31OCT2018

Each month, I break down my finances and financial progress.  This serves primarily to keep me accountable.  I hope it also helps others see the power of an income centric approach to early retirement investing.  Today’s report covers the month of October 2018 with year to date updates.

music selection:  “Cult Of Personality” — Living Colour

ASSETS:

Wells Fargo (taxable): This finished the month at 27,992 down from 29,679 at last month end.  That is a 5.68% monthly loss.  Year to date, this account is down 2,689 or 8.76%.

Interactive Brokers (taxable): Here I finished the month at 251,041 down from 50,567 last month.  That is a monthly loss of 16.77% and a year to date result of minus 22.48%.  There is no putting lipstick on the pig.  My picks performed very poorly and are only partially redeemed by 25k in gains over the last two days as the market rallied.

Interactive Brokers (tIRA): This account is also down to 157,703 from 172,215 last month.  The monthly loss is 8.43% and my year to date result is a 3.28% loss.  At least this account is beating the benchmark.

HSA: This account is down 920 on the period to 3,198.  That is a 22.35% move in the wrong direction.  For the year, I am down 252 or 7.31%.  This account is expected to decline a few percent a year (excluding new contributions) as I spent from it for doctor’s appointments and medication, which was the case this month.

Checking: Cash is up to 10,904 from 8,948.  That is a 21.86% increase from last month.  Year to date cash has changed by minus 9.23%, driven by spending and transfers to HSA.

Total investable assets come to 450,838 down 12.72% from 516,568 last month.   The year to date mark is minus 14.87%.  I am down versus the S&P benchmark including after deducting spending.  My worst performance since going FIRE on 5OCT2012.

Don’t forget to see the long term trend at Lizard King’s Transparency Page.

LIABILITIES:

Home: paid

Car: paid

Income tax: I have a 12,945 tax asset on deposit with the service.  Because of the mishap with UVXY, I expect to have a trivial tax liability this year and should even qualify for the maximum ACA subsidy.  Net tax rate could be negative for 2018.

WITHDRAWAL RATE:

I have automatic withdrawals from my taxable investing accounts set to provide a cash income of 25,000 a year.  Against a liquid net worth of 450,838, that is a withdrawal rate of 5.55%.  I earned 2,879 in options premium income during the month of October and am on pace to earn 38,103 in options for the year or 1.52 times budget.  Additionally, my income centric approach to investing includes 30,508 in expected distributions, dividends, and interest for the year or an additional 122.03% of budget.  In the event of a downtown, I should be immune to the need to “sell at the bottom”.  At the same time, I can expect steady and robust growth to keep ahead of inflation.  Together, my budget is covered 2.74 times over by portfolio earnings.  This is a great comfort as the portfolio balance declines with the market correction as I am not obligated to sell shares into a downturn to meet budget.

SPENDING:

Spending was 1,292 for the month, which is well under the 2,000 target.   Year to date, I have spent 21,942 and am pacing 26,330 for the year.  That is 1,330 over budget.  Driven largely by 5k+ spent on Stansberry Research products.  I should not need to purchase more advice in the future thanks to my flexible Choice membership.

OTHER INCOME:

I earned 300 this month or 277.05 after payroll taxes for my efforts at the Memorial Hills UD municipal water board.  It is a small amount but over a year’s time it adds up to another full social security credit.  This should improve my eventual payout when I reach qualifying age.

Devour your prey raptors!

Financial Transparency 31OCT2018

Never miss another opportunity to devour prey!

4 thoughts on “Financial Transparency 31OCT2018

  • November 5, 2018 at 4:47 pm
    Permalink

    It’s tricky to evaluate the performance of a portfolio that spins off cash but changes in market value. If you had an all-bond portfolio, you could just take the weighted average interest rate and largely ignore market values. If you put it all in the S&P 500, the performance of that index could be a proxy for your performance. However, when your short put gets assigned at a paper loss, but spun off cash in the process, you have essentially taken a withdraw from the account that caused a loss of market value greater than the withdraw. For whatever reason, I could not get Excel’s rate function to give me an answer with =RATE (10,2083.33,517877,450838,1,). The simplified approximation is to say: end value plus withdraws minus beginning value over beginning value. By that approximation performance is -8.9%. That’s a YTD number you could compare against other strategies / yields.

    Reply
    • November 5, 2018 at 6:03 pm
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      Frankly, my liquid networth number is personally sort of meaningless to me. I care about my ability generate income in excess of my needs into perpetuity. But I get emails wanting to know how the strategy compares to indexing. It is a fair question. Indexing and selling off 4% annually is the alternative, or more accurately, the opportunity cost of my strategy. If an indexer out there is thinking about adopting my strategy, they need an objective way to compare apples to oranges. I don’t begrudge anyone an indexing approach. There is solid science suggesting it is an efficient strategy.

      Reply
      • November 6, 2018 at 4:17 pm
        Permalink

        I’ve realized market returns are sort of like being paid to watch a line squiggle, and the more squiggling you can tolerate without freaking out, the more you get paid in the long run.

        This is the difference between volatility and risk. Risk is the probability of a bad sequence of returns from which you never recover within a relevant timeframe (i.e. if portfolio performance reverts to the mean in 20 years, your retirement is still toast).

        In your situation, you have accepted a high volatility portfolio designed to support a 5-6% WR. Some massive underperformance years, and sequences of underperforming years, are to be expected, as are the inverse.

        There is some probability of failure, such as a sequence of individual fixed income investments going bankrupt or a wipeout in a sector you have overweighted. I’m interested in how you’re attempting to hedge those risks with long/short positions, fixed income, and speculative lotto tickets.

        Reply
        • November 8, 2018 at 12:29 am
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          I don’t write much about short side investing because I’ve found nobody reads it!

          I have some small hedging position in long puts on: GM, F, THC, COF, SC, and have limit orders open for CONN, and ALLY. And of course, I still have the outstanding VXX traditional short.

          Reply

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