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2009 Goals

November 10th, 2008 at 11:54 am

I was thinking to myself why do I call them 2009 goals? I mean, these goals are just a naturally progression in my financial evolution. Does continuation of goals give it any less weight?

The truth being it is important to me to have concrete goals and ways to measure them. One year is long enough to establish real substantial goals without feeling to far away. For instance, paying of my mortgage is years if not decades away. It would be hard to keep my focus on that goal month in and month out. So I will break it down into a more manageable goal. If I could but $X towards principal this year, it puts me on a path to pay off my mortgage by 20XX.

Also with yearly time frames, it seems natural for us to all take stock of our lives around the holiday seasons. Christmas and Thanksgiving are times to remember the past with family and New Years gives a clean slate, so to speak.

I can look at my financial journey as building a house. In 2008, my objective was to clear the site - remove the boulders and trees, get approval from the wife about the house and where it would be situated, and start putting together a vision of what this house will look like at the end.

In financial terms, 2008 was spent getting on a budget and eliminating all non-mortgage debt. I started the year with over $49k in debt. I also had Murphy visit. In June, I received a medical bill for $4,500. I had to put my debt snowball on hold to attack this which caused some frustration.

Right now, I have less then $5,000 in debt. This is a very strange place to be. From last year to this year, my journey has been the difference between night and day. Last year, I was living (if you can call it that) paycheck to paycheck. This year, I am budgeting paycheck to paycheck. I have also budgeted enough to pay of 90% of my debt year to date.

2009 goals are really to set the foundation that the house will be built on. This has to be done right or else the whole house will eventually fall apart.

With that in mind, my major goals are to fully fund the emergency fund. The wife wants more then 6 months, so it will take me $30k to finish the emergency fund. Since $30k is a big number, I broke it down into months.

My other large goal is to play catch up on the college funds. $18k between my 2 sons will be as if I put $2k away for each, since they were born. I'll automatically contribute something to each 529 a month - $1,000 a month for the oldest and $500 a month for the youngest.

My last new goal is to start paying down the house.

My complete list of goals for 2009 are:
1. Invest $15,500 in 401(k)
2. EF Fully Funded
. a. 1st Month - $5,000
. b. 2nd Month - $5,000
. c. 3rd Month - $5,000
. d. 4th Month - $5,000
. e. 5th Month - $5,000
. f. 6th Month - $5,000
3. Contribute $12,000 to Son 1 529
4. Contribute $6,000 to Son 2 529
5. Extra $36,000 to mortgage
6. Rebalance portfolio

Will I accomplish every goal? Probably not. But by keeping some goals out of reach, it keeps me focused for the year.

Goals Review - October

November 3rd, 2008 at 07:47 am

So 2 of my goals were moved to next year (529s and savings $15k), and I have shorten the 4th quarter goals to 3 (max 401k, pay of all debt (except mortgage), and not add new debt with the holidays).

My 401k is now maxed so no more money going to that.

I have one debt left - my son's medical bill. I entered October owing $12,898. I paid off $6,989 leaving $5,909. How did I do this? I don't even know. I was just really focused this month, my 401k contributions stopped, and there was an extra paycheck. I was so happy earlier this month when I broke $10,000. Now, it seems to be just melting away at a staggering pace.

I'll need to finalize the holiday budget with the wife. We will need to finalize our gift budget for Christmas, wine budget for Thanksgiving and Christmas, decide if we will be hosting a happy hour at our house, and decoration budget (tree, wreaths, etc.).

I can't help but to think where I was last year and my feelings of desperation. Financially, I was just holding things together. How did I get from where I was to where I am now?

I looked at my life with my wife and we said where do we want to be? We wanted to be in a place to not worry about bills and not having enough money at the end of the month.

That's a great goal but what does that mean? How do you achieve that? And that's were the yearly goals come in. What do I need to do this year to get me to that point or closer to that point?

Then I took these goals and broke them down further into manageable pieces. What do I have to do this month or even this week to set me up for success? Each decision brings you closer or further away from your goals.

You have to prioritize your goals too. Most of us don't have enough resources to attack all the goals at the same time. We need to focus and concentrate on one or two at a time and then move on from there. That is why I have had to move two goals to 2009.

Did we fall? Yes. Did we stay down and give up? No. But, we had a shared vision of the future.

Now, you hear people saying that getting on a budget and focusing on what is important frees up money you didn't know you had. Truthfully, at first, I didn't believe this. I got nothing how could I be wasting money?

Well, that's exactly what happened. By budgeting, money was prioritized and went to achieve very focused small goals. Once goals were achieved, more money started freeing up. It started to snowball.

Which brings me to where I am now. My snowball is attacking my last debt with a vengeance. My old car payments, credit card payments, wife's braces, and 401(k) deductions are all focused on the last debt. Really, the debt doesn't have much of a chance and that's what I saw this month.

Some of you are probably struggling right now and just can't see a way out. Basically, where I was last year.

So imagine if you could take all those monthly payments and focus them on whatever financial goal you have. What would you do with that money? How much better off would your family be? How much less stress and anger would you have in your life.

The budget just keeps you in line and the goals just focuses that snowball.

Gamecock.. Just my thoughts

October 23rd, 2008 at 08:14 am

Personally, I think we have hit the bottom. And the technical analysis I have done seems to support it. Does this mean the technicals will start breaking down in the future? No. It means I have some expectations of what is occurring and so far the market is behaving the way I thought.

There is a concept in investing called capitulation. This is when everyone throws in the towel and gives up. In September, there was tremendous fear in the street. The pros were bailing out and moving to cash. Hedge funds were going under because they couldn't get there inventory out of Lehman. You might of heard something about prime brokers or other risks with Lehman. This is what they are talking about.

If you believe in Elliot Wave theory and how it pertains to the market, the last wave is when retail gives up. The Q3 statements hit people's mailboxes about 10/10. So I believe that we are seeing the last of the liquidations from the retail.

Now, I mentioned 8,451 on the dow. This was the low close. Sure the lowest point was 7,773 but in technical analysis it is the close that is important. Right now, I have support at 8,451. If you look at the chart, we keep bouncing off of 8,500. This is good, because to me it seems that the market has hit a bottom.

Now if you look at the VIX, it starting to top out. In other words, the markets are not getting more volatile, just the same highly volatile level.

With these signals, I have starting buying into the market. Did I lose a ton of money this year? You betcha.

The last is a little qualitative analysis. When Paulson handed all the money to the banks, he basically signaled that the banking infrastructure will not fail. This has in my opinion started to loosen up the credit markets. Right now, all I hear about is lower profits and recession. This is a far cry away from a global problem with the banking infrastructure.

But as I have said before, you this as an opportunity to assess your risk tolerance. Do not let fear drive you to a decision. What ever you decide is your investment philosophy, that philosophy should be followed in good times and bad.

As of this posting, the market is up 200 points.

Psychological goals are important too?

October 21st, 2008 at 12:17 pm

$10,000. It's just a number. $9,999 is only $1 less. Right? Or is it more? Is it going from a 5 digit number to a 4 digit number that big of deal? Does it really make sense that it FEELS like such a big deal? Maybe it just signals an end to a long road or a phase?

Does it even make sense? Should I even make a post about such a silly little thing? Is it embarrassing to feel I have to share this and can't keep it in? Does it really matter?

In any case, my total debt is below $10,000 (9,337 to be exact, but who's counting). What makes this number so important to me is that it's an ending of a negative phase and the beginning of a much more positive phase. It's not so much the financial aspects either. It's more of the communication with my wife, realigning our goals, coming together as a team, and really respecting each other's opinion.

Oh yea:

I wanna rock! (Rock)
I wanna rock! (Rock)
I want to rock (Rock)
I wanna rock! (Rock)

Turn it down you say,
Well all I got to say to you is time again I say, "No!"
No! No, No, No, No, No!
Tell me not to play
Well, all I got to say to you when you tell me not to play,
I say, "No!"
No! No, No, No, No, No!
So, if you ask me why I like the way I play it
There's only one thing I can say to you

I wanna rock! (Rock)
I wanna rock! (Rock)
I want to rock (Rock)
I wanna rock! (Rock)

Buy American. I Am.

October 17th, 2008 at 09:29 am


THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.


A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

Source: http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=1&ref=opinion&pagewanted=print&oref=slogin


And that's what I am doing!!! I have been purchasing leaps (call options longer then a year)on companies that are down 80% but still have strong cashflows and balance sheets.

I just purchased some Jan 2011 call options on VMWare. I have also bought call options on some beat down financials.

If you want to be a long term investor, why not listen to greatest long term investor and a disciple of Graham?

As Buffet says, in the short term, no one knows where the market is going to go. It could drop another 1000 or go up another 5000.

But don't be foolish!!! "Be fearful when others are greedy, and be greedy when others are fearful."

Mid October Update

October 13th, 2008 at 10:43 am

Well, we are almost half way through the first month of the forth quarter. So far so good. I just accomplished another goal. I have added $15,500 to my 401k this year. It is maxed.

I also decided to move goal number 2, saving $15,000, over to next year.

I have so far put $1,533 towards my son's medical bill this month. I would like to put another $4,000 towards it. Again, my focus for this forth quarter is to pay off the medical and not incur any new debt during the holidays.

I have also started road mapping my goals for 2009. To me, this means taking my yearly budgets and breaking them down to quarterly goals and monthly goals. Since the amount of weeks in a month change, the goals for each month are slightly different.

One of the things I am really debating is paying off the house mortgage. I am all for paying down my mortgage aggressively so that it is a 15 year mortgage. The issue I have is above that.

I understand both arguments and they both make sense to me. The argument focuses on leverage. Paying of the mortgage eliminates leverage and reduces risk. Hard to be foreclosed on without a mortgage. The other argument is that leverage is good. If you borrow at 5.5% (my current mortgage rate), I could invest that in a diversified portfolio and make about 8% a year.

So there are two driving factors in my life. One being to reduce risk, and this was way before the stock melt down. The other is to start investing in real estate. And both are pulling me at about the same force.

As a compromise, I am currently looking at aggressively reducing my mortgage from 30 years to 15. At that point, I think I'll reevaluate.

I would love to hear other people's thoughts.

General Investing

October 8th, 2008 at 06:18 am

I thought I would blog a little about by investments and how I invest in general. So be forewarned.

Generally speaking, 85% of my portfolio is diversified as the experts say. I have a mix of large, small, and mid size companies. I have a mix of domestic, foreign, and emerging market. I have a mix of asset types bonds, stocks, money market. I have a mix od index funds and actively managed funds

I rebalance my allocations once a year in the first quarter. This in essence rebalances my risk. If emerging markets has a great year, my portfolio may be taking on bigger risks because a greater percentage is allocated to emerging markets then I initially thought should be. The other thing is that the market goes in cycles and by rebalancing, you are selling you winners to buy out of favor assets. In the longer term, rebalancing and dollar cost averaging outperform just dollar cost averaging.

What about the other 15%?

Well 10% of the 15% is allocated towards sector funds and is a little more speculative. These are funds that I think the pendulum has swung too far. In this case, I am investing in REITs and financials/banking.

The remaining 5% is more short term trading I do. I go long stocks, short stocks, and play in the option market. I have developed some quantitative models that narrow down the stocks that I research. Then I use technical analysis and fundamental analysis to determine when to make the trade and what to finally trade. So after everything is done I usually end up with a watch list of 10 stocks that I'll follow for months before trading.

One example is GS where I have been playing the volatility. I keep tight stops on this and so I don't lose much money. In general, I usually set up my day trades for the late afternoon. I try to determine what the day traders are doing and do the opposite. In other words, if I feel the day traders are short, I'll buy the stock around 1:30 or 2:00 and end the position before the market closes.

I have been following NCC trying to figure it out. I have been filling out an excel sheet detailing when I would trade it and if it would be a profitable trade. I am still not ready to trade it and may never trade it.

But let's go back to my sector funds. How do I determine whether to get into to what when?

Well I first start looking at the major indices. I try to start determining support. I had support of the Dow at 10,750 then I had it at 10,000. Now? I am still trying to figure it out. What I am looking for is the indices to find support and hold it. What this means to me is that the big players are done selling.

I also look at the VIX, which talks about fear on the street or volatility in the option market. Usually high volatility signals tops and bottoms. So, I am looking to see if the VIX starts to retrace (go down).

Now I start looking at my industry charts and I start looking at sector funds and ETFs. In the REITs, I am in a sector mutual fund. I bought ETFs for banking and financial services.

Basically, split my buys into 3 baskets. I start with a 25% investments and then a 50% investment and then another 25% investment. So let's say I am going to invest 10,000 in banking ETFs. My first invest would be 2,500 then 5,000 and then 2,500.

This year I did my initial investment of 25% in banking and financial ETFs in March. I have been waiting to put in by second allocation. I will wait until the VIX retreats and the sectors start rebounding before the second investment.

This is an over simplification, but it is a general overview of the large things I look at around investments. Also, I small percentage of my portfolio is in trading/speculative investments. And only 5% is in single names.

U.S. options fear gauge soars to record close

October 7th, 2008 at 01:29 pm

I won't be buying stocks until the VIX starts moving down. For those of you who don't know, the VIX is basically a fear measure. It looks at the volatility of options; and besides 1987, it's at an all time high.


By Doris Frankel

CHICAGO, Oct 6 (Reuters) - An index regarded as Wall Street's fear gauge surged to a record close on Monday as investors clamored for protection in anticipation of more stock market turmoil on worries over the widening credit crisis.

The Chicago Board Options Exchange Volatility Index .VIX, or VIX, surged to a record high of 58.24 before easing back to close up 15.31 percent to 52.05.

"This is absolutely amazing. The elevated VIX is reflecting that people are unsure about every financial relationship they have ever known not only in the U.S. but worldwide," said Joe Kinahan, chief derivatives strategist at thinkorswim Group.

Persistent strains in the credit markets added to nervousness about the wider economic outlook, while a spate of bank rescues in Europe heightened worries about the stability of global financial institutions.

"Not only are the U.S. banks in financial trouble but it appears that the European and foreign banks may be in worse trouble due to the credit crisis," Kinahan added.

The Dow Jones industrial average .DJI dropped 369.88 points to fall below 10,000 for the first time in four years. The Standard & Poor's 500 index .SPX fell 3.85 percent to 1,056.89.

The VIX, which reflects investors' consensus about anticipated stock market volatility over a 30-day period, tends to move inversely to the S&P 500 benchmark, and spikes upward when the market posts sharp losses.

The record level in the VIX on Monday reflects a change in the index made by the CBOE in 2003 to provide a more precise reading on stock market conditions, basing the index on the prices of the more popular S&P 500 options.

The old VIX, introduced in 1993, is based on S&P 100 options, a smaller basket of stocks. That index, the VXO .VXO ,also hit a multiyear high on Monday, closing up 14.95 percent at 59.50, after scoring a new peak of 66.42.

"With today's high on the VXO of 66.42, it is safe to say the uncertainty now exceeds all times in recent history, with the exception of the crash of 1987 when the old VIX hit 150.19 briefly and remained above the current levels until about Oct. 29, 1987," said Randy Frederick, director of derivatives at Charles Schwab in Austin, Texas.

From a contrary view of the markets, the spike in the VIX is possibly a sign that investors have overreacted and the equity market is oversold.

But being a contrarian during the recent stock market decline has not been a winning strategy, said Frederic Ruffy, options strategist at website WhatsTrading.com.

He noted each time the VIX moved above key levels at 30, 40 and 50 readings, the stock market experienced a short-term bounce but the rally proved to be short-lived and the S&P 500 eventually faltered, falling to new lows.

Volatility remains exceptionally high and with the ongoing problems in the credit markets, many would-be buyers are likely to remained sidelined, Ruffy added.

"After being burned so many times during the recent market decline, very few investors are going to dive in and try to catch the absolute bottom," Ruffy said. "Instead, they might wait for signs that volatility is indeed falling and that stocks have found a solid leg to stand on." (Reporting by Doris Frankel; Editing by Leslie Adler)

Source: http://www.reuters.com/article/marketsNews/idINN0633769120081006?rpc=44&pageNumber=2&virtualBrandChannel=0