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Financial Transparency as of 30NOV2017

Despite the roaring bull market, I had a down month.

music selection:  “It’s Tricky” — Run-D.M.C.

weigh-in:  209.2 (0.4)

ASSETS:

Wells Fargo (taxable): Down 595 dollars on the month.  I’m up here 1,578 on the year.  Performance is about as expected as it is mostly debt instruments held for yield instead of capital appreciation.

Interactive Brokers (taxable): This is down 3,269 on the month.  As I’ve noted in previous posts, I’ve been pruning the portfolio of losers to harvest tax losses and deploy capital more productively.  The new mark is 308,429.

Interactive Brokers (tIRA):  This account is up 2,152 on the month.  A large part of that was my final UVXY put in this account as partnerships are no longer allowed in tax advantaged accounts at IB.  Except for Facebook, Altria and MORL, the tIRA account is now entirely in property and casualty insurance companies.  Month end closing balance was 162,565.

Checking:  I took a big hit paying for year end real estate taxes and home insurance.  This account is down 2,035 on the month and now sits at 10,583.

Total Liquid Networth: The entire portfolio was down 3,747 on the month or 0.73%.  Annualized year to date return was 15.84% including the 25,000 a year drag from paying for living expenses.  Without the withdrawals, the annualized gain would have been 21.94%.  That is a Warren Buffet like return.  If I can keep it up for 60 years like the master, you will all be calling me Lizard King, the Hot Shot of Houston.

 

LIABILITIES:

No real changes here.

Home – Paid

Car – Paid

I have a tax liability of about 9,500.  That is offset by a prepaid tax asset of 10,000.  I plan to put another 500 towards prepayment in January to cover additional gains in case of a strong Santa Claus rally.

 

WITHDRAWAL RATE:

I am budgeting 25,000 for annual spending.  Against a liquid networth of 512,289 that is a withdrawal rate of 4.88%.  Projected 12 month distributions, dividends, and interest come to 28,600 or 114.4% of budget.  Options income for the month was 5,744, driven largely by UVXY profits.  On the year, I’m on pace to collect 35,212 in annual options income or 141% of budget.  This is the last year I have significant tax losses to capture so my withdrawal rate will increase next year due to needing to put more away for tax liability.  I’m a lizard with a First World Problem.

 

SPENDING:

I really blew past the budget this month by spending 4,165.  I didn’t go wild.  I just had lots of non-discretionary expenses such as real estate taxes and insurance come due all at once.  My modest bill for FinCon17 also came due.  Total spending for the year is 22,600 which annualizes to 24,655.  I look to be coming in just under budget.  Next year probably has a 35,000 budget to cover tax liability.  I’m still trying to wrap my head around what the new budget looks like.

Devour your prey raptors!

{ 7 comments… add one }
  • Chris B December 4, 2017, 9:34 pm

    Nice YTD performance! My 401k at work returned 18%, which predictably beat most of my active investments. It does bring to mind a concern I have though. Living through almost 8 years of a bull market has somewhat trained us to invest bullishly. How would we hold up in a bear market or recession? When is the right time to lower portfolio risk, when such moves have returned nothing but punishment for years? A long recession would be a setback for those of us in the accumulation phase, but what will it be like to live off such a portfolio (selling bonds I assume?)?

    • The Lizard King December 5, 2017, 12:15 am

      Chris,

      I share your concerns. I’ve outperformed in a market where making money is like shooting fish in a barrel. I’m *untested*. I think about that a lot. I take comfort in a few things however. The first is I can cover my budget with just distributions, dividends, and interest. No need to trade at all. This is why I continue to keep a 40% allocation to fixed income. I could have better, maybe even much better results if I swang for the fences with that 40%. The second thing is that selling options for premium income is an approach that actually lowers risk versus simply being long the underlying.

      I’m maybe a little unconventional in this but in a bear market, I intend to continue holding my bonds and sell off my losers. Especially as they hit their trailing stops. I’ll accumulate tax losses to lower my tax liability while raising cash for the inevitable time when the market confirms a bottom with 90 days of upward price action. I will likely deploy some of that cash into deeply discounted high yield bonds. That is a tough sector right now due to some euphoria. But in a bear market, “junk” bonds go on fire sale. You can double your money over a couple years with very limited risk if you stick to companies that show strong collateral on the balance sheet.

  • Rich December 4, 2017, 11:50 pm

    Congrats! Excellent results.

    As your net worth has increased to the point that your annual expenses are nearing the 4% withdrawl rate, do you note any sense of relief at not having the higher hurdle anymore?

    Assuming the bull market will end at some point (I am starting to have a harder time finding things I am comfortable to invest in @ current prices), how do you plan to generate sufficient cash flow? Will you go more to fixed income or sell bear call spreads or have you ever shorted stocks? Do you use any technical analysis at all?

    Thanks,
    Rich

    • The Lizard King December 5, 2017, 12:19 am

      Rich,

      It is kind of weird. I feel relief on one hand but more pressure on the other. I lack the same motivation as before and it concerns me that I might get lazy.

      Cash flow in a bear market is as I noted to Chris in the earlier comment. I am roughly 40% closed end bond funds and generate more than my annual spending budget from dividends, distributions, and interest. I have shorted stocks and have a few short positions currently open. Except for a synthetic short in JC Penny, all my shorts are underwater. I think of them as hedges more than investments though. I may take a significant short position in SPY if the yield curve inverts.

      I use only the broadest forms of technical analysis. There is more art to science in most TA but I find any monkey can identify a trend line. And the trend is your friend.

  • Joe December 7, 2017, 7:56 am

    Great results for the year. When the bear market comes, I definitely will be shorting the SPY and possibly some other indexes. It will be done as hedge and also to try to make a profit. Thanks for the info every month, much appreciated.

  • MH December 9, 2017, 1:54 pm

    Hey LK,

    you know what I am going to ask :). How the hell did you get 5k in UVXY PUT profits? Especially when you reported you had had to liquidate part of the position due to IB not allowing that security in that particular account…

    • The Lizard King December 9, 2017, 2:01 pm

      MH,

      I don’t count options returns from the tIRA in my monthly summaries since I can’t spend them yet. The UVXY profits in the taxable account were 2815, from a sale on 1NOV2017. That was the two strike sale from the A/B strikes test. The rest was short options on various tickers.

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