BlueNote's Journal

Where are you and where are you going?
User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Sun May 11, 2014 10:28 am

Gilberto de Piento wrote:
I've often heard you shouldn't rotate bike tires. When the more worn out tire is on the front it is more dangerous because that tire is more likely to have a catastrophic blowout (not that that is very likely anyway) and a blowout is more controllable on the rear.
- If you want to wear out your tires completely without adding danger you could put a new tire on the front and move the old front to the rear. Then when this former front/now rear wears out you move the new front to the rear and put another new tire on the front. Hopefully this makes sense. You pay for this in tire changing time though.
That makes perfect sense, thanks for pointing it out. If I blew out the front I might lose control of steering and braking on the front tire. If the back blows out then the worst case scenario might just be damaging the wheel. I did some research and front braking seems safer and much more effective then rear braking if you do it properly:

http://sheldonbrown.com/brakturn.html

http://sheldonbrown.com/tire-rotation.html

I will rotate the front to the back and replace the front with new treads. I will also get my front braking technique down for better control.

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Fri May 23, 2014 11:27 pm

Amateur Bike Mechanic

My bikes flat tire is totally fixed, the new problem is a squeaky front brake. I wake the dead when I use the front brake now, but the brake still works fine. I will need to research how to fix it.

My new investing methodology

I am thinking of actually creating 2 or three part blog that explains it in more detail. It is constantly evolving but here is the basic gist of it.

1. Risk control is paramount therefore I want diversification, high financial safety, sustainable competitive advantages, reasonable inflation and deflation protectection at a fair or better price

2. I want to be able to reliably remove a small percentage of the stocks intrinsic value (cash) at regular intervals to fund my retirement while minimizing the worry about selling into an irrational market, particularly a paniced market.

Here is how I have been sifting out my stock picks:

1. I have a list based on the US dividend champions list of stocks that have historically paid an increasing dividend for at least 5 years. This list automatically takes out a lot of the rejects. I think that the 08/09 crash must have left us with a much better list of DGI stocks then prior to the crash.

2. I filter out anything that hasn't paid a dividend for at least 9 years. That leaves me with stocks that have paid an increasing dividend through at least one full business cycle.

2. Energy, consumer defensive, Utilities, REIT's, Railroads and Health Care Stocks are kept. A few other companies are kept like McDonalds and ADP but a lot of industries are left out because they have a poor long term track record (read The Future For Investors by Jeremy Siegel).

3. Stocks ranked in valueline below 3 for safety and/or rated below B++ in financial safety are filtered out. This leaves very high quality balance sheets that are likely to be able to weather an economic slowdown

4. Stocks with no moat from M* are filtered out

5. Utilities (including telecoms and REITs) with a chowder score (yield + 5 year div CAGR) below 8 are filtered out

6. Non Utility stocks with a chowder score below 12 are filtered out

7. Stocks with a div yield below 2% are filtered out

8. Stocks with a price above M* fair value are filtered out. This is an intrinsic value calculation discounting all the estimated cash flows the company is expected to make to the present value. This type of analysis is the gold standard for determining value vs price but has highly sensitive inputs which makes it prone to error.

9. Stocks that fall below the Fast Graphs blue line on a 15 and 10 year basis are filtered out. This is the ultimate "relative" valuation based on what the market generally values the business at and acts as a check against the risk of an erroneous M* intrinsic value calculation. The Fast Graphs tool is the only investing research I pay for, value line is through the library and M* is provided by my brokerage.

10. I filter out stocks with an ROIC below 10

11. I filter out stocks with an ROE below 15 ( I average out the ROE and look at historical ROE and ROIC to make sure that it is historically above minimum criteria for at least the last 5 years preferably the last 10 years)

12. Stocks that make it to the final cut get into a tie breaker

Tie breakers

1. Multiple of 10 year government bond yield

2. Moat Score ( I score the moast from 1-10 based on M* and my own ranking system)

3. % discount to M* fair value

4. Effect on diversification of existing portfolio

Here is the final cut from last week:

BHP Billiton plc
HCP Inc.
Procter & Gamble Co.
CSX Corp.
Southern Company
Wal-Mart Stores Inc. (some call this a consumer defensive, others a retailer)

I ended up buying HCP inc. because I don't own any REIT's. Seems like a great REIT to own because it makes it through my gauntlet and has a 29 year history of increasing the dividend (albeit at a low rate). I already own BHP but I don't own any of the rest of the final cut yet.

I guess that was a long post so if you read to the end I salute you!

jacob
Site Admin
Posts: 9272
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 73
Contact:

Re: BlueNote's Journal

Post by jacob » Sat May 24, 2014 10:34 am

You need to angle the brake pads in towards the rim so the front of the pad is the first to touch and the whole pad contacts when you apply full force.

User avatar
spoonman
Posts: 696
Joined: Thu Mar 28, 2013 4:15 am

Re: BlueNote's Journal

Post by spoonman » Sun May 25, 2014 12:21 pm

That's a very interesting analysis. I like the fact that you are using the Chowder score. It's difficult to go wrong with companies like PG and SO. CSX has always interested me, but I loaded up NSC back when it was $57 and by the time I was done with it CSX had gotten away from me.

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Sun May 25, 2014 8:48 pm

jacob wrote:You need to angle the brake pads in towards the rim so the front of the pad is the first to touch and the whole pad contacts when you apply full force.
That seems to have been what did the trick. I used a nickel to shim the back of the pad and then pulled the brake tight, loosened the pad screw and retightened it in the new forward slanting position.

I also cleaned the pads and rims with a little alcohol and sanded the pads down a little which didn't do anything to help.

I am working on getting all the gears to change properly now, I still can't shift into the lowest gear which has been a problem I have avoided solving since last year.

Tons of youtube videos on how to do this are available so it should be no problem with a little education.
spoonman wrote:That's a very interesting analysis. I like the fact that you are using the Chowder score. It's difficult to go wrong with companies like PG and SO. CSX has always interested me, but I loaded up NSC back when it was $57 and by the time I was done with it CSX had gotten away from me.
CSX is interesting but my analysis only shows that it is barely (5%) undervalued, so really almost no margin of safety in the price which is almost always the best form of risk control. Also railroads are very capital intense so they are slow growers but often solid long term investments due to the network effect competitive moat they have.

In fact of all the stocks in my final list BHP Billiton appears to be the most under valued on a relative and intrinsic value basis. I am not recommending it but I think it deserves a closer look by DGI investors because it's about the only basic materials stock out there that has a competitive moat (scale) and their diversification model is good at reducing the wipeout risk and cyclicality that most basic materials companies face.

Also the discounts to fair value on the final list are minimal, it's not like a year ago when I could probably have produced a list of 10 or 20 possibilities with some prices at 70% of fair value. The market of "BlueNote" stocks appears fairly or possibly slightly over valued. I am putting at least 1/4 of my net worth into the money market and will probably put 1/2 to 3/4 in if the market keeps going up. I guess if investing didn't get difficult at some point everyone would be doing it and making money like water.

I also increased my stake in berkshire hathaway class b stock. It's the only stock I own that doesn't pay a dividend, seems a little under valued right now when I compare current book value per share to historical averages. So I think it's fairly valued if my growth estimates are too rosy or undervalued if they aren't.

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Wed May 28, 2014 9:07 pm

My Day in Pictures May 28, 2014




Image2014-05-28 17.41.38 by bluenote_ere, on Flickr

Beautiful day to ride the bike. The squeaky front brake has returned, I need to work on that again. I think I need to sand or file off a good amount of the brake pad based on my research. There probably a grain of sand or something that is causing the crazy screeching noise.

Image2014-05-28 19.55.56 by bluenote_ere, on Flickr

I was working on my bikes gears and thought I had failed in getting it to switch to the lowest gear. However I was working with my bike flipped over which prevented the gear switching mechanism from catching properly on the largest gear. Once the bike was wheels down the gears switched properly, which surprised and delighted me on my way home. Luckily I didn't over adjust the limit screw or I might have thrown the chain and gear changing mechanism into my back wheel inadvertently :(


ImageIMG_20140528_195452 by bluenote_ere, on Flickr

I did this coming out of my parking spot, will probably cost me a pretty penny. Some of it is right down to the metal

henrik
Posts: 719
Joined: Fri Apr 13, 2012 5:58 pm
Location: EE

Re: BlueNote's Journal

Post by henrik » Thu May 29, 2014 3:12 am

I have the same problem with my front breaks. They work fine, but the noise is annoying. Let us know when you figure it out:)

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Thu May 29, 2014 8:56 pm

My Day in Pictures -- Thus May 29, 2014



ImageIMG_20140529_080640 by bluenote_ere, on Flickr

Another beautiful day to be alive (and biking)!



ImageIMG_20140529_183742 by bluenote_ere, on Flickr

See if you can find the worst car park job of the day in the picture above.



ImageIMG_20140529_211223 by bluenote_ere, on Flickr

Poor Charlie's Almanac is an awesome book. I suspect Charlie Munger is an INTP or ENTP MBTI personality type judging by his vast scope of knowledge and insatiable curiosity about just about everything. It's going to take a while to finish this book. It's intellectual and broad, at the same time folksy and humorous. The guy learned darwinian natural selection in his seventies. Stoicism, Darwin, Branding, Plato, ethics, accounting are just the tip of the iceberg. I feel like I need to take months of mathematics and science courses to get his point on physics being a cornerstone mental model for life. The topics are interesting and all over the place I love it.



A great friend of mine came over and we grabbed a pizza for dinner, a good day all around.

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Sat Jun 14, 2014 12:07 am

Bike Stuff

I got a bike stand for my bike. I bought new. I couldn't find a free one or a decent used one on craigslist or kijiji. It works great for me and cost about $120

Brake Squealing:

Recently both the front and back wheels squeal when braking.

I cleaned the back wheel with a 3M green scrubby using car soap and water which fixed the issue.

The front squeal is still with us, haunting our dreams and annoying the fine people of Toronto.

I have tried the following steps to remedy the issue:

1. clean with a wet wipe
2. Toeing in my original brake pads
3. sanding my original brake pads
4. replacing the brake pads with new
5. cleaning with a green scrubby using car soap and water (with oomph)
6. Using sand paper on the rims
7. applying a tiny bit of fluid film to the rims (marginally effective but reduces braking power)

Tomorrow I am going to try my Mr. Clean magic eraser on the rims, I think I have isolated this to a rim problem now because I get the same problem when using toed in new pads.

I also had to repair my bike on my way home from work with my little repair kit. My chain fell off and got lodged between the frame and the pedal crank shaft. I am not good mechanically so this was a proud moment.

Stock Market

Can't say I like my options right now. Market appears overpriced by most metrics (p/e, CAPE etc.) Not many good dividend growth stocks at the right price.

Researched small cap value investing. Very interesting area but not my cup of tea because i don't have the time to devote to this. However if I was able to invest into a large enough group of Net-Net stocks I would probably throw some money into this area. The portfolio diversification should reduce the risk substantially enough for me to likely make excellent returns. They aren't very common in the US market but you do see a good amount in Canada compared to the US. Ben Graham used this technique successfully during and after the great depression.

EdithKeeler
Posts: 441
Joined: Sun Sep 01, 2013 7:55 pm

Re: BlueNote's Journal

Post by EdithKeeler » Sat Jun 14, 2014 7:40 am

Just want to say how much I like the pictures! Especially love the one with the clover, I guess it is? (May 28)

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Sat Jun 14, 2014 9:39 am

@Edith: I thought I would try a more visual approach glad you enjoy it . There is a wide variety of vegetation on my bike ride. The city seems to let it grow naturally occasionally mowing it down. There's probably some clover in there though.

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Tue Jun 17, 2014 9:06 pm

Does anyone who knows anything about derailleurs and bike gears know if this part should be swinging down lower?

It seems too high which seems to be interfering with smooth gear changing to the lowest gear. I have tried adjusting the 'b' screw which has absolutely no effect whatsoever. Do I need to shorten the chain to get the derailleur arm to swing lower?


Image2014-06-17_09-55-45 by bluenote_ere, on Flickr



Saving and investing


BTW I am still saving at least 50% of my take home, more when you count the massive tax return I received from my RRSP contributions (like a 401k in America).

I don't know if the market is really overvalued right now. If you look at P/E ratios it appears overvalued historically. People are ringing the bubble bell because of this. However compared to bonds the yield on stocks are decent. I always look at the earnings yield on potential buys vs 10-20 year government bonds. Here is a very good and thought provoking article on the subject, requires some knowledge of stock valuation.

User avatar
Gilberto de Piento
Posts: 942
Joined: Tue Nov 12, 2013 10:23 pm

Re: BlueNote's Journal

Post by Gilberto de Piento » Wed Jun 18, 2014 9:17 am

Does anyone who knows anything about derailleurs and bike gears know if this part should be swinging down lower?

It seems too high which seems to be interfering with smooth gear changing to the lowest gear. I have tried adjusting the 'b' screw which has absolutely no effect whatsoever. Do I need to shorten the chain to get the derailleur arm to swing lower?
I'm no expert but I'll jump in.

This is a good guide for getting your chain length right: http://www.parktool.com/blog/repair-hel ... gth-sizing Make sure the chain is the right length first.

Then adjust the derailler: http://www.parktool.com/blog/repair-hel ... derailleur

Pull on the cable itself rather than using the shifter to get onto the smallest cog. If it won't go on or bounces on and off it is probably that your limit screw isn't letting the derailler move outboard far enough.

If you can't remember the last time you changed the shift cable change it. Change the housing at the same time. I like to buy 5mm housing and ends in bulk. A lot of shifting problems are sticky cables.

Good luck! Rear deraillers can be a pain.

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Wed Jun 18, 2014 9:02 pm

my bike

My brakes on my bike barely squeal anymore. I don't know why but I am happy squealing has subsided.

@ Gilberto thank you very much for the links and advice I will take them under advisement. I suspect chain length may be the problem however it's not worth the trouble to fix because my bike seems to be functioning pretty much properly otherwise. I can still gear down to the lowest gear it just grinds a lot.

Fat Bike

Has anyone ridden one of these types of bikes in the snow and ice? I am considering getting one for my winter commute.

Image*SURLY* moonlander complete bike by Blue Lug, on Flickr

Calorie Counting

I am trying to lose weight through dieting by reducing my calorie intake below my normal daily requirements and exercise. I am not going to try anything off the beaten path though just plain old reduction in calories while maintaining the generally recommended macro nutrient proportions and micronutrient recommendations. It's all very sensible, I count calories with the "my fitness pal" app and it tells me how many I have left in a day. It's almost like you have to eat healthy food for this to work because calorie dense good generally doesn't provide near the satiety as does a similar volume of calorie dense food (like butter vs celery).

2 questions

1. How the hell is anyone supposed to get 3,500mg of potassium a day. I ate two bananas and an avocado and I am not even half way there today. Beans might be my salvation!

2. How do I only eat 2,300 MG of sodium a day? I always go over, I like to salt my food. Food tastes way worse to me without a little salt. I have extremely good blood pressure levels and am healthy on most metrics other then weight so I am not too worried. However I'll need to think about the salt thing.


I find the diet industry to be full of kooks, charlatans and heavily biased people, it's just chalk full of them and I say that without trying to be funny. It's almost impossible to avoid these folks who sell or give away dieting information that really has little to no scientific merit as if it were the next origin of the species or something. Sometimes they won't cite studies at all, they just name something scientific sounding and say that it's based some science like evolution (see paleo for example). I think that's what people call pseudo science. Anyways that's the end of my rant.


investments

Its almost time to run my monthly stock screen again. Last time I barely turned up any results. I may be missing some good deals but it's probably better in investing to avoid large losses then to take more risk to get a little more return. My system is designed with long term risk control first and returns second.

sky
Posts: 733
Joined: Tue Jan 04, 2011 2:20 am
Contact:

Re: BlueNote's Journal

Post by sky » Thu Jun 19, 2014 7:31 pm

keto phasing into paleo is the diet true path

not that I would know

he says drinking a homebrew beer

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Sat Jun 21, 2014 10:23 pm

June 21, 2014

Health

I lost about 5lbs this week through calorie counting. A lot of the initial weight loss is probably water.

My system is to eat about 500 fewer calories a day then my body requires while otherwise maintaining proper nutrition. In terms of nutrition I follow the guidelines in the myfitnesspal app, I may need to double check that they represent current best practices but they seem reasonable.

I also exercise by riding my bike to work. I am thinking of also starting some resistance training and getting some kettlebells for that.

June 2014 BlueNote stock screen


ImageUntitled by bluenote_ere, on Flickr

Note: These stocks and metrics provided are just for informational purposes and aren’t reccomendations. I screen using a litany of factors including ROIC, ROE, M* Moat, Industry and many others.

CSX fell of the list because it’s price went up to M* Fair Value. Procter and gamble fell of the list because it is just too close to call when looking at a standard fast graphs chart. PG is probably one of those great company at fair price situations and I would like to make it a core part of my portfolio so I will keep my eye on it.

Baxter is a newcomer to the list. The funny thing about Baxter is that it coincidentally popped up in my quantitative screen at the same time Dividend Mantra also made it his most recent buy. The fact that I knew about this in advance may have had some effect on me through the social proof mental model but it didn't have had an affect on my screen which because it is a cold heartless algorithm. Therefore I am not worried about the possible bias because it wouldn't matter either way as Baxter is clearly the best pick my system could generate for my portfolio (I already own too much HCP and BHP to add more right now.)

I will be buying up some Baxter shares because my investing strategy is partially based on the ideas in the book “The Future For Investors” by Jeremy Siegel. In that book Healthcare/Pharma, Energy and Consumer Defensive sectors are shown to outperform other sectors in almost all long term scenarios. I have no Healthcare sector exposure right now so this will get my portfolio into a good position on those three sectors. Also the valuation is good, safety scores are excellent and the dividend growth history is solid. BAxter is planning on spinning off part of the company into a new stock. As per the aforementioned Jeremy Siegel book I will be keeping all spin off's generated from my holdings so it should be interesting to see how well this goes.

I was doing my due diligence on Williams (WPZ) and unfortunately it’s MLP legal entity status creates major tax headwinds for me because I am a Canadian. Therefore all US MLP entities are off the table unless severely discounted (30-40% at least). Americans should definitely take a good hard look at this MLP. I would definitely take a position in it if I were an American (Safe, 20% discount to FV, wide moat, decent dividend increase history).

Hopefully my system can shake out another worthy BlueNote stock next month.

User avatar
Gilberto de Piento
Posts: 942
Joined: Tue Nov 12, 2013 10:23 pm

Re: BlueNote's Journal

Post by Gilberto de Piento » Sun Jun 29, 2014 3:12 pm

Fat Bike

Has anyone ridden one of these types of bikes in the snow and ice? I am considering getting one for my winter commute.
I have ridden a pugsley a little but I haven't owned one. They have become really popular in the upper midwest but in my opinion are a fad for most of the people who bought them.

What are your winter riding conditions usually like? Fatbikes work better than other bikes on fluffy snow but are no better than a mountain bike on ice (unless you get studded tires). I winter commute on a 29er mountain bike with fenders and 700x35 nokian studded tires. It doesn't float on snow at all but since the problem is usually ice it works well enough. The studded tires help a lot but it still requires skill to ride in bad conditions. A fatbike may be more forgiving.

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Wed Jul 16, 2014 7:46 pm

Winter Bike

I am going to get a used mountain bike and winterize it. The winter will probably depreciate the bike rapidly therefore I will get an aluminum frame/forks which should prevent the whole bike from becoming a rust bucket.

Health

I continue to lose weight through calorie counting, its been a bit of an up and down ride but so far so good.

Savings

I've been reading YMOYL (Your money or your life) and created the graph they depict in the book showing my income, expenses and a line for investment income.

I don't know if it is exactly accurate but according to Mint and my brokerage account it looks like this right now:

Imageimage (1) by bluenote_ere, on Flickr

Stop Working Here's How you Can, by Derek Foster

This guy bills himself as Canada's youngest retiree at 34. Says he did it with what is basically a dividend growth strategy. The book is basic but has good advice. It's what is lacking in the book that makes me think it is mediocre. Also he makes judicious use of large font, thick margins and line spacing to make what would be a thin book into a novel sized book. Since he wrote the book he has come out and said that he made a large risky bet on Phillip morrisback in the 90's which paid off well and accelerated his early retirement, no mention of that in his book. He also caved during the '08 stock bust and sold all his holdings. I don't consider this guy to be in the same league as Jacob but he's definitely achieved something noteworthy as a result of enterprise and frugality.

jacob
Site Admin
Posts: 9272
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 73
Contact:

Re: BlueNote's Journal

Post by jacob » Wed Jul 16, 2014 7:58 pm

Even steel---the frame---won't rust. Your main concern is the drive train. If you want to avoid rust, clean it often, but which I mean almost or even daily, depending on how salty the roads get.

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Wed Jul 16, 2014 8:43 pm

jacob wrote:Even steel---the frame---won't rust. Your main concern is the drive train. If you want to avoid rust, clean it often, but which I mean almost or even daily, depending on how salty the roads get.
Thanks, Toronto seems to use a lot of salt so I'll probably have to clean the drive train almost every day.

User avatar
Chad
Posts: 3863
Joined: Fri Jul 23, 2010 3:10 pm

Re: BlueNote's Journal

Post by Chad » Thu Jul 17, 2014 6:20 am

BlueNote wrote:He also caved during the '08 stock bust and sold all his holdings. I don't consider this guy to be in the same league as Jacob but he's definitely achieved something noteworthy as a result of enterprise and frugality.
This doesn't make a lot of sense if you are a dividend investor. If you are buying the top tier dividend companies (Exxon, Phillip Morris, etc.), and one would assume any dividend investor is as they are on every dividend list, there is no reason to sell in a downturn. These companies almost never have a hiccup in dividends, so if you are retired and living off of dividends you don't even notice the downturn. He seems a little shaky.

henrik
Posts: 719
Joined: Fri Apr 13, 2012 5:58 pm
Location: EE

Re: BlueNote's Journal

Post by henrik » Thu Jul 17, 2014 6:26 am

BlueNote wrote:My brakes on my bike barely squeal anymore. I don't know why but I am happy squealing has subsided.
Mine are quiet now too, but I had to replace the pads to achieve it (the old ones were not worn out at all, probably just some weird material). Maybe I should have waited it out as well:)

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Thu Jul 24, 2014 6:57 pm

$435,778

That's my best estimate of all the income I have ever made (before any taxes or other adjustments).

There is an exercise in YMOYL that asks you to calculate this number as honestly as possible. I used my tax returns to calculate 95% of it plus a rough estimate of chore money, paper route money, gifts etc. from when I was a kid.

Essentially they want you to know the money was made but not to dwell on it.


Imageimage (3) by bluenote_ere, on Flickr

That's a tidy sum but nothing spectacular. I spent 6 years in "higher education" but worked part time to pay the bills. I then spent a little more then a year in Japan teaching english which was fun and I was able to save a bit there. My income really took off when I started my career in accounting/finance over the last 2 years.

Compounding

If I had half that money saved into a portfolio of the type of stocks I like to invest in I could probably get at least a 3% starting yield or $6,500 a year tax free. That would be tough to retire on but not impossible. I could live in a small apartment in a less expensive area with roommates, buy groceries intelligently, ride my bike or walk everywhere. Add to that a dividend growth factor of say 7% and my dividend income would double about every 10 years . By the time I was 65 I would hopefully be making 52K per year. If we discount that 52K back to today at an inflation rate of 2.5% (52K/1.025^31) that's about $24K per year in today's dollars. Let's also assume the portfolio value grew along with the dividends, that means I would have (217.5K * 2^3decades) $1.7M worth of fractional ownership working for me.

Let's take this to my 85th birthday and assume that I die then, which is probably pretty close to actuarially correct. If all my stocks kept up the average 7% dividend growth and valuations remained fixed to my yields I would be making 208K per year in dividend income ($59k in todays dollars). I would also have $6.8M in stock in my brokerage account. Maybe this is all just wishful thinking but it is interesting to think about. Compounding of this nature isn't easy to get but I don't think it's that hard either. The main problems would likely be psychological, ie not spending the principle, not panicking during all the crashes and not getting greedy and going outside of your competence and safety zones.

User avatar
spoonman
Posts: 696
Joined: Thu Mar 28, 2013 4:15 am

Re: BlueNote's Journal

Post by spoonman » Sun Jul 27, 2014 10:44 pm

I very much enjoyed reading this post. I've run through similar calculations and reached more or less the same conclusions.

$6,500/year is a nice chunk of change. It wouldn't be difficult to retire on that kind of income if you go abroad. I think Jacob spends $5000/year on himself right now, so you could in theory pull it off in North America as well.

User avatar
BlueNote
Posts: 406
Joined: Sat Jun 08, 2013 6:26 pm
Location: Toronto, Canada

Re: BlueNote's Journal

Post by BlueNote » Sat Aug 09, 2014 10:13 pm

Tired

I have been getting really tired of my job lately. I find it boring and repetitive with occasional bouts of urgent mostly useless work on top.

They gave me a raise at work the other day and I immediately thought of it like a lottery ticket rather than something I earned. This could be the influence of all the stoic literature I have been consuming over the last couple of years. I can't control a raise but I can control my efforts and the attitude I bring to my job. The problem is I don't think I can totally control my attitude either, especially when the work doesn't fit great with my personality.

Stock Market

The prices of securities have come down a little bit over the last week or two. My stock filter shows the following candidates for my FI portfolio:

Ticker Name
BAX Baxter International Inc.
BHP BHP Billiton Ltd.
BBL BHP Billiton plc
DE Deere & Company
XOM ExxonMobil Corp.
HCP HCP Inc.
UTX United Technologies
WMT Wal-Mart Stores Inc.


I own HCP, BAX and BBL and would like to diversify my portfolio a little more before adding more of those positions.

DE is cyclical and I am a little skeptical of their business franchise. I think their franchise is based mostly around the network of maintenance cenres they have developed for farm equipment. I wouldn't consider this a core holding but it is a solid company with a decent dividend history.

Retailing giants have come and gone throughout history (Woolworth's, Kmart etc.). What makes Wal-Mart so different? The structural advantages of great locations, scale (low prices), and the best retail logistics system around give them somewhat sustainable competitive advantages. Still I don't know if I would get into bed with this company knowing the industry has a history of has-beens that also had great locations and scale.

That leaves us with Exxon and UTX. Exxon is a goliath, they consistently earn high returns on capital despite oil prices being cyclical. They are a great company with long history of share holder friendly polices. UTX is probably a little outside my circle of competence right now so I am going to research them further.

Therefore Exxon would be my first pick right now as a core holding for my dividend growth portfolio.

Post Reply