Generation-X' Journal

Where are you and where are you going?
Mister Imperceptible
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Joined: Fri Nov 10, 2017 4:18 pm

Re: Generation-X' Journal

Post by Mister Imperceptible » Sat Sep 21, 2019 5:53 am

Things are well. The job change brought me back in state with a 20% pay increase. I am traveling out of state to pick up my RV, which is parked at a storage facility where I stayed (against the rules) for a few months at the end of my previous contract.

In the spirit of those Mormons, I recommend you have at least some physical bullion. I know, it hosts another set of problems, and was what prompted the origination of this firearms thread. But if the system really breaks, GLD and SLV are prone to failure. Kyle Bass articulates it well. I feel that if it is going to be a paper investment in my retirement account, I may as well be properly compensated for the risk I am taking with a counterparty, and go with the miners. I thought that was the whole point of gold, eliminating counterparty risk.

I agree that owning the miners is easier than trading options on them. My call options are only about a tenth of my paper position.

I do believe deflation will take hold in the headiest bubbles, like California real estate. But it is interesting to me to go back and read blogs during 2011-2012. Everyone was convinced the housing market would continue going down further. As always be careful about holding too much cash for too long.

Generation-X
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Re: Generation-X' Journal

Post by Generation-X » Sun Sep 22, 2019 3:47 pm

Good to hear - that RV sure seems useful.

It is my sincere hope that physical gold will not be necessary. That would truly be dire.

US government would have to default or the dollar collapse - which would devastate the stock market, treasuries, money market, banks, and government payments, including pensions, social security and medicare just to name a few.

Current sovereign US credit default swaps stands at 15.1, with implied probability of 0.25% of default with 40% recovery rate (if you win, you'd get 40 cents on the dollar): http://www.worldgovernmentbonds.com/cds ... s/5-years/


It would be considered a 3-sigma event (less than 0.3% chance of occurring) and to bet the farm on this would require a solid research and an inside view of all the minds in the Congress when the catalyst event triggers it.

All the members of the Congress know what government default means. If it does occur, it would be like a temporary insanity, equivalent to a situation where it enabled a person to commit suicide.

The catalyst events do happen:
https://ftalphaville.ft.com/2013/09/26/ ... -be-worse/

This is the same evaluation as always - what is the probability of the outcome, what is the pay off and when will it happen?


Now, as things stand currently, at 22 trillion dollars in debt, near 106% of GDP, we believe that the government still has the means to deal with the debt payments.

But at 1 trillion deficit a year, when the debt rises to 30 trillion, say by 2030 (very likely much earlier), what happens to our government's ability to pay? At 50 trillion? At 75 trillion?

The odds of default, standing here at this juncture with 22T of debt with GDP of 21T, is not likely. But say in 5-7 years, when the federal debt reaches 30-50 trillion, I'd say the odds will be high enough to be relevant.

The debt clock predicts that by 2023 we will have 30T of debt with GDP of 25T. https://www.usdebtclock.org/current-rates.html


Unfortunately, IMO, gold is not a good tool for hedging inflation, but more like a watchdog of how government is doing in managing its finances. When government does a poor job, it will reflect this by moving higher.

And since the price of gold has been driven down lately, when we see the government falter doing its finances, it's good time to place bets.

But I'm not going to bet my farm on this, just enough to profit from it. I'm being mindful of the drawdown risk.

Image

Generation-X
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Re: Generation-X' Journal

Post by Generation-X » Mon Nov 18, 2019 11:34 am

Status Update 11/18/19

* I am a bit excited to reach over 700k in net worth this month. This was achieved, mostly by having a steady source of income and by saving consistently. Anyone can do this***. This is the key:

1. Have a stable, steady income source.
2. Spend less than you make.
3. Save consistently. i.e. If you get paid every two weeks, then set savings aside every two weeks. If every month, then set aside every month.
4. Don't have debt. Don't get any new debt.
5. Ignore all the naysayers. Walk your own path. Make your own plans . It's okay to think out side of the box to help your cause. Plan ahead.

*** In my experience, it is more important to be a consistent saver than being an investor. Because being a saver is not affected by the type of job your have or how well the stock market does to increase (or decrease) your savings. It always works - slowly, consistently, predictably.

***It is better to be a grocer or a janitor and save millions (https://www.rd.com/true-stories/inspiri ... fter-died/) than to have millions but die broke because of your spending (https://www.varsitytutors.com/earlyamer ... died-broke).

SavingWithBabies
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Location: Midwest, USA

Re: Generation-X' Journal

Post by SavingWithBabies » Mon Nov 18, 2019 12:40 pm

Congratulations on $700k!
Generation-X wrote:
Thu Jul 25, 2019 12:26 am
I have come to roughly the same conclusion about the housing problem. I hadn't gotten as far as guessing on the timeline. I hope it's within 5 years. I've tried to think of alternate paths to take and one is building. It definitely seems like a more financially risky path though.

That is an interesting link about Thomas Jefferson at the bottom of your last post. I'm thankful that, as far as I know, I don't have to worry about inheriting debt. I can't imagine spending your whole life paying off debt from prior generation(s).

Generation-X
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Re: Generation-X' Journal

Post by Generation-X » Thu Nov 21, 2019 1:12 am

SavingWithBabies wrote:
Mon Nov 18, 2019 12:40 pm
I've tried to think of alternate paths to take and one is building. It definitely seems like a more financially risky path though.
While California tends to tax, one thing it does fairly well is consumer protection.

As things stand currently, the risk of home ownership in California is limited, as it is my understanding that the financial liability risk on a foreclosure of a residence in California is limited to the property and nothing else.

This is due to the California Anti-Deficiency Statutes which are derived from California Code of Civil Procedure Sections 580, 580a, 580b, and 580d. (https://leginfo.legislature.ca.gov/face ... .&article=)

More details here: https://www.nolo.com/legal-encyclopedia ... ornia.html
and here: https://www.lindacgarrettlaw.com/califo ... tutes.html

The exception is on a foreclosure of a home with both the home loan and a second loan such as HELOC. If they are both owned by the same lender, in such case, the California Supreme Court has ruled that entity that holds both the senior and junior lien can pursue deficiency judgment on the extinguished junior lien. (https://www.nolo.com/legal-updates/cali ... y-law.html)

So the risk of home ownership is limited to the cost of purchasing the home (i.e. down payment, closing cost etc.) and any subsequent property tax, insurance and mortgage payments that have been made until the foreclosure. They can still be somewhat substantial, but the financial risk appears to be limited to the property and not to other assets unless the exception is triggered.

Of course foreclosure is no laughing matter, but I believe this is worth the risk, especially if the conditions are right, after a major real estate downturn and Home Sale Tax Exclusion continues.

Mister Imperceptible
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Re: Generation-X' Journal

Post by Mister Imperceptible » Thu Nov 21, 2019 12:48 pm

Congrats on the $700k, GenX

SavingWithBabies
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Location: Midwest, USA

Re: Generation-X' Journal

Post by SavingWithBabies » Thu Nov 21, 2019 5:20 pm

@G-X Oh, I meant it seemed more risky to build than to buy existing. I've been a lifelong renter and I'm ready to buy for mostly non-financial reasons[*]. But it's been hard finding something I think is worth it and so I'm tempted to go down the path of building. Potentially with some DIY work. There is a company in Michigan that will build a structure and roof it and leave you to finish out the inside. But it's stick-built and I am enamored with Insulated Concrete Forms for the heating/cooling efficiency, stable temperatures and noise insulation. I think we will buy existing as it's a huge project.

* Reasons include: gardening, basement/workshop for tinkering, fixing things as we would like them fixed when they break, modifying the interior as we would like (ie replace flooring), performing maintenance as we would like it done, not sharing walls (partly due to our own noise with kids), having a garage, etc.

Jason
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Re: Generation-X' Journal

Post by Jason » Sat Nov 23, 2019 7:46 am

Generation-X wrote:
Mon Nov 18, 2019 11:34 am

* I am a bit excited to reach over 700k in net worth this month. This was achieved, mostly by having a steady source of income and by saving consistently. Anyone can do this***. This is the key:

*** In my experience, it is more important to be a consistent saver than being an investor.
Congrats on the 700K. That's great.

I have been parsing your *** recently, and although I agree in principle, it implies a dichotomy. Yes, its better to be a consistent saver than investor, but its even better to be a consistent saver and a good investor. Maybe for some it stops at making their bed everyday. But others might want to branch out to picking the blankets they want to sleep under.

Generation-X
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Re: Generation-X' Journal

Post by Generation-X » Thu Nov 28, 2019 3:40 am

@MI, SWB, J - thanks. It's good to have people with similar goals to cheer you on, and the best part is knowing that it comes from people that took the same initiatives. What's even better, is knowing that we will all make it. Because we have a crude guide map, left by those who trailblazed before us, in a form of a journal. Congratulations to you all.

Generation-X
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Re: Generation-X' Journal

Post by Generation-X » Thu Nov 28, 2019 3:47 am

SavingWithBabies wrote:
Thu Nov 21, 2019 5:20 pm
I think we will buy existing as it's a huge project.
I've only known a couple of people that have undertaken to build their homes and the outcome was not positive in both cases - so in my limited exposure, I would have to agree.

In my situation, less is more - less cleaning, maintenance, taxes, insurance, etc. I rather enjoyed that 200 sq. ft. office space.
Last edited by Generation-X on Thu Nov 28, 2019 3:52 am, edited 1 time in total.

Generation-X
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Re: Generation-X' Journal

Post by Generation-X » Thu Nov 28, 2019 3:50 am

Jason wrote:
Sat Nov 23, 2019 7:46 am
Yes, its better to be a consistent saver than investor, but its even better to be a consistent saver and a good investor. Maybe for some it stops at making their bed everyday. But others might want to branch out to picking the blankets they want to sleep under.
You are right of course. I'd much prefer to have the cake and eat it too.

Generation-X
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Re: Generation-X' Journal

Post by Generation-X » Thu Nov 28, 2019 4:05 am

Rules That Warren Buffett Lives By
https://www.investopedia.com/financial- ... es-by.aspx

Investing Rule No. 1 - Don't Lose Money.
Investing Rule No. 2 - Never Forget Rule No. 1.

Often times I see novices, encouraged by their newly acquired insight into investing, going all-in into index funds and such, without considering financial consequences of loss.

IMHO, it is much easier to buy low and sell high after the market is decimated, than to try to buy high and sell higher when the overall market is at an all time high in its recorded history.

Don't Lose Money. Never Forget Rule No 1.

(Given high risk, it is more important to focus on not losing money than taking that risk to make money. i.e. - Avoid picking pennies in front of a bulldozer)

Generation-X
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Re: Generation-X' Journal

Post by Generation-X » Wed Dec 04, 2019 5:37 am

Mister Imperceptible wrote:
Tue Mar 27, 2018 5:23 pm
Regarding options, the consensus suggestion of reading material has been Natenberg. Do you read that or anything else, or did you just learn by doing?
Sorry somehow I missed this question. For an average reader without math background, I would think Natenberg would be confusing, theoretical and falls short in explanation. It is also a bit dated now but does provide a good starting point and fundamentals.

You do not need the depth of Natenberg to understand options, and the reference material in McMillan should be sufficient to get you going.

If depth is of interest to you, I would start off with Robert W. Ward's "Options and options trading - a simplified course that takes you from coin tosses to Black-Scholes" which will provide the basic big picture of what options is with decent hand-holding.

There are few pages in Natenberg that are critical and they're in chapter 3, Introduction to theoretical pricing models.

Thing about options is that it's not magic. Most people lose sight of the most important aspect of options -and it's not about the options itself- it's the underlying.

There is only one certain method in options that I know of where you can't lose. (And no, it does not involve any kind of spreads or hedging nor predicting volatility with garch process etc.).

Mister Imperceptible
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Re: Generation-X' Journal

Post by Mister Imperceptible » Wed Dec 04, 2019 9:16 am

Generation-X wrote:
Wed Dec 04, 2019 5:37 am
There is only one certain method in options that I know of where you can't lose. (And no, it does not involve any kind of spreads or hedging nor predicting volatility with garch process etc.).
Is it a secret? :)

bigato
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Re: Generation-X' Journal

Post by bigato » Wed Dec 04, 2019 11:41 am

He’s probably referring to writing covered calls and puts, where you have the asset to sell (covered call) or the money to buy the asset in the case of a put.

Generation-X
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Re: Generation-X' Journal

Post by Generation-X » Wed Dec 04, 2019 7:17 pm

Mister Imperceptible wrote:
Wed Dec 04, 2019 9:16 am
Is it a secret? :)
Hi MI,

In a word, yes, as we were asked not to tell the whole world about it.

The concept is simple, but the application would entail a lengthy study to understand the idea, implement it in practice, and to perform the analysis and the computation to make a judgement call.

In other words, I can't just write it out in one sentence, it does get involved.

Generation-X
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Re: Generation-X' Journal

Post by Generation-X » Wed Dec 04, 2019 7:23 pm

bigato wrote:
Wed Dec 04, 2019 11:41 am
He’s probably referring to writing covered calls and puts, where you have the asset to sell (covered call) or the money to buy the asset in the case of a put.
Most beginners do not understand that they're synthetically the same thing. You can end up losing quite a bit of money chasing premiums this way.

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

Re: Generation-X' Journal

Post by Generation-X » Thu Dec 05, 2019 7:36 am

Getting ready


Sold the position in GDXJ with a small profit.

The expected fed rate cuts did materialize but the chaos with tariffs dampened the results.

It appears the market is not expecting any further rate cuts for a while and as such decided to exit. I fully expect when the market melt up happens the commodities will follow the market down. Still holding SILJ but with a tight stop.

Sold most of the index position and left about a third of the profits on the table in anticipation of the market melt up.

I have been accumulating cash position in after tax and will continue to do so.

At some point, I will be looking to buy puts. A lot can happen between now and the elections, with the impeachment, the tariffs and Europe.

If the market melt up does not materialize, the worst that will happen is that I will lose about a third of the index profits.

ertyu
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Re: Generation-X' Journal

Post by ertyu » Sat Dec 07, 2019 12:59 am

I was recently thinking along very much the same lines, and it seems to me that "they" don't want a melt-up. QE pushes equities higher then Trump turns around and tweets some trade bullshit thing to engineer a small sell-off. The 15th should be interesting as I fully expect tarriffs--but with QE going as it has been, I anticipate this would result in a bump not in a sell-off. Am also trying to time the gold/silver + puts trade

Generation-X
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Re: Generation-X' Journal

Post by Generation-X » Mon Dec 09, 2019 7:31 am

ertyu wrote:
Sat Dec 07, 2019 12:59 am
I was recently thinking along very much the same lines, and it seems to me that "they" don't want a melt-up.

I can see that as well and there maybe some truth to it. But as the old sayings goes, pigs will get slaughtered.

As is, the richest 10% own nearly 70% of all wealth in the US.

https://www.marketwatch.com/story/the-r ... 2019-05-24

"They" don't have a choice, or the end result will be the dollar collapse, a revolution or both. None of the outcomes are desirable to the 10%, as it will be self-defeating.

Either "they" let go or "they" will be slaughtered, economically, politically or both. Those that serve the rich will soon find themselves ostracized IMO. The anger directed toward the wealthy is already at a boiling point.***

It will be interesting to see the fate of the Republican party as people discover that they've not only been given a lip service but they were outright deceived with a higher financial burden to pay for the rich.

This has already taken place in the form of Trump-GOP tax cuts that take money away from the poor and the middle class and give to the rich (and corporations owned by the rich).

https://itep.org/finalgop-trumpbill/

https://www.cnbc.com/2019/09/23/who-is- ... -cuts.html


The next Trump-GOP plan is to cut social programs to pay for the rich again. These cuts largely affect low income states, the so-called "Trump base" states. The cuts in medicare, medicaid and food programs will affect millions of elderly and the poor.

And while GOP and Trump are stabbing their own base in the back to do so, they are pointing their fingers elsewhere, mainly to the "liberals" and the "immigrants" (anyone else but themselves) and flashing the red MAGA hat.

https://www.bloomberg.com/news/articles ... -pay-gains

https://www.cnbc.com/2019/03/12/trump-2 ... nding.html

https://www.businessinsider.com/trump-p ... nce-2019-6

https://www.nbcnews.com/news/us-news/tr ... s-n1092866


"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."


Survey after survey reveal that a large portion of the US population are living paycheck to paycheck.

https://www.usatoday.com/story/money/20 ... /39940123/

https://www.forbes.com/sites/zackfriedm ... dd5ea74f10

https://www.fool.com/retirement/2019/08 ... to-pa.aspx

https://www.prnewswire.com/news-release ... 15266.html


If we are to believe that our GDP is over 60% consumer spending, and given the financial state of domestic consumers, it is easy to see that it will not take much to derail this economy and hence the helicopter money.

Any shortfall from domestic spending must be generated overseas and given the current global trade political climate, we can see why the Fed would be nervous.

I know where I stand. But while waiting, I will continue to work and take advantage of any additional pay raises arising from this "healthy economy" while positioning myself for the eventual downfall.

Pigs get slaughtered, whether they're fat in stocks or fat with credit card debt.

---

*** The widening chasm in the left-right political spectrum is but a symptom of the wealth inequality problem that faces US today. This is the start, and both the extreme right and the extreme left are driven by fear - a fear that is engulfing them to struggle for their own economic security, to preserve their ability to make ends meet. The extreme right is trying accomplish this by disabling others. The extreme left, by including everyone, and not just the privileged 1%. What is common between them is that they are all struggling to make ends meet and are becoming desperate.

The Republicans haven't lost their minds. They are seizing an opportunity to accomplish what they've sought after for decades. Trump will take the fall. Same for Democrats.

If the end justifies the means, in doing so, one must wonder - would it also mean the end of this great experiment?

Many knowledgeable people have warned us:

https://www.vanityfair.com/news/2011/05 ... ent-201105
The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.

https://www.cnbc.com/2019/05/14/uk-head ... warns.html
"People getting rich is a good thing, especially when it brings prosperity to others. But the other kind of getting rich, 'taking' rather than 'making,' enriching the few at the expense of the many, taking the free out of free markets, is making a mockery of democracy."

https://www.politico.com/magazine/story ... ats-108014
Even the best of us, in the worst of circumstances, are barefoot, standing by a dirt road, selling fruit. We should never forget that, or forget that the United States of America and its middle class made us, rather than the other way around.

https://www.reuters.com/article/us-peop ... SKBN1YD1PD
“The central issue is we’re developing into a plutocracy. We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive. And they don’t like government and they don’t like to pay taxes.” (New York Times interview, 2018)

https://www.newyorker.com/magazine/2019 ... r-can-they
In 1831, Alexis de Tocqueville, at the age of twenty-five, was sent by France’s Ministry of Justice to study the American penal system. He spent ten months in the United States, dutifully visiting prisons and meeting hundreds of people, including President Andrew Jackson and his predecessor, John Quincy Adams.

On his return to France, he wrote a book about his observations, “Democracy in America,” the first volume of which was published in 1835.
...
The United States was the world’s most egalitarian society. Wages in the young nation were higher than in Europe, and land in the West was abundant and cheap. There were rich people, but they weren’t super-rich, like European aristocrats.

According to “Unequal Gains: American Growth and Inequality Since 1700,” by the economic historians Peter H. Lindert and Jeffrey G. Williamson, the share of national income going to the richest one per cent of the population was more than twenty per cent in Britain but below ten per cent in America.

The prevailing ideology of the country favored equality (though, to be sure, only for whites); Americans were proud that there was a relatively small gap between rich and poor. “Can any condition of society be more desirable than this?” Thomas Jefferson bragged to a friend.
Last edited by Generation-X on Tue Dec 10, 2019 2:08 am, edited 2 times in total.

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