A good month.

music selection:  “Let Me Be There” — Olivia Newton John

Spending is way over target.  I have unplanned expenses for auto repair, home repair, and the eye doctor.  I’ll have to be extra careful through year end with spending.   The non-profit gig remains on hold pending social distancing requirements.

ASSETS:

Wells Fargo (taxable): This finished the month up 486 dollars at 19,465.  The gain is 2.56% on the month and 33.25% decline year to date. This account also produces $141.00 in monthly distributions, which sweep to my checking.  I’ll be looking for more Closed End Funds to buy in that account as funds are available.

Interactive Brokers (taxable): This is up 11,424 on the month to 158,816 which is good for a 7.75% monthly gain.  Year to date, I am down here by 13.9%.

Interactive Brokers (tIRA): This account is up 7,659 on the month. The monthly gain is 10.01% and the year to date loss is 49.36%, driven by my 50k distribution to taxable.

Interactive Brokers (Roth): This is up 343 dollars to 6,656.  The monthly gain is 5.43%,  and the year to date loss is 51.84%, driven by complete losses for shares held long in MRRL.

HSA: This account is down 295 on the period to 10,860. That is a move of -2.64% on the month and 15.05% gain on the year.  I had withdrawals for refilling medications.

Checking: Cash is down to 9,328 from 10,280. That is a 9.26% decrease from last month and 11.00% loss year to date. Monthly withdrawals from the taxable brokerage are set at 1,500 a month, my target spending.

Crypto: Coming soon!

Total investable assets come to 289,321 up 6.90% from 270,656 last month and down 124,299 year to date or 30.05%.

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 9,865 income tax prepayment asset. This is all held to offset the tax hit from my tIRA conversion to taxable.  I will probably need to make some estimated payments in Q3 and Q4.

WITHDRAWAL RATE:

I am resuming withdrawals from my taxable investing accounts set to provide a cash income of 18,000 a year.  I am going to calculate my withdrawal rate against a tightened budget of (18,000) going forward. Against a liquid net worth of 289,321 that is a withdrawal rate of 6.22%. I gained 2,806 in closed options trades during the month of August and am pacing for covering 236% of 18,000 from options trades. Additionally, my income centric approach to investing includes 17,922 in expected distributions, dividends, and interest for the year or an additional 99.57% of the new budget. Total budget is estimated to be covered by 335.88%. Assuming last year’s spending is necessary, I am still covered.  The options performance is picking up and I hope to deploy some profits into more closed end funds with yield to get my passive income back above budget.

SPENDING:

Spending was 2,707 for the month, which is well above the 1,500 target.  I had to pay the bill on car repairs, home repair, car insurance, and more  I’m pacing 1,727/month in spending so far. I’ll need to tighten things down in September to make budget at year end as Nov and Dec have insurance and real estate taxes due.

OTHER INCOME:

I picked up 300 dollars from my efforts on the local Water Board.  These two items plus cash swept from taxable brokerage accounts come to $1,917 on the month.  I think I can reasonably keep up a $2,000/month pace but I am trying to belt tighten a little until I can trade my way out of a hole.  I am exploring employment opportunities as a contractor or as non-profit personnel.  If I can make 20k in a year as a contract (easy?) that seals the deal.  I prefer a non-profit even it is doesn’t pay well.   I want to feel good about what I am doing.

Devour your prey raptors!

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Financial Transparency as of 31AUG2020

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4 thoughts on “Financial Transparency as of 31AUG2020

  • September 2, 2020 at 2:27 pm
    Permalink

    I wonder if the trend toward zero percent interest rates has changed your longer-term objectives. Previously a bond portfolio was to provide baseline income and the options trades would provide the remainder. However as bond yields continue to collapse, the plan would seem to rely more and more on options trades, which are a bit more variable (see the year 2020). If we have a Japanese style lost decade, and bonds are useless, where will the income come from? Preferreds and some risky REITs are about the only things yielding >5%, but those are arguably riskier than bonds.

    Reply
    • September 2, 2020 at 3:23 pm
      Permalink

      Chris,

      It is certainly getting harder to meet my budget with bonds. My municipal holdings started out paying right around 6% and now pay between 4.5 – 4.7%. This is with NAV up. Low interest rates also hurt the options side of things. One of the things that drives options premiums is the prevailing interest rate e.g. the time value is driven in part by rates. But yes, I have been forced to be more reliant on trading. I’m looking for more individual distressed bonds to fill the void but it is a difficult space.

      One possibility is to give up some near term yield to pick up DGI stocks. Let yield on cost rise until it covers the budget need and trade around the positions with deep out of the money covered calls adding 1.5 – 2.0% in annualized yield to help cover the short fall. Sharp rallies that get you called away are problematic to that strategy. It would be a tough judgement call whether to put more money into the trade to roll up and out when at threat of being called.

      Reply
      • September 2, 2020 at 6:37 pm
        Permalink

        Trying to think of what I’d do in your shoes is what makes this blog so much fun. I’m caught between a conservative survival mode and a bold do-or-die bet.

        (A) Load up on REITs, preferreds, and maybe certain foreign funds like EWU that yield around the withdrawal rate of 6%. Hold this until the next correction, if it occurs. Maybe sell some puts for a 1% per month return.

        (B) Go for capital appreciation while living off the stash for a few months, and going back to work if that gambit doesn’t pan out. This would involve buying 2x or 3x leverage with long calls on the Nasdaq, a bet that the tech rally will continue as it did in 2010-2011, another time when QE was driving asset values up. This was the right answer for the last few months, so it could be MSFT and AAPL are heading to PE’s around 45 before it is time to bail out of the trade. A couple years of 20% returns could do wonders.

        The problem with (A) is that it only prolongs the reckoning and does not solve the problem of needing a bigger stash in a ZIRP world. Perhaps with (A) you hit a bump and end up back at work a few months/years later than if you lost playing (B) but you still end up at the same place in the end – B’s worst case scenario.

        (B) has the potential to rapidly change your financial fortunes but it could also wipe you out and send you looking for work within weeks. Plus you’re paying time value instead of collecting it, and at VIX > 25! Yet what other choice besides being bold gets you back to FIRE?

        I’m not sure a hybrid approach is really feasible, but either approach is doable while also working FT because they do not depend on frequent options trading. A FT job while pursuing either (A) or (B) might rebuild the portfolio within a couple of years.

        Reply
        • September 3, 2020 at 12:04 am
          Permalink

          March made me nervous and I think a little irrational. I was never in jeopardy of needing to go back full time. A PT barista gig would fill the gap just fine. I’m currently at 99.57% of budget covered by passive income. That will take a bit hit on 11SEP when my NLY shares get called. But its really no big deal. I will write out of the money puts that yield more than the underlying so my net budget needs will be fully met.

          For now, options premiums are fat and I’m making hay while the sun shines. I hope to book some profits and buy some bond and preferred funds as additional ballast. Maybe some more munis as well.

          Reply

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