly, then given the goal of maintaining the average [middle-class-like] lifestyle at 25% of spending IS the same as being 75% self-sufficient. (Ignoring such things as cost of poll or head tax equivalents.)

The Alpha-strategy is something different relating to storing a lifetime supply of all future consumables. It was a strategy that enjoyed a brief popularity during the darkest days of the 1970s.

The objection to punting comes from the law of diminishing returns on self-sufficiency. The last 25% of going from 75% self-sufficiency to 100% self-sufficiency is much harder (Wheaton 7->8) than going from 50% to 75% (Wheaton 5->7). A standard FIRE-enthusiast might have twice the average income and a 50% savings rate and aim to live like an average person (here 0% self-sufficient). If they fail under the 4% rule, they'd have to learn to learn to become more self-sufficient (which should be easy given that they start closer to 0%) or get a job.

Would also note that "the number" is very different in the two or three cases given a US financial market investment at current valuations:
  • 44x$7000 ~ 308k (okay, has enough money to maintain self-sufficient middle class lifestyle)
  • 25x$20000 ~ 500k (okay, has enough slack to learn self-sufficient middle class lifestyle)
  • 25x$7000 ~ 175k (not okay, not enough money and not enough slack to maintain middle class lifestyle, will likely need a job to either support (semi-ERE) or replace the lost capital income)

7Wannabe5
Posts: 6825
Joined: Fri Oct 18, 2013 9:03 am

Re: Damn it Feels Good to be a Gangsta

Post by 7Wannabe5 »

@jacob:

Gotcha. My first note would be that IMO once you get down to a certain level of spending below the normative, individual predilections will start to pop out more as "apples" vs "oranges." So, for instance, I think majority of the ENTPs on the forum would druther "the good life" on $8000/year ASAP and working a couple days/week vs. reasonable semblance of middle-class lifestyle on $8000/year and no work at all guaranteed. IOW, if one of the requirements of "the good life" is "plentiful free time" , those of us who have experimented with this factor have pretty much come to consensus that working a couple days/week (or more/less compressed alternatives) still leaves plentiful, plentiful free time. OTOH, the "good life" requirement of "clean and dignified living space" is most in alignment with what most people consider to be "middle-class lifestyle" and ENTP types are more likely to be able to tolerate the loss of "dignity" inherent, in, for instance, temporarily mooching half a bed from a mate who is temporarily mooching a bedroom from a friend. We are actually kind of amused with ourselves when we exhibit this sort of behavior.

My second note would be that "head tax" becomes very important at lower levels. Even somebody as near to level 8 in his own functioning as Mark Boyle, still has to pay something like Property Tax at the boundary between his unique system and the general economy. So, it is critical that the means by which head tax is to be paid is resilient to positive and negative changes in general economy. Based on my reading of Picketty, I would suggest that something like part-time employment by the government entity that collects property tax would be the most bullet-proof solution. Generally, the advantage of leaving part-time employment on the table as an option is that it allows you exposure to at least one more semi-independent market.

Jin+Guice
Posts: 755
Joined: Sat Jun 30, 2018 8:15 am

Re: Damn it Feels Good to be a Gangsta

Post by Jin+Guice »

7Wannabe5 wrote:
Fri Jan 24, 2020 12:21 pm
Is there any job that an ENTP would like to work for 40 hours/week for 5 years or more?
I'm hoping or 1-2 years of enjoyable full-time work and 1-2 years of angry trudging to get to the pot of FIRE at the end of the rainbow.


@c_L: I've pushed Jacob on the retirement numbers and overall message before. My interpretation of his response both there and here is that he is more concerned with sending a message that it's o.k. to undersave and retire completely than he is with people saving too much. I disagree, but that's how he feels. I don't think Jacob is opposed to semi-ERE in any way, a lot of the things I talk about are extrapolating on ideas he devoted a sentence to in a blog post or the book. However, ERE and a distrust of "set it and forget it" investment techniques have always been messages of Jacob's. I don't expect him to compromise those in order to further the semi-ERE agenda.

If you ask Jacob about investing he responds assuming that you're trying to build an investment portfolio to last 60+ years. That's what ERE is based on and that's what he did/ is doing.

Basically:
Fish wrote:
Sat Jan 25, 2020 3:15 am
classical_Liberal wrote: ↑Sat Jan 25, 2020 1:38 am
44X expenses is not a reasonable goal to encourage people towards, IMO.


This seems reasonable to me presuming we are talking about someone age <35 who wants to 1) retire to a lifetime of non-remunerative pursuits and 2) be assured of maintaining current standard of living throughout.

While conservative, it is the responsible thing for Jacob to say as one of the movement’s figureheads because there will be humans at the low end of the CCCCCC-spectrum following his advice to the letter. Those who get it can reduce the safety margin to get there faster... at their own risk. Then the risk-taking is done by those who are aware of the consequences instead of by those who are ignorant.

Saving 44x current living expenses because you want to quit your job is fucking insane. For someone out there it's going to be the best choice. You'd have to be in some very specific conditions though. Don't compromise your physical, emotional and mental health for lifetime security. Lifetimes are finite and security isn't real.

jacob wrote:
Sat Jan 25, 2020 11:44 am
The objection to punting comes from the law of diminishing returns on self-sufficiency. The last 25% of going from 75% self-sufficiency to 100% self-sufficiency is much harder (Wheaton 7->8) than going from 50% to 75% (Wheaton 5->7). A standard FIRE-enthusiast might have twice the average income and a 50% savings rate and aim to live like an average person (here 0% self-sufficient). If they fail under the 4% rule, they'd have to learn to learn to become more self-sufficient (which should be easy given that they start closer to 0%) or get a job.

Would also note that "the number" is very different in the two or three cases given a US financial market investment at current valuations:
44x$7000 ~ 308k (okay, has enough money to maintain self-sufficient middle class lifestyle)
25x$20000 ~ 500k (okay, has enough slack to learn self-sufficient middle class lifestyle)
25x$7000 ~ 175k (not okay, not enough money and not enough slack to maintain middle class lifestyle, will likely need a job to either support (semi-ERE) or replace the lost capital income)
I agree with all this. Don't assume you can quit forever with 25x expenses, especially if you are near 1 JAFI in spending! Do remember that $7000/ year is about what you'd make working for (U.S.) minimum wage for 20 hours a week 50 weeks per year. Having slack in the system is important. Investment income derived from increased savings is not the only source of slack.

IOW.... pretty much @7w5s last post.

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