patrick.net

Scott,

The VIPERS are great. But the case between ETF and its underlying fund is clear. For automatic investment plans, the fund is better, because ETF trading fees will be a drag on the performance for most people. For trading, ETFs win hand down, as there is no "early redemption fee".

oh one more thing about buying puts or calls from an IRA — if you reach maturity and they are in the money (I think that’s the right term), and you don’t have the cash to exercise the option, then you’re kinda screwed (since you cannot use margin to borrow the money). I think I read in Fidelity’s paperwork that if that happens they will sell the option a day or two before the maturity.

There are just too many ways to get screwed trading options.

MA,

The "San Diego Creative Investors Club" (or whatever they call themselves) has to be the largest compilation of mis-information ever assembled! The interaction looks like the blind leading the blind. It must be some seminar guru's invention so his/her newbies can "get real time support"! Ever notice how closely the flirt with the law? These guys are scary.

Scott,

I agree with you regard to puts vs shorts. I said in the beginning of the thread that I shorted TOL. I meant figuratively. I bought puts.

I have never shorted stocks yet. Don't think I ever will. Buying puts is less risky to me.

MA,

I'm sure these guys go through several lenders at the same time (or as closely as possible) so it doesn't show up on their credit report. For all we know they are going through 11 different brokers or even working the loans on-line?

I have never shorted stocks yet. Don’t think I ever will. Buying puts is less risky to me.

But puts require more considerations because they are very sensitive to implied volatility. Do you buy deep ITM puts? How about bear spreads?

NOT INVESTMENT ADVICE

MA (and for those that might be curious)

The gal on the SDCIA that is frequently mentioned is Suzanne Goulet and her web-site is www.terrasantainvestments.com for those considering buying "pre-construction" specials in Asheville, NC or perhaps El Paso "the new Phoenix". Units should be completed in 2007/2008!

Pfffft

RE: the new Phoenix

In the new Phoenix, 500K is the new 200K. :)

Yeah, multiplied by 11! LOL!

This brings me to my next bubble beef (as we are now at a point where this would perhaps be better rec'd).

Many posters here are now at a stage in life where they SHOULD be building real wealth. Not monopoly money bubble bucks, but real wealth. With lasting equity. I would love to be in a place where I could soberly consider buying my own office building. Perhaps sub-leasing a few spaces. Making meaningful impovements and building genuine equity.

Many posters here SHOULD be at a point where more and more of their income is from their investments (not as much by sweat of brow).

But Nooooooo! We aren't happy as a country (nor as individuals) unless we're going from one bubble to the next! Equity has become such a fleeting thing I can't see how anyone can not at least attempt to "time the market". When it's all said and done it's our sense of timing that seems to be the only thing that DOES matter. Welcome to the new Amerika!

Scott,

why don’t you have a self employed 401k? Much better than a SEP-IRA…. unless you have employees?

I had employees in my C-Corp, so the SEP was more effective. Since most of the employees were "top-heavy" on the salary scale, we were able to get much more out of the SEP rules than 401k limits. For my new LLC I'm not sure which way I'll go yet.

Peter P,

How do you recapture the present value of pre-withholding contributions in a taxable account?

Conor,

I certainly believe that ETFs (the index based ones) should and likely will remain very tightly correlated to their underlyings. That said, I let others test out the new products first...at least with my retirement money. After all, there are still a few remaining taxation and legal issues around ETFs. Again, probably nothing will come of them, but I can eliminate that risk by waiting and still do fine with a Vanguard market index MF.

How do you recapture the present value of pre-withholding contributions in a taxable account?

It is not possible.

There is no "rational" reasons not to have retirement accounts.

DinOR,

Cool! No need to worry about my crazy tax policy ideas. I'm not a sufficient overachiever to ever become the first North American overlord.

Peter P,

I consider myself a newbie when it comes to options - even though I have been writing calls for a long time. I started buying options very recently.

I like in the money put options. the only time I bought far out of the money puts, was my first put purchase. All other puts were very much in the money. The bear market that started in May has been kind till now - too kind. In fact everytime I covered (sold my put positions) I left a lot of the money on the table. No regrets. A small green is better than any red.

I have not tried any of the "advanced" option strategy yet. I am still a student. I am learning.

Peter P,

Of course there are rational reasons! You could be a BASE jumping fanatic. You could have a disease that will kill you by the time you're 30. You could be living on $10/pay. You could be a heroin addict. Just becase very few people have similar motivating reasons not to save doesn't mean they're irrational.

The current system does not incentive saving. Forget instant gratification aspect. Most people don't have the nerves and the money managing ability to deal with a retirement fund. It's not just shortsighted spendthrifts, it's that there's a serious barrier to entering the retirement savings area at all. The clearer heads and the comparatively well off may be persuaded by the tax advantages and the fear of a rainy day, but for most people, a retirement fund is a confusing burden.

astrid,

I didn't say your ideas on taxation were crazy. What concerns me is that for many generations Americans have been able to take wealth accumulation for granted. Now it seems like we're heading down a path where how comfortably you retire will depend on wether you cashed in your chips on Monday (or the Friday before)! No assumption should or could be made by looking at you net worth today, factoring in a reasonable rate of appreciation and drawing the conclusion that you will have "X" (or very near to it) upon leaving the workforce. I've studied Randy H's "Monte Carlo" simulations and have run more than just a couple of "hypos" and I'm not even sure their calculations are sufficient to deal with today's brand of volatility?

MA,

Exactly!

Oh, you prefer NOT to be a part of the ret. plan?

O.K, no problem. Have your wife sign here.

My wife? Well yeah, she at least has the right to know she'll be supporting you in old age!

O.K, I'll contribute.

Very provocative statemens at the begining. I thought this guy was as reasonable as they can get. Because earlier this year, he coined the term "buyer are leaving market" as opposed to buyers market. Alas.

Silicon Valley, West Rents Outpace Home Prices
by Broderick Perkins

Silicon Valley residents who've decided they can't afford to buy a home had better lock down the best deal they can get in a rental because they soon could be priced out of that market too.
Rents in the San Jose-Sunnyvale-Santa Clara metropolitan statistical area (MSA) were at an average $1,414 a month, up 9.1 percent in the second quarter this year, compared to the second quarter last year when they were only $1,296, according to Novato, CA-based RealFacts .

Emphasis mine.

Read the rest at
http://realtytimes.com/rtcpages/20060725_westrents.htm

To BA or Not to BA,

Um, firstly Mr. Perkins hardly is everyone that rents "priced out" by any means. Secondly a $100 increase in rent is not sufficient motivation for me or anyone else to impale themselves on the first neg. am. they can find.

What's surprising is this is such a current article! What will be interesting to watch is just how much avg. BA M/P's increase compared to avg. rents? He conveniently neglects to mention that.

Just got done reading that SDCIA post...

Wow. And this guy is one of their senior members and "resident experts". A night manager at the local Taco Bell who uses his wife --a hospital administrator at a public hospital no less-- as co-signer for his 100%+ financing on $1.9 million on 11 properties. Soon to be $2.6 million on 14 properties.

But he's "diversified" because they're all in different cities.
Gee... what's wrong with this picture?

Michael,

Are you registered over there as "Subcranium"? :-)

Just a wild guess ;-)

HARM Says:
Just got done reading that SDCIA post…

heh heh, and posting...

one interesting thing the discussion on short trading highlights:

what's the difference between 'investing' in residential real estate and speculation or other investing in the stock exchange? i assume the consensus is that residential real estate needs to be quarantined from investment markets in lieu of the right to an owner-occupying career for a reasonable % of net earnings. that the 'social contract' to a reasonable housing career is being violated by speculative activity and conversion of shelter to an investment class. therefore, the only legitimate investment in real estate should rightfully be in hotels, short-term stays, student lodgings, etc and a handful of places for people who want to rent for whatever reason -- the problem in the market being determining what proportion of people 'want' to rent this way e.g. out-of-towners, vs the people more or less forced to rent. The Robert G. Allen graduates of course are happy to see up to 90% of citizens become renters if it suits their 'wealth strategy'.

so one view of what the SDCIA guy (all the SDCIAers) is doing is that it is somehow immoral -- whereas speculating in the share market is not. it's a very fine line to draw between exercising your intellect to attempt to become a master of one or the other of these 'markets', when 'everyone is doing it' and personal investing in stocks appears to be a national endorsed hobby, something like owning guns and hunting.

so it's OK to invest in REITs or building co stocks (rising or falling), but not in actual residential buildings, and treat your tenants like a cipher? e.g. about 17% of REIT exposure is in 'residential', but not sure what sort of residential as defined.

i'm amazed at the amount of time and cognitive effort people are prepared to put in to learning how to invest or speculate in stocks OR real estate. interestingly, there are more shareholders in Oz as a % of the popn than in any other country in the world, but that is because all workers compulsorily have earnings invested for them by full-time 'experts'(?) in funds management. why does everyone want to become one of the experts in their spare time?

with the exception of persons, including posters, here who of necessity ARE the 'experts' by trade...

DS,

Not all "investing" is "speculating". Speculating is but one form of investor behavior.

And speculation is perfectly fine. I salute to real estate speculators who are smart enough to keep their profits.

the definition of speculating vs investing is often a little subjective, at least according to our SDCIA friends -- and what is investment but a relatively safe speculation?

but i have actually said 'speculating or investing', happy to include both approaches, and the principal question is clarifying with patrick.net where they stand on the morality of using ordinary residential property as an investment class. probably already the topic of a thread aeons ago... ;)

the definition of speculating vs investing is often a little subjective, at least according to our SDCIA friends — and what is investment but a relatively safe speculation?

Under some systems of astrology, people have different luck for investment and speculation. So there are differences and heaven knows the differences. ;)

Real estate is steadier than stocks.

Only because signs of volatility are not readily visible.

http://www.mercurynews.com/mld/mercurynews/sports/special_packages/olympics/15129247.htm

Bay Area may still get the curse in 2016.

the threshhold is potential downside or risk vs upside, same as anything. leverage is not harmful in itself, only potential downside is. not that i want to get technical about it...

going back to square 1, do i invest in planting a row of crops? i know that all going well, the weather and nature will work and deliver a worthwhile harvest in enough time. the potential downside is that the crop will fail, animals will eat it, animals will eat me, i will be invaded by a marauding power and lose my land, neighbours may steal the crop, i need to allocate time to allow the crop to grow, tend it and water it, etc. so to increase certainty, a number of social institutions and technical interventions have arisen: laws of property, title, national sovereignty, fertiliser, irrigation, scarecrows, wild animal traps and erasure of species, etc. and finally govt farmer subsidies to not grow the crop ;)

i guess investing in the sharemarkets or anything else is a matter of keeping a weather eye open, vs educated short term gambling, where the risk of downside is greater. however, my carefully selected buy and hold blue chip stock could also fail under some calamity, it's just that the risk is objectively much lower and it's considered 'safe'. safe as houses.

test

Speculation is defined as a matter of intent by the Investor. If one seeks to "place a bet" based upon whatever (a model, hunch, roll of the dice, or neural model), then that is speculation. If one seeks to reduce risk then she is not a Speculator, even if she invests short-term. Buying Puts because you invest in your company's ESPP is not Speculation, but Hedging. For long-term strategies, generally those who endeavor to time the market are speculating while those who simply dollar cost average are not speculating.

There is a separate definition for philosophical speculation. In that sense, we are all Speculators insofar as we choose to willingly stay in the US. Call it "speculating on life" if you will.

Randomness exists. If you think you can predict or exploit it, then you are speculating. That is my definition. If you seek to reduce it's impact on your outcomes, they you probably aren't.

Just my USD0.02. Others will have differing and equally valid definitions.

Speaking of speculation, here's a stock I want to pump (again).

FRPT (Force Protection) makes IED-proof vehicles for the American Expeditionary Army in the Middle East. IED stands for Improvised Explosive Device. The company cannot produce these vehicles fast enough to satisfy the Pentagon. When I pumped this stock a few months ago, it was around $3. Today it closes at $6.94. The upside potential is huge. You should also look at its historical chart.

This is a speculation advice.

Speaking of investment, I hear that GOOG is a long-term ten-bagger, even at today's price.

You are an investor if you put all your money in either Buffett's Berkeshire or Bonds. Otherwise, you are a speculator.

Don't kid yourself. Most people are speculators. Some are more daring (or deranged or desperate) than others.

Speaking of investment, I hear that GOOG is a long-term ten-bagger, even at today’s price.

I also hear that Chicago has banned foie gras. :(

Speaking of investment, I hear that GOOG is a long-term ten-bagger, even at today’s price.

How long a term are we talking about?

I believe 10+ years. Too long for me.

would you short GOOG then, with either stocks or put options? surely you can't lose with a longish short...