Generation-X' Journal

Where are you and where are you going?
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Re: Generation-X' Journal

Post by Generation-X » Wed Jun 14, 2017 12:57 am

MDFIRE2024 wrote:
Sun May 07, 2017 12:42 am
That is a great status update.

Your progress is fastern than you thought it would be. Why is that so? You save more than expected?

I'm curious about the details which you mentioned.

I guess the tax initatives from Trump could help you, don't they. Unluckily, here in Good Ol Germany, taxes are quite high. That makes it a bit more difficult to retire earlier for me. Anyway, I interested in your change from employee to retiree.
Couple of things have happened to expedite savings - first was an unexpected extra income through work and second was gains in an equity position.

US is currently in a second longest bull market in its history - going on for 7 years. If the bull market lasts past August 2018, it will be the longest bull market in US history.

It seems just throwing money at the market will make it grow. I have committed about 10% of my assets in an equity position and the gains have been realized very quickly. Anyone can be a stock market genius at times like this, and this is very reminiscent of year 2000 tech bubble, except worse because market is much higher.

The market will continue to rise until it can't. The trick will be knowing when to get out, as always.

When it comes to Trump, I don't expect much change. If anything, Trump's tax proposal seems to completely eliminate tax benefits for the middle class except for mortgage interest deduction and retirement contribution deduction. Pretty much all itemized deductions have been eliminated. Trump's proposal has a very slim chance IMHO. Same for his presidency.

I think I will very much enjoy being a retiree. I'm currently on a month long vacation and it's been wonderful. The 3 years can't come soon enough.

Having said that, I don't think this bull market will continue for 3 more years. I may have to face some tough choices ahead.

Thank goodness for FU Money. [ The Position of Fuck You (John Goodman in The Gambler) Caution: foul language ]

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Re: Generation-X' Journal

Post by Generation-X » Wed Jul 05, 2017 5:06 pm

July 2017 Update


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Re: Generation-X' Journal

Post by Generation-X » Mon Jul 24, 2017 3:10 am

A pre-retirement trial

I recently took an extended vacation for about a month and a half to see how I would react to that much time off. I loved every minute of it.

When the first paycheck arrived after the time off, I felt like royalty, as if I was being paid to have fun. It was a powerful experience: THEY PAID ME. FOR DOING NOTHING. AND THEY WILL FOREVER.

I was hooked. I still get chills thinking about it.

Since then, I've accelerated my plans for a pre-retirement trial period. Numbers on paper are one thing, living the life is another. Walk a mile in my shoes they say, right?

* Reduced net pay and increased deferred savings - it's been in the works, took advantage of a tax code which increased deferred compensation savings limit temporarily and reduced net income to match projected monthly retirement income.

* Moved - found an apartment that cost 40% of projected net retirement income. I truly appreciate having a shower and a kitchen now. This place is a luxury.

* Set up a frame work for passive income generation - this also has been in the works, and I've implemented and tested it. Currently, passive income consists of 2 components - capital gains, and fee generation. Thus far, most amount of income comes from capital gains.

However, the most consistent income comes from collecting fees. Due to current market conditions, I've limited exposure to about 8% of total net worth. I will further tune and implementing additional income strategies.

* Getting rid of more stuff - I've shed more things. I plan to shed even more and recoup some costs while doing so. Goal is to get down to few packs of essential "stuff" that can be transported easily in a car / van / truck or the like.

Strategies looking forward:

** Real Estate / Housing: As we speak, both the median housing price and cost of rent are on fire, at least here in California. There are parts of California that has the industry to sustain such leveraged prices, but they are a few.

While it would be nice to see real estate price come down in the next couple of years, I do not believe this will happen soon. The reason is that Fed will NOT be able to raise interest rates due to the national debt. They will have to cut services in order to raise interest rates.

However, when the prices do come down, I believe it will be a collapse - much greater than 50%. For the next few years, I will rent modestly, close to work, until retirement. If prices haven't corrected by then, I plan on touring the country by being mobile for a few years until it does.

As cost of mobile living doesn't appear to be exuberant, this will allow continued savings.

The biggest problem will be taxes, as pension and healthcare come as a package. I will earn about 35k/yr with about 450k in savings and healthcare will be covered until Medicare.

Another option is to cash out everything and cover myself using Obamacare until Medicare kicks in. I can retire with about 750k in savings, without pension nor healthcare.

I plan to let the trial period answer the questions for me in the next few years.

Currently I'm leaning toward the pension but this eliminates flexibility in tax and tax free conversion. How to have your cake and eat it too...

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Re: Generation-X' Journal

Post by Allagash » Wed Jul 26, 2017 1:48 am

Nice to see a fellow Gen-X-er with all these boomers and millennials around. We're a small generation....wherever I go I see lots of younger and older folks, but not many 40-somethings.

Interesting you think CA could crash 50%+ in RE prices. Why do you think this? Prices do seem terribly out of whack with incomes (especially SF Bay). But coastal CA seems to always have such low inventory supply and they are not building many SFR's. And home lending has been much more conservative post 2008 with much larger down payments, lots of cash purchases, low rate 30 year fixed loans. etc... And banks will not foreclose this next downturn because of Dodd Frank rules and learning their lessons from dumping REOs on the market back in 2008...they will just kick the can down the road if people default, modify their loans, let them sit in their house free for years...all to keep distress inventory off the market. So these are all different variables from pre 2008 in terms of residential housing.

You will probably be right on interest rates. I've heard a few folks predicting 1% in a few years on the 10 year treasury, which may mean 30 year fixed mortgage rates in the 2% range eventually.

Being Gen-X our generation has been hammered in its prime years by two massive asset crashes (dotcom 2001 and housing 2008). This past trauma has made us very gun shy permabears.

The post dotcom crash economy was saved by a fake real estate bubble being blown from '03-'07. And some may say the post 2008 crash economy we are in now was saved by central banks around the world doing something they never have before with 8 yrs of ZIRP and trillions in QE. So I always wonder in the back of my mind if this shit is real or just another fake mirage of an economy waiting for the bottom to fall out.

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Re: Generation-X' Journal

Post by Generation-X » Thu Jul 27, 2017 2:29 am

Always great to see another X'er on the forum. We are somewhat smaller in number but probably one of the most capable generations that is coming of age.

Comparatively speaking, we have managed to retain traditional work ethics and moral compass of the earlier generations and yet, have managed to adapt and blend in various innovative resources for betterment of ourselves in ways that no previous generation has been able to, while keeping empathy for others alive.

We certainly are not politically correct and in fact revere creativity and originality while maintaining a watchful eye on authority. I believe we are a happy lot, as many of my friends are, as well am I, having found that inner balance between life and work. we work hard but don't over work and know when to take time off for ourselves.

In contrast, I grow alarmed at millennials' penchant for political correctness and apparent lack of moral values, as well as their narcissistic tendencies and lack of empathy toward others. Fortunately, Gen-X will have a crack at the system before the millennials will, and perhaps we can come up with ways to "right the ship" before it is their turn. I do not cherish the thought of living in a nation with millions of Donald Trumps running around in my golden years, but I digress.

Talking California real estate in our area, I believe the problem is a classic one: people are buying homes that they can not afford. Median home price in our area is around 325k, but in reality it's more like 400k+. And along with higher monthly mortgage and property tax, the cost of utilities have also risen, to the tune of around $300 - $400 per month, which includes water, sewer, garbage, electricity and gas. This does not include HOA or PMI if there is such.

There simply isn't the industry in our area to support such prices and many are leveraged by housing costs. When recession hits in the near future, many will not be able to make payments due to the downsizing of the job market. A lot of them are getting by paycheck to paycheck and a good number of them will not have any savings to tap into, other than (you guessed it) credit cards.

I haven't even included the cost of transportation, food, education and healthcare. This is just the housing.

And while I do indeed sound like a permabear, I think it's more that as a generation, we tend to have a realistic point of view of the world. We tend to be pragmatic. I've heard many people say nations should just clear off each others' debt from the balance sheet and start over - that it's fiat currency anyway.

But I know too damned well, and probably most of Gen-X'ers too, that we will have to pay back every bit of that $19,864,171,931,991 in national debt, down to the penny, to the debt holders. Because we know that if someone owed us personally, that we'd want to be paid back.

It's the debt. 106% of our GDP. History has shown time and time again, that debt will make or break nations.

That the roosters are coming home to roost.

Here's another food for thought: While corporations are flourishing in trillions of dollars in surplus, the federal government is drowning in trillions of dollars in debt. What kind of future will this hold for our nation?

"It aint what you don't know that gets you into trouble.

It's what you know for sure that just ain't so." -- Yup. I watched The Big Short.

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Re: Generation-X' Journal

Post by Generation-X » Fri Jul 28, 2017 2:56 am

The last silver bullet to US debt problem - what else can they do?

The question of US debt problem was raised during my course study at the University. To our amazement, our professor suggested the following likely scenario:

During the Great Depression, US government issued Executive Order 6102, signed on April 5, 1933, by President Franklin D. Roosevelt. The Executive Order required all those who owned gold coin, bullion or gold certificates to deliver them to the Federal Reserve on or before May 1, 1933. The statute under which Executive Order was issued, criminalized the possession of monetary gold by any individual, partnership, association or corporation.

When the situation becomes dire, the government will probably take control of all existing retirement assets in the United States, which stands at 26.1 trillion dollars as of Q1 2017. Government will then issue an IOU, with some monetary incentive added to the original value taken, and will issue monthly payments similar to social security.

Then my professor stated - What else are they gonna do? THEY HAVE TO PAY OFF THE DEBT.

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Re: Generation-X' Journal

Post by wolf » Sun Jul 30, 2017 1:45 am

Hi GenX. How are you? Are things going as planned? I've read your journal so far. I'm in between GenX and GenY. Interesting how you see things. A few years ago I thought the equity market is crazy with a too high PE, but these days it gets even more crazier.

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Re: Generation-X' Journal

Post by Generation-X » Mon Jul 31, 2017 1:55 am

Hi MDFIRE2024,

Yes the market is reminiscent of dot-com crash years ago.

I vividly remember towards the tail-end of the bubble, the pace at which money kept coming in was quite noticeable, until the bottom fell out. Stocks were moving up for months on end at a rapid pace.

Nobody cared. The money was so good that everyone wanted it to last forever. (one of my co-workers lost $80,000 in the dot-com crash and it was still a lot of money back then).

Many believed that valuations no longer mattered. Technology was the new economy they said. Similar to what people say about 0% interest rate environment today.

I don't buy it.

However, I don't mind capturing the euphoria for a rainy day fund. As Soros said, "The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited."

But while participating in this financial orgy, I'm applying these margins of safety:

**I will be mindful of the drawdown: ... 3-minutes/ The risk is about 7%.

**The 7% is hedged (with profits already made).

**The 7% is invested in companies that were approximately 20% under the intrinsic value at the time of the investment and these companies are generally cash cows.

**As additional gains are generated, these gains will be used to bet against the market for the "discredited phase" for an additional income. If successful, the generated income will be re-invested in the market after the fall.

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Re: Generation-X' Journal

Post by Generation-X » Tue Aug 08, 2017 6:53 am

Aug 2017 Update


* Expect to cross 500k cash in approximately 3 months.

* Financial euphoria gamble is doing well, up 8% in 3 months. The investments are more fairly valued now, though still below intrinsic value. I plan to use additional profits to: 1) secure an equivalent position and take original money out of harms way or 2) leverage the position for higher risk but more return, or 3) start making side bets against the market.

Since the world appears to be falling apart and the fed is talking tough to raise interest rates, the market will probably go up.

* I will be staying cash as much as possible. Funny, recently came across 2011 documentary featuring Paul Wilmott, where he states "I'm afraid, because all my money is in cash.(nervous laugh) Earning no interest." (I'm pretty sure he knows about inflation.)

Cash is good. For right now, I will risk only what I can afford to lose. I slept through 2002, 2008, flash crash etc., and market crash had no immediate effect on me, though eventually, they had everlasting effect.

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Re: Generation-X' Journal

Post by taemoo » Tue Aug 08, 2017 10:47 am

Great progress, even with large cash position! Lol, I didn't sleep well during the crashes/downturns but made it to the other side ok. At least whatever comes next can't be as bad as what we already faced *knock on wood*.

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Re: Generation-X' Journal

Post by Generation-X » Thu Aug 10, 2017 11:42 pm

Fired Google Engineer Claims His Rights Were Violated. Trump's Labor Board May Disagree ... 6b8baf699b

I don't understand this young kid's thought process.

California is an "at-will" (employment) state. This is a two way street and applies to both the employee and the employer.

If you don't like your work environment, then move on. What is the purpose of whining about it in public? What rights?

There are no rights in working for a private company. My advice to this kid is, before you whine, put your FU Money together.

Welcome to the real world. And GROW UP.

Ethics and Millennials: Is the future of Workplace Ethics at Risk? ... nials.html
Last edited by Generation-X on Fri Aug 11, 2017 1:09 am, edited 1 time in total.

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Re: Generation-X' Journal

Post by Generation-X » Thu Aug 10, 2017 11:57 pm

taemoo wrote:
Tue Aug 08, 2017 10:47 am
Great progress, even with large cash position! Lol, I didn't sleep well during the crashes/downturns but made it to the other side ok. At least whatever comes next can't be as bad as what we already faced *knock on wood*.
Thanks - and you as well! Great journal.

I hope you're right. Though I've heard that a true valuation of the Dow would be around 5000 - and that's a long way down.

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Re: Generation-X' Journal

Post by Generation-X » Wed Sep 06, 2017 4:13 am

Living on approx. $2,500 per month then (2013) and now (almost 2018)

The earliest retirement will be possible in 3 years with about $2400/mo. in income stream.

Few months back, I reduced monthly net income to match the expected income stream in post retirement to see how I would fare.

When I started this journal in 2013, I was living reasonably well on a monthly expense of about $2800/mo.

It was a comfortable living, in a reasonably nice apartment in a nice neighborhood, being able to eat out few times per week, make purchases of goods and services within reason (i.e. <$200-$300) couple of times per month, drive a mid size sedan less than 5 years old and be able to afford short vacations a few times a year.

That was 5 years ago.

Here we are almost to year 2018, and I can sum up in a word what trying to live on $2,400/mo. in 2018 is like: Brutal.

Few comparisons:

Living situation: (2013) - $750 for a reasonably nice apartment in a nice neighborhood. (2018) - $1000/mo. for an 'OK' apartment in a somewhat sketchy neighborhood.

*Eating out: (2013) - eat out few times a week (2018) - eat out twice per week max.

*Goods and Services (<$200-$300): (2013) - afford couple of times per month. (2018) - afford once every OTHER month.

*Car: About the same, but cars are more expensive. (2013) - 22k for a new car. (2018) 25k for a new car.

*Short vacation trips: (2013) - few times per year. (2018) - once or twice per year. (cost of lodging, fees, etc. are way more expensive now)

In sum, I'm finding out quickly that $2,400/mo. in 2018 is just about enough to cover the basic necessities (housing, transportation, food, utilities) and really not much more. And to live in a more desirable neighborhod will cost an additional $400/mo. ($1400/mo.) for an apartment.

Therefore, this is just an estimate, but to have a similar lifestyle as in 2013, I would probably need to have around $3,500/mo. coming in.

The reason being, it took additional $2000 to cover expenses after housing (transportation, food, utilities PLUS discretionary spending and short trips), and everything has gone up, especially housing.

The catch-22 is that in order to make up the difference, I would have to delay the retirment by additional 2 years for a total of 5 years - and of course the process repeats itself.

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Re: Generation-X' Journal

Post by J_ » Wed Sep 06, 2017 11:14 am

Thanks for sharing your interesting figures. Needless to say that you can stop some of those; like owning a house, changing car for a bicycle etc. Then less catch-22.

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Re: Generation-X' Journal

Post by Generation-X » Wed Sep 06, 2017 3:07 pm

Definitely agree with your suggestions.

As a matter of fact, one of the ideas that I'm mulling about after retirement is to use a combination of mortgage deduction, 15% tax bracket and other means to lower the tax burden enough to transfer the difference from pre-tax savings to Roth IRA.

I have some preliminary analysis for optimum range, and maybe I will try the linear programming approach for a validation.

Now that Trump is pretty much inert, immediate changes to tax code isn't going to happen for a while. I was pretty aghast to read Trump's initial proposal of eliminating pretty much every itemized deductions available for the middle class. There were some talks about converting mortgage tax deduction to tax credit, but I wasn't holding my breath for that one.

Current issue is, as always, is that the valuation is too high in stocks, bonds and real estate, all of which are dollar denominated paper assets.

At present levels, I just can not see myself paying $450,000 for a small useless piece of land and a house made of plywood and particle boards just to have a place in suburbia.

How Americans spend their money ... ney-2017-9

Housing - 32.9%
Transportation - 15.8%
Food - 12.6%

From what I've been experiencing, the above figures from BLS are pretty close, although I've only few months of data.


Half of Americans are spending their entire paycheck (or more) ... ney-2017-9

The problem is that these expenses are for basic necessities. I believe this is how Northern Africa became unglued several years back (Libya, Jordan, Egypt, etc.) due to civil uprising.

Trump, MAGA, Charlotte, NC, Berkeley, KKK, etc. etc. are America's version of the same thing happening here in our "homeland" today, imho.

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Re: Generation-X' Journal

Post by wolf » Sat Nov 04, 2017 1:47 am

Hi Generation-X! I see the strength/weakness of the USD from the EURO-perspective. Although I too see the high valuations in stocks, bonds, ... I have invested some money, finally. I started investing, because I thought that I have to start with it. Do you have new plans about lowering your housing costs? Buying a small condo or land to build a cabin? I am dream about living in a small cabin lately. Hmm...let's see.

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Re: Generation-X' Journal

Post by Generation-X » Wed Nov 08, 2017 2:10 am

Hi MDFIRE2024, congratulations on the start of your journey into investing. I think you will find it worthwhile, provided that the investing horizon is at minimum 20 years, preferably 30 or more.

I too began my investing journey when the market valuation was very high couple of decades ago, but fortunately, I got scared and pulled out after about 25% loss as the market tanked. This was my first exposure to the market and taught me the most important lesson: buy low and sell high.

As such, while the economy *appears* good and people are lining up to buy $1000 Iphone X, I am conserving and accumulating cash. I am invested, only but a fraction of my net worth, because I was able to find some value.

I'll be busy buying when this market crashes. The crash, if and when it happens, will be the best gift to the upcoming generation. Given the size of the bubble, the crash will probably take a year or two.

I try to stick to buy low and sell high approach, and not the other way around. I'm of the opinion that this a 'sell high' time and not the 'buy low' time. Market timing is almost impossible to do consistently. But I do know this - I would prefer to buy low.

To answer your question about housing - yes I have several ideas.

1. Retire early, use the small pension to buy a house. Since pension is theoretically perpetual, it will cover the cost of housing. I can live off the savings for other things. This has been outlined in past posts and there are many reasons for doing so: tax deduction, 'freezing' house price by a fixed rate mortgage and conversion of tax deferred savings to tax free savings up to 15% tax bracket limit.

2. Retire early and do RV travel. The cost of RV living can be covered by pension as it's pretty low, especially if BLM land is used.

3. Do 1 & 2, except purchase the house as an investment property while doing RV travel.

There is a journal of someone who has done something similar to what you're thinking of, i.e. building a cabin or at least, living in one, I believe in Alaska. It maybe worth checking out.

My perception of a house is that it's a place to live. So it's an expense and not an investment. RV is a cheap way to accomplish this in conjunction with BLM, here in the United States. Or even a tiny home could fit the bill. ... e-company/

Another thought is to become a world traveller. The cost of world travel, when done somewhat conservatively, is surprisingly low - about $25,000/ yr. There is a couple that has tracked their expense for a decade and that was about the average. Clearly, the purchasing power parity of the native currency plays a role here. I would look at Eastern Europe or Spain etc., for some great values to be had right now, for example.

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Re: Generation-X' Journal

Post by Generation-X » Sat Dec 02, 2017 1:42 am

It's time to hunker down

It appears that Congress is on the verge of passing the tax cuts.

Brace for tough times ahead - market crash and hardship will follow in the long run.

The tax cut takes away from those making 30K/yr or less and gives to the rich, especially to those making over 200K/yr for the next 10 years. After that, it will take from those making 75K/yr or less and give to the rich.

The federal deficit projection following the tax cut is estimated to be more than 1 trillion dollars for the next decade.

As with Reagan and Bush tax cuts, higher interest rates and recession will be next on the horizon as federal deficit balloons.

It's time to set aside savings for the rough times ahead. Brace yourself.

It's 2008 robbery all over again.

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Re: Generation-X' Journal

Post by Generation-X » Sat Dec 02, 2017 6:55 am

Update 12/01/17


* Increasing savings allocation for next year by a small amount

* After a month of research, may have found a Mega Backdoor Roth with in-plan transfer option. Per Section 401(a), it maybe possible to make AFTER-TAX contribution up to 54k (2017) reduced by contributions to 401(k) and retirement. In-plan transfer is possible to Roth 401(k) or Roth IRA. If this is case, then I may be able to sock away additional 25K/yr as a mega backdoor roth. One year of contribution will almost equal 5 years worth of RothIRA contributions (!). This is a big deal. Now the problem is finding the money. I plan to think about this some more for solutions.

* Small investment has done well due to couple of factors. Had a long put that offset a dip in the shares and on the way down purchased a small long call on a whim, because it was so cheap. By luck, sold the long put near the bottom then the shares edged higher in anticipation of tax cuts beyond price levels before the dip. As a result, ended up profiting a bit on both sides of the price movement. Purchased several long puts on the way up in anticipation of tax cuts not passing, but it appears now that they will expire worthless. Monday will tell the rest of the story but so far, no complaints. I will let the shares run until concerns over tax cut deficits make their way into the market.

* Net worth has moved past 500k mark.

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Re: Generation-X' Journal

Post by Generation-X » Tue Jan 09, 2018 5:08 pm

Update 1/09/18

* Net worth has moved up to about 520k

* The small investment is nearing its intrinsic value. In the past 6 months it has run up about 40 points. I believe it has a good potential for another 30-40 point run, but I am contemplating some choices for risk management.

1. exit the position and replace with a call option. (This will cost about 6-7 points)
2. stay put until 6-7 point loss.
3. take out the principle and leave the profit in shares (and move on to something else)

For right now, I will stay with choice 2 but by the end of the week, most likely I will choose one of the other choices.

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