Retiring Early

Wednesday, February 28, 2007

In a word...


Like most people, I took a hit yesterday, but the hit was much softer than it would have been, had I not been steadily building a cash buffer over the last month (pigs get slaughtered, you know). At the start of the day yesterday, I was holding about 22% of my portfolio in cash.

That said, when I did look at my investment accounts, most of my holdings were down over 3% each yesterday -- a scary moment for sure. The only notable exceptions were ERTS and BSD, a municipal bond offering. The key is: I did not buy or sell anything yesterday, and it certainly would have been a mistake given the fact that the entire market was selling off in tandem. Anyway, after all the dust cleared, I was down around 2.5% of my portfolio. Again, given the Pacific rim sell off in the 7%-9% range and the US sell-off in the 3.5% range, I fared ok.

So what's next? This is exactly the correction I mentioned I was waiting for, and I'm particularly interested in doing some bargain hunting when the time is right. The time is not right yet and I'll be looking for more conviction before committing funds into the market.


Friday, February 23, 2007

Retiree kills mugger with bare hands!

Smart or stupid, this story is pretty amazing. A 70+ year old ex-military retiree on holiday in Costa Rica was part of a tour, whose bus was apparently held up. The story reports that he fought back, getting one of the attackers in a headlock, breaking his clavicle and essentially choking him to death.

WOW. I've been to the Atlantic side of Costa Rica through the shipping port of Limon, and I have to say, it's not a place to linger. The coast is an undiscovered gem, but getting there through Limon can be dangerous. All I can say is: I hope I retire with as much go-gettum as this guy!


Tuesday, February 20, 2007

Owning individual stocks

I own individual stocks, how about you? A lot of the PF blogs I read have authors who appear to primarily align themselves with mutual fund investing. While I agree that mutual funds have their place (primarily for indexing, IMHO), I believe that it's very possible to beat (if only slightly) the market with some well-researched, value-based individual stock picks. In the long term, how can you go wrong with buying undervalued assets??

Whether you agree with me or not, you're certainly entitled to your opinion. As I was thinking through this last night, I wondered how many of my readers do actually own individual stocks, and whether or not it is an interesting topic for me to post on. I have been spending a lot of my time lately thinking through how I am going to play the correction that I continue to believe is imminent. So there you have it. Lets call it "Fin_indie's Tuesday morning question" -- leave a comment and let me know if you own individuals or not. And if you're feeling adventurous, let me know why or why not.


Saturday, February 17, 2007

To give or not to give...

There is an interesting discussion going on over at Free Money Finance about what's better to give: time or money. Over the past several years, I have been giving both. Unfortunately, over that same time period, my work obligations and family obligations have grown and I'm in a position where I need to make a choice. I've given it a lot of thought, and at this point in my life, given my constraints, time is just more important to me. I've been dragging this on for a while and now is the time to just make the call -- I'm going to stop giving my time away and focus solely on giving money for the time being.

Since our goals are to hang up our corporate hats and retire in the next 4-5 years, I guarantee my approach will undergo a 180 degree change. When I have the right-sized nest egg and all the time in the world, I'll likely switch to giving away more time than money. In fact, I'm somewhat looking forward to spending more time on charity!

And isn't that what being financially independent is all about? Having more time to do whatever you want to do?


Monday, February 12, 2007 scare

Prosper.comOk, it's no surprise that I've been dabbling with over the past few months. I was checking on my loans yesterday and had a bit of a scare. Normally, I see 15 loans, all "current", etc., but this time, I had the unpleasant realization that one of my loans was marked in yellow and marked as LATE! Yes, LATE!

At first, I wasn't sure what to do, or what I could do, so this was definitely a new experience for me. I poked around the site a bit and found that I could contact the borrower and also found that Prosper does give you a few other metrics about the late loan, but you really have to dig for it. Perhaps what was most surprising was that this borrower wasn't one of my "D" credit borrowers -- they're all "current" on their loan payments. This borrower has a "B" credit rating and has a positive 10% debt to income ratio -- meaning that they have more than enough income to pay their debts off. All in all, this is a solid borrower, so what gives?

Well, hate to let you down after such a setup, but it turns out that the borrower had actually paid, but 4 days late. It appeared that the payment was "in-transit" and would be applied to the loan within days -- it just wasn't clear from the information provided by I guess the take away for me is: 1) don't freak out -- late payments will happen, even with worthy borrowers, 2) needs to figure out how to better show loans in different states of "lateness" -- currently it's hard to figure out what is going on and if you need to take action, and 3) needs to do a better job telling you exactly what to do when borrowers are late.

Anyway, I'm hugely thankful to see that I was only misunderstanding the problem vs. actually having a late loan.Anyone else freak out when they saw their first missed payment?


Sunday, February 11, 2007

January Net Worth Update (up 1.84% to $932,372)

growth chartAnother decent month -- not a blow out, probably because I am holding a significant amount of cash right now (more than 15%). Overall, my stock gains were up 2.44% and retirement accounts up over 4%, likely due to my REIT holdings blowing through the ceiling. Following are more details:
  1. Investment gains were great given the overall bull market sentiment. I did take some profits off the table because I believe, as I've said recently that the market is richly valued right now. My cash holdings moved up to over 15% as a result of the selling. I'll be looking to put this cash back to work as the market corrects. Yes, perhaps a bit of market timing here, but as a value investor, I don't see a lot of value right now. Value should peek it's head out in the next month or two and I want to be positioned to take advantage of it. If a correction doesn't materialize in the first quarter, I'll be happy with my 5% money market interest and look for opportunities to deploy the cash as the year wears on.
  2. I paid down the mortgage more in January and am on track with my mortgage goals for the year. As a reminder, the current plan is to pay double mortgage payments for the next 4.5 years with the result being a fully paid off home. Double payments are being made possible by reducing expenses, not through savings withdrawals. The ending mortgage balance goal for this year is: $135,000, and I'm on track.
  3. On the front, I have $3000 principle invested into 15 loans, and all loans are current. Over the past three months, this money has returned $10, $16 and $42 per month, respectively, as the loan payments have been paid. Once I reach steady state next month, I expect to see a sustained interest return of about 1.33% per month, or about 16% per year.
As I'm watching my net worth increase, one thing I am starting to realize and get excited about is the possibility that in the next few months, if all goes well, I should find myself above the $1MM mark in net worth. Some might think this is a bit of a stretch, but one thing I haven't been including in my numbers are my stock options. I currently have nearly $40,000 in stock options at the current market value, post-exercise and tax. One reason I haven't been including these is because I'm not sure if I should be including inherent value (ie. Black Scholes) or the value post-exercise and taxes at current market value. I'm sure I will get some feedback on this and should probably update my numbers to reflect them.


Saturday, February 10, 2007

Top 100 personal finance blogs!

I'm happy to say that my Retiring Early blog has been included in a list of the Top 100 Personal Finance blogs! Thanks to the good folks over at for including me! Many of the usual suspects are also listed there (My Money Blog, Blueprint, FMF, Consumerism Commentary, BostonGal, All Financial Matters, My Open Wallet, 2 Million, Frugal, and tons more. (btw, If that ain't link love, I don't know what is. :) I particularly like the breakout by category -- I'm included in the retirement category, as you might have guessed.

Check it out: Top 100 Personal Finance blogs

Thursday, February 08, 2007

REITs on a tear!

REITs have moved up nearly 20% over the past month in a largely flat market, and it's definitely time to consider taking profits. This is one of the great benefits of owning non-correlated assets -- some make huge moves up while others languish with the rest of the market. With the clarity on the EOP deal and information about SPG's offer to buy MLS, there is a lot of optimism in the sector and I personally believe it's time to take money off the table.

I'm not trying to show my investing brilliance here, but I wanted to raise the flag for others who may own REITs as well. The fact is, they've REALLY outperformed and if you own them, you should at least evaluate your position. (Again, do not consider this investment advice, but just some insight into my actions as a REIT owner myself.)

Check out this chart vs. the S&P for the period after Jan 5th:

REIT chartThat is a gigantic move! Moves like that just aren't sustainable and I'll be closing my positions when the market opens today. If they pull back over the next few months, I will probably buy back in, but I can't see owning them any longer given the risk in the market and this huge move. For what it's worth, REITs make up 6.3% of my portfolio, primarily invested in ICF.


Wednesday, February 07, 2007

"Stealth Correction"

I saw an analyst on CNBC yesterday that suggested that the market was undergoing a "stealth correction". I wish I remembered who said it, but does anyone have any idea what market symptoms might lead someone to believe that there is a "stealth correction" going on? ...or for that matter, even what a "stealth correction" is, as opposed to a consolidation? :)

mOOm, any ideas?


Sunday, February 04, 2007

I still don't trust Zillow...

zillowI've been marveling over Zillow since it first appeared back in 2005, and after moving to our new house about a year ago, I've become increasingly skeptical. Our old house was valued appropriately and even today, it's enjoying a nice bump in value along with the rest of the Seattle market.

Our new house is an entirely different story. The fact is: the Zestimate and even the "Value Range" listed on Zillow has been less than our purchase price since the day we closed. Now, I'd be fine if we purchased at the top of the market and overpaid, but similar houses in our neighborhood over the past year have been selling for between 30% and 45% higher than we paid, so I'm confident that that's not the issue. Our Zestimate is still listed around 10% lower than what we paid a year ago, and upwards of 30% lower than "like" properties are selling for today within a block of my house. Seems odd given that Zillow says their median error rate for the Seattle area is only 5.6%.

I've contacted Zillow twice about this and they've been less than helpful. And, while I've read a lot of criticism about Zillow and am starting to agree that without them improving their valuation model, it's hard to see how they are going to be successful. Sounds like StealthBucks trusts the Zillow numbers, but what about other Seattle-based bloggers -- do the numbers add up for you? What about others in different states?


Thursday, February 01, 2007

Still not saving enough...

Piggy BankI saw at least one other blogger commenting on this article about Americans not saving enough money, and I expect a few more... It's an interesting article, both from the perspective of "aren't they done studying this yet" as well as the supposed explanations for why we aren't saving enough. Here's my favorite quote:
"Economists have put forward various reasons to explain the current lack of savings. These range from a feeling on the part of some people that they do not need to save because of the run-up in their investments such as homes and stock portfolios to an effort by many middle-class wage earners to maintain their current lifestyles even though their wage gains have been depressed by the effects of global competition."
Wow. Really? We've all become such good investors that our portfolios are keeping us warm at night? I also don't buy the housing claim, but this idea that depressed wages and maintaining lifestyles is an interesting claim. It may be a bit of a stretch, but it's definitely an interesting point.