Someone once said the the only thing you can count on, other than death and taxes, is change.
No s**t, Sherlock.
This 2017 retrospective touches on the toughest year, bar none, in my adult life. In spite, and as a result of furious effort, endless hours, at least 3 advisors and many nights of poor sleep, I am on the verge of being unemployed for the first time in 30 years.
It's not all bad, because I'm precisely where I need to be, but the compulsion to "transform in place" rather than lock the door and throw away the key on a deteriorating set of relationships cost me an incalculable amount of gray hair and general misery.
Looking forward, all is good. The key is not to fight to preserve something from the past, rather take what is there and craft something new with it. I have a great set of plans, some of which will probably fail spectacularly, but no matter; I'm in it for the fun, not the money or the fame.
Something I learned, perhaps for the first time in a very profound way, is that the place I am happy is directly at the bleeding edge of innovation. My kind of innovation doesn't require a lifetime of computer science. I am a "low tech" kind of guy, but there are endless places one can make improvements that all add up to "grease"; smoother, simpler, more efficient products and processes when one puts one's mind to work.
So, what has charged me up for the last several years as my primary wage earning work has become less and less fulfilling and the environment in which I work became a hostile place for me? Innovation. Innovation in thinking about burn prevention in far away places. Innovation in how we replace skin after a major burn. Innovation in how we take the principles of burn care to places who could never afford how we do it. Innovation in treating scars with lasers. I have come to accept that I'm a frustrated inventor, engineer in the disguise of a surgeon. Starting in January, I'll earn a salary on short term surgical assignments out in the periphery and spend most of my time developing an independent laser scar treatment program, designing widgets in my mini-maker lab and pursuing the burn prevention objective in Africa. These are all things I am passionate about, have enjoyed doing in the recent interval and have nothing to do with the pressure cooker environment of an inpatient burn center.
How are the finances going to work out? God will provide...Seriously, I believe that. I also can't sit on my duff waiting for a check. We sold and bought a house this year, reducing monthly costs 20%. We will refurbish and invite the inlaws into the ADU and reduce costs another 20%. I will fund IRAs, but no more qualified plan for the time being. I'm on a virtual scavenge hunt to purchase the tools I need in the pre-owned market to keep costs down. I will have to ratchet back my life insurance costs again. I will need to work for wages 7-10 days per month to allow me to pursue the other items in the remaining time. It will be a grand adventure!
As much as I abhore everything about our national government at this point, I imagine the tax bill that just passed will benefit me. I intend to expense everything I can through the new business, drive my taxable income down to precisely what cannot be invested in the business.
Our overall retirement savings are in good shape; we have passed the point where savings can provide us a sustainable income from dividends/distributions/interest payments only. It's a bit scary not shoveling more at it, but I don't think we'll be missing out on round-the-world cruises for the lack of more retirement savings, since we weren't planning on that anyway.
I haven't seen a thing worth changing about my portfolio lately; the last bolus of money entering the qualified plan comes sometime in early 2018. If I invest anything outside of a tax free/deferred environment, it will be purchasing tax-free muni's or something similar. I think it's more likely I will invest in the opportunity to share ground with others who need housing in a beautiful place ( my new spread).
more reflection next time...
Thursday, December 21, 2017
The higher they fly...
Who knows how and why the stock market behaves as it does?
We have a hot mess in the White House, A lunatic at the helm, but we have record low( if you massage the numbers correctly) unemployment and equity markets continue to escape gravity in spite of threats of rising interest rates, sinking dollar, federal policy chaos.
The fact is, value should follow earnings first and foremost. Clearly some equities have performance to back up their evaluaton. The market still shows signs of overvaluation with many equities at historic valuations, hardly deserved by enlightened management.
Still, I remain fully invested, adding to my own holdings more often than adding new equities.
I am collecting over 50k in dividends for the first time this calendar year. Were I to fold my small TIAA/CREF account to my IRA and then figure out the impact of my wife's retirement accountants on our potential dividedend/distribution were they rolled into such an account. I would do this rapidly, but the companies that hold her retirement funds put up considerable barriers to transferring money out of their clutches.
The portfolio won't generate enough dividend income to support us at this juncture, but the cash flow is growing considerably year by year. Circumstances at work make me want to quit yesterday, except for that uncomfortable issue about tuition, home mortgage and health care coverage.
it still seems that the best strategy is hands under the weight of ones own backside. I have augmented a few positions that are available at a bargain and will continue this as funds come in until all positions are deemed fully invested and worm castings, compost and tea are available for routine use. At that point I'll either swap a few or capitulate and use funds to round out the whole.
more to come...
Nathan Kemalyan
We have a hot mess in the White House, A lunatic at the helm, but we have record low( if you massage the numbers correctly) unemployment and equity markets continue to escape gravity in spite of threats of rising interest rates, sinking dollar, federal policy chaos.
The fact is, value should follow earnings first and foremost. Clearly some equities have performance to back up their evaluaton. The market still shows signs of overvaluation with many equities at historic valuations, hardly deserved by enlightened management.
Still, I remain fully invested, adding to my own holdings more often than adding new equities.
I am collecting over 50k in dividends for the first time this calendar year. Were I to fold my small TIAA/CREF account to my IRA and then figure out the impact of my wife's retirement accountants on our potential dividedend/distribution were they rolled into such an account. I would do this rapidly, but the companies that hold her retirement funds put up considerable barriers to transferring money out of their clutches.
The portfolio won't generate enough dividend income to support us at this juncture, but the cash flow is growing considerably year by year. Circumstances at work make me want to quit yesterday, except for that uncomfortable issue about tuition, home mortgage and health care coverage.
it still seems that the best strategy is hands under the weight of ones own backside. I have augmented a few positions that are available at a bargain and will continue this as funds come in until all positions are deemed fully invested and worm castings, compost and tea are available for routine use. At that point I'll either swap a few or capitulate and use funds to round out the whole.
more to come...
Nathan Kemalyan
Saturday, May 27, 2017
Memorial Day reflections;
What a wonderful thing!.. 3 day weekend, sun is shining, nothing on the agenda that takes me away from my beautiful acre, other than things to whip it into shape.
The holiday also afforded me the chance to think about the people in my life who have given of themselves to serve this country; My father and paternal grandfather, great uncle, maternal uncle, niece and nephew. My family has not lost a member to war in the last several generations to my knowledge, for which I am grateful to God, and my heart goes out to those who have. Making that supreme sacrifice for this big, conflicted, messy and hugely aspirational country drives me to my knees in humility for their courage. The fact that I am sitting so smugly in my recliner gazing out on the beauty of it marks what I owe them for their service.
What a winter and spring it has been, both personally and in the public square. I have been way too self-absorbed over the last 2-3 years, trying to sort out what is nothing short of a midlife (well, a little later than midlife) crisis regarding my work and the environment in which I work. I think I may finally be coming around the final turn, understanding in retrospect that this has been a period of discernment that will take me to the last big chapter in my professional life. It has been very hard-won insight and it includes mourning what I will leave behind as I step into the next chapter.
I will earn less money and a lot more joy where I am going. My biggest uncertainty is how to maintain essentials like health insurance for my family and keep expenses covered while pursuing the path of my passion for improving access to the benefits of health improvement and low-tech/hi-tech solutions for the poorest people on earth.
The status of my financial security is a subject of endless amazement and amusement. In spite of what seems like utter chaos at the highest levels of government and international relations, the market chugs along, delivering increasing earnings, lower unemployment, doggedly persistent high valuations, broadly speaking, and the rising number of pundits piling on to the prediction game for a coming bear market.
In my multinational holdings, aside from tax policy that traps money abroad, a stagnant domestic market is balanced by robust emerging market. Some valuations have corrected very significantly.
While I remain focused on cash flow from dividends and new contributions, I have been able to view all this with less anxiety than in years past. I am becoming increasingly comfortable in this mode of investment, understanding my portfolio to be a business that generates revenue, rather than a pot of gold that grows and shrinks. In fact, the overall trend is solid growth, but this is better measured in share counts and dividend cash flow than in valuation.
What have I done over the last 5 months with new contributions? I have added to a few positions in the 401k, added a few selected positions in the industrial/business support area. Not much more.
A few of my positions have appreciated to the point that they occupy twice the weight of the average position. However, I have never fully accepted the rationale behind "rebalancing". I"m more content to follow the "never sell" advice of some of the voices I listen to in my reading. I am a "rarely sell" person. I keep track of the gross cash flow month by month which informs me a basic level that the strategy is working. I don't monitor as closely as I should, i.e. looking at growth trends or early warning signals for trouble in a business. That can be my next big task, becoming more deliberate and efficient in higher level surveillance.
Here's hoping that Twittler doesn't drag us into a war...
Ciao
The holiday also afforded me the chance to think about the people in my life who have given of themselves to serve this country; My father and paternal grandfather, great uncle, maternal uncle, niece and nephew. My family has not lost a member to war in the last several generations to my knowledge, for which I am grateful to God, and my heart goes out to those who have. Making that supreme sacrifice for this big, conflicted, messy and hugely aspirational country drives me to my knees in humility for their courage. The fact that I am sitting so smugly in my recliner gazing out on the beauty of it marks what I owe them for their service.
What a winter and spring it has been, both personally and in the public square. I have been way too self-absorbed over the last 2-3 years, trying to sort out what is nothing short of a midlife (well, a little later than midlife) crisis regarding my work and the environment in which I work. I think I may finally be coming around the final turn, understanding in retrospect that this has been a period of discernment that will take me to the last big chapter in my professional life. It has been very hard-won insight and it includes mourning what I will leave behind as I step into the next chapter.
I will earn less money and a lot more joy where I am going. My biggest uncertainty is how to maintain essentials like health insurance for my family and keep expenses covered while pursuing the path of my passion for improving access to the benefits of health improvement and low-tech/hi-tech solutions for the poorest people on earth.
The status of my financial security is a subject of endless amazement and amusement. In spite of what seems like utter chaos at the highest levels of government and international relations, the market chugs along, delivering increasing earnings, lower unemployment, doggedly persistent high valuations, broadly speaking, and the rising number of pundits piling on to the prediction game for a coming bear market.
In my multinational holdings, aside from tax policy that traps money abroad, a stagnant domestic market is balanced by robust emerging market. Some valuations have corrected very significantly.
While I remain focused on cash flow from dividends and new contributions, I have been able to view all this with less anxiety than in years past. I am becoming increasingly comfortable in this mode of investment, understanding my portfolio to be a business that generates revenue, rather than a pot of gold that grows and shrinks. In fact, the overall trend is solid growth, but this is better measured in share counts and dividend cash flow than in valuation.
What have I done over the last 5 months with new contributions? I have added to a few positions in the 401k, added a few selected positions in the industrial/business support area. Not much more.
A few of my positions have appreciated to the point that they occupy twice the weight of the average position. However, I have never fully accepted the rationale behind "rebalancing". I"m more content to follow the "never sell" advice of some of the voices I listen to in my reading. I am a "rarely sell" person. I keep track of the gross cash flow month by month which informs me a basic level that the strategy is working. I don't monitor as closely as I should, i.e. looking at growth trends or early warning signals for trouble in a business. That can be my next big task, becoming more deliberate and efficient in higher level surveillance.
Here's hoping that Twittler doesn't drag us into a war...
Ciao
Sunday, January 22, 2017
I guess it's not a bad dream after all
I woke up the other morning in a cold sweat. The Chief Narcissist is about to become our president. Either America has lost it's marbles, or there are nearly 50% of the public who have no sense of outrage when their chosen leader tramples all over the concept of simple decency. Today at the Sunday service, our Rector emphasized that it is our task to be in the world acting as the body of Christ, actively promoting the values of love, charity, patience, advocacy, long-sufferage in a time when even our leaders threaten the welfare of many amongst us.
It blows my mind that the markets have responded with about 8% rise over the last 10 weeks as a result of the election. What do these people think this man is going to do? Maybe there will be some elements of tax relief, or rollback in regulations, but I doubt our currency is going to become less valuable and our exports to explode any time soon. The world is too unstable a place for people of means to bet on Russia, China or any other large economy to safeguard their personal investments.
Even if the money is in offshore banks, they are still bidding up American institutions, real-estate, American based multi-nationals. European governments are requiring private depositors to PAY to keep their money safe with negative interest rates.
In spite of all the craziness and the bitter aftermath of the election, it hasn't hurt my investment performance. I'm thrilled to see the portfolio do what it was designed to do; outperform in flat and declining markets like most of last year, and spin off increasing dividend payments that can be reinvested. I like the capital gains as well, although they blunt the effect of the DRIP on number of shares and overall dividend payments.
After the KMI debacle, there have been no gross melt-downs in the portfolio. The smallpcap weighted 401k has experienced more volatility than my IRAs that are pumped full of blue-chip dividend paying large-cap stocks. However, it finished nicely in the positive and had a much greater leap in dividend payments, even accounting for the added investment contributions. I sold Johnson Controls after several years of holding it. It was the last of the battery storage companies I bought out of personal interest, but not on the DGI plan. I have redeployed that cash to better prospects. The 401k is sitting on several sizeable unrealized capital losses, but the dividend performance remains strong, and my holding period is infinite unless something drastic happens with my portfolio, apart from some failure in a company's fortunes.
I'm going to have to liquidate some holdings, as I will be in need of bridge financing to move to a new home. I'll probably use this time to clear out some of the laggards and leave the portfolio with its strongest performers. I'll take a loan from the 401k and a short term loan from my IRA to complete the down-payment, then repay them out of the proceeds of the sale of the current home
So what did I learn in the last 4 months? Mostly how to sit on my hands. I deployed some new cash in the 401k and switched some equities into the 401k by selling in the IRA and purchasing in the 401k to allow me to redeploy assets in the 401k. I improved the quality of that portfolio in the process.
Having built out the equities in my portfolio to the degree of diversity I want, now my task is to progressively improve the quality of the holdings, finding companies with higher credit ratings, lower volatility, slanted towards defensive sectors and low- to mid-cap values if I can find them with an adequate pedigree. This results rather low trading frequencies, mostly limited to deploying new money in the 401k.
Using DRIPs halves the amount of purchasing I would otherwise be doing, as all dividends are automatically reinvested. There are no brokerage fees on those reinvested dividends, so my account maintenance fees are truly tiny. Were I invested in funds, between the fund managers and the retirement account manager, I'd be shelling out between 5-10k in management fees every year. My new contributions to the 401k result in about 4-5 purchases per year, so the total cost of investing runs roughly around $100 per year.
I have an associate who pays $6000 per year for an advisor to tell him which funds to buy in his retirement plan. He buys funds individually, so he doesn't get a large institutional class of funds. I'm guessing those funds cost him another 5-10k per year.
At this point in time, I probably spend 2-4 hours/ week reading about investing and checking in on my holdings. That makes 100-200 hours/year. I'm paying myself somewhere between $50-100/hour by self-directing an individual equity portfolio.
Since dividends tend to be more predictable than stock price, I continue to focus on building share count, understanding that the dividend per share is paid whether or not the shares are at a yearly high or yearly low. The primary effect of price is on how many additional shares I can buy at each dividend payout.
This year I'll expect to collect 3+% more shares on the positions I own, and another 3-4% in new contributions. That secures 6-7% growth in the portfolio. Additional growth will come from capital appreciation and dividend growth. I will be thrilled if the portfolio grows by 10% in value of which 7% will come from deploying dividend dollars to reinvestment. Any capital gains will be welcome.
It blows my mind that the markets have responded with about 8% rise over the last 10 weeks as a result of the election. What do these people think this man is going to do? Maybe there will be some elements of tax relief, or rollback in regulations, but I doubt our currency is going to become less valuable and our exports to explode any time soon. The world is too unstable a place for people of means to bet on Russia, China or any other large economy to safeguard their personal investments.
Even if the money is in offshore banks, they are still bidding up American institutions, real-estate, American based multi-nationals. European governments are requiring private depositors to PAY to keep their money safe with negative interest rates.
In spite of all the craziness and the bitter aftermath of the election, it hasn't hurt my investment performance. I'm thrilled to see the portfolio do what it was designed to do; outperform in flat and declining markets like most of last year, and spin off increasing dividend payments that can be reinvested. I like the capital gains as well, although they blunt the effect of the DRIP on number of shares and overall dividend payments.
After the KMI debacle, there have been no gross melt-downs in the portfolio. The smallpcap weighted 401k has experienced more volatility than my IRAs that are pumped full of blue-chip dividend paying large-cap stocks. However, it finished nicely in the positive and had a much greater leap in dividend payments, even accounting for the added investment contributions. I sold Johnson Controls after several years of holding it. It was the last of the battery storage companies I bought out of personal interest, but not on the DGI plan. I have redeployed that cash to better prospects. The 401k is sitting on several sizeable unrealized capital losses, but the dividend performance remains strong, and my holding period is infinite unless something drastic happens with my portfolio, apart from some failure in a company's fortunes.
I'm going to have to liquidate some holdings, as I will be in need of bridge financing to move to a new home. I'll probably use this time to clear out some of the laggards and leave the portfolio with its strongest performers. I'll take a loan from the 401k and a short term loan from my IRA to complete the down-payment, then repay them out of the proceeds of the sale of the current home
So what did I learn in the last 4 months? Mostly how to sit on my hands. I deployed some new cash in the 401k and switched some equities into the 401k by selling in the IRA and purchasing in the 401k to allow me to redeploy assets in the 401k. I improved the quality of that portfolio in the process.
Having built out the equities in my portfolio to the degree of diversity I want, now my task is to progressively improve the quality of the holdings, finding companies with higher credit ratings, lower volatility, slanted towards defensive sectors and low- to mid-cap values if I can find them with an adequate pedigree. This results rather low trading frequencies, mostly limited to deploying new money in the 401k.
Using DRIPs halves the amount of purchasing I would otherwise be doing, as all dividends are automatically reinvested. There are no brokerage fees on those reinvested dividends, so my account maintenance fees are truly tiny. Were I invested in funds, between the fund managers and the retirement account manager, I'd be shelling out between 5-10k in management fees every year. My new contributions to the 401k result in about 4-5 purchases per year, so the total cost of investing runs roughly around $100 per year.
I have an associate who pays $6000 per year for an advisor to tell him which funds to buy in his retirement plan. He buys funds individually, so he doesn't get a large institutional class of funds. I'm guessing those funds cost him another 5-10k per year.
At this point in time, I probably spend 2-4 hours/ week reading about investing and checking in on my holdings. That makes 100-200 hours/year. I'm paying myself somewhere between $50-100/hour by self-directing an individual equity portfolio.
Since dividends tend to be more predictable than stock price, I continue to focus on building share count, understanding that the dividend per share is paid whether or not the shares are at a yearly high or yearly low. The primary effect of price is on how many additional shares I can buy at each dividend payout.
This year I'll expect to collect 3+% more shares on the positions I own, and another 3-4% in new contributions. That secures 6-7% growth in the portfolio. Additional growth will come from capital appreciation and dividend growth. I will be thrilled if the portfolio grows by 10% in value of which 7% will come from deploying dividend dollars to reinvestment. Any capital gains will be welcome.
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