Money Mongoose

FS:FAMA not FI:RE

I’m come to dislike the term FIRE. Aside getting into unproductive debates on the meaning and morality of early ‘retirement’, there’s also a separate pointless debate on the meaning of ‘financial independence’ whether a 4% SWR is really safe, or what you are independent from if you rely on stock markets etc.

I prefer to think in terms of financial security and define that as the state in which you no longer feel anxiety or negative emotions related to the actual or potential loss of remunerated work on a temporary or permanent basis.

The second part is instead of retiring early, which comes with quite some negative perceptions and misunderstanding, I instead put FAMA: fulfilling and meaningful activity. This could be:

  • Following a vocation (e.g. becoming the teacher you wanted to be instead of grinding out years as a corporate lawyer only for the money)
  • Taking kids out of daycare and spending more time parenting
  • Dedicating time to charity work

FAMA means different things for different people. Financial security allows them to pursue FAMA without the fear of financial inadequacy.


I lost 4 years

So I took a look at my stock market account and I am down 4 years. Four years of annual expenses. Had I cashed out my account two months ago, quit my job and did nothing for 4 years, I’d have the amount of money left in my account as I do now.

FIRE wisdom says, you need 25x your annual expenses to retire. 4 out of 25 represents a 16% hit.

It’s not great, but I’m surprisingly OK with it. I’m actually pretty excited about the stocks on offer. Facebook is getting a beating and approaching a level where I’m tempted to buy (a year or so ago I planned to buy at $80, but that edged further and further away). I’m not sure it will reach $80, but I’ll be happy to start averaging down from around $120.

CVS and FDX are on sale. Tobacco stocks (MO, PM, BTI) are at bargain basement prices. FQVTF is at a less insane valuation. ABBV is starting to tempt me. There’s actually too much out there where prices are looking good.

I just need to be patient until I get the cash to go out and buy!


Drained

The last few weeks have been exhausting. Work projects have multiplied and gone into overdrive, and at the same time, the baby has regressed his sleeping to waking up every 1-3 hours leaving everyone tired and grumpy.

In the background, my stock portfolio has tanked further. I have mostly been ignoring it due to personal exhaustion but also the exhaustion of my funds: there is no spare money to take advantage of any dip.

The more I think of stock market investing, the more parallels I see with no limit hold’em poker. In this case, I had planned to change my asset allocation to increase the cash component (which is technically negative). However, I did not manage to do this before the recent stock market crash. As in poker, making a bad decision early in the hand leads to difficult decisions later on in the hand.

In my case, I can either push through with the asset allocation change which would mean selling at the current market lows – which is unattractive – or waiting out for a better time to re-balance and committing the sin of trying to time the market and sitting with a sub-optimal asset allocation for longer.

For now, my default position is to do nothing and then start re-balancing next year when income starts to roll in again by putting half the income into investments and half to cash and then re-balancing this way gradually over several years.


Stock market crash

As I took my holidays on an Italian lake, I spent a lot of time hiking, kayaking and swimming. I had little time for keeping up with the news and investments except for a brief minute some days just before bedtime to check on my portfolio.

When I looked the first night, it was down $20k for the day. Another day it was down $15k. Then down $50k. Yikes!

Maybe it was the holiday mood, or the exhaustion from holidaying with young children, but it didn’t affect my mood at all and I wasn’t concerned about this thinking it will be something that I look into when I get home.

All in all, I lost >$100k in that single week! :O Normally, I would find it a great opportunity to buy more stocks, but all my cash is already invested not just now but incoming cash for the rest of the year is already earmarked for other expenditure.

I surprised myself how calm and philosophical I was about this, but do wonder how calm I would remain if the fall continues further and further. As primarily a growth stock investor, my portfolio has been hit particularly hard and a significant exposure to Chinese stocks added further pain.

Right now, my plan is to stay the course. How badly was your portfolio hit and what do you plan to do about it?


Supermicro hack leads to 30%+ gains

If you follow my Instagram account, you would have seen my post here regarding the 40% drop in Supermicro:

Source: https://www.instagram.com/p/Bohm6w2FPiH

I use Instagram to make quick posts when I don’t have much time, but now I can go more into details on my thoughts on this position.

Why I thought the Bloomberg story was bogus

I thought the story by Bloomberg was bogus for a number of reasons, including:

  • The described hardware attack method just didn’t make sense when other better methods were available
  • All affected companies categorically deny the claims
  • There was no evidence presented by Bloomberg at all. Not even a named source

It seemed like a case of bad journalism of possibly even a planted story in the context of the trade dispute with China.

Possibility of profit?

My expectation was that the story was not true, so could I buy the shares in anticipation that the story would be proven false and that the share price would recover? There were still risks:

  • I could be wrong and the story could be true
  • Even if the story is not true, it might not be conclusively rebutted and doubts remain
  • Even if the story was proven to be false, the story might still have an impact as if it were true

On the balance of probabilities, I thought it was worth the risk to buy shares in SuperMicro. However, the position I was willing to take was small. Even without the Bloomberg story, the company has a number of issues including ones which led to suspension of trading on the NASDAQ.


Why Suze Orman hates FIRE

Always good to hear an opposing viewpoint:


High frequency trading and electronic front-running

While I know of HFT and electronic front-running, this is a very interesting telling of the story from an institutional trader encountering this problem and his attempts to solve it.


Jeff Bezos: the stock is not the company

An important reminder from Jeff Bezos that the stock price of the company doesn’t necessarily reflect the underlying strength of the business:


Qualcomm server chip killed by takeover fears and short term demands

Interesting article that shows how take-over threats and quarterly demands of Wall Street can kill off long term investment.

My biggest concern in relation to investment into Intel was competition from ARM-based server chips. While these are still not able to threaten the high performance end, there are a whole class of workloads which could be more efficiently and cheaply performed by high core count, low per usage chips.

With Qualcomm dropping out of the race, x86 remains the only game in town in the near term.

https://www.bloomberg.com/news/articles/2018-09-20/qualcomm-s-bid-to-chase-intel-in-servers-fell-victim-to-broadcom


Buy cheap, buy thrice!

As I grow older, I appear to have grown increasingly frugal. Whereas I once wouldn’t think twice about spending >£100 on meal, or thousands on a holiday, those days are gone.

While an ex-girlfriend might claim this is because I’m a stingy-old git (and there may be some truth to that!) the main reason is that I increasingly do not see the value in a lot of things – or at least don’t see that the value is justified by the price.

While some people like to spend extra to buy quality items that last a lifetime, I like to buy cheap crap from China via Aliexpress. There’s an adage: “Buy cheap, buy twice” meaning that when you buy cheaply, you’ll waste money and end up buying again (next time the quality stuff!). However, I’ve taken this adage, gone a step further and made it a personal motto to live by: “Buy cheap! Buy Thrice!”.

I do this not necessarily as a money saving exercise, but as a learning exercise. When I buy something, I buy the cheapest thing that will suffice. Maybe the tool is good enough for the job and I use it infrequently enough that I don’t think further about it.

But if the tool is inadequate, then I learn what are the short-comings of the tool, maybe learn to work around it and then perhaps get frustrated enough to buy something better. I might iterate this process a few times, so that in the end, I could spend more than if I had ‘bought once’, but for me, the learning process is worth it as I’m learning the qualities and features of the tools that allow me to shop for quality in the future, rather than just shopping based on a brand name.