Eudaimonia's Journal

Where are you and where are you going?
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eudaimonia
Posts: 43
Joined: Thu Apr 24, 2014 3:51 pm

Eudaimonia's Journal

Post by eudaimonia » Thu Jun 21, 2018 12:11 pm

Seeking Happiness

Certainly not a unique goal. I would guess most people seek to be happy. But what does that even mean? For most of my life I followed the "American Dream": 1) work hard, 2) dream about buying the next thing, 3) buy it, 4) regret it, 5) repeat.

Back in college a good friend of mine and I had a dream of escaping the "golden handcuffs" as he put it. To strike out on the trail, or go surfing on the beach or live like a hermit in the desert. Both of us had the dream crushed with the reality of graduation. Things like rent, car payments, and "obligations" eventually overrode those natural instincts. I think the hardest thing for both of us was simply a lack of a role model. "Everyone" seemed to be getting a job, commuting, buying a car, renting an apartment, and then filling it with stuff.

Fifteen years later I was still stuck in the “American Dream”. Happily married, but unhappily bound to a materialistic way of life. My wife and I used to call it our “retail therapy”. It was the special dinner where you went to dull your despair and incentivize you to stick out another crappy meeting at work. It was the “keeping up with the Jones” because everyone seemed to have a new car. It was the commiseration with fellow employees about a bad day at work. It was about the hidden shame you felt– since you were living paycheck to paycheck. None of these actions seemed unreasonable in the moment but all of them were part of the lock-in.

The turning point was about five years ago after my wife and I had spent a stupid amount of money one ski season and hated every minute of it. The weather was bad, the driving was bad, my wife had hurt her knee, and generally speaking we were feeling like we'd spent a lot of money and we would have been better hanging out at home. We were determined not to make the same mistake next year and told all of our friends we weren't getting season passes. Interestingly, once we got over our own (and our friends’) social resistance, everything felt significantly better and easier. It made me curious about what else we weren't getting enjoyment out of and started us down the path of questioning every expense and on a deeper level whether we had to do what “everyone” was doing.

Since then my wife and I have been in exploration mode. We continue to work similar to before but we are no longer trapped. We’ve discovered even more resources since our initial foray: MMM, ERE, and even several stealth wealth friends who’ve provided us with ideas and inspiration. Due to our smarter financial choices, my wife has been able to stay home to raise our child over the past two years – something that we would not have dared to do in our former lives.

While we’ve been able to shift to a much more fulfilling lifestyle than we previously thought possible, there is a freedom that I remember from college that we are dreaming to recapture. I hope that the next five years open up even more possibilities.
Last edited by eudaimonia on Fri Jun 29, 2018 12:20 pm, edited 1 time in total.

eudaimonia
Posts: 43
Joined: Thu Apr 24, 2014 3:51 pm

Re: Eudaimonia's Journal

Post by eudaimonia » Thu Jun 21, 2018 12:22 pm

Expenses

Currently at $38,316 on annual expenses for 2 adults and one toddler. We are at 1.82 Jacobs if you consider a toddler a full person. Approximately 2/3 of that are necessities with the remaining discretionary. Our largest costs are:

Mortgage Int/Ins/tax: $664
Groceries: $431
Healthcare: $396

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Last edited by eudaimonia on Thu Jun 28, 2018 3:26 pm, edited 3 times in total.

eudaimonia
Posts: 43
Joined: Thu Apr 24, 2014 3:51 pm

Re: Eudaimonia's Journal

Post by eudaimonia » Thu Jun 21, 2018 12:27 pm

Net Worth/SWR

I only consider liquid net worth in our calculations. Our house is on a 15 year loan and we should have it paid off by the time we are FI.

You'll notice there is an active account and passive account. Investing has been one of my hobbies and is both a hedge against the passive portfolio as well as it's own source of alpha. I'll talk about my investing background and philosophy in a subsequent post:

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Last edited by eudaimonia on Thu Jun 21, 2018 5:02 pm, edited 1 time in total.

Finn
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Joined: Sat Jun 09, 2018 7:18 am

Re: Eudaimonia's Journal

Post by Finn » Thu Jun 21, 2018 1:47 pm

That's a great story, looking forward to hearing more about your investment philosophy!

eudaimonia
Posts: 43
Joined: Thu Apr 24, 2014 3:51 pm

Re: Eudaimonia's Journal

Post by eudaimonia » Thu Jun 28, 2018 3:10 pm

Active Investing Philosophy

I’ve been an active part-time investor for approximately 15 years. During that time I’ve had the good fortune of being mentored by three talented professionals: a former Corn pit trader, a futures spread trader, and former hedge fund manager. I’ve never worked in the banking industry (although I was an accountant which is how I met my original mentor) so I’ve always managed my own money (never a bank’s or client’s). Needless to say I’ve had both the outsider (retail trader’s) viewpoint and inside insight (through professional mentorship).

As for market products I’ve traded the following over the years: Commodity futures (grains, softs, energy, meats, metals, even orange juice at one point), Index futures, long and short dated future spreads (everything from Crack to Long dated Euribor), FX, stocks, options on stocks and futures. Probably the only thing I haven’t tried is penny stocks or bitcoin. Today I trade primary delta-neutral index stock option strategies, short/long volatility products, and pre-earnings driven options strategies with some occasional swing individual stock trades and/or seasonal futures spreads.

Regarding strategies/implementation I spent several years working on automation modelling including all the usual suspects for testing: machine-learning, walk-forward testing, etc. before deciding that I make a much better macro based semi-discretionary trader. Timeframes were anything from 1 minute to multiple months (never did HFT due to obvious reasons) but have settled towards anything from 3 days to 6 months (most trades I did last year lasted longer than 2 weeks but less than 3 months).

Speaking of approach, my current active investing is driven by the following: Macro top down analysis (research driven typically 2 hours per week), Inter-market relationships (e.g., how does the current rate environment affect treasuries and how will that in turn affect the dollar and SPX?)(2 hours per week), and technical top down analysis (1 hour per week). I tend to start my analysis at the 40,000 view and then go down into the detailed view (e.g., for macro that involves country analysis and then dive deeper into the earnings for say BIIB in the past few quarters).

While I’ve previously spent a lot of time immersing myself into active investing, these days my goal is to keep it on autopilot and continue to grow my portfolio but spend most of my free time on other interests. Although I’ve kicked around the idea of managing OPM or whatnot I really don’t like the idea of turning this into a new career. I already have demanding clients at my current job and they are hard enough to manage without the possibility of losing their money! In short I’m very happy to continue on as I am doing although my natural curiosity is likely to drive me to learn something about the markets going forward.

Below is a snapshot of the one year return for one of my three active accounts. This is included here as an example only and is not a solicitation of any kind.

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yantob
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Joined: Thu Jul 05, 2018 2:39 am

Re: Eudaimonia's Journal

Post by yantob » Thu Jul 05, 2018 4:07 pm

Inspiring

eudaimonia
Posts: 43
Joined: Thu Apr 24, 2014 3:51 pm

Re: Eudaimonia's Journal

Post by eudaimonia » Fri Jul 06, 2018 1:06 pm

yantob wrote:
Thu Jul 05, 2018 4:07 pm
Inspiring
Thanks, it's definitely been a journey to get here. I think the two key things that are necessary are 1) Finding someone who understands the industry to learn from, and 2) actually being interested enough to persist through many failures.

eudaimonia
Posts: 43
Joined: Thu Apr 24, 2014 3:51 pm

Re: Eudaimonia's Journal

Post by eudaimonia » Fri Jul 06, 2018 1:13 pm

June 2018 Recap

Savings

Savings rate dipped to about 45% this month. Primary reason is due to purchase lumber for a deck I'm planning to build in July.

Active Investing

Down 5% on the active account this month as I unwound the remainder of my short vol position upon US/international trade jitters. Plan to keep the active investing light as we enter the summer months since volume tends to be light over the summer and August is historically the month where long volatility tends to explode.

Fitness

Still doing my 5x5 strength training but have not returned to my previous PR weights from earlier this year due to shoulder injury (pulled muscle). Still training at about 60% of my 1RM on squats in particular.

Learning new things

The big challenge on my plate currently is my first bathroom renovation. The renovation is for a friend and he and I have made good progress thus far in June: Demo'd out the old tub/vanity, installed the new tub, roughed in the plumbing, and this past week just installed a new window and hardibacker. Next up is tiling.

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eudaimonia
Posts: 43
Joined: Thu Apr 24, 2014 3:51 pm

Re: Eudaimonia's Journal

Post by eudaimonia » Fri Sep 07, 2018 5:57 pm

August 2018 Recap

Savings

Savings rate continues to be a bit lower than I'd like - 36% due to a very large payment to Sacramento State University (my wife is going back for her Masters in Education). Good news is that this short-term expense is likely to have a long-term positive expectancy.

Active Investing

Flat on my vol positions during the historically most notorious volatility month. Delta neutral strategies basically flat for the month with directional futures positions adding about 1% to the portfolio.

Fitness

Need to reduce my beer consumption. The good news about having a kegerator and making your beer is that you make your own beer. The bad news is that drinking beer every night is totally bad for you (even if its somewhat economical).

Learning new things

Bathroom #1 for a friend is nearly complete.

Some lessons learned: Make sure that you get your rough in completely straight (meaning your shower valve) and try to get your walls straighter than you think is necessary. Small imperfections in the wall really make it hard to get large format tile to lay flat. Also, hardibacker (aka concrete board) is terrible to work with. For the next bathroom we plan to use Schluter kerdi and cutting that material is so much easier.

Over, the bathroom took about 180 hours between the two of us (his dad helped with the new window install). Was a fun project and probably saved my friend about $8-$10k in labor. Up next for the month of September is bathroom number 2 (which will be a shower install). Having a lot of fun with this little project. Side bonus is that I don't have to pay for it at all but get to enjoy doing the work.

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eudaimonia
Posts: 43
Joined: Thu Apr 24, 2014 3:51 pm

Re: Eudaimonia's Journal

Post by eudaimonia » Mon Nov 05, 2018 4:43 pm

September 2018 Recap

Bit delayed getting this one out.

Savings

Savings rate 51%, so a bit more normal.

Active Investing

Volatility strategies up 0.5%, directional strategies up 2%, and delta neutral strategies up 0.5%.

Fitness

Continued need to reduce my caloric intake from beer.

Learning new things

Bathroom renovations ongoing.

eudaimonia
Posts: 43
Joined: Thu Apr 24, 2014 3:51 pm

Re: Eudaimonia's Journal

Post by eudaimonia » Mon Nov 05, 2018 4:49 pm

October 2018 Recap

Savings

Savings rate at 45%. Noticing a definite increase in our grocery budget for convenience foods with my wife going back to school at night. Short-term additional expenses for a longer term payout.

Active Investing

Volatility strategies flat as there were plenty of warning signs to get out of short volatility prior to October's declines, directional strategies up 8%, and delta neutral strategies down 2%. This is definitely a trader's market. Right now my active accounts are hedging about 50% of the delta for my passive portfolio. I'd like to get this up to 100% prior to the next recession.

Fitness

Started a beer fast during the week and have been reasonably successful with that. Trying to overcome some pulled back muscles and have been doing more front squats.

Learning new things

Bathroom renovations ongoing.

Overall

Definitely feeling the ongoing grind at the moment with a lot of work and little play. Although I've got a lot of work (and toddler) constraints, need to try to set aside some time for something fun with the wife. Considering her workload (and mine) that may be a bit of a challenge for the next couple years. This reminds me of about 10 years ago when I was getting my Masters while working 50 hours a week. Sometimes you just have to grind it out.

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