bigato's journal

Where are you and where are you going?
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Bankai
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Re: bigato's journal

Post by Bankai » Sun Aug 25, 2019 3:33 am

Seems like a situation in which you want to pause and reflect before doing anything!

You might be right and gold could go up big time relative to stocks over next couple of years, but... there was a recent topic where someone (bsog?) wrote that there are always good arguments for both/all 3 ways the situation could unfold. And you make this decision based on...
after reading the news the last days
People are talking
I'm worried
seems like a good bet
Sorry for cherry-picking these, but these are in contrast to your usual rational approach. I might be wrong but are you not trying to 'avenge' your previous decision to sell gold which you consider to be a mistake (and which might not necessarily look so in few weeks/months)? If yes, this is probably the worst motivation to tinker with investments, on par with fear as it usually leads to compounding previous mistakes.

At least give yourself a few days before doing anything. Accumulating stash is just first step, keeping it for decades to come could be at least as difficult. Even if you are 'proved' to be right and make money on gold, that's not actually good considering your reasons for going all-in and it could backfire if based on this experience you make similar decisions at some later point.

bigato
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Re: bigato's journal

Post by bigato » Sun Aug 25, 2019 6:08 am

rube: gold can produce money just as well, I just need to sell it, right? Way more liquid than real estate at this point in history. Even if it doesn't produce any additional value, it is value. And we are all timing the market to some extent, aren't we? Either in the short or in the long run. Regarding counting on future money, about half of it is already mine (the unemployment fund) and the rest is just one year of work, not thaat bad, is it? Also yeah, the PP and the GB are nice concepts when you have no strong opinion on the future, but is it such a sin to do your own allocation when you can afford to be wrong? Or, can I? How am I being over-confident here? Are my worst-case scenarios missing something?

Bankai: I still think gold will drop in the short run as we approach elections time, but what changed is that after getting more informed I decided it is worth to play the long game instead. Another very important factor that changed is that I didn't get the severance package, and thus I can wait longer on such a move, because I'm earning a nice wage monthly anyway. The advantage I get by not waiting is that if I sell this month, the losses from the etf sell will be compensated by the gains from the gold sell, thus decreasing my taxes which must be paid monthly here on these types of operations.

But still, I'd like to learn in which scenarios my assumptions could be very bad. The worst that I can think of is that I miss some additional run up in the stocks and gold depreciates in the short run. Like, isn't *that* a worst offender if we are to criticize trying to time the market? Because I'd make more money by timing both the short and the long movements, but then I'd risk more because the short movement is in a opposite direction and short in nature.

I am not trying to average up my previous mistake, because although I didn't make as much as I could, I did in fact made 17% on the gold part which is nice for a couple of weeks. Actually by making this move now I'm averaging *down* my profit for the month to almost nothing. But in the end, I should do now what I think is better for the present and future, and not get attached to the sunk cost fallacy, right?

Thanks guys for answering. All of my questions above are sincere, not just rethorical. I would really like to understand where I could fail really hard with this movement, but I can't see it so far.

rube
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Re: bigato's journal

Post by rube » Sun Aug 25, 2019 11:53 am

Bigato, you might be right. I am not arguing with you about your reasoning. But there are thousands of persons right at this moment who claim to know for sure that btc will go up. Or down. Or stock XYZ will go up/down. Or gold go up. Or DOWN. Etc. Only a few of them will be right.
What make you so sure you belong to that small group?
Again, you might be, but I simply don't know/dare to predict and would myself not make a bet on it, even when I would as sure as you seem to be. My advise therefore is simply to not put in too much. Even if you can afford to loose (some) because you now might get/make more, I would try to remember rule # 1 of investing: don't loose money (you can't afford/don't really want to loose).

Gold doesn't produce anything. It holds value and the value can increase or decrease. You can sell it again for money, but 1 oz does not become 1.1 oz.
My real estate is producing enough free cash flow to live from, I don't need to sell it to get money. Same for people that hold stocks paying dividend.

bigato
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Re: bigato's journal

Post by bigato » Sun Aug 25, 2019 12:34 pm

History and logic is what convinces me of my opinion. I'd still like to see in which scenario it would fail.

Regarding investments that "produce" something, isn't that a useless distinction? The value invested in an asset changes over time up or down, and the way it happens may be through dividends (rent) or through changes in value. Future value will be the sum of dividends and changes in asset value. So, in the case of a theoretical house which you bought for 200k and which earns you a liquid 4% anually, you have an increase in total value of 8k per year. That is, after one year, you have 208k. If all remains constant, in ten years you'll have 280k (let's ignore compounding and inflation for simplicity's sake). Now, what if the house decreases in value in these ten years? What if it looses 50% of its value? Then in the end of the 10 years you'd have 180k, that is, a 10% loss in ten years. That's not too bad of a risk, you may say. Now what if that decrease in value happens from one year to another? Then you buy it for 200k, and in the second year you have 108k. That's almost a 50% loss in one year. That sounds risky, and the distinction between value and dividend is completely irrelevant. Now I know what you are thinking. But what makes *you* so sure that it won't happen? It did in the past, in several places, in several moments. There are plausible scenarios in which it could happen in several cases, in several places. I understand you have a mental model about your country, the economy and the world that makes you sure it won't happen in your case although you are all in a single asset. How is that any different from my line of thought regarding gold?

classical_Liberal
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Re: bigato's journal

Post by classical_Liberal » Sun Aug 25, 2019 3:51 pm

I think you should think about your personal risks, as opposed to the macroeconomic risks. Your short term personal risks are much more predictable. If you plan to RE in early 2021, I think you should begin building your preferred asset allocation for that specific time in your life, ie early portion of early retirement.

Will you have any cashflow? What are your biggest personal risks during this period? Probably not inflation in the short term (although I'm not an expert in your home countries currency), more likely some form of sequence of return risk in the first few years of ER that eats away too much capital to recover from. This means having your assets over-weighted in any particular asset class is a huge risk if you guess wrong about the short term macroeconomic situation. I think, in your case, sequence of return risk amplifies if you do not have cashflow from your unemployment for the first three years(am I understanding this correctly?). Once cash flow is turned back on and covering a portion of your expenses, then is the time to take more risks.

IMO this is a mistake many people make. They fall in love with a plan for assets due to economic thoughts, but fail to take into account their personal risk factors at any given point in time.

bigato
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Re: bigato's journal

Post by bigato » Sun Aug 25, 2019 3:57 pm

Thanks c_L, that's very useful

freedom86
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Re: bigato's journal

Post by freedom86 » Thu Aug 29, 2019 3:45 am

bigato wrote:
Sat Aug 24, 2019 5:05 pm
I started using pomodoro technique coupled with headphones to be able to be productive at work. Also started talking to colleagues about the talking affects concentration, and inquiring what we could do to convince the boss to let us work from home at least once a week. Kind of testing the waters to start a mutiny. The most senior colleague is very much on my side on this. Boss also hates the talking, but then he hates imposing himself as a boss. And is against remote work, but we'll get to that eventually. Good news is that the company is talking about substituting desktop computers for laptops and implementing coworking spaces, making remote work more normal, etc.
Hey bigato,

you should find out about the primary decider's desires & then suggest a test phase.

I did it his way:

"Hey [decider],

I think, that I could contribute far more to your [decider's primary desires].
Currently the work environment is holding me back,
because it's [noisy/ugly/whatever your problem is].

I think I can do much better, therefore I have the idea of starting a test phase, where I work one day per week from home.
I wouldn't need to commute, what would give me more energy & time to contribute to [decider's primary desires]
and I wouldn't have to spend energy to cope with [problems from above].

It's only a test phase, no risk for you & we can talk about which days I'll work from home."

At the test days, you have to show your peak performance.

bigato
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Re: bigato's journal

Post by bigato » Thu Aug 29, 2019 5:13 pm

Thanks freedom86. I plan to do something along those lines at some point. Although I may wait a little bit more. I'm getting good at using the pomodoro-with-headphones technique now, and I feel better for that. Also, the company is undergoing some positive changes in this direction right now. The better moment to achieve this painlessly is probably close. If I were to force my hand, I could probably do it now, but being able to produce in that environment is also a challenge I want to tackle a little longer.

bigato
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Joined: Sat Mar 05, 2011 12:43 pm

Re: bigato's journal

Post by bigato » Wed Sep 04, 2019 4:46 pm

I'm a bit surprised that I didn't see more people disagreeing with my strategy above, and also not many strong arguments or extended discussion. I'm not sure if that just mean that few people are reading my boring journal, or if most people agree with my points, or maybe don't have strong opinions on the subject.

Anyway, looking at the looses I'd eat, I couldn't bring myself to follow my own thesis. Instead, I'm slowly transitioning the portfolio more in the direction of having more gold, but not 100% gold. Reflecting on the subject, I decided that I prefer to be more diversified so as to be able to do *something* when the market swings in some direction. That does not mean that I'm following the golden butterfly, but that I'm using those 5 asset classes as the bricks for my strategy. For example, right now I don't have long term government bonds.

As for the comment on my all-or-nothing movements, part of the psychology behind this is because the instrument I use for gold right now is not tradeable in smaller chunks, so the smallest unit is already a lot. There are some ways around this, but for now I decided to keep gold mostly as an insurance for an extreme case, like major war or the market dropping 80%. And don't touch it otherwise. By the way, I got back in my position at a price slightly lower, so I'm good on that front.

Another diagnosis I made on myself was that it may help me to feel that I have agency to do something, or that I have stuff to keep me busy with the investing. Because of that, I decided to allocate 5% to high risk investments, that will both help me learn, expose me to higher gains, and also keep my nervous hands out of the rest of the portfolio, which I'll treat more conservatively. I made a move last week with those 5% and I'm up about 30% in four days with that amount.

suomalainen
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Re: bigato's journal

Post by suomalainen » Wed Sep 04, 2019 9:28 pm

Meh. People invest how they want to invest based on what appears to be their very deeply-set biases, and I've found there's not much point discussing it. Sell everything and go into gold! Sure, why not. I suspect many others are in the same boat where they are reading, but there's just no point in arguing investment theses over the interwebs. Everyone's an investing genius in their own minds.

bigato
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Re: bigato's journal

Post by bigato » Sat Sep 07, 2019 8:00 pm

I went to a friend's home to her birthday party, around 10 people or so, and I was presented to a programmer, statistician, who retired early from investments years ago and now live on his rural property near the city. He does options trading using his statistical models and is a bit of a legend. Teaches classes in some important universities without having the degrees for such. Does talks in places like MIT. Teaches a course for some people mostly for the satisfaction of getting to know people and wants to teach me for free.

BookLoverL
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Location: England

Re: bigato's journal

Post by BookLoverL » Sun Sep 08, 2019 5:24 pm

Sounds like an interesting person to meet, then.

bigato
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Joined: Sat Mar 05, 2011 12:43 pm

Re: bigato's journal

Post by bigato » Mon Sep 09, 2019 12:22 pm

Yeah, who would've guessed that I'd meet someone like him at a friend's birthday. The nice surprises you can get from cultivating interesting friendships!

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Ego
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Re: bigato's journal

Post by Ego » Mon Sep 09, 2019 1:39 pm

Wow. That sounds like the kind of person who could open lots if interesting doors. Are you interested in what he teaches?

bigato
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Joined: Sat Mar 05, 2011 12:43 pm

Re: bigato's journal

Post by bigato » Mon Sep 09, 2019 1:53 pm

Very much interested and excited by the possibilities! It just aligned with my growing interest in investing, recently sparked by my almost quiting the job through the severance package! It seems like this will be my main obsession for a while now. This Sunday I watched the six-parts bbc documentary called "The Ascent of Money", about economic history.

classical_Liberal
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Re: bigato's journal

Post by classical_Liberal » Tue Sep 10, 2019 2:03 am

Ahh, the advantages of social skills :lol: . I couldn't help myself.
bigato wrote:
Mon Sep 09, 2019 1:53 pm
This Sunday I watched the six-parts bbc documentary called "The Ascent of Money", about economic history.
Would your recommend? did it change the way you view investing?

Edit: I just read this too
bigato wrote:
Mon Sep 09, 2019 12:31 pm
After the one hour or so of talk, he wanted to pay my tab, so I ended eating free vegan food in exchange for sharing info I'm excited about :)
WTF Bigato? for a self proclaimed on spectrum autistic, you seem to be rocking the social scene!

bigato
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Re: bigato's journal

Post by bigato » Tue Sep 10, 2019 4:10 am

Definitely recommend the documentary. You learn about the origins of money, bonds, the role of gold, real estate, the influence of trade and economy on wars.

Hehehe my social energy is limited but not absent! It just need to be directed well.

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