Taking Early Retirement - I Retired Early

May 10, 2011
by Jeremiah
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Was it Skill or Luck?

I knew a guy back in the eighties. His name was David. He was a stockbroker in Vancouver, BC, Canada. He was an expert in mining stocks and we made quite a few trades together, based on his recommendations, and made some very good money. He told me then, back in the eighties, I should invest in silver. He also told me that I should avoid banks.

Should I buy stocks that have silver mines? Or should I buy junk silver at a coin dealer? How should I buy it and in what form? That was a big question I had.

He never really told me how to hold silver, and that was the big problem I had with buying silver. We live in an O.K. neighborhood in Santa Fe, New Mexico. But like any neighborhood we have our share of crime. I didn’t want to have a pile of silver sitting in my basement and I wasn’t all that crazy about stocks that had physical assets like silver mines, etc. The stock prices were too cyclical and I was not comfortable with the costs of the metal extraction. Too many variables for my liking.

So I put buying silver on hold. David told me he was going to be making some changes to his business, but that he would keep in touch, since he and I had such a good relationship.

I was going through some changes as well. We had started a family and other things got in the way of investing so I lost touch with David. I called his firm several times, and at the beginning, he was not there and then they told me he left the firm. We lost touch.

But always in the back of my mind, was his recommendation that I should own silver. I heard about an Exchange Traded Fund (ETF) that was a silver ETF. The symbol was SLV. ETFs were new at the time and I wan’t knowledgable about them. So I kept this on my radar and added it to my watch list of stocks in my portfolio tracker on Yahoo!

In 2005 I got really interested in real estate and attended several seminars from Ron LeGrande about flipping houses and buying real estate for no money down. I decided to sell some of my stocks to have money available for a war chest to buy real estate. One thing came to another and the more I looked into it, the more uncomfortable I was with the idea of “no money down real estate”.

I had money sitting in the bank so I decided in June of 2006, to buy the iShares Silver Trust. I got in around $10.50. I thought the price was pretty good since it was below the 50 and the 90 day simple moving average. Time would tell.

My portfolio design is complicated to most people. But I have a rainy day fund where I stash money that is not to be touched except for the intended reason. It sounds dumb, but that’s my method. My wife wanted to take some money out of the kid’s college fund to remodel the kitchen. I said no. My kids will tell you how much they appreciate their education and we still got the kitchen remodeled.

Maybe you read my post about my Early Retirement Curve Ball last fall. I didn’t go into it very much on the blog, but it threw a monkey wrench into my plans. I didn’t think of it as a rainy day, so I never gave my shares of iShares Silver Trust any thought.

On St. Patrick’s day I googled my friend David in Vancouver BC just for the hell of it and I got a hit. I had tried googling David a few times in the past but never got anything worth while. This year I did.

So, I gave him a call. We had a long talk. It was like we had never been a part for over 20 years. We just fell back into a natural easy rhythm – just like that. He asked if I had ever invested in silver. I laughed out loud. “What?” he asked. I had never thought about my iShares Silver Trust shares in a long time and told him what I had done. He said “You should sell what you have and get out.” He thought silver was headed for a ccorrection and now might be a good time to take profits.

So I did what he said. I sold out at almost $36. It was good for a 46% return each year for the five years I held it. What now, I asked him? Keep sitting on cash. There will be some good opportunities ahead.

In late April the iShares Silver Trust shares hit $46 and recently they have been trading at $36 or so. I’m happy. And I have used the profits from the iShares Silver Trust shares to take care of my Early Retirement Curve Ball. As is well here.

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For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!

Jeremiah John

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April 12, 2011
by Jeremiah
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Making Money in the Market

You already know how to make money in the market. You buy low and sell high. What if you did that in reverse order? That is, you sell high, and then you buy low. What is that called? Yes. It’s called making money in the market, but I am looking for the term that this way of making money is called.

When you buy first that is called being long the stock. And when you sell first that is called being short the stock. So selling first and then buying second is called shorting the stock or just “going short”.

Is this bad? No. Is it risky? Yes. What is the risk? The risk is that the security that you sell could go up in price and when you bought it to complete the transaction, you would be buying high.

Only people who are really savvy in the market sell short. That is why I thought it was interesting when I read in the financial press the other day that the world’s biggest bond fund manager was shorting US Treasurys.

What does that mean? PIMCO Total Return, the bond fund, thinks that the US Treasurys are going to go down in price. So they are selling now and hope to buy back when the US Treasurys are a lot lower.

Like I have said over and over the past few months, if you own Treasurys, consider selling now, while you can or sell later after the price goes down and you lose money.

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For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!

Jeremiah John

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April 11, 2011
by Jeremiah
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How Does 47% Sound?

We were sitting around having some wine over the weekend. I don’t want you to think that this was a special event. We get together with two or three other couples every three or four weeks to catch up and we enjoy each other’s company. Last week was THE weekend to do that. We rotate houses where we will go, so we don’t have the get togethers at the same house each time. And, most importantly, we all live in the same neighborhood so there is no driving involved. No chance for a DUI. I expect that we will be in real trouble once they start enforcing a WUI – Walking While Intoxicated. 🙂

We haven’t seen Richard and his wife since last fall and he was not aware of my early retirement curve ball that I wrote about on November 7th, 2010. I brought him up to date. He was always pumping me about stocks and this past weekend was no different. I asked when he first started noticing my blog and he said he had been checking it for over a year. I asked him if he could tell me if there was something on the blog that was on the front page that changed every time he visited but was essentially the same? He laughed and said “Not really.” I told him that I had a stock chart on the main page and it was the same week after week, but that the price and the graph changed every day. The stock was Starbucks – SBUX.

If Richard had looked into the stock when he first visited the page, he could have started some research and seen that this stock was $12 about two years ago and last year the price increased to $24. Now it was upwards of $35+.

So you are recommending that the people who read your blog buy Starbucks?, he wanted to know. Maybe, if they want. I have increased my profits by over 50% since I bought it. It’s done very well for me. I put the chart on the blog to show people that they need to look at other investments when retiring, so they can stretch their retirement funds no matter how long they live.

What about the dividend? Actually, I didn’t buy Starbucks for the dividend. It only pays about 2% which, for me is not enough to buy for a small quarterly payout. We talked stocks some more and I asked him what he needed for a return on his portfolio every year to maintain his standard of living. He couldn’t tell me.

Don’t get me wrong. A lot of people like Richard don’t know their numbers. They don’t know what they spend, on average, each month and how much each month they need to save to pay for annual expenses like house insurance, car insurance, real estate taxes, etc. He asked me what our expenses were and I told him that the number was confidential, but I told him that I needed a minimum of 12% per year on investments, to keep up with the Joneses. He started laughing, since Jones was his last name, he thought that was pretty funny.

Richard is still working and like a lot of people he has not thought about retirement, even though he is almost 60. I asked him if he wanted to do some retirement planning with me – sit down, come up with a budget, figure out how much he had in savings, what he could expect from his portfolio, and get a grip on when he could retire. He thought maybe I should put the retirement planning on my blog as a course for him and my readers. I thought about it and decided that I would take that on.

So starting this weekend, we’l start. I’ll develop an outline and a course schedule and make it available to everyone for no charge. There is a catch. I think that I might sell the course later, so I will not be putting it on the blog in posts like I have done in the past. I’ll let you know this weekend how to get it at no charge.

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For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!

Jeremiah John

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February 6, 2011
by Jeremiah
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I’m Buying Stocks – Cautiously

If you are old enough to remember the market in 1999 and also in 1987, you remember that the market went into the tank. It was not a good time to be in stocks. It was a time to stand aside and wait for the dust to settle. The dust settled, but I went to the cleaners in 1987 and vowed that it would not happen again.

In 1999, when the market went south, really deep-south, I was in cash. I am in cash right now for all of my 401k assets. All of my Roth IRA money is in high yield bond funds. But I am as nervous as a cat on a hot tin roof. Everything I see says that we are in for a correction, but still the market moves upward.

So I am buying small positions of common stock. Small lots are easily traded and do not have any effect in the market on the buy side or the sell side. I am hoping to get a bump on the stocks that will boost my high yield bond fund rates, enough that it will give me close to 12% that I need in a bad market.

So what has me spooked? The yield on the 30-year Treasuries hit 4.64% on Thursday, February 3rd. The 30-year Treasuries were at 4.39% back on the 3rd of January. I think that the stock market correction will occur around the time when the 30-year Treasuries cross 5.0%. The 5.0% rate correlates to the rates of the 30-year Treasuries market, with inflation, back in 1987 and 1999.

I finally ran my numbers for last year and did really well, considering the general market. My portfolio increased 24% over the previous year. I’ll take that. It would be nice if I could take some of that out of my plans without penalty, but I have a few more years to go for that to happen. I am bracing myself for a weak market this year and hoping for 12%. I am up 3% so far after the first month.

We’ll have to see if I am correct about the 30-year Treasuries.
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For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!

Jeremiah John

You can follow me on Twitter, by clicking here.

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January 26, 2011
by Jeremiah
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Taking Early Retirement – A Reminder About Bonds. . . Again

I read this headline this afternoon. It confirms what I have been talking about for several months. “BONDS PLUNGE AFTER FED STATEMENT – RATES CHALLENGE RESISTANCE” It goes on to mention that defaults in the muni bond market were on the rise. For example,

“The Clay Gas and Utility District of Clay County, Tennessee, didn’t file disclosures for 10 years, until one in November saying it didn’t expect to make future payments. Or how about . . .

A retired journalist in Chevy Chase, Maryland, spent $25,000 10 years ago on Maryland Health and Higher Education bonds. She said she checked regularly for updates online and didn’t see anything amiss. But then in October, she was stunned to get a letter from a broker offering 50 cents on the dollar. The letter said the issuer could not promise to pay more in the future. She searched for information and found none and couldn’t reach the issuer. Confused, she took the deal. Or how about . . .

Chowchilla, California, defaulted on its bonds used to renovate city hall earlier this month. The city, which bills itself the “Gateway to Prosperity,” had never filed documents notifying investors that a default was coming. The city’s most-recent financial statement currently on file is for the fiscal year ending in June 2009.”

Apparently there was an article in the Wall Street Journal quoting Peter Schmitt, CEO of DPC DATA. He was talking about how little financial disclosure muni bond issuers had to make and how some issuers failed to file any reports for years at a time.

Given this disturbing information, you need to change your investment tactics if you are a “buy it and forget it” investor. You need to actively check your portfolio once a week with a look at the Yahoo! Finance chart section to get an idea of the direction of your portfolio.

Enough said.

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For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!
Jeremiah John