Generation-X' Journal

Where are you and where are you going?
Stahlmann
Posts: 502
Joined: Fri Sep 02, 2016 6:05 pm

Re: Generation-X' Journal

Post by Stahlmann » Sat Jan 05, 2019 6:04 pm

There is no free lunch
how about freeganism?

Generation-X
Posts: 168
Joined: Mon May 06, 2013 4:43 am

Re: Generation-X' Journal

Post by Generation-X » Fri Feb 01, 2019 8:57 pm

Mister Imperceptible wrote:
Sat Jan 05, 2019 1:48 pm
Happy New Year friend.

I am long cash, 2-year Treasuries, physical gold and silver, and GDXJ.

Get your popcorn ready.
Happy New Year, MI. How are you doing? Is the weather giving you any trouble?

Let's see where things go from here.

Generation-X
Posts: 168
Joined: Mon May 06, 2013 4:43 am

Re: Generation-X' Journal

Post by Generation-X » Fri Feb 01, 2019 8:59 pm

Stahlmann wrote:
Sat Jan 05, 2019 6:04 pm
how about freeganism?
You have me there :)

Mister Imperceptible
Posts: 738
Joined: Fri Nov 10, 2017 4:18 pm

Re: Generation-X' Journal

Post by Mister Imperceptible » Fri Feb 01, 2019 9:12 pm

I’ve been indoors since November. The last several days have seen below zero F wind chill.

When I went to storage to warm up the Winnebago engine, I found mouse terds. I wonder if my housesitting friend is alive. I hope that if he froze to death, he chose to do so elsewhere. I would imagine a thawing mouse carcass does not make for a fresh spring scent.

Generation-X
Posts: 168
Joined: Mon May 06, 2013 4:43 am

Re: Generation-X' Journal

Post by Generation-X » Fri Feb 01, 2019 9:16 pm

Status Update 2/1/19


Things are on track, without issues. If anything, bit ahead of schedule.

Currently on the sidelines, watching the fireworks while earning risk free interest and saving.

My hope is that this euphoria will last couple of years, until the end of 2020 so that I can accumulate a more solid after-tax component.

The small index dollar cost average component has done well, at least for now.

I am in a serious work, save and accumulate mode, while the faux perception is good, until the truth is revealed.

Image

Generation-X
Posts: 168
Joined: Mon May 06, 2013 4:43 am

Re: Generation-X' Journal

Post by Generation-X » Fri Feb 01, 2019 10:02 pm

Mister Imperceptible wrote:
Fri Feb 01, 2019 9:12 pm
I’ve been indoors since November. The last several days have seen below zero F wind chill.

When I went to storage to warm up the Winnebago engine, I found mouse terds. I wonder if my housesitting friend is alive. I hope that if he froze to death, he chose to do so elsewhere. I would imagine a thawing mouse carcass does not make for a fresh spring scent.
Smart man, glad to hear. Ha, and I'm sure your nose will leads you to the right path come spring. Really like your RV idea.

I just heard through the grapevine that one of my ex co-worker came to work one day and gave notice on the spot and quit. He was always frugal, driving an old beat up Ford Taurus station wagon and living in a not so desirable neighborhood. People used to make fun of him because he was so frugal even though he earned a decent living as an engineer.

And now, he's truly living the life on his own terms in his 40's while the rest will slave away until their 60's.

It's time to awaken. Gave me a jolt when I heard this - hit so close to home.

User avatar
Kriegsspiel
Posts: 757
Joined: Fri Aug 03, 2012 9:05 pm

Re: Generation-X' Journal

Post by Kriegsspiel » Sat Feb 02, 2019 7:47 am

Image


Generation-X
Posts: 168
Joined: Mon May 06, 2013 4:43 am

Re: Generation-X' Journal

Post by Generation-X » Sat Feb 09, 2019 3:08 am

From other forum sections

Here's another way to evaluate.

For pension, the risk is not receiving payment while alive due to some unforeseen event.

The problem - do you take the pension or lump sum?

To help evaluate, we look to the stock market.

Many say the average compound annual return of the US stock market from 1926 to 2017 was about 10 percent including inflation (if 4% inflation, then 6% real return).

so 10% seems like the magic number. If you already know your monthly pension income amount after retirement, then annualize it (monthly pension income x 12) then divide that number by your total pension contribution.

i.e.:

Monthly pension income after retirement - $3000 / mo.
Monthly pension income after retirement annualized - $36,000 / yr
Your total pension contribution - $200,000

pension after retirement (annualized) / Total pension contribution = 36,000 / 200,000 = 0.18 or 18%

18% is greater than historical stock market return of 10% so the pension may be the way to go. You are getting 18% return on your investment. Break-even is (1/.18)= 5.555 years. After 5.555 years you've made even money.

The follow up question is, what is the chance of total loss on the investment? If total loss occurs, can you take that loss?

What is the percentage of the pension contribution to your total net worth?

If total loss occurs immediately after retirement, and say if you have 1 million in net worth, then $200,000 total pension contribution equals 20% loss. We look to the drawdown table:

Image

According to the table, 25% gain is needed to recover 20% loss, which will take about 2.341 years if the market returns more than 10% in 3 consecutive years. Maybe doable.

On the otherhand, if you have 500k net worth, then 200k total pension contribution equals 50% loss. The drawdown table says 100% gain is needed to recover 50% loss, which will take about 7.273 years if market returns more than 10% in 8 consecutive years. Probably not likely.

Here's a histogram of market returns from 1926 - 2017.

Image

While 10% average return it maybe, consecutive 10% return is probably hard to come by. So the years it will take to recoup that 50% loss will be longer, depending on short term market fluctuations (which could add more loss).

But if total loss occurs 1 year after retirement, then the total loss is (200k-36k)/500k or 32.8% loss. If total loss occurs after 2 years, then the total loss is (200k-36k-36k)/500k or 25.6% loss.

So the question is, what's the chance of total loss before the break-even period of 5.555 years?

And the next obvious question is, will you be alive to care? Because after 5.555 years, there is no risk.

Generation-X
Posts: 168
Joined: Mon May 06, 2013 4:43 am

Re: Generation-X' Journal

Post by Generation-X » Sat Feb 09, 2019 3:46 am

Took a small short position today to test the waters.

long put BRKB 322P200

Market is very volatile and treacherous at the moment, so the main focus remains on interest rates such as CD's and short term treasuries.

Continuing to index about 5%.

Mister Imperceptible
Posts: 738
Joined: Fri Nov 10, 2017 4:18 pm

Re: Generation-X' Journal

Post by Mister Imperceptible » Sat Feb 09, 2019 8:14 am

I need to start trading volatility like you.

I did well last year by holding cash, selling all my pre- and post-tax retirement account stock funds in August and moving into GDXJ and SGDM, and steadily buying precious metals from July-December. Maybe it was just luck but I think I might have a good “feel.”

But I know someone who claims to have done better by buying NFLX and TSLA puts.

Is trading options from a post-tax non-retirement account so bad? I think future tax rates are going to be very high. I would rather pay taxes now. Plus, the leverage I lose by not making pre-tax retirement account contributions can be regained later with directly held real estate. The NFLX/TSLA put guy recommended LEAPs if I went with a post-tax account.

******

Doesn’t the short fall in pensions concern you? The short falls in Social Security? I see the same problems there as with the government deficits. Both problems are intertwined.

I would be inclined to take the lump sum.

Generation-X
Posts: 168
Joined: Mon May 06, 2013 4:43 am

Re: Generation-X' Journal

Post by Generation-X » Tue Feb 19, 2019 6:18 am

Mister Imperceptible wrote:
Sat Feb 09, 2019 8:14 am
I need to start trading volatility like you.

I did well last year by holding cash, selling all my pre- and post-tax retirement account stock funds in August and moving into GDXJ and SGDM, and steadily buying precious metals from July-December. Maybe it was just luck but I think I might have a good “feel.”

But I know someone who claims to have done better by buying NFLX and TSLA puts.

Is trading options from a post-tax non-retirement account so bad? I think future tax rates are going to be very high. I would rather pay taxes now. Plus, the leverage I lose by not making pre-tax retirement account contributions can be regained later with directly held real estate. The NFLX/TSLA put guy recommended LEAPs if I went with a post-tax account.

******

Doesn’t the short fall in pensions concern you? The short falls in Social Security? I see the same problems there as with the government deficits. Both problems are intertwined.

I would be inclined to take the lump sum.

I try not to trade options in a taxable account because of tax complications - questions usually revolve around the wash sale, involving the underlying (stocks) as well as the options themselves (both ways).

The other is the options on an index and the difference in their tax treatment - i.e. SPY vs SPX. SPY is an options on an underlying ETF (SPY) and therefore falls under normal options tax rule where wash sale rules can get sticky.

SPX is an index option without underlying and therefore tax rules fall under section 1256, dealing with market-to-market rules and 60/40 split on long/short capital gains respectively.

I struggle with filing taxes every year as is and the question for me is, is it worth it? Unless one declares trading as a business, where again there are requirements to be met, for me it simply isn't worth the hassle and only makes the accountant happy.


LEAPs are very long term options which could last for two year or more. There are benefits with LEAPs in that effects of options time decay (greeks) are spread over a longer period but again, the direction must be correct or else there will be a larger loss due to a much higher premium.

Timing and direction are the name of the game in options and despite many fancy elaborate schemes of hedging and spreads, in the end, it is gambling if options are placed without a good understanding the underlying and the top-down economic conditions (i.e. playing the lottery) which many options traders do.

See Joel Greenblatt's "you can be a stock market genius" pp213 - pp236 on how LEAPs can be used in the market - hint: with a lot of homework and a good understanding of the situations involved. I believe this is the optimal way to use the options instrument - but you have to know your company (the underlying) and economy. (And do a lot of homework)

***

The pension shortfall does concern me a little, but I believe I will be able to break-even before that happens.

Also, if the situation does occur, then I don't think anyone will be safe (even those holding cash), as the dollar itself will be worthless.

Remember, real wealth is in real things - like food, water, shelter, medicine, tools etc. Can't eat paper when you're hungry.

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