patrick.net

Is my screaming semi-coherent?

clambo says

Is my screaming semi-coherent?

No, you're not screaming. I'm talking about other people.

You sound like yuppie scum, so invest your money with a nice wall street mutual fund or buy real estate cause it never goes down in value.

Kevin says

If you have $3.5m, why would you stay in the bay area? The only reason to go there is to get rich. It's a shit hole as far as actually living goes.

Dunno where you're from, but if this is a shit hole, OK by me! California feels like freakin paradise compared to most of the US, even after 15 years here:

* no real winter

* unbelievable coastline scenery

* interesting people from all over the world

* far higher pay for programmers than most other places

* far fewer Republicans screaming semi-coherent bullshit defending the 1%

OK, Prop 13 screwed over CA schools so that businesses could evade property taxes, there are earthquakes, and Silicon Valley is horribly expensive with bad air, but compared to most of America, it's still no contest. I will never go back.

*california* is great. I was specifically referring to the bay area as a shit hole. It's an endless stream of poorly maintained strip malls and suburban decay. It has no real culture outside of "work 80 hours a week and try to flip your startup to $BIG_CO".

If you're in SF proper, things are nice, but the rest is only tolerable because of the weather.

Also, if you're financially independent (but still interested in working), the value of working for a big company is limited. If you're an executive, you have plenty of opportunity to do great things, but if you aren't then you'll get far more out of life by joining a startup (or starting one).

Investment advice: Do it yourself; 99% of brokers and advisors say the same thing to follow the herd -- they really must. But that's why you don't want to go with them. Put your money with an honest, low-fee company like Vanguard and self-direct. Decide what % stocks/bonds/s.t cash and even IAU gold....perhaps 35, 40, 10, 15...with stocks being defensive like walmart, costco, bjs, family dollar, dollar gen'l, campbells, hormel, conagra, genlmills....and vang precious metals/mining fund. Buy vang energy fund if it looks like Repubs will win 2012......and bonds like Pimco total return, FAX, TRowePrice ELX......in other words, bonds that are mostly if not entirely OUT of us treasuries, europe and japan. This will be a bumpy ride the next 5-10 years and the 'experts' you would pay, do NOT want to stick their neck out with defensive advice. Don't buy a house; rent. Calif's worst days are ahead as are the country's. How big is our current $1.5T annual deficit, being financed by fed-money-printing? It's enough to give $30,000 to 50 million people. This can't go on much longer.....maybe 1,2,3 more years; we've just begun the 4th federal fiscal year of this insanity. Then boom, the economy will re-settle at a MUCH lower GDP. See also pensiontsunami.com for govt pension plans that are totally unsustainable and unaffordable by the private sector taxpayers. We're headed for trouble on MANY fronts.

Buy a house in Big Sur. Become a hippie, surf Fullers and grow organic food.

Pure Luck says

You sound like yuppie scum, so invest your money with a nice wall street mutual fund or buy real estate cause it never goes down in value.

Dude, I grew up poor in northern MN and went to a small country school. 42 in my HS graduating class. We heated our house with wood in the winter. The farmstead was originally built over 100 years ago and the wall studs were pine tree poles from the swamp still with the bark on them. The floor joists were raw tree trunks as well. My dad spent $2000 in 1979 to buy me a TRS-80 computer. That was over 10% of his yearly income. My mom freaked out, but my dad believed in me. He experienced the depression. Before I was born, he went big into turkey farms and lost his whole investment in a fire. However, he was an optimist. Any disaster can turn into a bonanza.

I started out at the bottom of the 99% and worked hard and was blessed for it.

The first thing I'm going to do with the money is donate 10% to non-profits.

It's people like you who are killing this country.

I'm all for the Vanguard idea, but y'all should keep in mind that even Vanguard cannot save you from a 45% market drop like what we saw in 2008, even if all you own is some utility company mutual fund.

Likewise, Vanguard has great low-expense bond funds, but when bonds go to hell they cannot save you from that either.

Pure Luck says

You sound like yuppie scum, so invest your money with a nice wall street mutual fund or buy real estate cause it never goes down in value.

I'm a Bob Dobbs kinda girl myself, but still, not a nice comment.

Iron Ranger :

Never posted here before - but had to reply.

You must have gone to Cherry or Cook or one of the other St. Louis county schools - I also grew up in the same area (Embarrass), same time frame, same lower 99%. I can go thru the same stories, heated our house with wood - but all those cords the first year by hand with a crosscut saw & a bow saw - and I was 12. -60 below one winter in the early 70's with 40 mph winds - we dressed up and went outside just to see what it was like LOL. 59 in my high school class and I was a National Merit Scholar. Tough place, tough people - almost no one can relate.

I have not hit the lottery like you have, but spent a long while in silly valley - it is definitely an interesting place - and ran a startup or two myself. Now I work as a hired gun and the pay is good but we move a lot.

Congrats on your success - people in most places have no idea what the Range used to be like. Party lines LOL.

Anyways - some free advice - worth what you are paying for it. I read your missive and I would be more than a little concerned that you seem to be completely ignoring (or unaware) of the current macroecon situation. Personally, we have also saved up a big chunk of cash (for us) and the idea that you can 'invest' in anything right now is a really really bad idea IMO. The Euro is collapsing as we speak and the US stock and bond markets are up only because of capital flight. You have a good job I am sure, and interresting I'm sure, but that company makes TOYS and when the econ situation gets far worse than it is now, I don't think they will fare too well - not meant as snideness, just reality. Important to stay now for sure as you wait for your windfall from them, but you need a good Plan B (and C & D if you are a decent engineer).

I will echo what a poster above said, pick out 20 or so credit unions with high ratings and dump that money in a savings & checking accounts (NOT a money market) and let that money SIT for a year while you go educate youself.

Read the Fourth Turning book by Strauss & Howe - written in 1997 it has predicted virtually every trend and turn of the last 15 years - they literally nailed it all and continure to do so. It's my handbook for the future.

Market Ticker should be your first stop on the net - if you have not been there you Karl D has a years worth of reading for you right there.

ZeroHedge as well, for up to the minute details of the econ collapse.

Nassim Taleb would be some good reading as well.

You got good & lucky hitting the jackpot and I admire you for it - dont throw it all away because you are extrapolating linear trends in a non-linear world.

If you are aware of all the above people and still choose to 'invest' your money, then there is nothing I can do to help. You are not going to like what comes next.

kochevnik

Nomograph says

Iron Ranger says

Where to safely invest $3.5M?

I would spend it on snorting coke off a stripper's tit.

For $3.5 million, I'll be that stripper.

Iron Ranger says

Where to safely invest $3.5M?

Celebrity body parts! Body parts only go up in value. Recently John Lennon's decrypted tooth sold for over $31,000 at an auction. And the tooth fairy only offered a quarter.

Note: Do not look at John Lennon's tooth within an hour of eating.

If a tooth can catch over $31k, image what you could get for Ted Kennedy's kidney, Helen Keller's eyes, Ann Frank's writing hand, or Bill Clinton's, well, ok, that's kind of disgusting.

The point is, celebrity body parts are the new gold. Act now, before Glenn Beck becomes spokesman for Bodyline and the prices go up.

With 3.5M, you really should get in touch with someone from Goldman Sachs, wealth management etc. Chances are they already have thousands who are like you aready and have a financial product that suits your need. Give them 1M to start out, that should be plenty enough to get their attention. It doesn't hurt to get some free advice anyway.

In my opinion, it sounds like you want safe fixed income, but with a better return than good old savings account. I would probably do a mix of short/medium term Corporate and treasury bonds. That should be minuscule risk for 3% - 5% returns.

Never pay cash for a house!!! Try by all means to get a FHA loan where Obama takes the whole risk of negative equity. Just pay a sloppy 4% in interest (considering inflation, 4% is the same as 0%=free money) and invest your money in something with a better return than the currently negative investment returns in real estate. Then, after the market fully tanked buy the house next door with your cash for half the price you owe on your FHA mortgage, turn in your keys and Obama will be happy to eat the loss, no matter how high. Don't worry about your credit rating. Good credit only means that the bank can give you a lot of loans to get rich of you. Bad credit means you pay cash, save tons of interest and don't make the banks richer than they already are.

Kevin says

*california* is great. I was specifically referring to the bay area as a shit hole. It's an endless stream of poorly maintained strip malls and suburban decay.

OK, Silicon Valley is shit, but compared to suburban Chicago shit, it still wins by a long shot because of the weather alone.

Lots of the Bay Area is exceptionally nice, not strip malls. San Francisco is still only semi-believable to me each time I go up there and look out across the bay. I just can't believe I'm allowed to live nearby without some special passport or proof that I regularly blow Congressmen.

It's actually like that all up the CA coast to Oregon and even OR and WA and Vancouver. But the jobs are here. Not that it matters much since I waste all my time working on this website.

Kevin says

*california* is great. I was specifically referring to the bay area as a shit hole. It's an endless stream of poorly maintained strip malls and suburban decay.

OK, Silicon Valley is shit, but compared to suburban Chicago shit, it still wins by a long shot because of the weather alone.

Lots of the Bay Area is exceptionally nice, not strip malls. San Francisco is still only semi-believable to me each time I go up there and look out across the bay. I just can't believe I'm allowed to live nearby without some special passport or proof that I regularly blow Congressmen.

It's actually like that all up the CA coast to Oregon and even OR and WA and Vancouver. But the jobs are here. Not that it matters much since I waste all my time working on this website.

There are plenty of jobs in Portland and Seattle. The weather isn't as nice though.

the best advice: "put it somewhere as secure as possible. ... don't touch it for a year. spend this year to plan what you're going to do." Educate yourself. Read as much as you can. Itulip.com is a very good start. nakedcapitalism.com is a good one. jessescrossroadscafe.blogspot.com is a good read, safehaven.com, nowandfutures.com Good luck!

1) Decide when you would like to retire (what age?)
2) Decide what your personal "living standard" would be in retirement (monthly required cash-flow to cover expenses, hobbies, vacations, etc.)
3) Annualize the previously calculated monthly cash flow amount
4) Calculate the amount of capital needed, at a certain rate of return (use historical average of 30 year T-bonds as a place to start), that will throw off cash matching (or better) than the amount from point '3)'

Ex: You decide you would need/desire $5,000 a month to live "comfortably" in retirement. That is $60,000 annually. At 7.5% (35 year historical average 30yTbond--hey, it might be back up there by the time you retire) you would need $800,000. At current 30yT rates you would need about $2m (divide annual cash flow requirement by rate of return to get investment principal amount)

5) Now decide how to get to amount 'X' (calculated from point '4)', see example). Stocks, precious metals, real estate, IUL, franchise, whichever investment vehicle you feel most comfortable with and like, that's the one (or some combination of) you should use to get to 'X'.

Note: The example of treasuries to be the fixed-income investment at retirement can be any investment of similar nature--cre, munis, MBS, etc. I just use treasuries as the assumed "safe" investment benchmark though "safe" is certainly arguable.

Another Note: I don't particularly care for the term "retirement". I prefer "point at which the majority of your income (51%+) comes from passive sources as opposed to active i.e. salary/wage sources"--I just haven't figured out an appropriate word or phrase to describe that scenario yet.

Yet Another Note: Taxes were not taken into account and neither was a more sophisticated model of determining required "retirement" capital saved that allows periodic liquidation of said capital to a determined 'death' target. This would leave little or no inheritance upon your death in theory--useful if your kids/nephews/nieces are jack wagons.

Disclaimer: I have worked as an investment adviser but currently work in commercial real estate and may or may not invest in the assets mentioned previously; any and all information is hypothetical and should not be construed as investment advice in any way.

kochevnik says

You must have gone to Cherry or Cook or one of the other St. Louis county schools - I also grew up in the same area (Embarrass), same time frame, same lower 99%. I can go thru the same stories, heated our house with wood - but all those cords the first year by hand with a crosscut saw & a bow saw - and I was 12. -60 below one winter in the early 70's with 40 mph winds - we dressed up and went outside just to see what it was like LOL. 59 in my high school class and I was a National Merit Scholar. Tough place, tough people - almost no one can relate.

You got it! rural St. Louis County school district. Uff-da! Nothing like splitting poplar after hauling it out of the swamp in -20F weather. Easy splitting when frozen. The best motivation to get to California. Have you ever been to Mesaba Lake Park? Commie country there. I had friends in Babbit. Embarass takes the all time cold temperature record though.

kochevnik says

I read your missive and I would be more than a little concerned that you seem to be completely ignoring (or unaware) of the current macroecon situation.

I am more than aware. I read John Mauldin -- The End Game. The next great depression is a real possibility. The Eurozone might bring us all down. Good advice fellow Ranger!

Iron Ranger : Glad you are aware, hate to see you lose that money.

I left the Range in the 80's for CA and it was quite an experience - been back to live for short stints, but I've had enough winter to last a lifetime. I have a lot of family back there still, and I love them but not -50 degress love them LOL so I'm staying on the west coast. CA is in deep deep trouble financially IMO and the plethora of laws and regulations is too much for me so I don't go there much any more.

Anyways, never read mauldin before, went and looked his book up - synopsis looks spot on to me. If you grokked that then I think you've got it covered.

If you have money and are wondering what to do with it (like I do and you do), a lot depends on how far down the rabbit hole you think we go. If this is 'investable', then the best thing to do right now would be to park your money to wait for the massive deflation still to come.

I just think we go a lot further down that hole than people want to consider. Only good news is that I think it takes some time (another 5+ years to get there). I don't think the US gets away with stiffing China for a couple of trillion without some kind of war. Having lived in China for a while, the chinese are a lot smarter and sneakier than the govt and the citizens of this country understand.

Anyways, best of luck - we all pays our money and takes our chances.

kochevnik

lots of advice to buy US bonds. Why would you buy that 1% paying below inflation crap of a country that is likely to default.
Buy a house.
Buy inflation-protected stocks (an advisory would help). Don't buy inflation adjusted bonds.. Government will lie about the rate.