Three Months and the Kid Thinks He Knows Something

On the 26^th of October (this coming Friday), it will mark 3 months of trading stocks and options online for me. The starting amount was fifty thousand dollars (spelled out for effect as usual). I had no idea what to do, how to do it, or how I was going to do. All I had was a history of investing through retirement accounts and doing quite well for myself (IMO). I was confident, but at the same time very scared – I know this doesn’t make sense, but this is how the market makes you feel. At the very minimum two faced.

First, the results: After losing six thousand dollars today my account balance is roughly at eighty five thousand dollars. That means I have made thirty five thousand dollars in three months. A seventy percent return. Now I’m sure that there are plenty of pros out there that have done better, and I’ve seen with my own eyes the people out there who could have possibly made over two thousand percent return in the same time (which with an initial fifty thousand dollar investment would equate to an even million – ok I’ll stop spelling out now).

To recap from when I originally posted this – I felt I could beat the 8.74% interest I would be paying on my home equity line of credit. And I’ve done it – for now. And since I had dreams of grandeur, I figured I should take a shot at getting to my destination as quickly as possible.

My first goal was to beat out the interest rate I’m paying on the money I borrow. Once that goal was surpassed, the next stepping stone would be to beat the average for the market at 12%. (For those of you invested through other “professionals” – please ask them if they are outperforming the market and by how much – I’ve heard that 80% of fund managers don’t). My next goal was to reach and possibly surpass what I will continue to shoot for every year since my first full year investing: A 34% annual return.

This is one of my favorite calculators: http://cgi.money.cnn.com/tools/savingscalc/savingscalc.html

Check it out when you get the chance. It’s amazing what putting 15% of your money away a year and the possibility of earning a 34% return every year can get you. The goal is to make enough money so I can retire and live off of interest for the rest of my life from 42 onwards. That’s 16 and a half years from now. Not saying I’ll stop working – but maybe I’ll work for fun instead of having to.

Now on to what I really have wanted to write about (it took me freaking 5 minutes to find that calculator – someone better use it).

Over the past 3 months, here are a few things that I’ve learned. And a few things I’ve wanted to teach myself. So when I write “you” here, I’m not referring to you – it’s just something I’d like to read for myself when I go through another day like this, and remember where I came from – and hopefully how much I’ve grown.

-First and foremost, I’ll probably end up stealing from the best. Because I feel it is probably the most important thing about investing – Warren Buffet’s rules:

Rule #1 – Don’t lose money

Rule #2 – Refer to Rule #1.

Easy peasy right? Wrong. On August 16^th 2007, a day I won’t soon forget – my account balance dipped below the $50K mark, and in to the red. Although it was intraday, I was down about 40% of the way to the MAXIMUM loss point I was allowing myself (and still allowing myself) of $10K. That was a scary time. I don’t ever want to live through that again – although I’m sure we’ll have plenty more days like that over the next 17 years.

-Which brings me to my next point: Protect profits. Make them, keep them. I gambled yesterday and got killed. 2 weeks ago I was at a profit of $46K. Less than 8% return away from 100%. And I got caught with how much capital I had to swing around. A bit of hubris and they all start to fall.

-You’ve got to have guts of steel (or balls – or something) in order to play. Big returns require a lot of risk. You have to have conviction the reason you’re making a certain play will work out. I don’t know how many times I’ve sold way too early only to kick myself a week later for missing out on more profit. And I kick myself for missing profit more than I congratulate myself for getting out while the getting was good. So over the past 3 months I know my plays have been solid. One thing I’m going to try to teach myself is to let enough of a position go to where I feel comfortable in just letting it ride. I’m too quick to pull the trigger on an entire position as soon as I’m in the green. I would’ve been a much richer man if I had left some scraps on the table for myself to eat later (terrible – makes no sense, but I’m leaving it).

-Options are not for the faint hearted. Neither are hot sectors, or Chinese stocks (as of today). High flying stocks can move 20% in a day – in either direction. And you can lose 99.9% of your option value or at the same time make a 7000% return. Welcome to one of the most ridiculous games on planet earth – gambling with ridiculous amounts of green.

-Picking stocks for me is easy (I laugh). First check the fundamentals. Jim Cramer says that growth to wall street is like crack to addicts. Revenue and profit growth, and hopefully a company that’s on it’s first leg of the growth cycle – you’ve got a winner right there. Compare it with the price to earnings though. A good stock should have a P/E ratio of at most 2 times the percentage of revenue growth. (The sweet spot is around 1.5 times for me). The current average is a P/E ratio of 22 across the entire market. High growth stocks deserve high multiples. After comparing with the average, compare with competitors. One of my favorite plays I’ve made this year is investing in Hewlett Packard (and I just bought one of their laptops – awesome). The growth looked good, they make a good product – and their closest competitor (at the time I bought HPQ), Dell was trading at a 10% higher P/E multiple than them. If that doesn’t scream “FREE 10% RETURN!” I don’t know what does. After doing your comparisons, watch the stock. Don’t jump right in. Understand the movement – where it’s headed. A lot of emotion drives the price of the stocks – so get in tune with that. I’ve seen a lot of good companies with great fundamentals but wall street just hates them. And it might be awhile before that sentiment changes. Each stock has it’s own story – understand it as best you can before risking any money.

-Price. I’ve made plenty of plays these past few months just based off of price. Stocks will oscillate with no news. You can make plays on price alone. Game Stop (GME) has climbed and slipped between $54 to $60 and back down to $55 over the past month. Make 3 moves at the right time and you’ve got a 30% return (or more) and the stock hasn’t moved really at all. Buy and hold my ass. Set price points for yourself though. Entry and exit. If you’ve made a profit and if it still doesn’t hit your price point, you still have my blessing to sell (or buy to cover). A stock’s price should never be anything other than what it currently is. I believe in an efficient market where all knowledge is priced in to a stock. So when I hear that HPQ should be a $54 stock today – it bugs the hell out of me. People will pay for a stock what they believe it to be worth. Nothing more, nothing less.

-Making money is better than making no money or losing money. So what if you made only $5 in the market today? That’s more than you had yesterday. Enough said.

-Build positions in a security. Buying it all at once ties your hands if in case the position starts to move in the opposite direction you expected it to. I give myself typically 2-5 purchases at most. Buying 25% of what I want my maximum holdings to be. Then possibly doubling that position, then doubling again if need be. Building in a good average price will make for more profit when the position starts moving in your favor. Remember, it’s not a realized loss until you sell.

-Respect the market. On a given day, an average of 70-90% of stocks will move along with the market. Regardless of what high flying tech stock you own, if the Dow is down 400 points that day, I’m willing to bet (and give you odds) your stock isn’t going up. Be ready. At any time the market could fall out and if you aren’t paying attention you might have just lost your shirt (along with possibly your house in my case). Respect is definitely required – but I don’t feel that fear is necessary.

-Don’t waste mental capital. As much as I write this one out, I’m not sure if it will ever come true for me – or stick for that matter. Remember the “kicking myself” I wrote about? I do that way way way too much. Always telling myself that I sold too early – or that I should’ve sold. Or that I should’ve bought more. I need to learn to move on and stop wasting my time on the past. The market is lightning fast and there is opportunity for profit in every corner. Wasting my time thinking about how I could have had some ridiculous amount of profit in a play I screwed up on 2 weeks ago is not going to help me make profit now. Learn the lesson. Move on. (This is probably my #1 biggest struggling point right now)

-The definition of “smart” to me – in regards to the market – is seeing something way before the other guy does. Or, I suppose, the other guys - the masses. Spot your trend or the movement in a security even days before everyone else does and you’ll make enough returns to possibly go pro. Everything in the market is connected. Connect the dots before anyone else does and it’s free money. For those that realized what was going on with the sub prime market – the stated income, no money down, negative amortization loans – there were people out there who knew that sooner or later all of them would come crashing down – just a matter of time. The guys that saw that coming probably just bought themselves another Manhattan sky rise, or possibly a bigger yacht (if that’s your type of thing). Get in early, have conviction, let it ride. That basically defines this blog post.

-Research. Read as much as you can about stocks you are interested in. Understand what everyone has to say about those companies – and check your own bias against theirs. Think for yourself. Following the crowd may end up getting you trampled if they turn quickly on you and you’re not paying attention.

-Investing is a marathon, not a sprint. I have at least the next 16 years of my life to reach one of my goals. But between now and then is a lot of time. Things will happen I can’t control. Time will change almost everything. Not every day will be a homerun, or even a single. Some days I will lose, and I expect to lose. The market has made me feel rich like a king on a given day and the next day made me feel like a complete idiot novice who should quit while he’s ahead. I do hope that over this marathon, the steep climbs and the huge drop offs will start to subside as I get better at this. I’m not sure my knees (or my heart) could take much more of the swings. But I do know that as long as I continue to keep my head up and look at the big picture, I’m sure I’ll do just fine.

Good luck to us all (especially me).

*Sigh*

C’mon.

Think of something to write.

I know that I’ve had so many ideas for subjects, topics to talk about, things to be celebrated and other things to complain about. But every time I thought of something to put in here, I thought to myself how I probably couldn’t put more than a paragraph in to it. And therefore couldn’t live up to some ridiculous standard that I set for myself in this blog that each post I put up has to be at least 3 pages long, single spaced.

Last week I noticed I was starting to nap a lot more than my usual amount. (Which is about 2 naps per week – Friday afternoon and Saturday afternoon). And then when coming out of the nap I wasn’t really able to jump out of bed like I normally do. Usually when coming out of bed, I am able to just stand up, get my clothes on, stretch, maybe yawn…and just go.

Then I noticed the stomach cramps. Then the black stool (sorry, gross, I know, but my blog). And I knew it had come. Just like all the previous years. Just like my other problems – mainly the alopecia.

Every 2 or 3 years or so, the acid in my stomach burns a hole through the stomach lining…therefore creating – you guessed it – an ulcer. I attribute it to stress, I attribute it to not eating as healthy as I should be – I attribute it to a bacteria called “h. pylori” (sp). If you’re really bored you can look it up (on wikipedia) and be grossed out just by knowing me. But it’s something I’ve had since I was about 13 or so – and as much as we try and fight it with antibiotics, it always makes it’s way back in to my life.

So I guess this has turned in to “let’s learn about something weird about Seth’s body night”. Oh well, something to write about. And here’s the main point I want to make: Ladies, I know what cramps feel like. My bleeding ulcer I guarantee hurts about as bad as your cramps do, if not worse. It won’t let me sleep.

I get abnormally tired from the blood loss. Being tired makes me moody. I have problems focusing.

I am a mess.

Luckily I know how to fight it...and it’s slowly starting to work. Take an acid reducer like Prilosec (which is what I’ve been taking the past week) and also take in some iron (from something like Centrum) to help with the blood loss.

But until my stomach stops hurting, it sucks. I know, I know, I should go see the doctor. I will, soon. Of course not tomorrow or the day after that - I’m just so stubborn.

On the way home and on the way to work recently I’ve been listening to NPR. I would listen to it on and off throughout the years – jazz being the first thing to draw me in – but over the past few weeks it has been the only station on in my car. I’ve been thinking about pledging some money to their station (and I’d recommend anyone else reading this to do likewise) because they are a publicly funded radio station. I realized those few minutes of joy I receive getting “enlightened” every day is actually worth something to me.

And they made a good point last night (while I was listening on the way to my basketball game). The cable company tells you how much to pay. And then they basically tell you what to watch (you have a choice of what is available from their lineup). Just like the other utilities. They tell you how much the service is; then they take your money. NPR is free for everyone to enjoy. And they don’t force you to put a price on it. But since both my company and my wife’s company matches the contribution, I’ll be giving NPR a good donation for what I feel on most of the days I work are the smartest part of the day – actually listening to that station. (88.5). Actually, the only thing I don’t like is the Saturday night blues – since I’m not a huge fan of blues. Fun to play, but not that fun to listen to. And who is freaking listening to NPR anyway on a Saturday night?

A nerd like me.

So if you wanted to check it out (if you haven’t already), I’m a huge fan of “All Things Considered”. http://www.kplu.org/home2.html That’s the website for those that would like to check it out/donate. The best way I can put it is that their programs are informative but at the same time highly entertaining (again for a semi-nerd like me). The best mix for something to keep my attention I’ve found.

The reason I wanted to mention NPR is that they’ve been doing an afternoon series on what’s going on in the Middle East. It’s such heartbreaking stuff to hear from the kids caught up in the mess of things – Iraqi teenagers who don’t understand the war and just want to hang out with their friends and play soccer. On the way home today I heard a story about a group of officers serving in Iraq. They were talking about how they swore never to leave a fallen soldier behind. A few months ago, they were attacked and two of the men in their group were held hostage. Since then, they have been searching day and night to find them. They think the villagers know where the men are – but since it has been so long and they’ve had no luck they’re just presuming those two soldiers as dead.

A 19 and 24 year old.

And yes, it is an emotional story – but the reason I wanted to share it here is because it gives me a little perspective. Owww – my stomach hurts. But at least I’m not over there fighting or losing one of my best friends. It almost makes me feel lucky that that is the worst part of what’s going on in my life right now.

The *sigh* though is just how I’m feeling lately. Work has gotten a lot tougher – the stomach thing – and now the cold and dark are back for the next 8 months. On Sunday I took the dog out for a run and everyone was out in our neighborhood – which is rare because most of the time this neighborhood feels like a ghost town. (Suburbs = Isolation) Families were walking, people were playing ping pong and badminton, and kids were riding their bikes. I think everyone realized like I did that this was probably going to be the last day of warm weather we were going to get. I would be pleasantly surprised if I got at least one more day in of being able to run outside in my basketball shorts and feel comfortable.

If that was the last day we get – it was a good end to what was not that great of a summer (weather wise). Thanks for trying though.

For the Employed

Happy 100^th post to me!

Really short post tonight.

Meh, most of my posts are tl;dr anyway.

So for those of you who don’t like to read that much, here’s one for you (I’ll try to keep it under one page or less).

What would you do if tomorrow you didn’t have to work? Or the day after that? Or for the rest of your life? What if you had no schedule to adhere to? No commute? How would that change your life?

Recently I’ve found myself disliking my job more and more. A year ago it was the perfect job. Now it’s about 70% as perfect as it once was. And it’s mainly because we have less people to do the same amount of work as even 3 months ago – and along with that my pay hasn’t increased. Go figure.

But even if I did get a pay raise, what would be enough for me? Obviously I have a number I would be very happy with – but it’s unrealistic.

But the thing I’ve had trouble with recently is how I would be if I was at home every day with the dog. I mean, I’ve been at home sick on my own for a few days and while everyone was away at work I was just trying my best to fill time…

I always said that there were so many things that I could do on my leisure time if I wasn’t working. Go to the gym, take up new hobbies (finally get that piano tuned and finally learn something by Chopin), read all the books I want to, run errands, volunteer – sleep in and nap. But really I’m starting to notice that maybe that isn’t the ideal life. Maybe I actually need work to fill my time? Did I forget how to be a kid during summer/winter breaks? How did those months of time off fly by so quickly?

What if working hard and saving towards an early retirement isn’t what I really want?

Scary thoughts. Think about how life would be if you didn’t work – assuming you didn’t need to in order to pay for life. I wonder if a lot of people nearing retirement feel this way too? As in, “What in the world am I going to do with all my free time?”

Could you think of things to do to even fill three months let alone three weeks of free time (assuming world travel would be too expensive)? Too tough a question to ask me on a Sunday night. Back to work tomorrow…

Rando Notes for September Oh Seven

Darn

I didn’t get a chance to write my standard of four posts for this month. So, three will have to do for now. Actually, there’s no going back on this month. So unfortunately three is all we will get.

I’ll try my best to put up five next month. Or some time before the end of this year. Because I know how I get during winter – all emo and full of things to write about. That’s what the dark and cold do to me.

So to start…

I love the movie “Million Dollar Baby”. It’s not only probably in the top 3 “sport” movies for me of all time for me, it’s also probably in my top 10 favorite movies of all time. I haven’t ever written out the list, so I’m not sure what it would include. That movie was just done so well. Every time it’s on TV I take the time to sit through most of it. And the reason I say most of it is because the ending is so sad to me. If I could pick one movie to have a standard American ending it would be that one. Why not let her just outright win the championship and show her and the trainer in a house together sipping lemonade? Could we possibly get an alternate ending to that movie? I hope there is one.

Anyway, it was on CBC tonight (go figure, canucks) so I had to watch it up until the championship fight…Then I had to turn it off. But before I was writing this, it bothered me because I knew what was going to happen (I’ve seen it only entirely once, and up until the championship fight at least 3 times) after the championship bout. And it bothered me that I knew what was going to happen. And I refused to watch it. Look at me, I’ve got movie denial…such a nerd…

If you haven’t seen it, please go rent it. Even if you’re not a fan of boxing I’m sure you’ll love it. I’ve tried my best not to spoil it for those that haven’t seen it.

You know what I find silly? People that complain about gas prices. We have some of the cheapest gas prices in the world. People should travel over to Europe or Japan and see how much a gallon of gas is there. Then they can come back and be happy about how cheap our gas is.

Here is my rant about gas complainers – and yes, if you use it for small talk, that’s fine. I understand. Just like the weather, almost everyone has to experience it. S’all good. However, if you are a typical gas price complainer here is a list for you:

1) Have you ever figured out what the difference is when gas prices are “expensive” to you versus “cheap”? For me, I consider $2.70 per gallon of premium “cheap” right now and $3.50 per gallon “expensive”. My car takes 13 gallons of gas and I fill up every 2 weeks. Over an entire year the difference for me between what I consider a “cheap” price and an “expensive” price is: $270.40. For the math nerds out there (like I used to be): (52 weeks per year / 2 weeks) X 13 gallons X $.80/gallon. That’s it! $270 a year! You probably spent that much drinking or smoking or gambling in a month! What the hell are you complaining about $300 a year for!

2) If you seriously are complaining about gas, you either a) drive a gas guzzler or b) have a ridiculous commute. So c) go get yourself a more fuel efficient car (that’s probably better for the environment anyway) and d) move closer to where you work, or drive less and carpool or ride the bus. Again, this is $300 to maybe $2000 a year we’re talking about. In my opinion you shouldn’t be filling up your gas tank more than once every 5 days. And if you are then you need to get a bicycle or something.

3) Darn, I wish I had another point. Look at me, I’m complaining about complainers. I’m going to shut up now.

What’s the deal with Olive Garden? They know everyone goes for their endless salad and breadsticks. And they advertise that “when I’m there I’m family”. Well, when I eat with my family I eat until I am sick usually. And I don’t have to wait. The food is on the table, I can grab whatever I want and munch down. Endless salad and bread sticks…please. I’ve noticed with the breadsticks they’ll start you off with 150% of what you would like. 2 people in your group? Here’s 4 breadsticks. 4 people? Here, have 6. But after that initial bread stick run? The amount of stickage diminishes. Suddenly you’re at a 75% level. 2 breadsticks for 2 people? C’mon! By the time you drop them off they’re gone already! 3 breadsticks for 4 people? That’s just not right.

Oh and the salad. Seriously, count how many times you get salad when you go. I’ve found that that third salad is almost impossible to get. Like the breadsticks they come out fast and full the first time around. Then the 2^nd one barely comes about 25 minutes later. And the third one I think they’re just hoping you’ll leave with your andes mints and forget about the extra salad. Seriously, the advertising is false. Change your shit Olive Garden. And quit putting hair in my fettucine alfredo. Ok thanks.

Honestly, I believe that somewhere in the kitchen they have a graph of # of breadsticks to be given/amount of time to wait for each salad bowl vs. # of people per table. They say they send people to cooking school in italy when they become chefs for Olive Garden. I believe that they just send them to Shoreline Community college to get them to memorize this graph. Boo on you guys, give me more breadsticks. $15 for pasta? That alone is worth my proper fill of endless something. Jeez.

Do you ever wonder about where you would be right now if you stayed with a certain someone? Of course, there are always reasons why one relationship didn’t work out over the other. But on drives home at night on cold nights like these my mind begins to wander. Where would I be right now if everything had worked out with one of my exes? For some reason the image I keep getting is renting some apartment near or in Seattle. And not doing the job I’m doing right now. The thing I guess I keep questioning is whether or not I am happier in that imaginary “what if” life – but I can never know because I’m not living that life. Eh – just messing with myself.

I have a $50 gift card at Amazon that I got for doing this wellness assessment thing. Having money at amazon is so tough. Literally you can buy so much – there’s so many cool things on that site. Books I want to read, DVDs I want towatch, music and random pieces of junk I think would amuse me for more than their worth…It’s been tough. I’ve had the gift certificate for the past 2 weeks and can’t make my mind up. I’ve spent about 6 hours on the site just browsing, reading reviews – and yes, I am crazy. I write myself notes about what I want and why. And then I get to thinking about it and maybe I shouldn’t buy it…so I talk myself out of it…out of spending a gift card! Seriously I should go see a psychiatrist…

Halo 3 came out this past Tuesday. I traded in a few games for it and only paid $10 to get it. I am happy that I only had to pay $10 because for me, that’s what video games are worth. On Saturday during the day while I was looking for things to do (since the Huskies played that night – Way to go Russo, fumbling that punt return! Jeez – Locker connect more passes and we win that game! We were so close to beating #1 USC, but lost 24 to 27) I pulled up my Halo 3 and could only put in about 30 minutes of it. I hate playing by myself. I hate when I feel like it’s me against all of these enemies. Luckily they’ve got a co-op program where I can play with my buddies online and then I don’t feel so lonely. How did I get through this as a kid all cooped up in my room and playing video games on my own? I’m so dependent on human interaction now…

The shin splints are back again. I am frustrated with myself because I know I won’t be able to go through with my new year’s resolutions. But rarely do I actually attain them. They’re just nice to think about and push for. This year, I wanted to finally consistently dunk a basketball. I had this idea of doing all these plyometrics (sp?), get signed up with a coach and everything and increase my vert 4-5”. It never happened. And yes, I do have 2 months left…but c’mon! 2 months! Turkey is coming…no way I’m going to fly with a turkey in my belly. My second goal was to run the Seattle marathon. I haven’t run longer than 5 miles since about last November. I suck. I’m playing in 2 basketball recreational leagues and one soccer league and my shin splints came back. I love the leagues – they are the reason I run actually – and right now just playing 3 nights a week is enough for me. It’s hard to get up and go for a run when I know the next day I’ll be sprinting up and down the hard woods or turf. I know, plenty of excuses…but I promise I’ll get one in before I die. There, that’s a good enough goal for me.

I sat here for about a minute in silence trying to think of at least one more thing to write and I couldn’t come up with it. There’s the investment stuff but I find that kind of dry. So for now, goodnight.

Soul Killing and Muted Surroundings

This is going to be a somewhat depressing post. But I don’t really care. Because I can’t really afford a psychologist. Nor do I think many of my friends understand. So, the best I can do for myself is this. Write it out.

I should’ve known. I thought I knew. But obviously not. I’ve been through days like this before, but today stung extra for some reason.

What I’m getting at is this: Today, in the stock market, I lost more money in my stocks than I’ll make in a month at work. And I’ve lost more in previous days. Intraday once I took a twenty one thousand dollar swing down. Spelled out for effect. But I didn’t sweat it.

And I’ve still got way more than I need. I’m still up a ridiculous amount. Beyond my wildest dreams. But for the first time I feel like I made a real mistake. I bet against the market and it whipped me. Two put options on Lehman and Bear Stearns. Two companies I thought were going to report terrible earnings because of the sub-prime mess and then get kicked again with either no rate cut, or a rate cut that wasn’t enough.

I saw it coming the whole way. These financials were too big to let the puny sub-prime mess really slow them down. I was thinking way too US based and not enough globally. Regardless, Lehman reported better than expected (bad instead of terrible) and then the Fed continued to cut rates 5 basis points. The double whammy. The stocks shot up and I was trying my best to bandage the bleeding.

And the thing is, when you’re wrong like this, you see immediate results. That’s the problem with the two things regarding money I’ve come to love the most…poker and the stock market. Maybe I should stop playing both at the same time. Maybe that’s too much for me?

Make a bad read against another player on the tables? Say goodbye to your entire chip stack. Make a bet against the market and it shoots up 330 points? Same story.

But the key in both is to not get down. The key in both is to play the game with high quality moves and in the long term be a winner. Even a 51%/49% edge is large enough. However, there are days like today when it seems like everything is moving against you. A poker player that plays “on tilt” loses their mind and gets destructive. I felt a bit of tilt today and started buying things I shouldn’t have which created further losses. Fortunately in poker I’m not betting the house. Unfortunately in the market, I am.

So I was thinking tonight in the shower (where of course my best thinking is done), maybe I put too much on the line. I’ve been feeling way too stressed out by this whole thing, so maybe I should take it all out and just sit back for a little bit. Maybe it wasn’t worth the money I was pouring in to it.

But I know I would miss it. And I know I would crave it. My retirement accounts aren’t enough for me now. Or maybe I’ll look back on this post and wish I had quit. You know the last time I was thinking about this is when I took that huge twenty thousand dollar dive…and if I had jumped off then I would’ve never been where I am today.

So here’s the catch-22 to all of this: To do well at either (specifically the market now) you have to play without emotion. This is the problem. I am not an emotionless person. I start to think about those 20 or so odd days. All those days of waking up at 5:40 am. Getting dressed. Micro waving my lunch. Sitting in those uncomfortable chairs in front of a monitor that is too small for me. For what?

For less than what I lost today in the market.

And right there is where the emotion hits me. I just die inside. My soul dies. On another screen on my laptop with CNBC playing in the background as the market is skyrocketing upwards, the poker table is flashing. It’s my turn and I’ve got 9 2 off suit in the big blind. Check, check, fold. How much can I win playing this anyway? $100? What’s $100 to me right now?

I start to lose sense of reality. And I try to find things to ease the pain. Try to take solace in anything. I watch recordings of my favorite comedy shows. Play with my dog. Hug and kiss my wife a lot. But hardly any of it works. I can’t separate what I do on a daily basis like this and my leisure time. I should be able just to turn off at 3 pm when I get off of work and just let go, relax, and not think about anything.

But that’s unrealistic for me right now.

Today I burned on the couch. Slumped over. TV on. But I couldn’t hear it. During dinner I don’t really think I said a word. Everything was in a haze, and even writing this right now I’m considering not posting it because I can’t figure out exactly what I’m writing or where I’m trying to go.

I wanted to be the cold, heartless, greedy bastard who didn’t care for anything other than the bottom line. I thought I could train myself to be that way. Uncaring about anything else other than my return. On nights like these, it seems pointless to try.

With poker, I got to a point where I was finally comfortable. I can now play at limits where I don’t feel huge swings of emotion. But when I do play at those limits, I feel like I am wasting my time. What fun is it to not feel anything? Right now, in my head the little voice is screaming, “This is just like a drug addict…always searching for the next high…the higher highs”.

And it’s exactly right.

I am going to admit to myself right now…In the stock market I am playing way over my head. In Vegas with poker I usually play over my head. But with Vegas I can leave. And I only had as much cash as was in my bank account. The stock market can take my house if I don’t wake up and start playing properly again. Well, not really take my house but put me in to some proper debt for the next 15 years. Side prayer: Dear Lord, please give me the knowledge to stop when I know I can’t lose any more.

So here I am. Scared, vulnerable and on the verge of an ulcer. I have a hard time getting to sleep, constantly thinking about moves for tomorrow and betting on earnings announcements and interest rate movements. I honestly think that there are a few select people out there who are fearless in these situations. They wake up every day in worse situations than me with more on the line and they come through without a scratch. I’d like to meet some of those people. Ask them where they got their guts.

Because right now I’m in need of some.

Or maybe those are the folks that got eaten up today. The guys who are picking up the second job as a night janitor because they took their shot and missed. I will do everything necessary to not end up like them.

Tomorrow’s another day. And at 6:30 am PST it’s back to battle for me again.

*deep breath*

Gender Speak

First off, I am not apologetic about anything I write here.

If you are offended, or feel that I am generalizing, stereotyping or just plain stupid that’s fine.

The fact that I am starting my blog post like this should be enough by itself to warrant your further reading or not.

Ok, now that the disclaimer is over (can’t believe I even write stuff like that, but whatever) I can continue on with my post.

I honestly can’t believe I haven’t written anything about this before. However, I didn’t read through all of my random notes, but I definitely know I have thought about this, and expressed it to plenty of people before.

This post came about after 2 things happened today. First off, this hilarious article from The Onion:

http://www.theonion.com/content/opinion/bro_youre_a_god_among_bros

And secondly, a discussion I had with a female coworker regarding one of her female friends.

She was complaining about how she hates to hang out with this female friend of hers because the friend dominates the conversation. And how she always interrupts my coworker as soon as she starts to say something.

So I told her that she should say something to her about how she feels. And she said she wouldn’t do it.

Which brings me to the point of this post, my theory about men and women – at least men and women near or around my age group.

I believe that in a majority of social groups today, in the 18 to 30 year old category, I find that the glue that holds together these small social groups together is the men of the group. In almost every “friend circle” I have been involved in (not many) and the other ones that I have seen (again, still not that many), the men of the group are the originators – and the women kind of just tag along. They are either girlfriends, or friends of one of the men, or maybe you’ll get that one instance of the girl like PJ from the show “My Boys” (love the show) where she’s just “one of the guys”. In my opinion though, becoming “one of the guys” takes a lot of time and history – it requires a lot of history probably, and more than likely being a tom boy during developmental years. (Not a bad thing).

Some of you may be wondering why I have this theory about social groups, or may be agreeing with me about how social groups in our age range are formed. I think my female coworker provides me with a perfect example of why groups of women more than 2 rarely work.

Well, actually before I get to that, maybe I should just dish up the prime rib before I get to the mashed potatoes and grilled asparagus…

Gender speak was one of my favorite workshops I’ve ever gone through. And go figure, it was all done while I was at work.

Gender speak was a workshop which was supposed to teach us how to successfully deal with the other gender in the workplace. Want to know the only thing I remember from it? And as another disclaimer, I’m not even sure if this is right, but here we go:

Women create a level playing field. At it’s most basic, let’s take Barbie dolls. Little girls play with Barbies and they share. I can just see my sister now (who wasn’t a big fan of dolls – she was actually the tom boy and still today doesn’t get along very well with other women) trying her best to share with a neighbor girl all of her Barbie dolls.

One of them could be Barbie while the other one was Malibu Stacy (was this a Barbie product? Sorry Mattel – lead killer – if not) and guess what? They could ride in Barbie’s hot pink convertible to the mall to talk to Ken! Everything was happy go lucky and everyone was on an equal playing field and as long as things were in balance and harmonious then there was nothing to worry about.

On the flip side, we have the men (boys). The boys my age played with transformers. G.I. Joes. He-man characters. And for each “good guy” there was always an opposite (and now that I look back on it equally awesome) “bad guy”. The decepticons. Snake. Skeletor.

And if you had more than one boy playing, you could never both be on the good side. One had to be He-man on his mighty cat and the other had to Skeletor fighting over the castle of greyskull.

And dependent upon who argued the best, or maybe who got hit with a rock in the head first and went crying home to mommy, that’s who won.

See? Obviously I didn’t learn much. But here’s what I garner from what I remember: Men (boys) need that kind of structure to their social life. They need to know where they stand or rank in a hierarchy of people. Women (girls) need that structure too. However their structure is more flat and they don’t mind if Malibu Stacy wants to drive the convertible back home from the mall instead of Barbie…even though it is her car.

So how have I applied this to my professional career? No idea.

But just looking around at the guy friends I have, I realize that nothing really has changed since we were little kids. But for women, I think they’ve lost their way a bit (which is why I think that men are the glue that holds most of our social groups together).

Let’s start with the men - since I think I am one – and since I know our subject matter the best. By saying that “nothing has changed since we were little kids” I mean that instead of Transformers we have Fantasy Football. Instead of G.I. Joes we have how many shots of alcohol can you throw down in a night without puking?. Instead of He-man and all the other action figures we now have all the toys in the world – gaming consoles, huge TVs with surround sound, fast cars…you name it; I’m sure at least 2 guys are competing over how much one has of it over another guy.

And it’s not even that it has to be materialistic. I’d like to think that I know where I stand with my guy friends and what they all think of me. We all have our different strengths and weaknesses and at all times we’re pointing them out to each other. One may be exceptionally good at baseball, while the other basketball, while one excels at academics and the other is great with the women. And the thing is, we all, as a group of guys, understand this. So that when one of us steps out of line and thinks a little too highly of themselves (which I tend to do often), the group can come together and knock them down a notch – therefore restoring order to the male group hierarchy.

And that hierarchy is what holds it together in my opinion. The things we compete at are just the fillers to continue to hold those spots in order. Because without the order, you have a bit of chaos, which is what I feel women in our age group have gotten themselves in to.

Before I continue on with the women, I’d like to say that men’s position in the hierarchy is not defined in stone. At any time they may move upwards in a certain aspect of their lives, however it will first take a lot of work on their part as an individual, and second it will take the acceptance and recognition from the group that the individual has changed and raised (or lowered) their status. Without both – chaos again.

Now women. We live in a world where comparisons are constantly being made. And in the world that I live in, because of these comparisons, it breeds a better “comfort” zone using the social hierarchy that men adhere to. But remember, little girls wanted things to be fair and equal. Everyone on the same level. But what happens when the levels are strikingly different? What happens when one girl starts to wear Marc Jacob’s sunglasses and citizens jeans? At some point at least one of the women in the group will end up smarter, more beautiful, or have more things than the other women in the group.

And unlike the men, who would typically confront this outlier with verbal barbs and blatant taunting – they tend to just sit back and listen…and smile...and avoid confrontation. Which is exactly the reasoning why groups of women can’t really work in the long run – or why they can never feel “close”. I’m not a woman, but I believe I’ve seen this happen so many times. For women in my age group, it’s almost required that you dump on your so-called “friends” behind their backs. Because it would rude to do it to their faces right? How on earth would you get closer to the “friend” you really want to be friends with unless you share a common thread? The common thread of knocking on another girl because she’s obviously tried to raise her status within the group without really notifying the other girls.

Everything else being equal (in a woman’s world) the only thing left is to differentiate you from the others. Because there are still women out there who are willing to play like girls, and women that have moved on and created their own hierarchy, like the men. And since not all women subscribe to the same thoughts of their social group, you’ve got a real disconnect.

What used to be such a close knit group of girls in high school (or even junior high) has now split in to 3 or even 5 groups of friends – in as small of groups as 2. And the ugliest part of it all is that you’ve got them all smiling and lying through their teeth whenever they all get back together.

I honestly would hope that men aren’t like that. If I don’t like you, you’ll know it. Shit, I don’t even really like some of my guy friends, and that actually makes for a better relationship between us. But for the guys I am really close with, I think we all have a general idea of where we all stand at a given point. Order and peace.

Anyway, I could go on with this subject, maybe I will at a later time. For now, I’m just going to end it abruptly here. I think everyone reading either gets what I am saying or thinks I’m a complete idiot. For you women out there, look at your social groups and try your best to figure out what’s going on. It might help you avoid social turmoil (if that’s not your bag). For the men: $20 bucks says I can beat you at a round of 3 par at Greenlake. Holler. (I can’t believe I ended a post with that - /dork)

Allergic to Retail

I hate the mall.

I have plenty of allergies. Dust, pollen, peanuts…and you know those people who claim they are “addicted to retail”? I am their opposite.

Flat out hate. Literally it puts me in a bad mood whenever I come close to it; know I’m going there, or worse have to sit around while someone is shopping.

And it’s not that I really hate shopping that much. It’s just that I hate the malls around here. They lack imagination. They lack originality. And the people are just disgusting.

I just love to look around when I’m there (which thankfully is on average less than once a month) and imagine all the financial standings of everyone around me. I like to think that at least 30% of the people I’m looking at are shopping with money that isn’t close to being theirs. The type that can only afford the minimum interest payment on their 24% APR Nordstrom’s/GAP/Banana Republic/etc. visas. Or less! And they think they’re getting somewhere.

These people talk as if they will die if they don’t get a certain style of jeans. Or the newest fall line, or this year’s hottest accessories. I have to admit - at the least they are keeping this capitalistic economy afloat. All the billions of dollars companies are spending on marketing to them is obviously working.

While living in Fremont before taking the bus downtown, I’d always look at this graffiti that has stuck with me for years. It read, “Consume less, live more”. And I’ve honestly tried to do that. And I hope that there are a lot of people out there who try to live by that same statement. If I purchase something it’s typically for utility. And I agonize over every discretionary purchase. Recently it took me almost a month to purchase my laptop because it took me that long to admit to myself that I needed it enough.

I still wear clothes from 6^th grade. Back then, all the rage (at least from what I saw/what I wore) was to get things oversized. Guess what? All that buying of extra large clothing fits me now. And I’ll be the first to admit - I have more clothes than I need. But the only clothes I do buy? Shoes. When the soles wear down, or there is a hole in the shoe, it’s time for me to get new shoes. When was the last time I made some major purchases of clothing? April of 2005. More than 2 years ago. And what was I buying? Business casual for work. I didn’t have any. And my job required me to wear it. And more than half of my stuff that I have that is considered business casual is hand-me-downs from my dad. The other half? Christmas and past birthday presents. My parents are very good about buying me the necessities – underwear and socks. Since I’ve got what I need as far as clothing is concerned, I never feel the need to keep up with “style”.

This is all based on the fact that I’ve always thought that if someone is going to like me for my material possessions, then that’s probably not a relationship that will be lasting very long. However, I will admit that at times I do feel a bit “out of style”. But as soon as I see those price tags in the stores I’m reminded why I’m so cheap, and why I refuse to buy anything without analyzing the cost/benefit of the product. And most of the time, there is no benefit. I’m not trying to impress anyone right now, and really I shouldn’t have to (nor will I).

While waiting on a mall bench the last time I was there (and I suppose the main reason for this post) I heard a group of teenagers talking together as they were walking. They looked about 13 or 14, and the subject was cars.

One of them said, “Well, I want a BMW.”

“You can’t have a BMW – I wanted a BMW!” the other friend responded.

“Ok, well fine I guess I’ll just go for the Mercedes then”.

Seriously? I couldn’t believe it. I honestly think that there are just so many people out there like this. Maybe it’s just the kids? Naw, I think there’s more people out there like that. Anything to own the car of their dreams. Living with mom and dad at 27 and 3 maxed out credit cards in order to lease the latest 5 series. But they’re happy right? For their sake, I really hope so. I just wanted to stop every single one of them and ask them about their goals/plans for life. Ask them how they were doing in school (if they even cared about school) if they had a plan for higher education, and what they were going to do once they got out. How in the world they were going to make all this money so that they could afford those cars. Sure, they were probably just dreaming aloud, but since there was no laughter within the conversation I only have to assume that these kids really thought they would own these cars soon. For their sake, I am hoping that mommy and daddy won’t be so kind. In my opinion giving children everything they want sets them up for failure later. They’ll expect to just get things without actually working for them…

Maybe I’ve just learned to think a lot differently regarding material wealth than others out there. Or maybe I’m an early adopter to semi-minimalist ideals. There’s a certain point at which I look at people and realize that maybe they’ve got some major money backing them up. When I see exotic cars, classic cars, or just anything top of the line luxurious – I have to draw the line at that point. At some point a person doesn’t front about how much money they have or how much they make. But for every person like that, in my opinion there are 7 or 8 people doing the exact opposite. Putting on a complete front. Sucking up every last dime to hopefully fill some sort of void.

And to those of you who are doing that, the mountain of debt you’re building has a peak. Good luck to all of us over the next few years as this credit crunch might really hit us hard. One of these days, those 0% APR for 12 months, $0 transfer fee cards is going to run out. And when it does there’s going to be plenty of people scrambling to get rid of things they thought they needed. I hope you’re all able to either return the stuff you’ve purchased or pawn them off on Ebay. So that the next time it seems like there’s free money to go around you’ll have learned from this time around and use more discretion in the future.

Consume less, live more.

I’m trying.

Happy Anniversary

In less than a week it’ll be one year that I’ve been married.

Wow.

Now I know how our parents, and their parents made it 40, 50 or even more years as married couples.

Because it flies. And yes, at times it crawls. But on nights like these, you tend to wonder what happened to a year.

I was looking back over my blog for what I wrote in September…nothing. Well done myself.

It’s ok – I’ve got enough pictures from that month and the wedding to fill up volumes (and they do).

I don’t claim to know much about how a successful marriage should be, or should work, but I think I’m trying to teach myself a few things, or maybe learn things from myself from writing them out here. I don’t really have any other way to lay them out properly…eh…anyway.

Advice, Comments, General Sharing of Self Experience and/or Knowledge:

When people ask me how married life is, it’s really no different. Especially if you were living together before you were married. And honestly, I wonder what couple doesn’t live together before they get married. I would actually find that kind of weird…I mean, I would want to know how my future spouse lived in close quarters with me before I could decide whether or not I could spend the rest of my life with her. Wouldn’t you?

I honestly don’t understand the guys who are single in to their mid to late 30s. What is wrong with you guys? I worry about the guys who are in their mid to late 20s and in no hurry at all. I worry they’ll become those mid to late 30s guys. Guys, marriage is not the prison you make it up to be. Unless you marry the warden or prison guard. So choose wisely. Or maybe it’s because nobody wants to marry you? I suppose that could be a possibility too. I’m not going to solve that problem…

Michelle is my 2^nd mom. Thank God. Sometimes I can feel kind of useless because I used to do everything myself when I lived out in Seattle on my own, but her cooking is better than my micro waving so I do my best to be gracious.

Marriage takes a lot of work on both sides. Sure, I wrote it. Do I follow it enough? No. I’m working on it. It’s going to take time. Luckily I’ve got a lot of it ahead of me.

Do I get scared sometimes that this is forever? Absolutely! Do I give shit to other guys about to get married? Definitely! Would I be worse off still living with a roommate or my parents? Exactly. Having someone there…(by law – heh) is always great. Which brings me to my next point…

It’s not going to be puppy love, hot and steamy, I’m going to die without you need you here with me now - all the time. It’s just not realistic. Especially in a household with two working parties and schedules. To try and keep it fresh all the time is just trying too hard in my opinion. Can it get boring and routine sometimes? Yes. But (being the pessimist that I am) think of all the bad things that could go wrong. I could be struck down with lung cancer after only smoking one cigarette in my lifetime. Then what? Then I’d be wishing I was more grateful for those days that we just went to work, then came home and sat around – and were healthy. It’s all about perspective. Something I’ve got to remind myself of sometimes. And being out and adventurous and on the road gets tiring. Sure, a few weeks away from home a couple times a year? Great…wait…does that mean I’m really converting to home body status? Uh oh…

One of the best things about marriage is that you can set goals for the both of you. You can work together to achieve things, and the synergy (woot! Go vocab) that’s created between your partnership does so much more than if you had been working separately (even on the same thing! Confusing…). Having someone there to support your endeavors and dreams however far fetched they may be is one of best things about having a partner “in crime”.

And on that note, Michelle and I are building an amazing base. We’re accomplishing things I wouldn’t have thought would be possible until we were more financially secure. Sometimes I look at us and am blown away by how well we are actually doing. I honestly can’t think of one couple who is doing better (even adjusted for inflation for older couples :p), although I know of one who is close. And of course I’m tooting my own horn (or ours) but I’m just excited about the launch pad that we’re building ourselves…to of course rocket us in to the future. (cheesy) We’re young enough to really shape the direction of our lives and take risks where if we had had kids already or were in more demanding jobs we couldn’t have done these things. It really makes me proud that we are learning together and bettering ourselves. I can’t ask for much more right now.

I started to write advice for other married couples or soon-to-be married couples but then realized I completely flipped from talking about me/us to getting up on the soap box. I don’t feel like preaching that much.

It’s getting pretty late, and I know my posts have been short…but I literally feel like I am so inundated with things right now that I don’t have a clear enough head to write. I’ll try my best to keep pounding these out though…if only for my own sake of reading these later on.

Here’s to one year. We made it. And I guarantee a lot more where this one came from.

Love you darling.

Balance

One of the key ingredients to a healthy life I’ve decided.

Too much of a good thing (or a bad thing) can really ruin you. Make you lose your sense of reality.

Without pain, there is no joy.

A few years ago, sitting in my philosophy class (which was a huge waste of time) we were discussing this machine that would give you any experience you wanted. Any experience ever felt by the human brain.

You can read more about it here (it’s the first google link I found):

http://www.bu.edu/wcp/Papers/Valu/ValuRive.htm

In the class, I was one to argue for plugging in. To give myself the ability to experience things I’d probably never experience in this lifetime. That alone was worth the ability to plug in.

But just recently, my view point on being for plugging in changed. Of course there were the kids in the class who felt they should live their own lives, and they’d prefer their own lives over plugging in. However, from what I recall of the class part of their reasoning was that they would know it wasn’t real life; it was just your brain fooling you in to these experiences.

I had a good enough imagination, so I didn’t go along with what they were saying. If you were stuck in a machine and didn’t know any better – how could you have known any better? You wouldn’t know what real life was like because you had been attached to the machine. Our example was based off of being attached to the machine since birth – not given the opportunity to get plugged in after living in the real world for some time.

But now I’ve realized that I would miss out on all the pain. All the bad things in my life that affected me – changed the person I am – if I had plugged in. Why would anyone in their right mind, hooked up to the experience machine choose a bad experience? One that caused them physical or mental pain?

Over the past few weeks, I’ve felt minor physical pains. I know this is silly, but whatever. About 3 weeks ago, I got this huge cold sore on my bottom lip. Thinking back, I don’t think I’ve ever had a larger cold sore. And it was painful. And annoying. I am a lover of citrus and salt unfortunately, and every time I’d eat something of that nature I was cringing. After using some hydrogen peroxide over the past week it’s finally subsided and I can eat normally again. I was chewing on my right side only for some time – or avoiding foods that I normally love because of this stupid cold sore.

This past Thursday I slid into 3^rd base abnormally during our softball game and received the biggest raspberry on my hip that I’ve had since either 3^rd or 4^th grade. I’ve been hobbling around since then and every few minutes I’ve got to pull my boxers off of the wound because they start to stick together. And every time I do it’s about half as bad as pulling a band aid off. It’s hard to sit, I’ve had to lay only on my right side while I sleep, and getting in and out of cars is the worst.

And because of these two things, I’ve realized how grateful I am to be in such a good condition (only compared to myself in minor pain). My mouth is almost fully healed now. Tomorrow I’ll be able to drink orange juice and brush my teeth without cringing. I’ll be able to eat foods with barbeque sauce on them, or even French fries with salt without it killing my mouth. So I learn to appreciate – and be grateful for the state I’m in because of that pain.

I’m sure by next week my hip will be healing nicely, and I’ll be back outside and running again with full motion of my leg. There won’t be pain when sitting down, or while I’m riding in the car around corners. I won’t have to pull my boxers off of my oozing wound and will be able to toss and turn in my sleep normally.

And that is exactly what I am getting at. In the machine I would never choose pain for myself. But in the machine how can I really understand joy and pleasure when I would never choose pain and sorrow? The steak would not taste as good, the emotions I felt would not be as strong, and I would never feel as grateful as I do for the things I have – or how I am after what my real life has put me through.

So I’ve changed my answer now. The machine sounded good in theory and still to this day I’m a bit of a hedonist, but I’m beginning to realize now in life that both sides of the coin are needed to have a fair toss.

Reap What You Sow

Warning: I am only writing this for my own memory’s sake. I wanted to include this in my blog so I can remember it. And it’s about the financial world for anyone reading. So if you want to stop here, great. I can’t guarantee there will be any interesting or new information as I’m sure everything I’ve read recently I’ve ripped off a little bit from multiple sources. I am only including it so that when I read through this again, years down the road I can remember what I was thinking at the time. Just like how my dad always says to me about how those “rotisserie chickens at the grocery store used to be a dime”.

Just like that.

Sub prime. AKA, Sub slime. AKA housing bubble. AKA this post. Reap what you sow.

Thinking back over the past 12 years, it’s been kind of creepy. We’ve been building ourselves up - our economy on very little. In 1995 it was tech. Everything was tech. Sure, some value was added, but the stock market went shooting up like a sky rocket in dot coms that were worth nothing with ridiculous valuations in to the thousands. And people who were smart enough got out before it all when to shit. Others that didn’t got hurt. Bad.

And by the end of 2001 and in to 2002, things were looking terrible. Which is when the Fed decided to cut rates to “their lowest point in SO many years”. What did a lower rate mean? It meant borrowing cash became cheap. Suddenly those that couldn’t afford a 30 year fixed at 8.5% were magically able to afford it at 5.5%. Look at all the interest they were saving!

So all that money that wasn’t being made in the market had to move somewhere. How dare we expect people to earn less than 10% a year on their money. Is part of your American dream being wealthy beyond your wildest dreams? Mine’s about halfway there.

So people borrowed. And borrowed. And borrowed until they were so heavily leveraged that paying principal became a thing of the past. Because now everyone could afford a home. In fact, the housing market got so hot that new products were popping up everywhere. Balloon mortgages, 1 month ARMs and negative amortization loans. All for $0 down! Can you imagine that? Oh, and what’s that? You and your wife don’t have a job either? Well, we’ll put you on a stated loan that says that you’re a doctor and she’s a lawyer and together you make upwards of two hundred and fifty thousand dollars a year.

Sure, I got caught up in it. And I still am. My wife got in to a condo at the right time, in 2004 just as the housing market was peaking. I threatened leaving her because Issaquah was “too far” for me. Little did I know I’d love it out there, and it’d be one of the best investments of our entire lives thus far. But she put a little amount down, on a stated loan and paid PMI on a 80/20 split loan. Luckily we were able to get out of there while things were still hot.

Because builders saw it. They saw the wild buying. People outbidding the asking price just to get in to a property as soon as possible. Because a 20% return on even a $300K property is a lot of money in a year.

So they built more. And more. And buyers kept scooping them up. Because “property isn’t as risky as the stock market – you actually own something FEASIBLE – that you can touch – when you own property”. It’s amazing how hearing this now, 3 years later makes me cringe after it was pounded in to my head so much…

But now, there’s more homes than there are buyers. Back in 2002 was when that first 5/1 ARM at 5% or whatever ridiculous rate was out. And everybody saving hundreds of dollars a month by just paying their interest every month is having a hard time either refinancing in to another loan – because they’re not going to give you “interesting financing” on your property now. No. Too many people out there over the past few years have screwed the lenders over and vice versa.

5 years ago you moved in to a property you had no right affording. Expecting that your home value would appreciate enough that you’d have a good return on investment as soon as your ARM/balloon/negative amortization loan was up. And you were broke the entire time, but it was OK, because as soon as you sold the house, you’d make back everything you put in. Right?

Well, little did you know that the builders kept building. And as soon as inventory started piling up, suddenly 5 blocks down the street they were selling a brand new house that was bigger and had more upgrades than yours and they were selling for the same price. Who was going to buy your house?

So you had to reduce your price. And reduce it further. And maybe you were going to rent it out…but it was crunch time and the lender was breathing down your back. Maybe putting nothing down and not getting a fixed rate wasn’t the best idea in the first place. It seemed like a good idea at the time…such a small monthly payment…

But at the same time there were those out there (just like me in the past month) who realized that the market has been on a tear since 2005. It seems like at that same moment in 2002 someone realized that they could take a second mortgage out on their home, or leverage something they had to invest it in the stock market. In another property. In something. Wouldn’t that make sense? If you were paying 6% on your 2^nd mortgage and you were earning an average of 12% on your S&P 500 fund, why in the heck wouldn’t you bet the house to earn a little extra cash? If another property was going to earn you a 20% return on your money, why wouldn’t you do it?

So I made it a little bit late to the party. So what. I’m still going to fight and struggle and do my best to succeed.

But for the rest of the people out there in a lot shakier positions, I’m sure there is guy X out there who just did the same thing as me. Except they pulled out more. And over this little stock market correction we’re experiencing over the past 2 weeks they’ve lost everything they’ve made. Or there are the people that bought 3 more properties. And suddenly that value in those homes they were holding onto has just dropped out of the bottom. The sure thing didn’t seem like it anymore…

And now the only out for them is bankruptcy. You couldn’t afford it in 2002, what makes you think you can afford it 5 years later when the rates have gone up and unfortunately wages haven’t really followed.

So here we stand. One of the slowest “shit hitting the fan” sequences I’ve ever seen. I saw my first sub prime lender go bankrupt in February of this year. And that was the red flag for me. Debt was cheap, so we threw it around to whomever felt they could handle it. Americans love debt. Unfortunately not all of them have the right mind about them to control it properly. In fact, to the tune of about 7 million home owners.

7 million. Can you imagine that? 7 million families, people, friends, neighbors literally just walking off of their property and claiming bankruptcy because no one will provide them with a loan to which they can afford their property any longer? I can’t. My neighbors actually seemed proud that they put nothing down on their property. Like they were almost getting some sort of deal.

It is the perfect storm at it’s finest. And unfortunately everyone that bit off way too much are going to reap what they sow. And they’ll bring the rest of us with them. I just hope it hurts a lot less than I think it will. I’ll keep my fingers crossed, but it’ll require a lot more than that to fix what’s coming down the pipeline.

The Fed meets tomorrow. I can’t wait to hear what they’re going to say. Either they’ll go along the lines of my blog post. Everyone can just tank because none of you read the fine print or expected less than 28% year over year growth in the value of your properties.

Or, the Fed can bail everyone out by cutting rates and possibly restarting the whole cycle again.

For the short term, I like the idea of a rate cut. Or at least the acknowledgement that something has gone terribly wrong when a person making $28K a year can suddenly afford a $300K house with nothing down.

For the long term though, I’d love to see us suck it up. Just like the ridiculous valuations in 2000 of high flying stocks with worthless underlying companies, we’ve got people who gambled with the worst possession they could…their own homes.

At the least, it’ll be interesting to see what happens between now and 2009. That’s when the big lenders say most of the “interesting loans” will either be refinanced or defaulted by.

One of the best rules I’ve continued to follow is, “If it sounds too good to be true, it probably is”. Unfortunately so many people are going to get burned by not remembering this rule. We’re on shaky ground right now, and end of this seems so far away…

Until this whole mess is over, I’m praying that the bad apples don’t spoil it for the rest of us.