tag:blogger.com,1999:blog-61683964403489340572024-03-05T16:47:15.813-08:00DigiblogiolaDanhttp://www.blogger.com/profile/04395885817612314880noreply@blogger.comBlogger249125tag:blogger.com,1999:blog-6168396440348934057.post-28385682282656734292013-09-04T13:26:00.000-07:002013-09-06T10:08:38.479-07:00Nuts and Bolts of the Joe Dominquez Investment Strategy are Still Valid<h2>
</h2>
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9tXXVArD3Mm4vRYPKcDde4FJgBvVzT_7OIZlsp8vrdW0eyFX4gjwvycsbNJzfJTygoXsKSCg0X5WprpbYyAw7Ygz9K7bn1_oFeHT1S9L0fyIBWfh8Gd7zn51af9bFlp62eQ9mbDR52t4/s1600/Joe_Dominguez.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9tXXVArD3Mm4vRYPKcDde4FJgBvVzT_7OIZlsp8vrdW0eyFX4gjwvycsbNJzfJTygoXsKSCg0X5WprpbYyAw7Ygz9K7bn1_oFeHT1S9L0fyIBWfh8Gd7zn51af9bFlp62eQ9mbDR52t4/s400/Joe_Dominguez.jpg" width="282" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Joe Dominguez</td><td class="tr-caption" style="text-align: center;"><br /></td></tr>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgv6gpMiNArOx2GpVdbUWnoNL4WnYUd2HnJEHobUkH3AvfzH-dMy0NOxqD6VlkF3-_f2pDrbmL06TLjk7Zno8Jkf4DK7cr_W281FvcMc3hTT-MKtfnIB5_56KbFnER_cEOlLRkDMKXnga0/s1600/YMOYL_book_cover.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgv6gpMiNArOx2GpVdbUWnoNL4WnYUd2HnJEHobUkH3AvfzH-dMy0NOxqD6VlkF3-_f2pDrbmL06TLjk7Zno8Jkf4DK7cr_W281FvcMc3hTT-MKtfnIB5_56KbFnER_cEOlLRkDMKXnga0/s200/YMOYL_book_cover.jpg" width="128" /></a>The book that has made the biggest impact in the way I think about money is "Your Money or Your Life : 9 steps to transforming your relationship with money and achieving financial independence" (a.k.a. YMOYL) by Joe Dominquez and Vicki Robin. Although I didn't follow all of the 9 steps as meticulously as described in the book, the lessons did stick. Well, maybe with the exception of the last step, managing your finances. Basically, Joe Dominguez suggested keeping a six month reserve of cash and investing the remainder in long term government bonds. There's more to it than that but perhaps that chapter created so much dissent in the retirement forums, book reviews and opinions expressed by financial planners that when the book was revised and updated in 2007 that final chapter was mostly rewritten. Was this a good move? In my opinion, no. What separated YMOYL from other books on investing or personal finance or retirement or personal growth or self help (YMOYL was all of these) was the concept of going all in on government bonds. I must admit that until recently I thought that putting all your eggs in one asset class, especially treasuries, was not a great idea but the more I studied retirement planning, it became clear to me that this is what made YMOYL stand apart from other authors who claim to show you the most secure path to financial independence. If you want to read, or re-read YMOYL I suggest finding a copy before the 2007 revision. At the very least, skip chapter 9 and read that chapter from original version, fortunately is it <a href="http://ymoyl.wordpress.com/resources/oldies-but-goodies/chapter-9-now-that-you%E2%80%99ve-got-it-what-are-you-going-to-do-with-it-from-the-first-edition/" target="_blank">archived online</a>. If you'd like to get a bit more personal with Joe you can hear him lecture on the audio series that preceded the book, <a href="http://www.soundstrue.com/shop/Transforming-Your-Relationship-with-Money/326.pd" target="_blank">"Transforming Your Relationship With Money"</a> which is still available. The audio series are recordings from Joe's lectures that preceded the book, the message is presented differently than the book and works well on its own.<br />
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A while back I wrote a multi-part article on investment lessons for one of my nephews and although I recommended YMOYL, I don't think Joe would have approved of the advice I was offering. As unconventional as his methods may seem at first, he had some very compelling reasons to do what he did and to suggest that the reader do the same.<br />
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Before getting into to it, a disclaimer. Nothing in this blog is to be construed as investment advice. <br />
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Joe Dominguez <a href="http://www.nytimes.com/1997/01/27/us/joe-dominguez-58-championed-a-simple-and-frugal-life-style.html" target="_blank">died</a> on January 11, 1997 at age 58 which is coincidentally the same age that I am today. Joe quit his job and never returned to work, at least not for money, when he was only 31 years old. Obviously Joe knew a lot more about investing than I do and probably a hell of a lot more than most retirement experts. He worked as a stock analyst until 1969 saving $100,000 that provided him with a steady income of $6,000 per year. There are reports about how Joe lived an extremely frugal lifestyle yet gave away a small fortune to charities. At the time of his death his nest egg had grown to more than that original amount though I could not confirm his final balance. All this despite having major medical expenses on cancer treatment towards the end of his life.<br />
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Many people reading the original YMOYL would think that what Joe accomplished in 1969 was unique to that era and funding your retirement these days requires exposure to equities and a risk managed approach to investing. I disagree.<br />
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<b>How much is enough? </b><br />
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When the book was published in 1992 and I was single I could get along just fine on $20,000 a year, now that I'm married and have a more upscale lifestyle (two can't really live as cheaply as one) let's double it up to $40,000 per year. Mind you this is a big downsize considering that this is closer to my yearly tax bill rather than my current salary.<br />
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I got these figures using the steps outlined in YMOYL, not the advice given by retirement experts saying you'll need 70% of your pre-retirement income. The figures are based on my somewhat frugal lifestyle and are pretty close to my actual expenses while I'm still working. For more on frugality as defined by Joe refer to chapter 6 of the original YMOYL <a href="http://ymoyl.wordpress.com/resources/oldies-but-goodies/chapter-6-from-original-1992-edition/" target="_blank">archived online</a>.<br />
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<b>Who are you going to trust?</b><br />
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If I were to ask a retirement expert for advice the expert would most likely run a few calculations and recommend that I invest $1 million in a balanced portfolio made up of a balance of stock and bond index mutual funds or electronic transfer funds (ETF's) along with an annuity for good measure in order to withdraw 4% annually and increase my withdrawal in subsequent years by the Cost of Living Index (CPI) in order to keep up with inflation. This plan should give me a steady cash flow for the next 30 years or until I'm dead, whichever comes first. If you have researched retirement planning this will sound very familiar to you.<br />
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Joe doesn't recommend going to a financial planner or a stock broker or to buy mutual funds. To quote Joe directly:<br />
<blockquote class="tr_bq">
<i>Step 9 is about empowering yourself to make wise financial choices, and your first lesson involves educating yourself so as not to fall prey to unscrupulous brokers, financial planners and salespeople who want to put you into all manner of investment vehicles that pay them handsome commissions.</i></blockquote>
He also doesn't suggest you try to figure out what the next hot investment will be or to listen to economists: <br />
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<blockquote class="tr_bq">
<i>There is an old saying, "If you get ten economists together, you will get fifteen different opinions."</i></blockquote>
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The more I think about it the more it seems that Joe was one of the few people making sense of the confusing world of personal finance. When the book was revised the book's original co-author, Vicki Robins along with her new collaborator, Monique Tilford, sought out advice from Mark Zaifman, a fee-only financial planner (his company is <a href="http://www.spiritusfinancial.com/">www.spiritusfinancial.com</a>), Tom Trimbath, a stock trader (author of <a href="http://www.amazon.com/Dream-Invest-Live-Investment-Frontier/dp/1440109206/ref=sr_1_2" target="_blank">Dream. Invest. Live.</a>) and others that were probably more knowledgeable in the products and services that they were selling rather than the philosophy behind Joe's investing strategy. <br />
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Here are Joe's words:<br />
<blockquote class="tr_bq">
<i>One of our primary missions in this book is empowerment-allowing you to take back the power that you have inadvertently given over to money. As we will see later, this includes the power you have turned over to various financial "experts" to external circumstances and to financial beliefs and concepts.</i><br />
<i>...</i><br />
<i>Becoming "knowledgeable and sophisticated" does mean learning enough so that you can free yourself from the fear and confusion (or pride and prejudice) that pervade the realm of personal investments. The principles and financial strategies outlined in this chapter are safe, sensible and simple. They are also very inexpensive to implement and do not require extensive financial management or expertise.</i></blockquote>
Compare that to this passage in the revised edition:<br />
<blockquote class="tr_bq">
<i>However, there are independent financial consultants who work for a fee, not for commissions on products. Be sure to hire a "fee only" consultant. This is the only way you can be sure that your advisor will never benefit financially from any of the specific investments she/he recommends to you. (You can find a list of them at www.napfa.org.) Also, try to find a consultant that supports the principles in this book. Otherwise, your planner is likely to recommend higher-risk investments that are not in alignment with a typical FIer's* investment objectives.</i></blockquote>
<span style="font-size: xx-small;"><span style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">* FI can mean Financial Integrity, Financial Intelligence or Financial Independence something that was disambiguated in the revised edition by using FI1, FI2 and FI3, though I find it more confusing than helpful.</span></span><br />
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According to Joe, his methods are safe, sensible, simple and free from fear and confusion. So why seek out an advisor that will charge you a fee and will most certainly instill some fear, add risk, confusion and throw in a little greed--after all if the advisor can't get you a better return than Joe, what's the point in hiring an advisor?<br />
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In my opinion a better update to the last chapter would have been to tell the reader to forgo advisers and brokerage firms altogether and simply open an online account with Treasury Direct where you can buy treasury notes bills and bonds in denominations as low as $100 without paying any fees whatsoever. There's quite a few choices at Treasury Direct including I Bonds and Treasury Inflation-Protected Securities (TIPS) for those who fear inflation but Joe's favorite would probably be the longest term (30 year) bonds.<br />
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<b>Is investing in treasuries still a viable option?</b><br />
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If I would have invested in long term bonds when I first started saving and kept at it I would have caught the record high yields of the 80's, peaking out at over 15%, and the average return of my portfolio would be in the vicinity of 7%. The value of the bonds rise as interest rates fall (and vice versa) so most of the older high yield bonds would be worth more than their face value. This didn't matter to Joe because he recommended holding them to maturity, though this is something even he admits that he hasn't always followed. <br />
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Sure, that's all well and good but bond yields are low and what if they drop even lower? Let's go to the extreme and say that I don't trust the government so I stuffed that $1 million into my mattress. According to Joe, "mattresses produce income for only a small part of the population" and in fact the best I can do is to draw that $40,000 per year for 25 years without any cost of living increases or just under 19 years with 3% yearly increases at which point it will be depleted. Mind you this mattress strategy will cannibalize the investment, a.k.a. capital, but then again that's what you do with a portfolio of stock and bond mutual funds. The only upside to the mattress method over collecting interest is that I won't have to pay income taxes. Think about it though, provided that I don't tell anyone that I've got $1 million in my mattress, there isn't much risk. Though this isn't something any sane person would do, how terrible can it be? In my case I would only need to fully rely on my mattress money for the next 12 years until I am obligated to apply for Social Security at age 70 and receive monthly checks, with yearly cost of living increases, for the rest of my life. In addition I'll be receiving a pension from work. Include my wife's benefits into the equation and that's two Social Security and pension payments that will amount to substantially more than $40,000 per year. So I should be doing fine even after my mattress money is spent and that's without any interest. Treasuries pay interest, maybe it isn't much right now but at least it is more than the mattress.<br />
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Alas, I don't hold any treasury bonds and I'm not a young lad that might be able to catch the next rise in interest rates. As I write this the yield on 30 year treasury bonds are at 3.7% so if I drop that entire $1 million nest egg the financial advisor told me I needed on long term bonds I would be getting $37,000 per year in interest payments albeit without cost of living increases but with a government guarantee and I'll get the $1 million that I invested back when I'm 88 years old. The hit is only 0.3% less than the 4% quoted by the advisor. Investing in treasury bonds would most likely make up this difference because U.S. treasuries are exempt from state and local income taxes while other investments may not be as tax efficient. Now a government guarantee might not seem very secure these days, but ask people who have lost money in the stock market or real estate what a guarantee of getting back their original investment is worth.<br />
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<b>What about inflation?</b><br />
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Sure, we've all heard stories of how Social Security will go bust, the government will default on its debt and inflation will take what's left of your pension and savings but how likely is that, really? The first two haven't happened yet so let's look at inflation.<br />
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Joe believed that our fears of inflation were inflated. Indeed he made it through years of double digit inflation. The most common measure of inflation is the Consumer Price Index (CPI) which is a list of items weighted by consumer preference. According to Joe the CPI isn't a cost of living index. You don't buy a refrigerator every year and if cold weather makes the price of orange juice skyrocket while simultaneously a bumper crop of apples makes the price of apple juice plummet a financially intelligent shopper switches to apple juice. <br />
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He listed the 1970 prices of several items that have remained the same or even decreased by 1990. Now in 2013 several of his examples are still valid. In his example of a family of 4 going to a movie was $15 to $20 in 1970 while in 1990 it was only $4 including the drive, popcorn and soda, I suppose he was referring to being able to rent a video in the 90's. Today a Netflix or similar subscription is only $8 per month and you don't need to drive, the trimmings can be bought at a discount and practically every night can be a movie night. When I was in the Navy in the 70's I had a Volkswagen fastback that cost $5 to fill up for a week of driving around San Diego. Now I use a Vespa to get around the neighborhood where I work and can get everything I need in a smaller geographic area. Though gas prices seemed high in the '70's they are much higher now yet I can fill the tiny Vespa tank for about $5 and it lasts me nearly a month. Joe's usual lunch in the '70's costs around $2 while his '90's lunch was only $.60. He didn't elaborate on what was on his menu but I sometimes buy a 10 pound bag of potatoes for $2 which lasts me over a week, I simply microwave them at work so I don't even spend anything to cook them. If you fancy something more interesting <a href="http://en.wikipedia.org/wiki/Ellen_Jaffe_Jones" target="_blank">Ellen Jaffe Jones</a> wrote a recipe book titled <a href="http://www.amazon.com/Eat-Vegan-Day-ebook/dp/B0062O7H2M/ref=sr_1_1" target="_blank">"Eat Vegan on $4 a Day"</a> and <a href="http://drmcdougall.com/" target="_blank">Dr. McDougall</a> claims that you can get by fine on just <a href="http://www.drmcdougall.com/misc/2008nl/mar/foodcost.htm" target="_blank">$3 per day</a>.<br />
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I've read studies that show as people get older they tend to spend less. They must have studied healthy old people because medical expenses have most definitely increased. According to Joe you can lower your medical costs with proper lifestyle choices. Indeed one of the top causes of death today is misuse of prescription drugs so avoiding doctors as much as possible might even increase your longevity.<br />
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It may seem that Joe was recommending not to factor in inflation but that's not really the case. He did make a point not to fear inflation but one of his mantras was <i>"enough and then some."</i> By living below his means, even on interest payments alone, he was able to keep buying treasury bonds and increase his income. Going back to my example of needing $40,000 per year income, Joe's method at determining the Crossover Point to financial independence was to base it on your total expenses while working. In another step he had you ask, <i>"How might this expenditure change if I didn’t have to work for a living?"</i> So if I could raise my investments to $1,081,081 to make my goal income with a 3.7% bond yield but really end up getting by just fine on $37,000, the $3,000 surplus is invested back into bonds and provided I can keep living below my income the surplus will continue to compound and the investment income will increase every year.<br />
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<b>So that's all there is to it, just put all your money in treasury bonds?</b><br />
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There's more to it than that. Joe recommends having at least a 6 month cash reserve put aside for emergencies. He recommends the following criteria to whatever you do with your capital:<br />
<blockquote class="tr_bq">
<i>1. Your capital must produce income.</i><br />
<i>2. Your capital must be absolutely safe.</i><br />
<i>3. Your capital must be in a totally liquid investment. You must be able to convert it into cash at a moment’s notice, to handle emergencies.</i><br />
<i>4. Your capital must not be diminished at the time of investment by unnecessary commissions, “loads,” “promotional” or “distribution” expenses (often called “12b-1 fees”), management fees or expense fees.</i><br />
<i>5. Your income must be absolutely safe.</i><br />
<i>6. Your income must not fluctuate. You must know exactly what your income will be next month, next year and twenty years from now.</i><br />
<i>7. Your income must be payable to you, in cash, at regular intervals; it must not be accrued, deferred, automatically reinvested, etc. You want complete control.</i><br />
<i>8. Your income must not be diminished by charges, management fees, redemption fees, etc.</i><br />
<i>9. The investment must produce this regular, fixed, known income without any further involvement or expense on your part. It must not require maintenance, management, geographic presence or attention due to “acts of God.”</i></blockquote>
<b>If Joe is right does that mean that the financial experts are wrong?</b><br />
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There are lots of people claiming to be experts though most are just adding to the noise. I wanted to find out what the "real" experts were discussing. When I did my research I looked up scholarly papers and what I found was very scary.<br />
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In their paper, <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2201323" target="_blank">"The 4% Rule is Not Safe in a Low-Yield World,"</a> authors Michael Finke, Ph.D., CFP®, Wade D. Pfau, Ph.D., CFA and David M. Blanchett, CFA, CFP® claimed that withdrawing 4% from a typical balanced stock/bond investment portfolio is too optimistic. Considering that the 4% rule was a worse case scenario that has gone through exhaustive regression tests, that's a grim outlook.<br />
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Books on investing have almost universally pointed out that stocks have always outperformed bonds in the long run and nobody can predict the future. That isn't quite true. Long term treasury bonds were the best investment during the several years of the Great Depression and most recently they have once again outperformed stocks. Low interest rates and a stagnant stock market can last for decades like what happened in <a href="http://en.wikipedia.org/wiki/Lost_Decade_%28Japan%29" target="_blank">Japan</a> since the 1990's. As far as predicting the stock market's future, it is possible to look 10 years forward with a fair amount of certainty. In the paper, <a href="http://mpra.ub.uni-muenchen.de/30877/" target="_blank">"Can We Predict the Sustainable Withdrawal Rate for New Retirees?"</a> Wade Donald Pfau of the National Graduate Institute for Policy Studies (GRIPS) presented a formula that predicted the Maximum Sustainable Withdrawal Rates (MWR) and back tested it to 1883. The following graph not only shows you how closely it tracked the actual MWR, but it shows a frighting prediction of where we're headed. That 60% stock, 40% bond balanced portfolio will have a predicted MWR of less than 2%. In addition, the pessimistic side of the 96% Confidence Interval hit bottom so it could be much worse.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhI354pgziJdYn2wYgqgJeS0-Gz_UvPx-knEsqWNv1vIljKmjV-Rddo32AwYwXPdFk567iM9NxTlDI3TMGEyewir4aYsuywOZUIXuAi2UHrxX-kfR8BgfRfpUhZ9m6xhzvA9yGwjR3rbjM/s1600/Maximum_Sustainable_Withdrawal_Rates.JPG" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="460" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhI354pgziJdYn2wYgqgJeS0-Gz_UvPx-knEsqWNv1vIljKmjV-Rddo32AwYwXPdFk567iM9NxTlDI3TMGEyewir4aYsuywOZUIXuAi2UHrxX-kfR8BgfRfpUhZ9m6xhzvA9yGwjR3rbjM/s640/Maximum_Sustainable_Withdrawal_Rates.JPG" width="640" /></a></div>
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Of course there are some studies that show a more cheerful future but even at today's 3.7% long term treasury rates, a relatively comfortable and worry free retirement is possible using Joe's treasury bond investment strategy.<br />
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<b>What will I do? </b><br />
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I'm not really sure but reading the latest studies and re-reading the original YMOYL is a good start.Danhttp://www.blogger.com/profile/04395885817612314880noreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-32343211102905548832011-07-21T11:23:00.000-07:002013-06-06T10:04:59.956-07:00Investment Lesson #7 - Creating a Lifelong IncomeIt has been a while since I finished blogging my series of investment lessons but perhaps the most important lesson was missing. One of the goals of investing is so that you won't run out of money. Ideally, your investments will someday provide you with a lifelong income.
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A few weeks ago I took an extension class at <a href="http://www.ucla.edu/">UCLA</a> called, "Your Transition to Retirement: Creating a Lifelong Income" taught by Paul <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Heising</span>, MBA, <span class="blsp-spelling-error" id="SPELLING_ERROR_1">CFP</span>. Here's the course description from the catalog:
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<blockquote>
This course is ideal for those who are recently retired and those concerned financially about whether or not they will be able to retire some day. Unlike other retirement planning courses that focus solely on the accumulation of assets, this course also covers the transition from accumulation to the distribution phase and identifies critical financial strategies so you don't outlive your money. Key planning areas covered include identifying the most common mistakes that retirees make and how to avoid them, determining the income you will need in retirement and where it will come from, a review of withdrawal rate strategies based on recent academia studies, and creating a lifelong income so you won't outlive your money. Participants leave the class with a clearer understanding of how to analyze their options and successfully manage their own transition from accumulation to distribution. This course also includes many examples of real life retirement and investment situations.</blockquote>
There were only about eight of us enrolled, which illustrates just how shamefully ignorant most people choose to remain about their future. Did I learn anything? Yes, lots. Would I make any changes to the investment lessons I already published? Not really--there is a big difference between the accumulating stages of investing which I covered in these lessons and drawing an income from your investments.
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It would take much more than a single blog post to cover everything that was discussed in class so I'll just hit on some of the highlights that I found interesting.
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<span style="font-weight: bold;">The most common mistakes people make when it comes to retirement planning:</span>
<br />
<ol>
<li>Underestimating how long you will live in retirement.</li>
<li>Not recognizing the impact of inflation on reducing your purchasing power.</li>
<li>Investing too conservatively relative to your income needs.</li>
<li>Excess withdrawal rates and point-in-time risk.</li>
<li>Not understanding tax planning and how it can be a benefit.</li>
<li>Overlooking health care issues and costs.</li>
<li>Not understanding the importance of estate planning.
</li>
</ol>
It seems that the general thinking among the people that I know is to work until forced to retire somewhere around 65 years old and then social security or the company pension will take care of them. Basically, these are just excuses for not saving or planning for retirement. Then there are the all too common stories of people working well into their golden years then dying a few years after retiring. If you have the discipline to start saving and investing early in your working years, there's no need to put off retirement until the government or your employer tells you that it is time.
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So how do you plan for retirement? First of all plan to be retired for a long time. There are charts and tables drawn created by <a href="http://en.wikipedia.org/wiki/Actuary">actuaries</a> that show statistics like two thirds of all humans who have reached the age of 65 are alive today and if you are a 65 year old female your life expectancy is 85 but a woman who is 85 today will likely live to over 92. No one knows how long they will live and most of us don't really want to think about it too much but to be on the safe side, plan on living 7 years or more beyond your life expectancy. Even if you wait until 65 to retire, we're talking about spending 30 years in retirement. Considering early retirement? Plan for 40, 50 years in retirement or even longer.
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As you age your money will be worth less because of inflation. The rate of inflation varies from year to year. I remember some years where we had double digit inflation and people bought things <span style="font-style: italic;">now</span> because they knew that the price would only go up if they waited. Annualized from 1914 through today inflation grew at a rate of 3.29%. Using the <a href="http://en.wikipedia.org/wiki/Rule_of_72">Rule of 72</a> that means that the cost of living doubled every 21.88 years.
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Investments should stay ahead of inflation and this brings up the subject of <a href="http://en.wikipedia.org/wiki/Real_interest_rate">real rate of return</a>. Historical rates of return for an all stock portfolio average out to 10.3% per year, intermediate treasury bonds have returned 5.1% and a blend would of course be somewhere between the two. However, inflation eats away at the earning power of the portfolio so stocks real rate of return drops to 6.8% and treasury bonds to 1.75%.
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It would make sense to try and maximize your return within your risk comfort zone but many people tend to invest for retirement too conservatively. Not only is it difficult to accumulate enough to retire, the funds will run out quickly. The consequences are outliving your money, having to reduce your spending, return to the workforce or trying to make up for it by taking on more investment risk during retirement than is prudent.
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That brings up the point of excessive withdrawal rates and point-in-time risk. Ideally your withdrawal rate will be enough to cover your lifestyle, keep up with inflation and either run out when you die or maybe leave a little something for your heirs. Point-in-time risk can't be predetermined unless you know which direction and how far stocks and bonds will be going in the future, in other words you will only know you retired at the wrong time when you run out of money! Let's say your investments drop 50% as has happened many times in history. Your portfolio would have to gain 100% just to get back the where you started but let's say you decide to take a 4% withdrawal rate, which is pretty standard, you'll need a 132% increase to recover.
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At this point the prospect of ever retiring may seem pretty slim, but using computer modeling and historical stock market returns an initial investment in 1972 of $200,000 in an all stock portfolio with an initial withdrawal rate of 7% and adjusted to keep up with 3% inflation would last over 30 years. The initial withdrawal would start at $14,000 and by 2005 the annual withdrawal would increase to $37,133 and the total withdrawals for the life of the investment added up to $838,405. What did this portfolio in was the dot-com bust of 2001, a bear market which it never recovered from. Reducing the withdrawal rate from 7% to 5% and keeping up with 3% cost of living increases on the same $200,000 all stock portfolio would start you out with $10,000 (in 1972) and by 2011 you would be taking out $30,748 per year and still have plenty left over. In fact despite the 35 years of withdrawals the portfolio would have grown to $2,448,813 in 2011.
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It would seem that the answer to maintaining a life-long income is to invest only in stocks and don't be greedy with the withdrawals but it isn't that easy. Starting a withdrawal plan right at the beginning of a long and deep bear market is risky. How much risk are you willing to take? You won't really know until your portfolio is down 50%, 75% or even 90% as has happened in past bear markets. It is difficult to stomach these declines and stay fully invested. Many investors panic and sell right at the bottom, their portfolios never recovering. A way of smoothing out the bumps of the stock market is by adding bonds to the portfolio. A stock/bond portfolio mix is a bit more difficult to model but assuming that the bond portion of the portfolio earns a fixed rate of 4%, a 60/40 stock/bond mix of $200,000 starting in 1972 with a 5% withdrawal rate and 3% annual cost of living increase would not be drained by 2011. The portfolio would still have $309,267 left over, much less than the all stock portfolio but with a lot less fluctuation in value. In addition, in order to keep the portfolio balanced you will be withdrawing from the portion of the portfolio that is performing the best for that year. For example, in a stock bear market you'll draw from the bond portion. If the stock portion drops significantly then funds should be transferred from the bond portion to the stock portion to keep the target stock/bond mix. This will automatically force you to buy low and sell high, which is exactly what you want to do.
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Another factor to throw into the problem is taxes. Stocks and bonds will pay out taxable dividends. You will be taxed on these dividends even if you don't withdraw them so it would make sense to shelter as much of that income from taxes as possible. In addition, if you have a choice of adding to a tax free or tax differed account like an IRA or 401K, it is probably a good idea, especially for the bond portion of your investments. Exactly how to figure out what works best is beyond the scope of these basic investing lessons but I will say that I have converted all of the retirement accounts that I had control over into a single Roth IRA. I've also got a pension from the trade union I belong to and of course there is Social Security but I don't have any say so over how that money is invested. In fact, I don't even factor those funds into my retirement equations because there's no guarantee that there will be anything left by the time I'm eligible.
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Right now my biggest obstacle for taking an early retirement is health care. It isn't that my wife and I have any serious health issues, it is because insurance is very expensive in the U.S. and being under covered can be very risky to our finances. In fact it is the main reason that I continue working--to collect my union health benefits. Although we covered several options in the class, none of them seem as cost effective as putting in just enough hours to qualify for a good group health plan. Until, that is, Medicare eligibility kicks in. Again, this subject is a bit beyond these investing lessons.
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Finally, estate planning. Ideally, your investments run out right at the time of your death but if that's not the case it is much better to have some left over instead of the other way around. If you want to leave anything to your heirs you'd better look into drafting up a will and possibly moving some major assets like your home into a trust. Like the last few points covered, this is also beyond these investment lessons but it is worth mentioning in case your investments outlive you.
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Is it possible to invest enough to eventually live comfortably or are we commended to working the rest of our lives? It depends on your definition of living comfortably. Some people work only a few years and retire in their 40's or even their 30's, others struggle until they are forced out of the workforce in their 60's and 70's with no savings. Someone who learns basic principals of investing and puts them into practice should be able to accumulate enough investments that will provide enough of an income to live off of the investments for a lifetime.
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Just to make sure I got the concepts of creating a lifelong income, I created a few spreadsheets and experimented with some what-if situations. Although taking a larger percentage along with a bigger risk of say 7% from a 100% stock portfolio, if the stock market doesn't cooperate and you fall into the trap of a bear market early in your retirement there is a good chance of running out of money. Your chances of avoiding lots of anxiety by living frugally and drawing between 3% to 4% of a balanced portfolio. How you balance it of course is very individual but let's say that if the portfolio is made up of 50% stocks and 50% bonds, deciding whether to draw from the stock or bond portion of the portfolio becomes very easy. There's no need to constantly re-balance. Simply draw from stocks when they outpace the bond portion of the portfolio and from bonds in the years they outpace stocks.
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Overall the lesson learned from the UCLA class was that not only it is possible to fund your own retirement but with the current state of Social Security, company and union pension plans, it is probably the only way to guarantee a lifelong income. Note that the goal of investing isn't to be able to live a luxurious lifestyle. In fact living frugally not only helps when you're saving for retirement, it is imperative in order to create a lifelong income.
Danhttp://www.blogger.com/profile/04395885817612314880noreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-104934766785943742010-12-15T15:31:00.000-08:002011-01-02T11:34:50.486-08:00Investment Lesson #6 - Asset Allocation<a href="http://en.wikipedia.org/wiki/Asset_allocation" target="_blank">Asset allocation</a> is simply how much of your money you split into stock, bonds, real estate and other investments. You've probably heard the old saying, "<a href="http://en.wiktionary.org/wiki/don%27t_put_all_your_eggs_in_one_basket" target="_blank">Don't put all your eggs in one basket.</a>" In the financial world that usually refers to <a href="http://en.wikipedia.org/wiki/Diversification_%28finance%29" target="_blank">diversification</a> as a means of reducing risk. However, there's a flip side to this, "<a href="http://www.yourdictionary.com/idioms/put-all-one-s-eggs-in-one-basket" target="_blank">Put all your eggs in one basket and--watch that basket.</a>" The meaning of this is that someone who concentrates his efforts in one area is more likely to succeed.<br /><br />So which is best for you? It depends. Let's start by taking a wider view of asset allocation, a much wider view.<br /><br />In the big picture, everything available to you, both tangible and intangible, are assets. A nice smile, a bicycle, money and time are all examples of assets. The opposite of assets are liabilities, these are things that hold you back. The most obvious example of a liability would be debt, but it could also be a pimple on your face or a lack of time. We all have a mix of assets and liabilities. That nice smile could overpower the pimple on your face and a strong will could overcome a severe handicap. Likewise as you have learned in lesson #2, if you have a long time frame to invest in, it could offset not having much money due to the power of compounded <a href="http://en.wikipedia.org/wiki/Rate_of_return">return on investment</a>.<br /><br />Sometimes an asset could turn into a liability. For example, owning stocks during a bear market or holding long term low yield bonds while interest rates are rising. But what if you owned both stocks and bonds?<br /><br />Over the long term both stocks and bonds have given investors positive returns. However, they don't always move up and down in value at the same time. In fact there are times when they move in opposite directions. Having a mix of stocks and bonds is known as a low-correlation investment mix and this is generally what financial managers recommend in order to minimize risk.<br /><br />What is the ideal mix of stocks and bonds and for that matter, which stocks and bonds work best for this method of asset allocation? I would recommend something that closely resembles the "Couch Potato Portfolio" in Paul B. Farrell's book, The Lazy Person's Guide to Investing. Farrell's portfolio is a 50-50 mix of the Vanguard 500 Index Fund (VFINX) and the Vanguard Total Bond Market Index Fund (VBMFX), I substituted the Vanguard Total Stock Market Index Fund for the 500 Index Fund because I wanted to have greater diversification in the stock portion of the portfolio. This asset allocation has served me well during the crash of 2008 when stocks plummeted and the subsequent interest rate cuts by the government to restart the economy boosted the value of bonds. Although the target 50-50 ratio got out of whack at times, I didn't have to exchange shares to rebalance. I simply kept up my regular monthly investments and bought into whichever fund was lower at the time in order to get the mix back to 50-50. The advantages to this are, and I quote from the book:<br /><ul><span style="font-size:-1;"> <li>No complicated accounts.</li> <li>No diligent reading of the financial press.</li> <li>No phone calls from brokers with "opportunities."</li> <li>No meetings with investment advisers demonstrating their constant supervision of accounts.</li> <li>Very simple tax returns.</li> </span></ul> So that's it. This is all you need to know about investing and asset allocation. If you skipped all the other lessons and heed the advice of these last few paragraphs, you'll probably be a successful investor practicing not only the advice of, "Don't put all your eggs in one basket," but also allocating as little of that valuable asset, time, to managing your investments.<br /><br />Of course you could change the mix depending on your age and your risk tolerance. Generally, younger people have a longer investment horizon (the horizon generally referring to retirement) and want their investment to grow in value while older folks usually prefer a steady income stream from their investments. <a href="http://en.wikipedia.org/wiki/John_Bogle">Jack Bogle</a>, the founder of <a href="http://en.wikipedia.org/wiki/The_Vanguard_Group">The Vanguard Group</a>, suggests holding a mix of stock and bond funds equal to your age--in bonds. In other words a 20 year old would own 20% bonds and 80% stocks while an 80 year old would own 80% bonds and 20% stocks. The 50-50 split worked fine for me but then again I'm in my 50's.<br /><br />Now let's put all our eggs in one basket.<br /><br />If you take a look at the richest people, the very top few, you'll find that most of these people are wealthy because of one thing, one business with one main product or service, they are specialists. Each empire might be made of computer software or manufacturing or communications or real estate or even royalty but most every ultra-rich person has made their money in a single field. Unless they have inherited their wealth and are living off of a trust fund, these very wealthy are pretty much fully invested in their one thing.<br /><br />I have seen first hand how a couple of very wealthy individuals work, <a href="http://en.wikipedia.org/wiki/Steve_jobs">Steve Jobs</a> and <a href="http://en.wikipedia.org/wiki/Jeffrey_Katzenberg">Jeffrey Katzenberg</a>. I can't say that I've gotten very close to either of them or that I'm much of an expert on their lives and working methods. What I can tell you is that these two remarkable men work much harder and are more focused on their work than I or anyone else that I have met.<br /><br />I can't give much advice into what single investment is going to work best for you. Whatever you do choose, you had better know it well.<br /><br />Though I usually prefer to keep a mix of stocks bonds and real estate right now most of my money is in real estate. As I write these words real estate prices are down which make it a good buying opportunity. I can't say if the housing market hit bottom yet but the prices of a condo on the beach have come down to a point where we don't have to look to Mexico for something that we can afford. We found something just a few miles away so we're buying it. I made it a point in the real estate investment lesson that it isn't an investment until you rent it or sell it, we'll be renting out this one. In a few years when the housing market hopefully recovers we plan to sell our house and move into the beach condo or perhaps sell the condo if we decide we're not cut out for beach living. In order to make this deal I had to cash out our non-retirement stock and bond funds. I didn't take out a mortgage this time. Even with today's low interest rates, the last thing I wanted to do was to get myself into debt.<br /><br />Am I crazy to do this? Like the saying goes, "<a href="http://en.wikipedia.org/wiki/Hindsight_bias">hindsight is 20/20</a>," so ask me in a few years. Interest rates have been at historic lows for the past couple of years and at some point it will most likely start moving up. This makes bonds unattractive and holding long term bonds very risky. Stocks will most likely continue their long term upward trend but like always, it will be a bumpy ride. I recently traded the Vanguard Total Bond Market Index Fund that I held in my Individual Retirement Account for the Total Stock Market Index Fund.<br /><br />Working out your own asset allocation strategy is highly personal. It really depends on your tolerance for risk, your perception of investment conditions, the amount of time you can devote to studying your investments and it is also dependent on your tax situation. Earlier I mentioned that I held the bond funds in my retirement accounts. Assuming that I will be holding onto my IRA's for several years before making withdrawals it might seem at first that stock funds would be a better choice. It isn't, at least not if you are holding a mix of stock and bond funds. The reason is because of <a href="http://en.wikipedia.org/wiki/Excess_burden_of_taxation">tax efficiency</a>. Bonds generate income and that income is taxable. Most of the gains in stocks and real estate come from growth, also known as <a href="http://en.wikipedia.org/wiki/Capital_gain">capital gains</a>. Those type of gains aren't taxed until the asset is sold.<br /><br />Although you can get by fine and be a successful investor with a very simple asset plan, the study of asset allocation, also known as <a href="http://en.wikipedia.org/wiki/Modern_portfolio_theory">modern portfolio theory</a>, can be very complicated.<br /><br />From Wikipedia:<br /><b><blockquote></blockquote></b><blockquote><b>Modern portfolio theory</b> (<b>MPT</b>) is a theory of <a href="http://en.wikipedia.org/wiki/Investment" title="Investment">investment</a> which attempts to maximize portfolio expected <a href="http://en.wikipedia.org/wiki/Rate_of_return" title="Rate of return">return</a> for a given amount of portfolio risk, or equivalently minimize <a href="http://en.wikipedia.org/wiki/Financial_risk" title="Financial risk">risk</a> for a given level of expected return, by carefully choosing the proportions of various <a href="http://en.wikipedia.org/wiki/Asset" title="Asset">assets</a>. Although MPT is widely used in practice in the financial industry and several of its creators won a <a href="http://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Economic_Sciences" title="Nobel Memorial Prize in Economic Sciences">Nobel memorial prize</a><sup id="cite_ref-0" class="reference"><a href="http://en.wikipedia.org/wiki/Modern_portfolio_theory#cite_note-0"><span></span><span></span></a></sup> for the theory, in recent years the basic assumptions of MPT have been widely challenged by fields such as <a href="http://en.wikipedia.org/wiki/Behavioral_economics" title="Behavioral economics">behavioral economics</a>.<br /></blockquote>I first learned about about "behavioral economics" just a few days ago. In a way, it neatly sums up these investment lessons.<br /><br />Again, from Wikipedia:<br /><p><b></b></p><blockquote><p><b>Behavioral economics</b> and its related area of study, <b>behavioral finance</b>, use social, <a href="http://en.wikipedia.org/wiki/Cognitive_bias" title="Cognitive bias">cognitive</a> and emotional factors in understanding the <a href="http://en.wikipedia.org/wiki/Economic" title="Economic" class="mw-redirect">economic</a> <a href="http://en.wikipedia.org/wiki/Decision_making" title="Decision making">decisions</a> of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on <a href="http://en.wikipedia.org/wiki/Market_price" title="Market price">market prices</a>, <a href="http://en.wikipedia.org/wiki/Profit_%28economics%29" title="Profit (economics)">returns</a> and the <a href="http://en.wikipedia.org/wiki/Allocation_of_resources" title="Allocation of resources" class="mw-redirect">resource allocation</a>. The fields are primarily concerned with the <a href="http://en.wikipedia.org/wiki/Bounded_rationality" title="Bounded rationality">bounds</a> of <a href="http://en.wikipedia.org/wiki/Rationality" title="Rationality">rationality</a> (selfishness, self-control) of <a href="http://en.wikipedia.org/wiki/Homo_economicus" title="Homo economicus">economic agents</a>. <a href="http://en.wikipedia.org/wiki/Behavioral_model" title="Behavioral model" class="mw-redirect">Behavioral models</a> typically integrate insights from <a href="http://en.wikipedia.org/wiki/Psychology" title="Psychology">psychology</a> with <a href="http://en.wikipedia.org/wiki/Neo-classical_economics" title="Neo-classical economics" class="mw-redirect">neo-classical economic theory</a>.</p> <p>Behavioral analysts are not only concerned with the effects of <a href="http://en.wikipedia.org/wiki/Market" title="Market">market</a> decisions but also with <a href="http://en.wikipedia.org/wiki/Public_choice" title="Public choice" class="mw-redirect">public choice</a>, which describes another source of economic decisions with related biases towards promoting self-interest.</p></blockquote><p></p>Investing has as much to do with our psyche as it does with interest rates and return on investment. Before you spend another dollar, consider your choices. Do you really need to buy that new toy or would it be better to pay down your debt? Can you picture yourself free to choose how you spend your time or are you going to be stuck in a job where you don't have this choice.<br /><br />Let's end these investment lessons with one final quote. This is a definition of money that has profoundly changed the way that I think about my own personal finances:<br /><blockquote>"Money is something we choose to trade our life energy for....This definition of money gives us significant information. Our life energy is more <span style="font-style: italic;">real</span> in our actual experience than money. You can even say money <span style="font-style: italic;">equals</span> our life energy. So, while money has no intrinsic reality, our life energy does--at least to us. It's tangible and it's finite. Life energy is all we have. It is precious because it is limited and irretrievable and because our choices about how we use it express the meaning and purpose of our time here on earth."</blockquote><br /><div style="text-align: right;">--Your Money or Your Life,<br />Transforming Your Relationship with Money<br />and Achieving Financial Independence<br /><br />by Joe Dominguez and Vicki Robin<br /></div><br /><br /><a href="http://en.wikipedia.org/wiki/Disposable_and_discretionary_income" target="_blank"><br /></a><a href="http://www.sec.gov/investor/pubs/assetallocation.htm" target="_blank"></a>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-6168396440348934057.post-17051494947889293302010-12-14T20:53:00.000-08:002013-06-06T10:18:03.839-07:00Investment Lesson #5 - Other InvestmentsThere are many other ways to invest besides stocks, bonds and real estate. Let's look at some that I've got experiences in and a few that I have never tried.<br />
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<b>Start or Buy a Business</b></div>
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When you buy stock you are purchasing a tiny piece of a company, when you're Warren Buffet you buy enough stock to take control and can pick someone to manage the company. You can do that on a much smaller scale either by yourself or with a few partners but what often happens when you buy or start a business is that you end up running it. In fact you could say that you're buying yourself a job.</div>
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There are several ways to set up a business, basically it is going to be either a <a href="http://en.wikipedia.org/wiki/Sole_proprietor" target="_blank">sole proprietor</a>, <a href="http://en.wikipedia.org/wiki/Partnership" target="_blank">partnership</a> or <a href="http://en.wikipedia.org/wiki/Corporation" target="_blank">corporation</a>. I've had experience with sole proprietorship, it is the easiest to set up and corporation, which is the most difficult. A corporation is a legal entity. Why would you want to do this? Usually it is either to protect the owners from liability or to take advantage of some tax laws that favor corporations. Doctors and lawyers set up <a href="http://en.wikipedia.org/wiki/Limited_liability_company" target="_blank">limited liability companies</a> (LLC) to protect themselves against law suits. Several actors, directors, cinematographers and others who work in entertainment and make a substantial salary have set up corporations. When they are hired to do a job the studio actually makes a contract with the corporation. All payments go to the corporation without withholding taxes and the corporation is responsible for paying the taxes, insurance premiums and other details. The big advantage is that nearly all the expenses can be deducted including meals, all travel, tickets to sporting events, yachts and so on which are expenses that are normally not allowed to a sole proprietor or partnership. I formed a corporation for the job I had in Israel in order to take advantage of a tax treaty between the U.S. and Israel. It actually worked well for me until someone took over accounting and decided that I shouldn't be paid as a corporation but as a foreign worker who needed to pay Israeli income tax. I fought them on it and won that battle but only because I put in my notice to leave by then and they would have had a very hard time taking back 25% of what they already paid me.</div>
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I made a living in photography since I was in college in the early 70's until I got into motion pictures in 1992. A part of that time I had a studio and had to deal with all the details that go into running a legitimate business--business licenses, special taxes, hired help, accounting services, insurance, open accounts at the photo supply store and laboratory (this was before digital cameras) and of course doing all the running around to get the jobs, shoot and deliver to the clients. Then there was the big wait until the client pays the invoice. Most paid within 30-60 days, but sometimes it took longer, once I had a client that took over a year to pay. Having to pay for all of the costs of the job up front I often felt like I was giving interest free loans to my clients. One excuse I heard over and over was, "you'll get paid when I get paid." That didn't make sense because it wasn't their client that hired me. A few times I ended up filing lawsuits in order to collect what was owed to me. I even had a client go bankrupt and another move to another state without leaving a forwarding address. Obviously I didn't collect in those cases.</div>
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In order to grow a business you've got to feed it. This means that a portion of the profits have to go back into new equipment, advertising, supplies and possibly hiring workers. What happened to me was that the more successful I got, the less photography and more management I seemed to do. I knew some photographers who specialized in location work, mostly for clients like <a href="http://en.wikipedia.org/wiki/Life_magazine" target="_blank">Life magazine</a>, <a href="http://en.wikipedia.org/wiki/Sports_Illustrated" target="_blank">Sports Illustrated</a>, <a href="http://en.wikipedia.org/wiki/Fortune_%28magazine%29" target="_blank">Fortune</a> and other well known publications so I asked them how they ran their business. To my surprise, none of them had business licenses or paid business taxes, they were pretty much "flying under the radar." Why were they able to get away with it? Exposure, and I don't mean like in photography, I mean that because I was renting a business location I was an easy target for the taxing authorities while these other photographers were working from their homes but being contracted in different cities, shooting in various location and were generally difficult to track down. What's the lesson in this? For me it was that business laws are sort of a gray area so instead of doing everything "by the book" just do your thing and figure it out as you go along. In addition, it turns out that to be successful you don't really need lots of equipment or even a place of business--you need clients and you need the means to deliver what your clients need.<br />
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If you're considering buying or creating businesses as an investment so that you can eventually retire, you need to find something that will be able to sustain itself with a minimum of involvement. Many business owners are very hands-on and they can't stand the idea of handing over management decisions to someone else. To put it another way, investing in a business can consume your life.<br />
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<b>Life Insurance</b><br />
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There's basically two types of <a href="http://en.wikipedia.org/wiki/Life_insurance" target="_blank">life insurance</a>, <a href="http://en.wikipedia.org/wiki/Term_life_insurance" target="_blank">term</a> and <a href="http://en.wikipedia.org/wiki/Whole_life_insurance" target="_blank">whole life</a>. Term life insurance isn't really an investment, at least not for the person who is on the policy, because the only way to collect is to die. Whole life insurance can be defined as an investment because it accumulates a cash value that you can borrow against, use in case of emergency or possibly convert into an <a href="http://en.wikipedia.org/wiki/Annuity_%28US_financial_products%29" target="_blank">annuity</a> to use in retirement. At first it may sound like a good deal, but returns on insurance policies are usually much lower than other investments because of the fees and commissions that are built into the policies. In addition, if you want an early out of the contract there are substantial penalties and fees.<br />
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Frankly, I wouldn't recommend getting whole life insurance to anyone and would only consider term insurance if they are the sole bread winner of the family or have lots of debts and don't want to pass that along to their heirs. The only life insurance that I have ever had were the ones that came as a part of a contract. When I was in the Navy my parents would have been awarded a very small sum if I would have died in the line of duty and right now Rosie is entitled to a tiny life insurance payout as a part of my union contract.<br />
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I mentioned <a href="http://en.wikipedia.org/wiki/Annuity_%28US_financial_products%29" target="_blank">annuity</a> a little while ago, this is another insurance product. It is basically a retirement account. You can buy an annuity through a whole life insurance policy, a part of the premiums go to building up an annuity, or you can hand over a load of cash in exchange for a guaranteed income for life. Again, there are fees and commissions tied to annuities so their return usually isn't as good as managing an investment portfolio yourself but somehow the insurance companies have managed to influence tax laws in their favor. I'm not considering an annuity for ourselves right now but I can see how it could be comforting to know that no matter what happens to stocks, bonds or real estate, you have a guaranteed income that will last the rest of your life.<br />
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<b>Gold and Precious Metals</b><br />
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There are several ways to invest in <a href="http://en.wikipedia.org/wiki/Gold_as_an_investment" target="_blank">gold</a>, <a href="http://en.wikipedia.org/wiki/Silver_as_an_investment" target="_blank">silver</a>, <a href="http://en.wikipedia.org/wiki/Platinum_as_an_investment" target="_blank">platinum</a> and other precious metals. One way <i>not</i> to invest is through jewelery. Chains, rings and other such items have a small amount of precious metal in them and there are too many variables when it comes to assessing their value. An easy way to invest is through coins, but again there are other forces like <a href="http://en.wikipedia.org/wiki/Numismatic" target="_blank">numismatics</a> value. Then there are gold bars or you can buy shares of a mining company or a mutual fund that invests in mining operations. I invested in a gold mutual fund once and found that it was very <a href="http://en.wikipedia.org/wiki/Volatility_%28finance%29" target="_blank">volatile</a>, in other words, risky. What? Don't people often buy gold to avoid risk? Many people believe that it is a <a href="http://en.wikipedia.org/wiki/Hedge_%28finance%29" target="_blank">hedge</a> against <a href="http://en.wikipedia.org/wiki/Inflation" target="_blank">inflation</a> and in times of world turmoil gold is a <a href="http://en.wiktionary.org/wiki/safe_haven" target="_blank">safe haven</a>. Perhaps in extreme situations it is true, but I'm not sure it I would invest in precious metals. Even though gold is trading today at a very high <span name="advenueINTEXT">$1,234.55 an ounce, according to some financial analysts' estimates it hit an </span>inflation adjusted high in 1980 of $7,150.<br />
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<b>Options and Futures</b><br />
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I'm lumping <a href="http://en.wikipedia.org/wiki/Option_%28finance%29" target="_blank">options</a> and <a href="http://en.wikipedia.org/wiki/Futures_exchange" target="_blank">futures</a> together because they are very closely related. We're getting into an area known as <a href="http://en.wikipedia.org/wiki/Option_%28finance%29" target="_blank">derivatives</a>, which is basically something that has a value determined by something else. When you buy an option, or a futures contract, you're trying to predict the future price of a stock or <a href="http://en.wikipedia.org/wiki/Commodity_market" target="_blank">commodity</a>.<br />
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The history behind these investments goes way back to a story credited to <a href="http://en.wikipedia.org/wiki/Aristotle" target="_blank">Aristotle</a> about <a href="http://en.wikipedia.org/wiki/Thales" target="_blank">Thales</a>, a poor philosopher from <a href="http://en.wikipedia.org/wiki/Miletus" target="_blank">Miletus</a>. <br />
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Thales invented a "financial device, which involves a principle of universal application." Thales attempted to predict the quality of the olive harvest in the fall. Based on his estimate of a good harvest, he contracted with local olive-press owners to buy exclusive use of their olive presses when the harvest was ready.<br />
Thales bought low because no one else pretended to guess on the quality of the harvest. The olive-press owners, being human, wanted money now rather than later, so they hedged against the possibility of a poor yield. The quality of the crop was irrelevant, because at harvest, presses are always needed.<br />
Thales owned the rights on all of them, and he rented them at rates he set, which made him rich.</blockquote>
The most popular futures market is the <a href="http://en.wikipedia.org/wiki/Chicago_Board_of_Trade" target="_blank">Chicago Board of Trade</a> (CBOT), established in 1848, but it wasn't the first. <sup><a href="http://en.wikipedia.org/wiki/Futures_exchange#cite_note-0" target="_blank"></a></sup>The <a href="http://en.wikipedia.org/wiki/Dojima_Rice_Exchange" target="_blank">Dojima Rice Exchange</a> was in operation since 1710 in Japan and the <a href="http://en.wikipedia.org/wiki/Shogun" target="_blank">Shoguns</a> were trading rice futures long before that.<br />
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Here's how it works--futures trading in the U.S. started with wheat so I'll use that for the example. A farmer wants to know how much wheat to plant so he gets a contract from a buyer. The contract helps the farmer determine not only how much to plant, but it states an agreed price and the date of delivery for his harvest. The farmer can now use that contract as collateral on a loan to buy seeds, fertilizer, equipment or whatever else he needs to meet his obligation. This is known as a futures contract.<br />
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Options are a bit different. The Chicago Board of Trade (CBOT) established the <a href="http://en.wikipedia.org/wiki/Chicago_Board_Options_Exchange" target="_blank">Chicago Board Options Exchange</a> (CBOE) in 1973 though the use of options is a very old business practice. The difference between an option and a futures contract is that while a futures contract must be completed, the holder of an option has the right but not the obligation to engage in the transaction. For example, you think a certain stock is going to go up in price but instead of buying the stock you buy an option to buy the stock at a price lower than what you think it will go to on a certain date. If that stock goes higher than your option price, you can buy the stock at a discount and make a nice profit. You can also work this the other direction if you feel the price of the stock is going to fall. Something interesting about options is that most options expire worthless. That's right--most options are not exercised and no trade ever takes place. So what's the point? The few times that options are completed, lots of money can be made or in some cases a large loss can be avoided. In addition, options can be traded during the life of the option. The worse that can happen if the option expires worthless is that you loose the premium paid for the option. Some stock holders sell options on their holdings. Knowing that in most cases the options expire worthless, it could be a good way to make money on your holdings. However, if an option is exercised, the stock holder is obligated to complete the transaction and perhaps sell the stock at a discount to its current price.<br />
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Things can get very complicated very quickly in futures and options trading. In some cases it can keep your losses in check, in other cases it can be a highly leveraged investment that can make huge profits as well as force a trader into bankruptcy. Investments into derivatives are often taken on by <a href="http://en.wikipedia.org/wiki/Hedge_fund" target="_blank">hedge funds</a> which are <a href="http://www.sec.gov/answers/hedge.htm" target="_blank">acknowledge</a> by the <a href="http://en.wikipedia.org/wiki/U.S._Securities_and_Exchange_Commission" target="_blank">Securities and Exchange Committee</a> (S.E.C.) but not regulated by them.<br />
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I have never traded options or futures and doubt I ever will.<br />
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Though the futures market had a good reason to establish itself, I believe that once traders outside of the industry got involved the reason for its existence was distorted and now commodities prices are no longer driven by supply and demand but on <a href="http://en.wikipedia.org/wiki/Speculation" target="_blank">speculation</a>. In other words, much of the trading in commodities these days has nothing to do with a supplier and a buyer making a contract.<br />
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If you're interested in a short introduction to commodities, here's an excerpt from <a href="http://www.moneyinstructor.com/art/commoditymarket.asp" target="_blank">Understanding the Commodities Markets</a>:<br />
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<div style="margin-left: 40px;">
True agricultural businessmen, such as farmers or agricultural exporters use commodity contracts to hedge the price fluctuations of their products. Speculators, however, take advantage of price movements, and are not interested in the buying or selling of the actual commodity.</div>
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With careful use of options, I feel that it is possible to increase returns on stock investments and possibly avoid large losses. Here's an excerpt from <a href="http://www.moneyinstructor.com/doc/optionquestion.asp" target="_blank">Common Questions about Stock Options and Derivatives</a>:<br />
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<div style="margin-left: 40px;">
An option instrument and other similar derivatives can serve an important purpose in any investment plan. Believe it or not, using them often gives protection against risk rather than adding to it.</div>
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Still, it is a very advanced investment vehicle and not for the faint of heart.<br />
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<b>Tax Liens</b><br />
<br />
When local governments can't collect property taxes they sometimes sell the <a href="http://en.wikipedia.org/wiki/Tax_lien_sale" target="_blank">tax liens</a> to investors. You might compare tax liens to high yield "junk" bond with a very important difference, in case of default you are entitled to foreclose on the property so the risk is minimal. Some real estate investors have bought property at huge discounts using tax liens. However, the majority of tax liens are redeemed before the property is foreclosed.<br />
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I looked into tax liens but never got into it. I found that it take much more effort than stock and bond investing. In fact there are agents that will help investors find and purchase tax liens, for a fee of course.<br />
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<b>Art and Collectibles</b><br />
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Some people have made a fortune collecting things. Of course it takes a special appreciation and knowledge to become a successful collector. Collecting is a rather <a href="http://en.wikipedia.org/wiki/Esotericism" target="_blank">esoteric</a> investment compared to other options and assessing works of art is still very subjective compared to how stocks and bonds are priced. It seems to me that the most successful collectors took it up as a hobby, those who enter this field with the intent of making a profit are at a disadvantage unless they are very well informed.<br />
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We've got a few works of original art but only for our own enjoyment, they are not for sale. Of course if someone walks in and offers a boatload of money for something that's hanging on our wall we'd certainly consider it!<br />
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<b>Ponzi Schemes</b><br />
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Okay, this isn't really an investment but so many people have fallen into this trap that it's worth mentioning. <a href="http://en.wikipedia.org/wiki/Ponzi_scheme" target="_blank">Ponzi schemes</a> and its close relative, the <a href="http://en.wikipedia.org/wiki/Pyramid_scheme" target="_blank">Pyramid scheme</a>, is when investors get their own money and money from new arrivals in the scheme as a payout. In other words, it may seem that you're getting a great return on your investment but in reality no investment is being made. You would think that the warnings signs to such a scam would be obvious but as the <a href="http://en.wikipedia.org/wiki/Bernard_Madoff" target="_blank">Bernie Madoff</a> scandal has proven--it can go on for several years without detection and even the very wealthy can fall victim.<br />
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By the way, <a href="http://en.wikipedia.org/wiki/Social_Security_%28United_States%29" target="_blank">Social Security</a> has often been compared to Ponzi schemes and the government has responded to this accusation. It's actually a very interesting argument!<br />
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<b>Invest in Your Health</b><br />
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I'm putting this in because the leading causes of personal <a href="http://en.wikipedia.org/wiki/Bankruptcy_in_the_United_States" target="_blank">bankruptcies</a> in the U.S. are due to <a href="http://en.wikipedia.org/wiki/Medical_debt" target="_blank">medical debt</a>. Sure you can buy health insurance, which is an expense and not an investment, but that doesn't really make you healthy. I might be stating the obvious so I'll just refer you to a famous quote:<br />
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<div style="margin-left: 40px;">
<span style="font-family: Arial,Helvetica,sans-serif;">There is this difference between those two temporal blessings, health and money: Money is the most envied, but the least enjoyed; health is the most enjoyed, but the least envied: and this superiority of the latter is still more obvious when we reflect that the poorest man would not part with health for money, but that the richest would gladly part with all their money for health. ~ <span style="color: #009900;"><a href="http://www.blogger.com/blogger.g?blogID=6168396440348934057">Colton</a></span><br /></span></div>
Keeping to the subject of investing, let's see how health and investment are related.<br />
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It goes without saying that the less you need to spend the more you have to invest. I believe that keeping healthy is actually less expensive than leading an unhealthy lifestyle. I'll break it down into a few general categories--if you don't agree with me, that's fine, as long as you can rationalize your position.<br />
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I should emphasis that when I was in the service and then in college I prided myself at not being a picky eater and having a "lead belly" that could digest anything. My exercise was made up of various games or lifting weights in order to look good but I hadn't made the connection between exercise and health yet.<br />
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Then there's the old <a href="http://en.wikipedia.org/wiki/Adage" target="_blank">adage</a>, "<a href="http://en.wikipedia.org/wiki/Time_value_of_money" target="_blank">time is money</a>." Well, the longer you live the more time you have for your money to grow and the more money you will eventually have. I should add, the more healthy years you have to live. Old people often are poor as a direct result of not being healthy.<br />
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<span style="font-weight: bold;">Exercise</span><br />
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The <a href="http://en.wikipedia.org/wiki/List_of_causes_of_death_by_rate" target="_blank">leading cause of death</a> is heart disease. The <a href="http://en.wikipedia.org/wiki/Heart" target="_blank">heart is a muscle</a>, so doesn't it make sense that the most import muscle to exercise is the heart? You might have great abs, biceps, deltoids but really, have you ever known anyone who dropped dead due to a weak bicep? In my personal research I've determined that there are a couple of different theories on what makes the best exercise, one is <a href="http://en.wikipedia.org/wiki/Aerobic_exercise" target="_blank">aerobic</a> which is a moderate exercise level over an extended period of time and the other is <a href="http://en.wikipedia.org/wiki/Anaerobic_exercise" target="_blank">anaerobic</a>, high intensity exercise for short periods--no longer than 2 minutes. Aerobic exercise is for endurance, anaerobic for strength. Certainly both strength and endurance are important but if I only had the time for one, I'd exercise my heart for endurance. Of all the exercises that raises the heart rate to a beneficial aerobic zone, walking and running are the most easily accessible. I couldn't get Rosie to run and she doesn't like walking fast enough to raise her heart rate but I got her to walk up hills and that works for her. I found that running, when done properly, is an easy way to get my heart rate up. I also have no gym fees and require no special equipment, not even shoes are really needed so I have no exercise expenses.<br />
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<span style="font-weight: bold;">Diet</span><br />
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So many people think of diet as something you do until you reach a weight goal then get off of it. That's <a href="http://en.wikipedia.org/wiki/Dieting" target="_blank">dieting</a>, I'm talking about <a href="http://en.wikipedia.org/wiki/Diet_%28nutrition%29" target="_blank">diet</a> as a life-long habit. If you don't believe diet has anything to do with money, check what I stumbled on in a Wikipedia article on diet:<br />
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<div style="margin-left: 40px;">
A three-decade long study published in the British medical journal, <a href="http://en.wikipedia.org/wiki/The_Lancet" target="_blank" title="The Lancet">The Lancet</a>, found that Guatemalan men who had been well-fed soon after they were born earned almost 50% more in average salary than those who had not. The <a href="http://en.wikipedia.org/wiki/Randomized_controlled_trial#Single-blind_trial" target="_blank" title="Randomized controlled trial">blind trial</a> was performed by giving a high-nutrition supplement to some infants and a lower-nutrition supplement to others, with only the researchers knowing which infants received which supplements. The infants that received the high-nutrition supplement had higher average salaries as adults <sup><a href="http://en.wikipedia.org/wiki/Diet_%28nutrition%29#cite_note-2" target="_blank">[3]</a></sup>.</div>
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Hopefully the first thing your mom did for you when you were born was to feed you!<br />
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Shortly after my father died of liver cancer I attended a <a href="http://www.sierraclub.org/" target="_blank">Sierra Club</a> meeting where<span style="font-family: inherit;"> <a href="http://planetgreen.discovery.com/food-health/veganism-doctor-ordered.html" target="_blank"><span style="font-size: 85%;">Dr. Michael Klaper</span></a> </span>who was a director of an organization called <a href="http://www.earthsave.org/" target="_blank">Earthsave</a> gave a presentation on how our food choices affects the <a href="http://en.wikipedia.org/wiki/Ecology" target="_blank">ecology</a>. This group had a theory to solve many of the world's problems by promoting a <a href="http://en.wikipedia.org/wiki/Vegetarianism" target="_blank">vegetarian</a>, or even better yet a <a href="http://en.wikipedia.org/wiki/Veganism" target="_blank">vegan</a> lifestyle. Dr. Klaper's arguments were very convincing and later I found out that Earthsave was started by <a href="http://en.wikipedia.org/wiki/John_Robbins_%28author%29" target="_blank">John Robbins</a>, who was in line to inherit the fortunes of the <a href="http://en.wikipedia.org/wiki/Baskin-Robbins" target="_blank">Baskin-Robbins</a> ice cream fortune but he gave it up to promote a healthier lifestyle. I became mostly vegetarian and though I've been on and off the wagon so to speak, I really do feel much better when I abstain from eating animal products. At one point my cholesterol level shot up when I was working in Israel which I believe was due to work stress and the fact that <a href="http://en.wikipedia.org/wiki/Kosher" target="_blank">Kosher</a> restaurants are either dairy or meat and the dairy restaurants put cheese on almost everything, including watermelon! I was able to bring back my cholesterol to "normal" levels largely because I followed the dietary advice of <a href="http://en.wikipedia.org/wiki/John_A._McDougall" target="_blank">John McDougall</a> who advocates a starch based, vegan, diet. Here's a link to <a href="http://www.drmcdougall.com/" target="_blank">Dr. McDougall's official website</a>, there's lots of interesting reading there.<br />
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Of course there are plenty of people that would vehemently try to discredit any benefits of a vegetarian diet. I've been pointed to several articles that come to the conclusion that not eating meat or dairy products are detrimental to your health. Every one of the studies used as reference in those articles were sponsored by the meat council, dairy council or some special interest group that promotes animal products. Yet there are many legitimate articles and scientific studies that have concluded that what we need is more more fresh fruit and vegetables in our diets.<br />
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As far as finances and diet--I found that a healthy vegan diet is much cheaper than a meat based diet. I emphasize healthy vegan diet because there's plenty of vegan junk foods available.<br />
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<span style="font-weight: bold;">Dietary Supplements</span><br />
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If you have a healthy diet there's no need for <a href="http://en.wikipedia.org/wiki/Dietary_supplement" target="_blank">dietary supplements</a>. Of course the manufactures and distributors of supplements would argue against that statement but remember that their interest isn't in your best interest, it is for their financial gain. There has even been some pretty convincing studies that suggest dietary supplements are actually harmful. Dr. McDougall posted an interesting article on his website: <a href="http://www.drmcdougall.com/misc/2010nl/may/vitamins.htm" target="_blank">Just To Be on the Safe Side: Don't Take Vitamins</a>. Here's an excerpt.<br />
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<div style="margin-left: 40px;">
<b> </b><br />
<div align="left" style="line-height: 150%; margin: 10px 5px;">
<b><span style="font-family: Verdana; font-size: 85%;"> Supplements Make People Sick</span></b></div>
<b> </b> <span style="font-family: Verdana; font-size: 85%;"> People believe in supplements, even though the preponderance of scientific evidence condemns taking isolated concentrated nutrients. Most carefully studied are the effects of beta-carotene, vitamin E (alpha-tocopherol), and folic acid. Randomized controlled trials involving more than a hundred thousand subjects have proven that taking these and other supplements increase a person’s risk of heart disease, cancers, and premature death. Damage to the kidneys in diabetics and an increase in the severity of respiratory infections have also been shown. Vitamin supplement manufacturers, stores selling vitamins, medical doctors, and dietitians should act responsibly and warn consumers about the serious health hazards from these highly profitable potions.</span><span style="font-family: Verdana; font-size: 85%;"><sup> </sup>For the same reasons, fortification of our food supply (cereals and flours) with folic acid and other nutrients should be stopped.<sup> </sup></span></div>
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In my opinion products like <a href="http://en.wikipedia.org/wiki/Whey" target="_blank">whey</a> protein powders fall into the category of food supplements. I haven't always felt this way, when I was growing up we were taught that scientists were working on the world hunger problems by isolating and packaging nutrients in concentrated form. I believed that some day our diet will consist entirely of highly processed foods--<a href="http://en.wikipedia.org/wiki/Better_Living_Through_Chemistry" target="_blank">better living though chemistry</a>!<br />
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The financial impact of not taking dietary supplements is saving money that would have otherwise gone to waste.<br />
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<span style="font-weight: bold;">Spouse</span><br />
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As humans we are social animals that are programed to have mostly monogamous relationships. Well, a lot of people would probably argue with that statement but for some strange reason we live in a society that frowns on having multiple simultaneous sexual partners so you're eventually going to have to pick just one. That's not something to take lightly, make the wrong choice and a costly divorce can set your investment goals back several years or worse, it can destroy you emotionally and financially. Some people would say that I waited far too long before I found a mate, but I don't regret it a bit. I found someone who had a successful career, someone who owned a house, had some savings and most important of all, didn't need anyone to depend on. In other words we didn't have a dependency issue. This is something that you don't normally find when you're young. In addition, it is best if you marry someone who is also a best friend, someone that perhaps won't always agree with you but will challenge you mentally. I'm never bored with my life partner! Though I have been the main bread winner in our relationship, Rosie does work and brings extra income to the household. In addition, she shares much of my <a href="http://en.wikipedia.org/wiki/Frugality" target="_blank">frugality</a> and desires to work less and spend more time simply enjoying life. The point I want to make here is that the choice you make for a life partner can improve your financial situation.<br />
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<span style="font-weight: bold;">Children</span><br />
<span style="font-family: Arial,Helvetica,sans-serif;"><a href="http://en.wikipedia.org/wiki/Charles_Caleb_Colton" target="_blank"><span style="color: #009900;"> </span></a></span> <br />
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Just like we are hard-wired to seek out mates we are also programed to reproduce. However, I would be willing to bet that many people don't really plan on having children, they just "happen."<br />
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Couples have children because of religious reasons, pressure from parents wanting grand children or because their friends have children. Then there are people that believe that by keeping the family name going or spreading your DNA around this will somehow make you immortal. Do you really believe any of these are good reasons to <a href="http://en.wikipedia.org/wiki/Reproduction" target="_blank">procreate</a>?<br />
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Don't get me wrong, I'm not totally against having children even though we did not have any children ourselves. However, like anything else that has a big impact on your life, you had better be damn sure you know what you're getting into.<br />
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The <a href="http://en.wikipedia.org/wiki/Cost_of_raising_a_child" target="_blank">cost of raising a child</a> can be quite high. According to a U.S. Government report:<br />
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<div style="margin-left: 40px;">
WASHINGTON, June 18 (UPI) -- Raising a child from birth to age 17 cost middle-income parents $222,360 last year amid rising childcare and education expenses, the U.S. government reported.</div>
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Think about it, using these numbers raising four children to age 18 will cost an average of nearly $1-million. The report goes on to state: "annual expenses ranged from $11,650 to $13,530 a year, depending on the child's age." I think this is highly under estimated, when one of our nephews was living with us we spent far more than that. In addition, expenses tend to continue after age 17. How many people do you know that have graduated college and yet are continuing to sponge off their parents? And who paid all of those college expenses? Helped with the down payment on the first house? The expenses go on and on and usually up and up.<br />
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I have friends tell me that they could not do what I'm doing, retiring early, saving money, traveling overseas, because they have children. One of them told me, "The rich get richer and the poor get children."<br />
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Of course you could argue that children will bring fulfillment to your life that no amount of money can buy. Yes, that may be true but what's also true is that when they are young you will probably be busy working and not have much time to spend with them, when they become adolescent your children will hate you and won't want to spend much time with you and when they become adults they will have their own lives and be too busy to spend much time with you.<br />
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Back to the subject of finances and investing, the bottom line is--children are expensive.Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-6168396440348934057.post-57691220649593898392010-12-14T19:41:00.000-08:002010-12-14T20:53:25.318-08:00Investment Lesson #4 - Real Estate<a href="http://en.wikipedia.org/wiki/Real_estate">Real Estate</a> refers to land and buildings attached to the land though we could expand it to include <a href="http://en.wikipedia.org/wiki/Mobile_home">mobile homes</a>. In the past only royalty owned land and everyone else had to pay rent to the kings and queens either directly or through lords. These days it is common to either own your home or pay <a href="http://en.wikipedia.org/wiki/Renting">rent</a> to a <a href="http://en.wikipedia.org/wiki/Landlord">landlord</a>. Of course real estate also includes office buildings, shopping malls and other structures intended for commercial purposes.<br /><br />Compared to opening a savings account, buying bonds, mutual funds and stocks, real estate my seem like an advanced topic for a beginning investor but hang in there.<br /><br />Let's begin with what I believe is the simplest way to invest in real estate. Buying shares of a <a href="http://en.wikipedia.org/wiki/Reit">Real Estate Investment Trust</a>, REIT. The overall value of this type of investment tends to fluctuate just as much as stocks do. In fact I have owned REIT's and found them virtually indistinguishable from stock mutual funds. The investors' money is pooled together and the REIT invests in buildings that are <a href="http://en.wikipedia.org/wiki/Leasing">leased</a> and managed. REIT's are regulated to pay out at least 90% of their profit to the investors. Of course you may be wondering what's keeping the managers from keeping most of the profit for themselves. That's the "trust" part--OK, let's get into managing real estate by ourselves.<br /><br />Much of my experience in real estate has to do with the homes that we have owned. Real estate agents talk about owning your own home as an investment but in my opinion your own home is an expense while a home you rent out or intend to immediately re-sell is an investment. You usually don't receive an income from the home you're living in so all the money that goes into the mortgage, taxes and maintenance are expenses. The only way to get money out of your home is to either rent it out or sell it. Real estate agents will tell you that you can get cash from the equity of your home but I hope you are reading "<a href="http://www.amazon.com/Debt-Slavery-Other-Things-Taught/dp/0978545702">Debt is Slavery</a>" and know by now why that is usually a bad idea.<br /><br />Over the long term I have heard that bonds return on average about 6% per year, with stocks it is around 9%, but what about real estate? Property values barely out pace inflation, a measly 5%. So, why would anyone want to get into the complex world of real estate investment?<br /><br />There are a lot of forces that go into real estate investment. One of the most important is called <a href="http://en.wikipedia.org/wiki/Leverage_%28finance%29">leverage</a>. Let's say you want to buy an apartment building. You don't just plunk down a load of cash, you take out a loan, or as it is known in real estate terminology, a <a href="http://en.wikipedia.org/wiki/Mortgage_loan">mortgage</a>. You make a down payment of let's say 20% and mortgage the remaining 80%, you bought 100% of a building but only paid 20% of the purchase price. Your stake in the building, your equity, is less than the amount of the loan so technically, you're in <a href="http://en.wikipedia.org/wiki/Debt">debt</a>--you owe more than you own. Now you've got a mortgage to pay but you are collecting rent and most of it goes to the monthly mortgage payments. If you made a good deal you're collecting enough in rent to pay the mortgage and other miscellaneous expenses like property tax and maintenance. Let's say the property value does go up an average of 5% per year. How much does your equity go up? Sure, you're paying off some of the principal of the mortgage every year but not much so let's not even factor that in.<br /><br /><pre>Original purchase price --------------------------- $1,000,000<br />Mortgage 800,000<br />Down Payment (original equity) 200,000<br /><br />5% property value increase after 1 year ------------$1,050,000<br />Mortgage 800,000<br />Equity 250,000<br /></pre><br />Note: Don't be alarmed by the size of these number, I'm trying to give you a realistic scenario and you could buy a small apartment building in Los Angeles for around a million dollars. Also, these are easy numbers to work with.<br /><br />You're still making 5% on 100% of the building's value, but since you only put up 20% of the money you're actually making a 25% return on your investment. What about the bank? They're making whatever percentage rate that's on the mortgage, these days it would be around 4.5%. Why would they settle for such a small return while you're making the big bucks? You're taking all the risk and doing all the work, if you don't pay the bank they can take back full ownership of the building no matter what balance is left to pay off the mortgage.<br /><br />You might wonder if you can increase your leverage by making a smaller down payment, say 10% or even 5%. The problem with this is that your monthly mortgage payment increases and the bank will add other charges like <a href="http://en.wikipedia.org/wiki/Private_mortgage_insurance">Private Mortgage Insurance</a> (PMI) making it unlikely that the rental income will cover the mortgage, taxes and maintenance costs.<br /><br />Of course this is an oversimplification. There's all sorts of charges and expenses that you have to deal with when owning rental property, but this is basically how leverage works in your favor. What if the property value drops? Hopefully you still have tenants paying the mortgage so you can wait it out until property values rise again--they usually do over the long term. One thing to take into consideration is that you haven't really made a profit or loss in this deal until you cash out by selling the property.<br /><br />Something else to consider is if rentals go up during the time you own the property, you'll eventually have a decent cash flow. I had a friend who owned a few rental properties for many years and a large part of his personal income came from the rent he collected on those properties.<br /><br />There are lots of other ways to invest in real estate. If you can find a property that is close to defaulting on the mortgage you might be able to buy it for a substantial savings either from the unfortunate owner who is about to have his credit rating destroyed, from a <a href="http://en.wikipedia.org/wiki/Foreclosure">foreclosure</a> sale or from the bank (<a href="http://en.wikipedia.org/wiki/Short_sale_%28real_estate%29">short sale</a>), then fixing it up and <a href="http://en.wikipedia.org/wiki/Flipping">flipping</a> it. There are even ways you can buy property with no money down by taking control of a distressed property. This is what so many get rich quick in real estate schemes are all about. I have watched several infomercials by real estate gurus like <a href="http://www.robertgallen.com/">Robert Alan</a>, <a href="http://www.carletonsheets.com/">Carlton Sheets</a> and <a href="http://www.ronlegrand.com/">Ron LeGrand</a>. I've also read books on real estate investing, including "Real Estate Money Machine" by <a href="http://en.wikipedia.org/wiki/Wade_Cook">Wade Cook</a>. It seemed simple enough but rather risky. How risky? In 1987 Wade Cook filed for personal bankruptcy and in 2007 he was sentenced to 88 months in Federal prison for tax fraud. Lots of wannabe millionaires who followed similar real estate investment schemes have either ended up bankrupt and/or in jail. Now don't get me wrong, there are legal ways to make a fortune in real estate. It isn't easy, in fact it takes a lot of work compared to other investments.<br /><br />So much for what I haven't tried--let's get into some of my personal experience with real estate.<br /><br />When I was helping out with my mother's finances I noticed that she was still paying off the house. My parents bought that house over 20 years ago but they still owed about half of the original purchase price of the house. How can that be? On a normal 30 year fixed loan the payments are fixed. In the early stages of the loan the principal amount is high so there is more interest due but as the principal is paid down there is less interest. As a result, the principal isn't halfway paid off in 15 years but in about 20 years.<br /><br />I entered some nice round numbers into an online <a href="http://www.amortization-calc.com/">amortization calculator</a> to illustrate how this works. Here's a $100,000 loan amortized for 30 years with a 5% interest starting in January 2000.<br /><pre>Amortization Schedule<br />Year Interest Principal Balance<br />2000 $4,966.49 $1,475.37 $98,524.63<br />2001 $4,891.01 $1,550.85 $96,973.79<br />2002 $4,811.67 $1,630.19 $95,343.59<br />2003 $4,728.26 $1,713.60 $93,630.00<br />2004 $4,640.59 $1,801.27 $91,828.73<br />2005 $4,548.44 $1,893.42 $89,935.31<br />2006 $4,451.57 $1,990.29 $87,945.02<br />2007 $4,349.74 $2,092.12 $85,852.89<br />2008 $4,242.70 $2,199.16 $83,653.74<br />2009 $4,130.19 $2,311.67 $81,342.06<br />2010 $4,011.92 $2,429.94 $78,912.12<br />2011 $3,887.60 $2,554.26 $76,357.86<br />2012 $3,756.92 $2,684.94 $73,672.92<br />2013 $3,619.55 $2,822.31 $70,850.61<br />2014 $3,475.16 $2,966.70 $67,883.91<br />2015 $3,323.37 $3,118.49 $64,765.42<br />2016 $3,163.83 $3,278.03 $61,487.39<br />2017 $2,996.12 $3,445.74 $58,041.65<br />2018 $2,819.83 $3,622.03 $54,419.61<br />2019 $2,634.51 $3,807.34 $50,612.27<br />2020 $2,439.72 $4,002.14 $46,610.13<br />2021 $2,234.97 $4,206.89 $42,403.24<br />2022 $2,019.73 $4,422.12 $37,981.11<br />2023 $1,793.49 $4,648.37 $33,332.75<br />2024 $1,555.67 $4,886.19 $28,446.56<br />2025 $1,305.68 $5,136.18 $23,310.38<br />2026 $1,042.91 $5,398.95 $17,911.43<br />2027 $766.69 $5,675.17 $12,236.26<br />2028 $476.33 $5,965.52 $6,270.73<br />2029 $171.13 $6,270.73 $0.00</pre><br /><br />If you add up the principal column it should add up to $100,000 but because of rounding errors on the calculator it only adds up to $99,999.98. Care to add up the interest column and add it to the principal? It's $93,255.79 in interest so $193,255.79 is what will be paid to the bank over the life of this loan, basically you will pay the bank double what you borrowed. Mind you 5% is a very low interest rate. Rates on 30 year fixed home loans were at about 10% when Rosie and I got married and have spiked even higher in history. Try plugging those numbers in an amortization calculator.<br /><br />My mother was shocked to learn that after making mortgage payments for so many years she had so much more to go in order to pay off the house. I pointed out that by taking the money she had in a very low interest savings account and paying off the mortgage she would save several thousand dollars that she still had to pay in interest over the remaining life of the mortgage. She took my advice and asked me to take care of her finances for the rest of her life, which I did.<br /><br />Around 1988 I almost bought my first home. I was still making a living as a photographer but recently got out of a studio space that I was renting in order to concentrate solely on location jobs. One of the most important parts of the property that I was looking for was a garage where I could lock up my van and equipment. I found a very small house with a full sized garage near my parents. The structure was tiny, about 400 square feet, but it had a large backyard, enough for a pretty decent vegetable garden for now and room to expand the house when I needed the extra space. I called the agent who was handling the listing and put in an offer, along with a "good faith" check of about $1,000. The house was listed for around $92,000 and I started the <a href="http://en.wikipedia.org/wiki/Real_estate_transaction">transaction</a> by offering $90,000, the seller accepted. One of the first things that happened was that the house was inspected by an expert and <a href="http://en.wikipedia.org/wiki/Real_estate_appraisal">appraised</a>. It was appraised at about $97,000 (I'm pulling these numbers from my memory so they aren't exact but well within the ballpark). I was planning on putting 10% down--in my earlier examples I used 20% because that's "normal" for rental or commercial property but this was a house that I was planning to live in and I didn't want to put my entire life's savings into it. One of my photography clients was a mortgage banker so I approached him with it and asked if I could qualify for an $81,000 loan ($90,000 minus the $9,000 down payment). "No problem," he said, but his company only accepts their own appraisers' valuations so he had it appraised again. This time it was appraised at $85,000. What this meant was that I could only get a loan for $76,500 and I would have to put up $13,500. I looked at other options including something called a <a href="http://en.wikipedia.org/wiki/United_States_Department_of_Veterans_Affairs">VA</a> loan which I qualified for because I was a veteran but nobody wanted to work with me on it because of the government bureaucracy involved. In addition, although I could technically buy a home with no down payment, I wouldn't be able to qualify because of the high mortgage payments and my very unstable freelance income--so much for serving your country! By this time I got to know the owners quite well. They were a cool, semi-<a href="http://en.wikipedia.org/wiki/Hippie">hippie</a>, unmarried couple who used to live in the house and <a href="http://en.wikipedia.org/wiki/Lease">leased</a> it out when they moved to a nicer neighborhood. Their renters subleased the garage and they even had someone living in the garden shed! I actually started moving in and staying there a few nights just to see what it was like and discovered that it was a terrible neighborhood. The seller then suggested cutting out the real estate agent so he wouldn't have to pay her commission--she was representing both the buyer and seller so she would have gotten double commission, 6% for selling and 6% for buying and that 12% ($10,800) had to be paid by the seller. Of course the real estate agent could have sued both of us for breach of contract. It was all getting too weird so I backed out of the deal. I think I got back a little bit of the $1,000 I put in when I made the offer.<br /><br />It was almost 10 years later that I finally did buy my first property. This time I was married, had a mostly steady income and enough money to put 20% on a $240,000 townhouse in West Hollywood. I actually had to qualify without including Rosie and her income because she was working on "<a href="http://en.wikipedia.org/wiki/The_Mask_of_Zorro">The Mask of Zorro</a>" and couldn't sign the loan papers during the <a href="http://en.wikipedia.org/wiki/Escrow">escrow</a> period. I was working in Northern California at <a href="http://en.wikipedia.org/wiki/Skywalker_Ranch">Skywalker Ranch</a> and flew down to Los Angeles every weekend to take care of things--other than that, the deal went through very easily. It was a bit scary having to pay $1,500 per month on the mortgage for the next 30 years, up until now the most I ever paid in rent was $850. As it turned out we didn't have any trouble making the $1,500 monthly payments and we were even able to put some money into an investment account. Interest rates were quite high at the time so when rates dropped I took the opportunity to refinance the loan, basically that means that we paid off the old loan with a new loan. I paid down the loan when we <a href="http://en.wikipedia.org/wiki/Refinancing">refinanced</a> and lowered our payments to $1,300. This was a time when we were both working and the stock market was booming with the dot-com craziness. I was caught up in this <a href="http://en.wikipedia.org/wiki/Irrational_exuberance">irrational exuberance</a> but it nagged me to owe money to the bank. I started to pay down the mortgage by paying more than $1,300 every month. At this point you might be thinking why would I do this? Only the interest on the loan is tax deductible, but only a small percentage of it--my feeling on the <a href="http://www.irs.gov/businesses/small/article/0,,id=224713,00.html">mortgage interest tax deduction</a> is like having to pay a dollar in interest for every fifty cents saved in taxes--in reality it is probably even worse than that. Paying down the principal didn't lower our monthly mortgage obligation. If we were making more money we could have been able to afford to move into a larger house, but we liked our condominium just fine. What was I thinking? First of all, a <a href="http://en.wikipedia.org/wiki/Mortgage_loan">mortgage</a> is literally a contract to the death. Many people never live to see the day their house is paid off. I was doing quite well with my investments but I knew that I could lose it all with a few investment mistakes. The safest investment I could possibly make was to pay off the mortgage, the loan papers told me exactly how much I would be paying into the mortgage and it was much more than our home was worth. If we fell on hard times and missed a few payments the bank could <a href="http://en.wikipedia.org/wiki/Repossess">repossess</a> our home no matter how much we already paid into it. I cashed out most of my stock holdings and paid off our first house, two years after we first bought it, one year after we refinanced it. The bank had a clause that levied a $6,000 prepayment penalty, but they never charged it to us. I doubt they had much experience with borrowers paying off their loans that early.<br /><br />We might still be in that first home if it weren't for another situation that came up with my mother. At the time she was almost 80 years old and living alone. She wanted to live closer to her sons but still be independent. What she didn't want was to go to a retirement home, not yet. Rosie and I looked into several options, the most reasonable seemed to buy a duplex so we could have her right next to us. However, the duplexes we found were not as nice as our condo. We kept looking for something without stairs, nearby, nice neighborhood close to shopping and a hospital--just in case. Then one day after seeing yet another disappointing duplex I suggested looking at open houses in an area where we would like to move into, just a few blocks away from our condo. We saw a couple of very nice houses and Rosie almost cried telling me why were we looking at places that we couldn't afford, these houses were listed over $800,000. What we learned was that these homes had garages that were converted into guest houses. I did some calculations and if we sold my mom's house and rented out our condo, we could make this work. We made an offer on one of the houses, the owners <a href="http://en.wikipedia.org/wiki/Offer_and_acceptance">counter offered</a> and we finally settled on a price of $750,000. When we were going through the escrow period we found out that one of the condos in our building sold for a very high price so we changed our plans from renting it out to selling. I can't say that everything went smoothly but we were able to sell both our condo and my mother's house and buy the house that we now live in. Our condo sold for $420,000, nearly twice what we bought it for, and my mother's house, which my parents bought around 30 years ago for $22,000 sold for about $350,000. While our condo was in escrow we had to take out a mortgage which we easily qualified for in order to close the deal on the house, but our intention was to pay it off as soon as possible. We were able to pay off the mortgage in just two months. That seems to impress lots of people but I can tell you that those two months really hurt, $4,000 per month going mostly to the bank to pay interest on the loan. The funny thing was that the both times we bought homes I was between jobs and collecting unemployment benefits. Fortunately I didn't have to dip into our other investments because I kept an emergency cash account that easily covered these expenses.<br /><br />Not having a mortgage allowed us to continue building up our savings and investments. At one point Rosie was becoming interested in owning an apartment building. She had some friends who owned rental property and they were doing quite well. She also wanted and investment that she could manage herself because she didn't understand the type of investing that I was doing. I agreed with most of her arguments except one--real estate always goes up, never down. We were very fortunate to have sold our condo at nearly double what we paid for it about 5 years earlier, and our house was rapidly appreciating in value but I have seen housing prices drop several times. When you have a loan on a property that is declining in value, leverage works against you. If the value drops to less than the amount of the loan, it is called an upside down mortgage, underwater loan or <a href="http://en.wikipedia.org/wiki/Negative_equity">negative equity</a>. However, at the time prices were going up and banks were coming up with all sorts of creative ways to package up loans in order to make it affordable to home buyers. One type of loan that has been around for several years ties the interest rate to an indicator of current interest rates, usually Treasury bills, this is known as an <a href="http://en.wikipedia.org/wiki/Adjustable-rate_mortgage">adjustable rate mortgage</a> (ARM). These mortgages have lower starting interest rates than conventional fixed rate mortgages where the interest rate never varies, but there is a possibility that the interest rate could rise during the life of the loan to the point of becoming unaffordable. Other loans had low interest rates for a few years, usually 5 years, and would then either go way up in interest or would require a huge <a href="http://en.wikipedia.org/wiki/Balloon_payment_mortgage">balloon payment</a>. The way these loans were marketed the borrower would either move or refinance the loan before the balloon payment became due. Some loans required that the buyer pay the interest only for several years so none of the principal would be paid down and some were even <a href="http://en.wikipedia.org/wiki/Negative_amortization">negative amortization</a> loans where the borrower wouldn't even pay the entire interest due so the loan kept growing with every payment. I didn't want to have anything to do with these loans and would only agree to taking out a 30 year fixed rate loan. By the way, eventually when housing prices did fall during the <a href="http://en.wikipedia.org/wiki/Subprime_mortgage_crisis">subprime mortgage</a><a href="http://en.wikipedia.org/wiki/Subprime_mortgage_crisis"> crises</a> these "creative" loans were termed <a href="http://en.wikipedia.org/wiki/Predatory_mortgage_servicing">toxic mortgages</a>. In any case, one of Rosie's friends was a real estate agent and she found us a four unit apartment building a few miles away in an area known as "<a href="http://en.wikipedia.org/wiki/Melrose_Hill">Melrose Hill</a>." My requirements were that the rental income at least matches the mortgage payments, one thing I didn't want was an "investment" that we had to keep feeding in order to keep. We put down $150,000, mortgaged the rest of the $750,000 purchase price and became <a href="http://en.wikipedia.org/wiki/Slumlord">slumlords</a>. For the most part Rosie enjoyed dealing with the tenants but every time something went wrong, stuck toilet, clogged drain, etc. I had to get involved. There was a community coin operated washing machine and dryer and we used to pay our smaller cash expenses with the quarters we collected. Technically we were supposed to report those quarters on our taxes but we didn't, in fact we in a rather gray area with some of the income and expenses we were reporting on the apartment building. That's actually quite typical with landlords. We would buy paint and use what was leftover on our house, you know, things like that. My friend with the rental property used to go to Home Depot and collect receipts off the floor to report extra expenses. Of course we had quite a bit of fully legitimate expenses too, during the time we owned the building we made several improvements including building a new enclosed patio on one of the units. When tax time did come, we had more deductions than we anticipated. You see the tax codes were written to heavily favor property owners. We could deduct all of the interest we were paying on the loan because it was a rental property. We could also depreciate the building which gave us even more deductions. For tax purposes we were loosing money but we were actually breaking even. After owning the building for just over a year I was noticing that real estate prices were rising very quickly. I suggested putting the building on the market for $1-million, after all if somebody buys it for that we would make a quick profit and it didn't really matter to us if it didn't sell right away because the renters were paying our mortgage. We got an offer for $950,000 and took it. Remember earlier in this lesson how leverage can work in your favor? We made a $200,000 profit on a $150,000 investment. Well, that's if you include the real estate agent and the bank under "we" because we had to pay commission, interest, loan fees and so on. However we did manage to double our money in just one and one-half years. This was the best return on investment in the shortest time that we have ever made. Though in a way I pitied the couple who bought the building, they had to take out two loans and there was just no way that the rents could cover the cost of their mortgage payments.<br /><br />We looked for another apartment building near the beach so we could possibly keep one of the units for ourselves, but every time I tried running the numbers I couldn't get it to work. Somehow the real estate agent could get a positive cash flow out of the buildings she showed us but she was doing it with some loans that would charge just 1% interest for 5 years and then would come due. She too was convinced that the buildings would only appreciate in value but I wasn't that sure. I saw too much risk in her plans. Eventually I was proved right, the <a href="http://en.wikipedia.org/wiki/Housing_bubble">real estate bubble</a> that burst in 2007 was triggered by bad loans on declining property values.<br /><br />We still wanted to live by the beach so we looked for opportunities in Mexican properties. Once we made a trip to Mazatlan, Los Cabos, Todos Santos and La Paz searching for a beach home that we could live in part time and list it with a vacation rental management company for the rest of the year. We almost put an offer on a beautiful architect showpiece home in Cabo San Lucas but we didn't file the paperwork when we found out that access to the beach for that community of homes had been cut off. Good thing we checked, the real estate agent claimed he didn't know anything about it.<br /><br />There are houses in our neighborhood that are selling for over $2 million, by some estimates our home is currently worth about $1.5 million but like I said, it isn't an investment unless you rent it or sell it. I have considered selling the house and moving to a more modest place away from the city, but we weren't quite ready to retire--or rather, Rosie didn't want me to retire just yet. I wanted to move to at least a semi-retired lifestyle so we came up with the idea of remodeling the garage, moving into it and renting out the house. People that I talked to about this either thought it was very smart or very desperate--how bad was work that I had to do this? We aren't really suffering at all. We were able to rent out the house for $4,000, the same as the mortgage I had to pay when we first bought it. Of course since we don't have a mortgage, the tenant is actually paying our living expenses. Sure, we have to deal with a tenant with a couple of kids living right next to us but so far it has been more than worth it--and actually kind of fun!<br /><br />I can't claim to be an expert on real estate investing. By my definition we really made one investment in a single apartment building. Maybe not buying the properties we passed up were the best real estate investing decisions we made, maybe not. In any case, a part of the reason we can afford a comfortable semi-retired lifestyle is because of the deals we made in real estate.<br /><br />In any case, for now our downsizing experiment is working and we're still thinking about selling the house and buying a small place by the beach, but not necessarily in that order. As I write this the real estate market is way down. Has it bottomed out? Who knows, all I know is that condos by the beach that used to sell for $1-million are now within our means. If we do buy a place we'll probably hold onto the house until the market recovers--at least we hope it recovers in a couple of years or so.<br /><br />One last note about real estate investing. If you think being a landlord with a bunch of apartment buildings is a retirement, think again. It is a lot of work! In fact, you're running a business which is something we'll get into in the next lesson.Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-6168396440348934057.post-89867503462254938822010-12-14T18:03:00.000-08:002010-12-14T18:42:27.981-08:00Investment Lesson #3 - StocksStocks are one of the most popular and accessible investment vehicles for individuals as well as institutional investment firms. But what is a stock anyway?<br /><br />According to Wikipedia:<br /> <br /><div style="margin-left: 40px;">The <b>stock</b> or <b>capital stock</b> of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a <a href="http://en.wikipedia.org/wiki/Security_%28finance%29" title="Security (finance)" target="_blank">security</a> for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Stock is distinct from the property and the assets of a business which may fluctuate in quantity and value.<br /></div><br />Security, gee doesn't that sound safe? It's basically what is invested in a company also known as its <a href="http://en.wikipedia.org/wiki/Market_capitalization" target="_blank">market capitalization</a>. You may have heard of stocks referred to as securities or equities. The value isn't just the value of the assets that it owns, it's also what price investors are willing to pay to own a piece of that company.<br /> <br />Back to Wikipedia:<br /><div style="margin-left: 40px;"><p><b>Market capitalization/capitalisation</b> (often <b>market cap</b>) is a measurement of size of a business enterprise (corporation) equal to the <a href="http://en.wikipedia.org/wiki/Share_price" title="Share price" target="_blank">share price</a> times the number of <a href="http://en.wikipedia.org/wiki/Shares_outstanding" title="Shares outstanding" target="_blank">shares outstanding</a> of a <a href="http://en.wikipedia.org/wiki/Public_company" title="Public company" target="_blank">public company</a>. As owning <a href="http://en.wikipedia.org/wiki/Share_%28finance%29" title="Share (finance)" target="_blank">stock</a> represents ownership of the company, including all its <a href="http://en.wikipedia.org/wiki/Ownership_equity" title="Ownership equity" target="_blank">equity</a>, capitalization could represent the public opinion of a company's <a href="http://en.wikipedia.org/wiki/Net_worth" title="Net worth" target="_blank">net worth</a> and is a determining factor in <a href="http://en.wikipedia.org/wiki/Stock_valuation" title="Stock valuation" target="_blank">stock valuation</a>. <sup><a href="http://en.wikipedia.org/wiki/Market_capitalization#cite_note-world-exchanges.org-1" target="_blank"><span></span></a></sup></p> </div>When you buy the stock of a company you are basically becoming a part owner of that company. Although you might not make day-to-day business decisions, as a stock holder you do vote to accept or reject things like who should be president of the company, who should be on the board of directors, if they should continue to use the same accounting firm and other matters that the board of directors decide to present at a meeting with the stock holders. That's right, you actually get invited to a meeting though most of the stock holders at large publicly traded companies usually vote through a <a href="http://en.wikipedia.org/wiki/Proxy_voting" target="_blank">proxy</a>. Some privately owned corporations issue stock but generally when we speak about stocks we're talking about tiny pieces of public companies that are bought and sold through the major stock exchanges via brokerage firms. There are several types of stocks, common stock, non-voting "preferred" stocks that pay dividends like bonds. Then there are some things like ETF's (exchange-traded funds) that are traded in the major stock exchanges which aren't really stocks but they represent groups of companies and then there are mutual funds which we'll get into detail later. It may sound complicated at first, and it gets even more complicated as you get deeper into it. That's why there are so many financial advisers, stock brokers, financial analysts and reporters broadcasting a never-ending stream of spreadsheets, earnings reports, graphs, ticker tape and, well--confusion.<br /> <br />The first point I should cover is why would a company want to go public and invite total strangers to become part owners? The simple answer is, to raise money. Why not just take out a loan? Companies do take out bank loans and issue bonds, which you've learned from our last lesson are loans that investors can buy and trade--but these are debts that must be paid back with interest. Debt reduces the value of a company. Stocks represent the equity of a company and doesn't need to be paid back. If a company is expected to be profitable, investors will tend to bid up the price of the stock. The price of the stock multiplied by the number of outstanding shares equals the company's market capitalization. The company can then sell some more stock which might somewhat dilute the value of those outstanding shares but the money raised does not need to be paid back.<br /> <br />It is to the company's best interest, and to their stockholders, to keep the stock price up. Sometimes companies even buy back their own shares to take them out of circulation and raise the value of the outstanding shares.<br /> <br />There are many factors that go into the value of a company's stock price. Obviously there's the number of outstanding shares, the hard assets owned by the company and the revenue it generates but there's also price to earnings ratio, debt ratio, price history, analysts' expectations, meeting estimated earnings and many other factors. Different industries are also valued in various ways. A hi-tech company developing a cure for cancer may need money for many years of research and testing before it becomes profitable, but if investors believe that the company will succeed, the stock price can go through the roof even while the company is loosing millions of dollars. Of course if the clinical tests fail the stock price will most likely come crashing down.<br /> <br />I should emphasis that I had no role model when it came to investing. In fact my father was very much opposed to investing in stocks and referred to it as legalized gambling. He blamed Wall Street for the economic recession that resulted in his becoming unemployed in the 1970's (see <a href="http://en.wikipedia.org/wiki/Recession_of_1969%E2%80%9370" target="_blank">Recession of 1969-70</a>) and he never invested in stocks. Neither did my mother, though she wanted to start a business, invest in real estate and do other things with the money she put away in the family savings account.<br /><br />If there was only some reliable source of information that could guide me through this treacherous but potentially highly profitable stock market. In fact there was, or at least at the time I thought I found the sage who would make sense of the stock market. I was still in high school when <a href="http://en.wikipedia.org/wiki/Wall_$treet_Week" target="_blank">Wall $treet Week with Louis Rukeyser</a> first aired on the local public television station (PBS) but I tuned in every Friday evening whenever possible to listen to <a href="http://en.wikipedia.org/wiki/Louis_Rukeyser" target="_blank">Louis Rukeyser</a> explain complex investment strategies in simple to understand terms, quiz his panel of investment experts on the future direction of the market and find out what stocks his special guest was buying.<br /> <br />Years later when I still had my photography studio and was getting myself out of debt I decided to start investing in the stock market. I had a list of stocks which I thought might make good investments, not too risky with fair growth potential, and called up the local <a href="http://www.ml.com/index.asp?id=7695_15125" target="_blank">Merrill Lynch</a> office, got in touch with a stock broker and set up an appointment. When I got to the office I was in awe, it seemed that I stepped right into a major stock exchange though it was just up the street from my studio which was at that time in Orange County, California. We discussed various stocks on my list and the broker suggested I buy shares in <a href="http://www.weyerhaeuser.com/" target="_blank">Weyerhaeuser</a>. I was familiar with the name because I've seen it stamped on lumber, reams of paper and even my parents mortgage was through Weyerhaeuser's financial division. I bought 30 shares and became an investor. The broker was telling me strategies like buying more on the dips and selling if it outruns its 200 day moving average then buying back as it dips below the moving average but the stock didn't move very much. In fact, it was a very boring stock and underperformed the construction sector as well as the overall stock market. Obviously the broker recommended the wrong stock for me. I waited until it rose in price, just a bit, and sold out my position. Even though I sold at a higher price I didn't really make a profit because I had to pay the broker's commission. If I would have bought and sold several times like the broker suggested, I probably wouldn't have made more money but the broker would have received his commission every time I traded. This is known as "<a href="http://en.wikipedia.org/wiki/Churning_%28stock_trade%29" target="_blank">churning</a>" and is illegal if overdone. In any case, I didn't loose my shirt and it was a good experience seeing how it all worked.<br /> <br />I still had an appetite for investing so I hit the books. That's when I found out about mutual funds. Oh sure, I knew something about mutual funds because many of the experts on Wall $treet Week were mutual fund managers but because it was a PBS series they were not allowed to advertise their funds on the air. Mutual funds are basically investment vehicles where a group of people pool their money and allow a manager to invest it for them. Sure, rich people have investment managers but they charge quite a lot for their services and have minimum investments of hundreds of thousands of dollars. Some mutual funds have minimum opening investments of just a few hundred dollars--some even waive the minimum if you sign up for an automatic monthly investment plan of as little as $20 per month. At least that's what it was when I was getting started. Some of these mutual funds were getting fantastic returns, far above the market averages and the mutual fund companies were hiring the best money managers and paying them a king's ransom. The <a href="http://en.wikipedia.org/wiki/Magellan_Fund" target="_blank">Magellan Fund</a> had returns averaging 20% when I looked into it and advanced as much as 116% in a single year! Alas, the minimum investment was far beyond what I could afford but I did find 20th Century (now <a href="https://www.americancentury.com/index.jsp" target="_blank">American Century Investments</a>), Strong Funds (now either out of business or absorbed by another company) and finally <a href="https://www.fidelity.com/" target="_blank">Fidelity Investments</a>--the company behind the Magellan Fund.<br /> <br />At this point I wasn't completely out of debt and if there one thing I learned from all that reading was to pay off creditors before investing. Then an interesting event happened, <a href="http://en.wikipedia.org/wiki/Black_Monday_%281987%29" target="_blank">Black Monday -- the stock market crash of 1987</a>. Stock market crashes have happened many times in history. Perhaps the most famous was the crash that triggered the <a href="http://en.wikipedia.org/wiki/Great_depression" target="_blank">Great Depression</a> in the 1930's, aka <a href="http://en.wikipedia.org/wiki/Black_Tuesday" target="_blank">Black Tuesday</a>, but similar events have happened long before, for example the <a href="http://en.wikipedia.org/wiki/Panic_of_1901" target="_blank">panic of 1901</a> and <a href="http://en.wikipedia.org/wiki/Tulip_craze" target="_blank">tulipmania</a> in the 1600's. It seemed like everyone was panicking in 1987, everyone except Louis Rukeyser. What did he know? Were his personal investments impervious to the crash? What he knew was that a crash was a perfectly normal event in the crazy world of stock market investment and it should be seen as a buying opportunity. In fact there is a style called "<a href="http://en.wikipedia.org/wiki/Contrarian_investing" target="_blank">contrarian investing</a>" where you basically try to do opposite of what the majority of investors are doing.<br /> <br />Once out of debt and into investing through mutual funds a few interesting changes occurred with me. First of all, it was much easier to save because I didn't have as many bills to pay. I also found that instead of buying the latest and greatest photography equipment or getting a new car, I was more interested in building up my investment portfolio. I did almost buy a house around this time but we'll get into that story in the real estate lesson. I set a goal of building my investment portfolio to $500,000, move to a quiet town and retire as early as possible--certainly no later than 55 years old. This was a time when my father was very ill and eventually died of liver cancer. Working, making lots of money and collecting material possessions didn't seem very important to me anymore.<br /> <br />My mom was getting interested in what I was doing and asked if I could help her out with some money she had set aside. Reviewing her finances, one of the first things I recommended was to pay off her mortgage. Even though there was only a few years left to pay off the house I was able to save her several thousand dollars in interest. We opened up a joint account at Fidelity Investments and deposited $20,000. I was much more conservative with her money and found out that her account would often outperform my own more aggressively invested portfolio.<br /> <br />It was around this time that I started working in the motion picture industry. I liked photography, but I didn't enjoy paying bills, going on appointments, collecting what was due to me, much of my profit would have to go back into the business in order to grow and things like health insurance for a self employed single guy was getting very expensive. Working a union job I got free health care, retirement benefits, a decent salary, had few expenses and it was fun, or at least it was a change from what I was doing the past 10 years as a still photographer.<br /> <br />I continued to read investment books. I found out that when the news reported on "<a href="http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average" target="_blank">The Dow</a>" it was only a group of 30 companies picked by the company that owns the <a href="http://online.wsj.com/" target="_blank">Wall Street Journal</a>. There are other indexes that are useful for reporting stock market averages like the <a href="http://en.wikipedia.org/wiki/S%26P_500" target="_blank">Standard and Poor's 500</a> (here's a link directly to <a href="http://www.standardandpoors.com/home/en/us" target="_blank">Standard and Poor's</a>), the <a href="http://www.russell.com/indexes/data/default.asp" target="_blank">Russell 3000</a> and the <a href="http://www.wilshire.com/Indexes/Broad/" target="_blank">Wilshire 5000</a>. All of these indexes give the "big picture" of how the overall market is performing. But who wants to be "average" right? I was looking for ways of doing better than the market averages.<br /><br />One method involved investing in only <a href="http://en.wikipedia.org/wiki/Mutual_fund_fees_and_expenses" target="_blank">no-load</a> mutual funds offered by Fidelity Investments. The idea behind this is that there are far too many mutual funds to try and follow, about 9,000 in total, so by picking just one company and narrowing it down to only the funds without up-front fees or commissions, known as loads, you would be choosing from some of the best quality funds. There were still too many funds but by subscribing to a newsletter called <a href="http://www.fidelitymonitor.com/" target="_blank">Fidelity Monitor</a>, you could get recommendations depending on your investment goal and model portfolios showing how well the picks performed.<br /><br />Another method involved investing only in one Fidelity <a href="http://personal.fidelity.com/products/funds/content/WhatYouCanBuy/sector_funds.shtml.cvsr" target="_blank">sector fund</a> at a time. The way this works is that not all market sectors move in the same direction at the same time so if you can identify which sector is moving up the fastest, jump on that and ride it until another sector performs better. Investing in a sector fund was supposedly safer and easier than picking individual stocks and there were several indexes that could be used to verify movement in the various market sectors. I subscribed to a mutual fund newsletter called the <a href="http://allstarinvestor.com/" target="_blank">All Star Fund Trader</a>. because their single sector fund history included several years of outstanding performance, over 40% in some years, while managing to avoid the worst market downturns by switching into a <a href="http://en.wikipedia.org/wiki/Money_market_fund" target="_blank">money market fund</a>.<br /><br />Mutual fund investment newsletters are plentiful, all promising fantastic returns. There's even a company that rates the newsletters, <a href="http://www.lipperweb.com/" target="_blank">Lipper</a>. However, subscribing to these newsletters can get expensive. I was paying about $400 per year for just two newsletters. Somehow I wasn't getting the same returns they were reporting. Maybe I wasn't switching funds at exactly the right time? Maybe they had more money and thus lower fees in their accounts? As it turns out, most newsletters overstate their returns.<br /><br />I was doing fine with mutual funds and was satisfied with the strategies and returns I was getting until the early 90's when I signed up for <a href="http://en.wikipedia.org/wiki/AOL" target="_blank">America Online</a> and got access to a whole new world of real-time investment advice. One of the most popular forums at AOL became <a href="http://www.fool.com/" target="_blank">The Motley Fool</a> which was started by a couple of brothers, David and Tom Gardner, just out of college. They wrote articles which turned into books about investing using an entertaining writing style. They suggested beginning investors start with an <a href="http://en.wikipedia.org/wiki/Index_fund" target="_blank">index mutual fund</a> that tracks the Standard and Poor's 500 stock index. However, they also wrote about why small-time individual investors have an advantage over large institutional investors when it comes to picking individual stocks. Things have changed since I bought those few shares of Weyerhaeuser as discount brokerage firms started becoming more popular. You no longer had to deal with a stock broker, trading stocks could now be done online. I followed the Gardner brothers portfolios online and they outperformed everything I have ever seen before. I was interested in improving my returns so I started selling my mutual funds and buying individual stocks.<br /><br />This was also around the time I met Rosie, got married and bought a condominium. We'll get into more details about our first home in the real estate lesson but let's just say that I was able to put a down payment of 20% and still had plenty of investment money left over to continue playing the market. I kept reading and taking on more risk, it seemed so easy to make money. I didn't know it at the time but I was riding one of the longest running <a href="http://en.wikipedia.org/wiki/Market_trend" target="_blank">bull markets</a> in history.<br /><br />As you've learned from the previous lessons, I don't like to borrow money. However, there are some situations where taking out a loan makes sense. One of them is to <a href="http://en.wikipedia.org/wiki/Leverage_%28finance%29" target="_blank">leverage</a> an investment. My Fidelity brokerage account qualified for <a href="http://en.wikipedia.org/wiki/Margin_%28finance%29" target="_blank">margin</a> trading. What this meant was that I could buy more stocks than I had money in my cash reserves. The way it works is that I basically take out a loan using the stocks that I own as <a href="http://en.wikipedia.org/wiki/Collateral_%28finance%29" target="_blank">collateral</a>. Fidelity would charge interest on the margin positions but the rate was low compared to other kinds of loans because it was secured by the value of my investment portfolio. I could pay off the loan by depositing more cash or selling some stock. Buying more stock than I could afford has it's risks. If the value of my portfolio falls below the outstanding margin balance I could get a margin call and some people have been wiped out financially when the stock price fell so rapidly that they couldn't sell the stock fast enough to cover the margin call. I used margin sparingly back then but don't use it at all these days.<br /><br />There is another form of borrowing that I learned from reading The Motley Fool, but never used. If you believe that the price of a stock is going to fall, you can actually profit from it. The technique is called <a href="http://en.wikipedia.org/wiki/Shorting" target="_blank">short selling or shorting</a> a stock. The way it works is that you borrow some shares of the stock you want to short from the brokerage firm, sell it, wait for the price to fall, buy it back when it hits your target price and then return the stock to the brokerage firm. You get charged interest for the value of the shares you borrow so it is very much like taking out a loan. Some people have make fortunes on other people's misfortunes but short selling involves quite a bit of risk. The possible gains are limited (the price can only go to zero) but there are no limits to the possible losses you can incur if the stock price goes up.<br /><br />By the late 1990's I amassed a sizable portfolio for Rosie and me as well as for my mom. I was also working on a job that required lots of overtime so I was earning a rather large salary but didn't have the time to enjoy it. We did have cable service at work and we had the financial news running in the background. It was impossible to ignore what was going on with the technology sector of the market. Anything associated with computers, networks or had a dot-com in the company name was skyrocketing in price. I started trading companies like Yahoo, Amazon.com, AOL, Microsoft, Apple and lots of lesser known start ups that have gone extinct since the <a href="http://en.wikipedia.org/wiki/Dot-com_bubble" target="_blank">Dot-com bubble</a>. Of course I didn't know we were in a bubble and I was getting into dangerous territory but I was making lots of money. I didn't feel comfortable, one day I'd make a 20% profit on a trade and the next day I'd loose 40%, I still owed a hefty mortgage on the house, I was burning out at work. Keeping up the portfolio was taking up more of my time. I would get up before the stock market would open to place my orders and would use tactics like <a href="http://en.wikipedia.org/wiki/Order_%28exchange%29" target="_blank">stop loss and limit orders</a> to keep any losses to a minimum. These were the days when everyday people were getting into <a href="http://en.wikipedia.org/wiki/Day_trading" target="_blank">day trading</a> and even though some of my orders would trigger buy and sell commands on the same day, I didn't want to get into what was looking more and more like gambling.<br /><br />I decided to sell out most of my non-retirement positions and pay off the mortgage. I was a great feeling for Rosie and me not to owe on the house. Some of my friends thought I was crazy to do this, they were taking out home equity loans in order to buy more stocks. For about a year it looked like I made the wrong choice, the market kept climbing. I did continue trading in our retirement accounts and there was my mom's portfolio that I was still managing but I wasn't trading at a maniacal pace.<br /><br />I also started investing in <a href="http://en.wikipedia.org/wiki/ETFs" target="_blank">ETF's</a> which are sort of like index mutual funds but they can be traded like stocks. The advantages they had over mutual funds included being able to set buy and sell order automatic triggers. The disadvantages included not being able to setup automatic reinvestment of dividends (some companies pay stockholders dividends on the profits) and having to pay the <a href="http://en.wikipedia.org/wiki/Bid-offer_spread" target="_blank">bid and asked for spread</a> which is something that brokerage firms would rather you not find out about because it adds to their profit and isn't as up front as the discounted commission fees given to online traders.<br /><br />At this point I also started investing in an index mutual fund. I read about <a href="http://en.wikipedia.org/wiki/John_Bogle" target="_blank">John Bogle</a> and his market theories. To quote: "Mutual Funds can make no claims to superiority over the Market Averages." In fact the majority of mutual funds under perform the market averages and in addition are tax inefficient because they tend to trade often and the mutual fund investors are taxed for any distribution even though they don't usually receive the pay out. I opened an account in his <a href="http://en.wikipedia.org/wiki/The_Vanguard_Group" target="_blank">Vanguard</a> S&P 500 Index Fund and set up an automatic investment plan starting at something like $200 per month. We never noticed the money going out every month and every year I increased it a little more.<br /><br />When the dot-com bubble did finally burst I was in the process of buying our current home so I was almost completely out of the stock market and since my mom was moving in with us, her account was mostly in cash. Well, so I'd like to say, our retirement accounts were still heavily invested in stocks and I saw the value of our retirement portfolio tumble. At one point my retirement account was worth about half of what it was when the market peaked. Remembering my lessons from Louis Rukeyser and the Motley Fools, I didn't panic, I saw it as an opportunity to get back into the market so I started building back our investment portfolio.<br /><br />Most of my new investments in our Fidelity account were either ETF's or stocks of companies I knew quite well. When I started working at DreamWorks Animation the company gave every employee 100 shares of stock when it first went public. I thought that was a good gesture so I bought another 100 shares in their employee plan. However, I always liked Pixar movies better so I also bought Pixar stock too. As it turned out Pixar far outperformed DreamWorks Animation until Disney bought Pixar in 2006.<br /><br />Now I must admit that every once in a while I'd take a very small portion of my portfolio and invest in something outrageous. Once we were discussing electric cars at work and I discovered a company called <a href="http://www.zapworld.com/" target="_blank">ZAP</a>, for zero air pollution, that imported electric cars, scooters and bicycles. I found out that their stock was trading very cheap because a deal they were trying to make to import <a href="http://en.wikipedia.org/wiki/Smart_Car" target="_blank">Smart cars</a> fell through. I did some research and found that many investors were shorting the stock and it was down to about $0.30 per share. I bought 1,000 shares for about $300. As it turned out the company announced plans to import cars from China, the stock started to climb, I bought another 1,000 at $0.50 per share and then something amazing happened, the stock was caught in a <a href="http://en.wikipedia.org/wiki/Short_squeeze" target="_blank">short squeeze</a>. One day I looked at my account balance and found that the stock shot up to over $1 a share. I sold enough to cover my initial investment so whatever happened next would be pure profit. It went as far as $3 per share then started heading back down. I've heard of <a href="http://www.fool.com/investing/small-cap/2010/02/18/your-best-shot-at-a-10-bagger.aspx" target="_blank">10 baggers</a> but this was the first time I experienced it.<br /><br />This lesson on stocks came out much longer than I anticipated. Of course there's much more that I could have included. Here are a few more tidbits just to make the lesson more complete.<br /><br />Warren Buffet - Berkshire Hathaway.<br /><br /><a href="http://en.wikipedia.org/wiki/Warren_Buffett" target="_blank">Warren Buffet</a> is one of the wealthiest men in the world. He is the chief executive officer (CEO) and primary shareholder of <a href="http://www.berkshirehathaway.com/" target="_blank">Berkshire Hathaway, Inc.</a> He made his fortune by investing in companies. There are many books about him, his investment style and his philosophy but what I found interesting was that you could hitch a ride on his current investment strategies simply by buying shares of his company. The original (A shares) Berkshire Hathaway stock never <a href="http://en.wikipedia.org/wiki/Stock_split" target="_blank">split</a>, as I write this one share of Berkshire Hathaway will cost you $120,600. There's also a second offering (B shares) that does split and is much more affordable for the average investor. I owned some of these B shares for a while. During the time I owned them, the stock underperformed. Sure, Warren Buffet was one of those people who made some very good decisions early in his career and was able to maintain an average investment return of about 20% for many years, but eventually his investment portfolio became so big that now it is difficult for him to outperform the market averages. In fact many people would probably agree that his investment portfolio affects the overall market.<br /><br />More foolishness.<br /><br />What about the <a href="http://www.fool.com/" target="_blank">Motley Fools</a>? They are still around but the outstanding returns they were reporting in the mid-nineties aren't looking so impressive these days. Much of their early successes had to do with them including America Online in their portfolio which at the time was one of the best performing stocks. As far as I know the main reason they bought share of AOL was because they started as an AOL forum and included the stock out of courtesy to their sponsor. Their other stock picks did go up, but lagged way behind AOL. They wrote several books about stock investing including one for more conservative investors called "<a href="http://en.wikipedia.org/wiki/Foolish_Four" target="_blank">The Foolish Four</a>." The idea behind this was based on an older strategy called <a href="http://www.ohiggins.com/beatingthedow.asp" target="_blank">Beating the Dow</a> or <a href="http://en.wikipedia.org/wiki/The_Dogs_of_the_Dow" target="_blank">Dogs of the Dow</a>. Basically, you buy the worst performing stocks from the 30 companies in the Dow Jones Industrial Average. The idea being that these are the best managed companies in the world and their excellent management team would do everything possible to keep up with the other companies on the index or Dow Jones will drop them from the list. How well has it worked? Below average and they stopped recommending that strategy. After the dot-com bubble burst the Motley Fool lost 80% of their staff and they nearly went out of business. If you look at their current portfolios you'll see that they can't consistently outperform the market averages.<br /><br />We still haven't recovered from the dot-com crash.<br /><br />Most of the hi-tech companies that fueled the dot-com craziness of the late-nineties were listed on the <a href="http://en.wikipedia.org/wiki/Nasdaq" target="_blank">NASDAQ</a>. An index which includes all of the companies in that stock exchange, called the <a href="http://en.wikipedia.org/wiki/Nasdaq_Composite" target="_blank">NASDAQ Composite Index</a>, reached an all time high of 5,132.52 on March 10, 2000. Today, over 10 years later, the index stands at 2,288.47, less than half its peak value. The overall market has done much better. For example, the <a href="http://en.wikipedia.org/wiki/Dow_Jones_Industrial" target="_blank">Dow Jones Industrial Average</a> which was at 10,367.78 on March 10, 2000 is now at 10,653.56.<br /><br />Note: Just to clear up any possible confusion, you can't directly compare one company's stock price to another company's stock price and you can't compare stock indexes to each other by their "points." These are relative values and it is like comparing the currencies of different countries.<br /><br />Don't try to time the market.<br /><br />You've probably heard the old rule, "Buy Low and Sell High." When applied to stock trading this is known at "<a href="http://en.wikipedia.org/wiki/Market_timing" target="_blank">Market Timing</a>." Basically, you buy when the market drops and stock prices are relatively cheap and sell when the market peaks and stock prices are expensive. The problem is, how high and low will the market go? Jumping in and out of stocks often causes what's known as a "Whipsaw Effect." The way this happens is that your buy order is executed then shortly thereafter the stock drops enough to trigger your stop-loss order. Forecasting market direction is difficult though in <a href="http://en.wikipedia.org/wiki/Hindsight_bias" target="_blank">hindsight</a> it seems easy to figure out when you should have bought and sold. I tried to time the market and have failed to do any better than average. That said, though I don't really believe in luck, I guess I've been lucky--that's a paradox, isn't it? I cashed out of my non-retirement stock investments in the late 1990's in order to pay off the mortgage, just about a year before the dot-com bubble burst. I also made a major change in our investment portfolio in early 2008 in order to reduce risk and simplify. By putting about half our money in a bond mutual fund I kept our losses from being much worse during the housing bubble crash that caused a very serious economic recession. Had I tried to time these events I most likely would have missed them.<br /><br />Dollar cost averaging vs. a systematic investment plan<br /><br />I didn't really explain <a href="http://en.wikipedia.org/wiki/Dollar_cost_averaging" target="_blank">Dollar Cost Averaging</a> properly. The way it works is if you have money saved up and ready to invest but instead of investing all of it at once in one lump sum you make small periodic investments until it is all invested. This works when your investment period includes a market dip but basically dollar cost averaging is a form of market timing and it generally doesn't work any better than lump sum investing. In fact if you're investing during a bull market dollar cost averaging does much worse.<br /><br />However, a <a href="http://en.wikipedia.org/wiki/Systematic_Investment_Plan" target="_blank">systematic investment plan</a> does work--Finally, you're probably thinking, something that works! In this case you're also making periodic investments but you never had a lump sum in the first place. If you invest the same amount every period which is usually monthly but it could be weekly, quarterly or yearly, you're buying more when prices are low and less when prices are high. In the long run this investment strategy works very well. Of course systematically saving is the first step in building wealth and the more you can put aside, the faster your savings will grow. The more money you have saved, the more you can invest--just don't invest it all, remember to always have a cash reserve just in case.<br /><br />Looks like I ended up on my soapbox lecturing about savings once again so I'll end with another famous quote, this time by cowboy philosopher <a href="http://en.wikipedia.org/wiki/Will_rogers" target="_blank">Will Rogers</a>:<br /><br /><ul><li><b>"If you got a dollar, soak it away, put it in a savings bank, bury it, do anything but spend it. Spending when we didn't have it put us where we are today. Saving when we've got it will get us back to where we was before we went cuckoo." </b></li></ul><div style="text-align: right;">--Will Rogers, Nov. 24, 1930<br /></div><span style="font-size:85%;"><span></span></span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-55845165559830478362010-12-14T17:37:00.000-08:002010-12-14T18:01:39.160-08:00Investment Lesson #2 - Debt SecuritiesIn the first lesson I made it a point to emphasize that debt is bad -- in fact debt is slavery. Now I'm going to turn it all around and tell you that it's good to be on the other side of a debt. In other words, if you owe money, that's bad but if money is owed to you, that's good.<br /><br />Of course it isn't that simple. There are situations where borrowing money makes sense. Businesses borrow money all the time, so do governments and banks. It would be very difficult to buy a home without taking out a mortgage. There are even situations where you can leverage your investments by using a form of borrowing called margin--but we'll get into that later.<br /><br />My mom wanted to teach us about saving so she took us to the local savings and loan. I was earning interest on the money I had on deposit there because someone else was borrowing that money and paying interest on it. Basically, that's how banks work. I was aware that the bank was lending out my money at a higher interest rate than they were paying me, but it would have been very difficult for me to find who was borrowing my money so I could deal with them directly. In addition, all the depositors' money was pooled together so it was impossible to determine who's money was going to which borrower.<br /><br />What would happen, I thought, if a majority of the depositors decided to withdraw their money at the same time? That actually happens, it's called a run on the bank. People are afraid that the bank would make bad loans, fail and they would loose their money. It happened a lot during the Great Depression in the 1930's so the U.S. government created the Federal Deposit Insurance Corporation (FDIC) which protected depositors. When I opened my savings account, it was insured up to a limit of $15,000. Wow, I thought I'd never reach that. Today the FDIC limit is $250,000 per depositor. Federally insured savings accounts are one of the safest investments you can make, they also pay the lowest interest rates.<br /><br />Up until this point we've been covering savings, though I sometimes refer to a savings account as an investment. There's a fuzzy line between savings and investing. Some people might define savings as money hidden under the mattress, others say that short term investments like 3-month treasury bills and money market mutual funds are savings, not an investment. Still others define all government issues as savings. It doesn't really matter where you draw the line. As far as I'm concerned when you are accumulating money, you are saving. When you put that money to work for you, you're investing.<br /><br />Collecting interest on a savings account might sound very basic, but is it really? I didn't withdraw the interest that the bank was paying me, it went right back into my account so that the interest would compound. In other words, the bank started paying me interest on the interest that they already paid me. Over the short term it doesn't seem like much, but over a long period of time it can really add up.<br /><br /><div style="text-align: left;"><ul><li>"Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it."</li></ul><div style="text-align: right;">--Albert Einstein</div></div><br />There is dispute whether this is an actual quote by Albert Einstein, it probably isn't--but it's a good quote nonetheless. Einstein was also credited for discovering a simple mathematical formula for compound interest called the <a href="http://en.wikipedia.org/wiki/Rule_of_72">Rule of 72</a> but the formula has been found in the writings of Italian mathematician <a href="http://en.wikipedia.org/wiki/Luca_Pacioli">Luca Pacioli</a> dating back to 1494. The way you use the rule of 72 is like this: 72/(interest rate) = (years required for the investment to double). My passbook savings account was earning 5.5% so using this formula, 72/5.5=13 years to double. If you can find an investment that returns 12% it would take just 6 years to double. I've made trades that doubled in just a few days, but those are very rare. Why is finding the doubling rate important? Exponential growth. You might have heard of the <a href="http://en.wikipedia.org/wiki/Wheat_and_chessboard_problem">Wheat and Chessboard fable</a>. Basically, if you put one grain of wheat (or rice or sand or whatever) on one square of a chessboard then 2 on the next, 4 on the next and keep doubling it for each square, how many grains would you have when you finished all 64 squares? The answer is such a huge number that it is greater than the amount of all the grain that was harvested in the history of humanity and the pile would be bigger than Mount Everest. That's the power of compound interest.<br /><br />The rule of 72 breaks down in the real world of investing as does exponential growth. Still, the greater the return and the longer the time, the more likely you'll be able to accumulate a large sum.<br /><br />Investing in debt securities may seem very simple and safe at first and once you know about the power of compounding interest and exponential growth--heck it's a no-brainer. Just find the investment that gives you the highest interest rate for the longest time and that's it, right? Wrong! First of all, a bond (a long term debt) that pays the highest interest rate relative to other debt securities is usually referred to as a junk bond. What it means is that the interest rate on a junk bond is high because there is a good chance that the entity that issued that bond will likely default on the payment. In addition, interest is taxable as regular income so depending on your tax bracket the amount you will be able to keep from your interest income is a fraction of the actual interest rate. Another thing to consider is that if you want to sell a debt security that you own before its maturity date, it may be worth more or less than face value due to fluctuations in the prevailing interest rates.<br /><br />My experience with debt securities began when I opened my first Individual Retirement Account, IRA. I was just turning 30 and realizing that I've got to start doing something about retirement. Interest earned in an IRA are sheltered from taxes until you start withdrawing at retirement. I figured that I should play it safe so I invested in short-term debt securities issued by the U.S. government. The simplest way to invest in these treasury notes, bills and bonds (they have different names depending on the length of maturity) was through a mutual fund. An advantage of investing through a mutual fund was that instead of investing the entire $2,000 IRA limit at one time I could invest $166.67 per month--that made it much easier for me to get started. I kept close watch on my IRA and saw it gradually go up in value, never going down. I was definitely playing it safe, too safe. As it turned out, the mutual fund was a "tax advantaged" account meaning that a portion of the interest was exempt of state and local taxes--but the IRA was already exempt from all income taxes so it didn't make sense using this investment in an IRA. If I had invested instead in a taxable bond fund I would have gotten a better return. I eventually changed my investment strategy for my IRA from bonds to stocks but a couple of years ago I went back into bonds for my IRA. Why? Because bonds are a valuable mix in a total investment portfolio and the interest is sheltered from taxes in the retirement account.<br /><br />One of the biggest risks to debt securities, even a greater possibility than default, is interest rate fluctuation. I read about it and thought I understood it but it didn't sink in until I experienced it. Once my father died my mom started relying on me to help her with her finances. She had some money that she put into a mutual fund in that same savings and loan where I had my first savings account. She wanted something that paid a better than average interest rate but preferred it to be non-taxable, she hated to see her earnings get eaten up by taxes. The manager at the savings and loan suggested a tax-free mutual fund for her. Tax-free mutual funds invest in bonds issued by local and state governments (municipal bonds) for community projects like building bridges, dams and schools. Since it is an investment in the community these municipal bonds are either not taxed at all or are taxed only by state but not federal or federal and not state. Many municipal bonds have very long maturity dates and very low interest rates. My mom was happy getting her meager tax-free interest but what she didn't realize was that her principal, her original investment, was dropping in value faster than the interest that was coming in. The way it works is like this--let's say you buy a $1,000 bond that earns 5% interest and you decide to sell it before the maturity date. At the time you put the bond back on the market the interest rates have gone up to 10%. In order to get that 10% the bond will sell for less than face value. It depends how many years to maturity, dividend date and other factors but basically, your bond has lost value. Of course the reverse is true if interest rates drop. If you intend to hold onto the bond until maturity, it shouldn't really matter to you if the value goes up or down, you will still get the same interest (coupon rate) but since a mutual fund has to report the value of it's portfolio they have to report the current market value. In addition, a mutual fund may need to sell or trade bonds before maturity to meet customer redemption demands. In my mom's case, interest rates were rising and her mutual fund lost value. She had no idea until I pointed it out on her statements. I also discovered that the fund she was invested in had very high fees and were commission based, also known as load funds, so the drop in value was even more severe.<br /><br />There are a wide variety of bonds, some have interest rates that change during the life of the bond (like the Treasury Inflation-Protected Securities - TIPS) some bonds are callable, meaning that the issuer can pay them off before the maturity date, some don't pay interest at all but are sold at a discount to their face value like series EE Savings Bonds. There are also many rules how they are taxed and reported. I got to play the rich uncle when I sent my nephews Kevin and Brian $100 Savings Bonds for Christmas that only cost me $50--and since it was a gift to a minor nobody had to report taxes on them. There's lots to bonds, the way they are reported in basis points (0.01% = 1 basis point), the way they are listed, some can be converted for company stock, etc. It can get very complicated and as a result bonds are neglected in many portfolios--I didn't invest for bonds for several years.<br /><br />What I do these days is to put a portion of my investment in a mutual fund that invests in a large number of bonds in order to match an index of the total bond market. I'll get into this more in another lesson on asset allocation.<br /><br />In the next lesson we'll finally get into stocks--something that I'm sure you'll find much more exciting. However, some people that know the stock market much better than I do put all of their money in bonds. Joe Dominguez, the author of "Your Money Or Your Life" worked in a Wall Street firm but put all of his own money into 30 year treasury bonds. He retired when he was 31 years old. Of course back then the "Long Bonds" as they are known were paying over 13% interest. I'd gladly put all of my money in 30-year treasuries with that sort of return. Today they pay a measly 3.73%. Of course interest rates are at historically low levels, but what happens to today's bonds if, or rather when, interest rates rise?<br /><br />Next lesson--the stock market.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-3492616478052644492010-12-14T10:37:00.000-08:002011-01-07T19:49:06.651-08:00Investment Lesson #1 - Before you invest you should save.There's lots of ways to invest and it can be a very complicated subject or it can be very simple. I have dabbled in stocks, bonds, real estate so I'll tell you about my experience in these areas. Let's start with the first lesson and how I learned it.<br /><br /><b>Lesson #1 - Before you invest you should save.</b><br /><br />When I was about 10 years old my mom took me to the local savings and loan and opened a passbook savings account for me and my sister. After depositing a few dollars that I earned mowing lawns I received a little booklet that listed my account balance. Once a month I would go deposit a few more dollars and get my passbook updated with the amount of interest I earned. It may seem a little outdated these days but savings accounts are still around. Of course my motivation for saving back then was to buy something that I wanted. What was interesting was that once I saved enough money to buy that something, I didn't really want it as badly any more. I also found out that if I took money out of my account, the interest that I would earn would go down. I can still remember the interest rate that I got on my first savings account, 5.5%. I also remember that when I would walk into the savings and loan they would have advertisements for their other services. I learned that once I had enough in my savings account I could earn a higher interest rate in a different type of account called a certificate of deposit (CD). There was a catch though, I couldn't withdraw my money for a period of time called a maturity date. The longer the maturity date, the more interest they would pay me. I bought a 6-month CD and earned a whopping 7%. It seemed like a very long time back then, but every month I'd go to get the interest stamped into my booklet and watched it grow. Of course I didn't save all of my money, I also bought stuff--paint for my bicycle, a tennis racket, model rockets, you know--stuff. The stuff that I bought became more and more expensive as I earned more money, cameras, stereos, even cars, but I kept my savings account, though at times the balance went down to just a few dollars.<br /><br />Of course I eventually opened up a checking account and once I was in college I got my very first credit card--an American Express Card. It may seem like an unlikely card to start with, but they were running a promotion for college students that can prove they had a guaranteed job upon graduation. I had an uncle who ran a TV repair shop in Mar Vista and he helped me with the job guarantee, though I never went to work for him. Once I got that card, other credit cards were easy. In a few months I had at least two Visa and two Mastercards, a Shell gas card, a JC Penny's card a Sears card and probably a few more I forgot about.<br /><br />Now I want to make sure you understand the time line here. This was after I was in the Navy (1975-77) and before I started Art Center College(1981). You see, I didn't have enough money saved up to go to Art Center (the college of my choice) so I went to Cal State Long Beach for a couple of years and got a degree in journalism. As a Vietnam era veteran I was paid to go to college. It didn't matter which college or how much the tuition, I got paid the same. So instead of getting a job I went to an inexpensive, state funded college. It was with my government subsidy income that I was able to qualify for all this credit. I was also able to save up enough money to go to Art Center for one semester. With my good grades and credit rating I qualified for student loans.<br /><br />I did graduate, a BFA in photography, with distinction no less, but only because I was awarded a scholarship and got a couple of those student loans. For the first time in my life--I went into debt. It wasn't terrible, I had several months after graduation before I had to start paying back the loans, the interest rate was a very low 3% and they gave me a 10 year payment plan so the monthly payments were doable. So--I went off to New York City to apprentice with some of the best photographers in the world. I made very little money and paid a lot in rent. I had to watch every penny. I mean that quite literally, I got some accounting ledgers and kept track of all my income and expenses, including a few coins I found on the street. It was very tough in the city and I was barely scraping by but I was determined not to give up. I started getting my first "real" photography assignments in New York about 6 months after I arrived. I had several magazine assignments, including my first cover. My assistant days were over sooner than I could imagine. However, magazine publishers and advertising agencies tend to be a bit slow in paying. They expect you to cover the expenses of the assignment until their client pays them or when the accounting department decides to pay your invoice, 30 to 90 days later--or more. Those credit cards sure came in handy and I went further into debt. My plans were to learn from the best in New York then return to Southern California where the weather was much more to my liking so I started looking for assignments out West. I got offers to shoot corporate annual reports--good money, good work, so I packed up and bought a ticket home, paying with my credit card. I kept busy and in a few months I rented a studio space and bought a brand new mini van, financed of course and I even had a line of credit at the bank and open accounts at the local pro photography stores. I was still in my 20's with my career well on the way--but why did I feel poor? Debt.<br /><br />There's an old mining song where the chorus line goes like this:<br /><br /><div style="margin-left: 40px;">You load sixteen tons, what do you get<br />Another day older and deeper in debt<br />Saint Peter don't you call me 'cause I can't go<br />I owe my soul to the company store<br /></div><br />The way mines used to operate was that the workers were allowed to bring their families to live in the shacks near the mining site and instead of being paid with money they were paid with credit vouchers which could redeem at the company store. Everything they needed, well at least their basic survival necessities, were available at the company store. If they needed more than they had earned vouchers, the owners would give them credit which they could pay off by working. Eventually, the miners got so far into debt that they couldn't leave to work somewhere else. This was known as "Debt Bondage" and it was essentially a form of slavery. The practice continued until the United Mine Workers and other unions put an end to it.<br /><br />Think about it, the practice of Debt Bondage is illegal yet people continue to get themselves into debt all the time. They are working to pay interest to the bank, credit union, mortgage company, loan shark, etc. There are basically two ways out of debt, bankruptcy or death. Okay, there is another option, pay off the debt--that's what I decided to do.<br /><br />I moved back home with my parents. It wasn't too bad, I basically just slept there. I was also getting along much better with my parents in my 30's than I was when I was in my early 20's. I did the math and found out that if I got out of my studio and only took the location jobs I would take in less money but would cut my overhead costs dramatically so when my lease was up, I moved out of the studio. First of all I paid off my high interest debt, the credit cards. From then on, I always paid off their balances in full. I also paid off the loan on my van, early. I even paid off my student loan way ahead of the 10 year payment plan. I was going to buy a house and almost closed a deal on one but it fell through at the last minute--so, I continued living at home instead of renting an apartment.<br /><br />Things were going okay for me. Though I wasn't rich yet, my savings were growing. I had just enough work to keep me busy enough. On the weekends I would go sailing. And my relationships with girls were starting to get more serious. Then I got the worst news ever--my father had cancer and only a few months left to live.<br /><br />I tried taking him to different doctors, maybe there was something someone could do, but there was nothing. The only thing I could do was to spend as much time with him as possible--and get to know him better. Some of our conversations were barely coherent. He told me to eat lots of meat because cattle were big, powerful animals. Mind you the doctor advised my father to cut back on red meat when he had a heart attack 20 years earlier--he really missed his steaks. My dad wasn't religious but he did get interested in eastern philosophy in his later years. Zen and Buddhists believe in reincarnation so I was surprised when he told me to, "find what you really want to do with your life and do it--you only live once." I hadn't worked or earned any money in months but because I had no debt and enough savings I was able to spend that precious time with my dad. I was right next to him when he died.<br /><br />I made a few decisions at this point. I always wanted to work in the motion picture industry but was talked out of it so I settled on my second choice, photography. Though I liked photography, I didn't like running the business. I decided to find a good paying position making movies. I also decided that I didn't want to work until mandatory retirement age, do a couple of trips and drop dead--like my father. I was going to get healthy and leave the rat race early. In order to do this I had to start getting serious about saving as much money as possible. I wasn't too concerned about finding the right person, getting married or having kids. My friends who got married early and had kids were either miserable, divorced or both--and they were all in debt.<br /><br />I'll spare you the story of how I got into the movie industry but it was during that first year working in film that I got really serious about building up my savings and to start investing. I did have an Individual Retirement Account that I started when I had the studio and was starting to take care of some of my mom's money--I always seemed to do better managing her money than my own, probably because I didn't take as much risk with her investments. I was also getting a fairly substantial salary and had almost no expenses. I was still living at home with my mom on the weekends and staying with my brother during the week. He didn't have much room so I slept in a sleeping bag in his living room for an entire year. When I finally got an apartment my requirements were to be in a nice neighborhood, I choose Beverly Hills, and the rent had to be so low that I could pay for it even if I was on unemployment, I found a place in Beverly Hills for $500 per month, my unemployment benefits were about $1,000 per month back then. However, I never went on unemployment while I had that place.<br /><br />You might have heard of "rules" like save 10% of your income. I'd say that would be good but it isn't really a rule, just a suggestion. What really helps is to have a reason to save and to set a realistic goal. My reason to save was to have the freedom to go where I pleased, when I want, having the option of taking a job or not working, in other words--to be financially independent. I wanted to reach that point as soon as possible, certainly no latter than 55 years old so I could have several years of leisurely living. I also had a dollar amount in mind, $500,000. I figured with that I could live a nice quiet, simple yet secure life as a bachelor. You could call it early retirement. I'd rather call it an alternate lifestyle because for me retirement brings up images of old people sitting in rocking chairs waiting for the Grim Reaper to arrive.<br /><br />I didn't remain a bachelor, I got married. Matrimony, well that's a whole different lesson. Let's just say that I was very fortunate to meet someone who shares my dreams.<br /><br />So to wrap up this first lesson:<br /><br /><div style="margin-left: 40px;">1. Live below your means - Spend less than you earn, the difference between your income and expenses is called savings.<br />2. Stay out of debt - Debt is Slavery!<br />3. Make attainable goals - It is much easier to save if you have a plan. Make sure your goals are reachable, don't set them too high but definitely don't make them too easy!<br />4. Avoid compulsive buying - Stop and think before purchasing anything. Is that item really necessary? Is it really going to make you happier? Are you willing to push back your financial goals to make that purchase?<br />5. Don't spend windfalls, save it - A windfall is when you come upon money that you weren't really planning to get. I could be an inheritance, winning a law suit selling some property or taking the prize in the lottery. There are plenty of stories of lottery winners going bankrupt.<br /></div><br />I got rid of lots of books when we downsized to fit in the back house, but there were a couple of books that I saved. I read them a few times and passed them on to one of my nephews.<br /><br /><div style="margin-left: 40px;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiM7XCB5OJS83iuvPPQAtRfQyk0cOhkTaKb6mxYnAlmR_I3_pjhNHlpIdctZ38YehsOIOb_1M_Y1uMhnAkSq8gnE-rPHJRFpqOsZkdG7sXXwc4ovbFV3K2XKj5PRnLzqzlf6l-iEJ_RugLS/s1600/your_money_or_your_life.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 207px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiM7XCB5OJS83iuvPPQAtRfQyk0cOhkTaKb6mxYnAlmR_I3_pjhNHlpIdctZ38YehsOIOb_1M_Y1uMhnAkSq8gnE-rPHJRFpqOsZkdG7sXXwc4ovbFV3K2XKj5PRnLzqzlf6l-iEJ_RugLS/s320/your_money_or_your_life.jpg" alt="" id="BLOGGER_PHOTO_ID_5550613138442099154" border="0" /></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLaSS8nsXCpYEIfzRTp8tLZX8jpKLTxU43-MrUAbGVPRSEgSU4v3aWPvUIXaymkIaNxltVuvRsZfzCqNwXBLzM6t7KFBFR49kumD-37Qo2_rmWvsv3m1Aqq7ezYDwHETiMr8dTr1l_V2TS/s1600/Debt_Is_Slavery.jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 192px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLaSS8nsXCpYEIfzRTp8tLZX8jpKLTxU43-MrUAbGVPRSEgSU4v3aWPvUIXaymkIaNxltVuvRsZfzCqNwXBLzM6t7KFBFR49kumD-37Qo2_rmWvsv3m1Aqq7ezYDwHETiMr8dTr1l_V2TS/s320/Debt_Is_Slavery.jpg" alt="" id="BLOGGER_PHOTO_ID_5550613901999181586" border="0" /></a><br /></div><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><div style="margin-left: 40px;">Your Money Or Your Life - by Joe Dominguez and Vicki Robin<br /><br />Debt is Slavery: and 9 Other Things I Wish My Dad Had Taught Me About Money - by Michael Mihalik<br /><br /></div> So start saving. In the next lesson we'll get started on investing.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-11550566390084137592010-12-13T20:14:00.000-08:002010-12-13T21:15:39.389-08:00My Very Quiet Year - and 1/2<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9_ltCv0B2EQqIvfkTFQKWU9Nd7Ih9BVjKMx2gmaDhPJLRAyC3YO5A_UEVTKoEho-fJt0NdCu9hy7VeAW44iwuqa4Jv9lFU8UnnNVsZZ-De97TkMhLrUYC0HEU1Eh2tVYJsise4bj4kEv4/s1600/At+Sea.jpg"><img style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9_ltCv0B2EQqIvfkTFQKWU9Nd7Ih9BVjKMx2gmaDhPJLRAyC3YO5A_UEVTKoEho-fJt0NdCu9hy7VeAW44iwuqa4Jv9lFU8UnnNVsZZ-De97TkMhLrUYC0HEU1Eh2tVYJsise4bj4kEv4/s320/At+Sea.jpg" alt="" id="BLOGGER_PHOTO_ID_5550387028193077506" border="0" /></a>It has been one and one-half years since I last blogged. Yeah, that's quite some time off. I guess it is about time for an excuse and an update.<br /><br />Well, I guess I just didn't have a compelling reason to post anything. This blog evolved from a racewalking training diary to a way to keep in touch with my nephews to saving some interesting notes and articles for future reference to sort of a pointless collection of wandering musings. Note that my last post was about downsizing to one car and a scooter, but there was a lot more going on at that time that I didn't write about. Why? Maybe I was a bit afraid--afraid that what I was doing would be a complete failure or perhaps I might be doing something wrong and a government agency would use my post as proof of illicit activity.<br /><br />Enough with the fear, it seems that there is way too much of it going around these days. As for what wrong I might be doing--I'm having so much fun that it probably isn't legal. We did a few upgrades to the studio that the previous owner built over the garage and converted it into a very cozy guest house. Then we moved into the guest house and rented out our main house. Now for the best part, when I finished up the show I was working on at DreamWorks Animation, my wife Rosie and I took a trip to Greece and toured around some of the islands. When we got back I enrolled at Los Angeles City College and signed up for drawing and guitar class. I went back to work between semesters, but just long enough to keep my union hours updated so that we wouldn't lose our health insurance benefits. Oh, and we also took a trip to New Mexico to deliver a car to a friend who was working out there and another trip to Spain for a friend's wedding.<br /><br />All this traveling around has changed my perspective on the world, or more specifically on how we live in the United States of America. We downsized and rented out our house so we could work less and have more time for ourselves. In other words, we wanted to check out of the rat race. Not surprisingly, people in the US tend to work more and travel less than Europeans. I think that a part of that is the fear that the government has instilled on its population, of course there are terrorists going after Americans--just look at the government's foreign policy. In addition, we have higher medical costs than most countries. In fact one of the main causes of bankruptcy in the US is caused by medical bills. The one thing that is keeping us in the workforce is the fear of losing our health insurance. If we need to buy the coverage that we're getting from the Motion Picture Industry Pension & Health Plan we'd need to find a part-time job. However, there are no part-time jobs in our professions, there are only jobs with long days. No wonder one of my co-workers at DreamWorks used to say, "yeah I served time on that show" whenever we talked about work.<br /><br />Where am I headed from here? I'm playing around with doing some hand-drawn animation. I've only done a little bit of it so far but it is great fun and totally different from the army of "creative" people employed by the studios cranking out ****--well, I guess it's called entertainment. Sometimes something really good comes out of Hollywood, but not very often.<br /><br />I'll be getting back to posting, if for nothing else than to save a few notes and have them out in the open to share with anyone--without fear.Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-6168396440348934057.post-43917393356665180772009-04-28T10:51:00.000-07:002009-04-28T11:24:08.481-07:00Trying Hard to be Green<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiaVj_TYbsa6e_hvr5_CHWIqAome_3X6N0oAtHwKyLJ9YWmYXNZa0U1xqfvgzF82OzNcvDqwRiYKFacKNR7a3GY6_8qZa8V_Dd0lbhCq5HG6QNjJYaiRx_PO3xcChhRjh-qx_a_SNq8CjW2/s1600-h/Prius+and+Vespa.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiaVj_TYbsa6e_hvr5_CHWIqAome_3X6N0oAtHwKyLJ9YWmYXNZa0U1xqfvgzF82OzNcvDqwRiYKFacKNR7a3GY6_8qZa8V_Dd0lbhCq5HG6QNjJYaiRx_PO3xcChhRjh-qx_a_SNq8CjW2/s320/Prius+and+Vespa.jpg" alt="" id="BLOGGER_PHOTO_ID_5329801529762544930" border="0" /></a>I've been talking about getting a <span class="il">Vespa</span> for a long time--well, I finally did it. It is a used 2001 model ET4 with less than 500 miles on it. Yeah, I know--crazy. We've been a one-car household for a while now and although I really like riding the bicycle/bus/train sometimes I want something that I can run some errands and get me to/from work a little quicker.<br /><br />Well, it turned out that riding the Vespa around town was such a blast that it has become my main transportation. I even took Rosie out for a 2-up ride and she loved it.<br /><br />Oh yeah--the one car we settled on was a new Prius. I've heard the arguments for and against it, but for our needs it seemed to make the most sense.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-54140403734988883352009-03-27T06:39:00.000-07:002019-09-20T07:24:38.638-07:00Good Blood, Bad BloodI had my yearly physical a week ago and got the results of my blood test. A little over a year ago I was diagnosed with very high cholesterol and was prescribed statin medication which I decided not to take and to try lowering it with diet and exercise alone. Here's how it's been going:<br />
<pre>
January '08 June '08 August '08 March '09 ***April '11 ***May '12 *August '16 **August '18 ****August '19
Total Cholesterol 289 215 183 195 197 189 221 197 179
LDL Cholesterol 214 121 115 122 115 112 131 110 110
HDL Cholesterol 48 46 42 47 52 43 51 52 46
* Added August 21, 2018 - darn it, cholesterol is still too high after all these years.
** Added August 31, 2018 - well, it is headed in the right direction but not far enough.
*** Added October 3, 2018 - Dr. McDougall 10-Day program from 2012
****Added September 20, 2019 - so now LDL between 70 and 189 mg/dL is a reason to consider statin therapy. Ugh.</pre>
<br />
In November I had it checked at a health fair where I work and got a reading of under 150 but I doubt that was accurate. In any case, I've been successful at keeping it down but it has creeped up since the summer.<br />
<br />
I've got to confess that because of that super low reading in November I started getting a bit careless with my diet and exercise. I'm still riding my bicycle and eat mostly vegetarian and low fat, but the dessert bar at work is way too tempting and I tend to gobble down whatever is put in front of me.<br />
<br />
Feeling a bit apprehensive over this last exam I decided to do the equivalent of cramming for an exam. I rode my bicycle hard and fast over the hill to work all week and cut out all the fat I could from my meals. I'm not sure if it made a difference on my cholesterol but something else popped up on the blood test:<br />
<br />
<div>
</div>
<blockquote>
<div>
Hematocrit 40.3 </div>
<div>
<br /></div>
<div>
YOU ARE MILDLY ANEMIC. STOP BY FOR ADDITIONAL BLOOD TESTS TO FIND OUT WHY YOU ARE ANEMIC.</div>
</blockquote>
<div>
<br />
Geez, if it's not one thing it's another! In addition, my blood pressure was rather low. What's up with low blood pressure and anemia?<br />
<br />
Well a quick check on the Internet (what did we do before Google?) calmed me down. It turns out that many athletes experience these same symptoms when starting up a strenuous exercise program. So much for cramming for a blood test by over training. In addition, there's a slight chance of vitamin B-12 deficiency that could also cause anemia but I'm not a big fan of popping pills (including vitamin pills) for a quick fix.<br />
<br />
I need to go back for another blood test but I won't be cramming for the test.</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-19250049824237461882009-03-24T17:08:00.000-07:002009-03-27T17:02:56.208-07:00Hybrid Bicycle Experiment<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEguC_-WaBsHgTuoLRYbtBMDhgr6PzZsFdRWlBfN-Pp_X0qhAFe91f66Vpd_BU6sJLbBm5PBZHYkk_e0hNjvCIXodn91Ur3wQWiLObO5K8tT08L-yMbXPa6ShmF3Y2sZctZ992v6FCOSb-HA/s1600-h/Hybrid+bike+and+car.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEguC_-WaBsHgTuoLRYbtBMDhgr6PzZsFdRWlBfN-Pp_X0qhAFe91f66Vpd_BU6sJLbBm5PBZHYkk_e0hNjvCIXodn91Ur3wQWiLObO5K8tT08L-yMbXPa6ShmF3Y2sZctZ992v6FCOSb-HA/s320/Hybrid+bike+and+car.jpg" alt="" id="BLOGGER_PHOTO_ID_5316911324571900098" border="0" /></a><br />We recently became a one-car household so I've been doing some experimenting with alternate forms of transportation. The bicycle was working fine, especially when combined with public transportation, but it was nowhere nearly as fast or convenient as a car. However, driving the one and only car we own to work just so it can sit in the parking structure all day and leaving my wife stranded at home without wheels--well, that wasn't an option.<br /><br />Riding the bike was fun for the most part but mashing my way over the <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Cahuenga</span> pass, in traffic, in the rain, late at night, not so much. What I needed was a little push to make it a little easier and the answer seemed to be to augment the energy from my legs with an electric motor.<br /><br />I already had a couple of bicycles so I had a backup in case the experiment went awry. Good thing too.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0iRSVJxINRX1K2mRbzDlCu3Eg2H5Q6gZFGZk-9nrcKyph3Me6mvUrc4h5-Q4Ocv1yJdaPV991-lM-iMIdsi5R-F7beZ2et2UNHYjV7IT12Syw7RB2ogRtjAQS8aDM99PI4hrG2oT8dsS-/s1600-h/Bafang+front+detail.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 300px; height: 300px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0iRSVJxINRX1K2mRbzDlCu3Eg2H5Q6gZFGZk-9nrcKyph3Me6mvUrc4h5-Q4Ocv1yJdaPV991-lM-iMIdsi5R-F7beZ2et2UNHYjV7IT12Syw7RB2ogRtjAQS8aDM99PI4hrG2oT8dsS-/s320/Bafang+front+detail.jpg" alt="" id="BLOGGER_PHOTO_ID_5316915353530041314" border="0" /></a><br />The motor I settled on was a <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Bafang</span> geared front hub. The reason I went with a front hub was because it seemed simpler to mount. A geared motor should have more torque than a direct drive which should make climbing the hill pretty much effortless. Another advantage of a geared motor is that it freewheels. Some may say freewheeling is a disadvantage because it cannot regenerate <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">electricity</span> and recharge the battery like a hybrid car--but this requires a special controller and I didn't <span class="blsp-spelling-corrected" id="SPELLING_ERROR_3">want</span> to over complicate things since this was my first e-bike build.<br /><br />I got the motor as a kit that included building the hub into a 700c wheel along with an <span class="blsp-spelling-error" id="SPELLING_ERROR_4">ecrazyman</span> controller, twist throttle and brake levers with cutoff switches so you can't apply power and brakes at the same time.<br /><br />What the kit didn't include was a battery and that's where I went all out and got the latest craze in e-bikes, a lithium iron phosphate, <span class="blsp-spelling-error" id="SPELLING_ERROR_5">LiFePO</span>4, 48 volt 20 amp hour <a href="http://www.pingbattery.com/">Ping</a> battery pack.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjiPLpIgTcdtenWkOW1J1Bw1AXYBdxyyrjRf1w8tUrxlMgPYI5S51rayKw_KUa4R8-QAuSo8ZwRNj1cgLBLJ4SvNzCx2HmiCTxh-NpAstGIMMCYdvNXxrEmJIK6RsMwNg6CaejuOZ_mvjRN/s1600-h/Battery.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 213px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjiPLpIgTcdtenWkOW1J1Bw1AXYBdxyyrjRf1w8tUrxlMgPYI5S51rayKw_KUa4R8-QAuSo8ZwRNj1cgLBLJ4SvNzCx2HmiCTxh-NpAstGIMMCYdvNXxrEmJIK6RsMwNg6CaejuOZ_mvjRN/s320/Battery.jpg" alt="" id="BLOGGER_PHOTO_ID_5317595405377750946" border="0" /></a>Granted, it doesn't look like much more than a bunch of metal strips wrapped up in black duct tape, but it should deliver quite a jolt of power for many years, more than enough to get me to and from work. Notice that it has three wires, a positive, a charging negative and a discharging negative. Also notice that it doesn't have a connector and the end of the wires. The charger came with a connector but the controller had a completely different connector. Neither of these connectors were standard of the shelf items so I soldered common <span class="blsp-spelling-error" id="SPELLING_ERROR_6">XLR</span> audio connectors that are available in any neighborhood Radio Shack store--though you might have to do some searching because the sales people probably won't know they have <span class="blsp-spelling-error" id="SPELLING_ERROR_7">XLR</span> connectors.<br /><br />I was able to find a <a href="http://www.topeak.com/"><span class="blsp-spelling-error" id="SPELLING_ERROR_8">Topeak</span></a> trunk bag that fit the battery perfectly. The bag, paired with a <a href="http://www.topeak.com/"><span class="blsp-spelling-error" id="SPELLING_ERROR_9">Topeak</span></a> rack made it very easy to remove the pack from the bike and take it inside for charging. However, in order to make this practical the controller and all the other wires and connectors had to live somewhere other than the trunk bag so I got a frame bag which worked great for this purpose.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivOKLAcf6-8o-W-7uWgJ3e1WKrRaQ920dXt1YupFeFagcGN7fJy_NxT6WoVdkorYf4mEr5I-YeprXrz5SEB-4SpPJ31mnARUulLRd7o0zjeYTEjBUdA30K3FHvQulQbIPV8omY4kF8aQ55/s1600-h/Controller.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivOKLAcf6-8o-W-7uWgJ3e1WKrRaQ920dXt1YupFeFagcGN7fJy_NxT6WoVdkorYf4mEr5I-YeprXrz5SEB-4SpPJ31mnARUulLRd7o0zjeYTEjBUdA30K3FHvQulQbIPV8omY4kF8aQ55/s320/Controller.jpg" alt="" id="BLOGGER_PHOTO_ID_5317601088615222338" border="0" /></a>Except for the connector for the battery everything seemed pretty much straight forward even though absolutely no instructions were included with any of the items that I ordered. Some wire colors didn't match up but the connectors did, like this one for the brakes:<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuT3jlXdWFmbCuiiyGMQuAjK5loj5s-i4q4MHFyI_mO-wbu2czD84obRrl0eJ73NlqtlGKNti2UkB4z5MGB9i_OixnX6KHxOOOL0LLx2Mt1VSWZmYWpGbG1OWtfcLhyphenhyphencYWz6fzGjKRaySn/s1600-h/Brake+color+mismatch.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuT3jlXdWFmbCuiiyGMQuAjK5loj5s-i4q4MHFyI_mO-wbu2czD84obRrl0eJ73NlqtlGKNti2UkB4z5MGB9i_OixnX6KHxOOOL0LLx2Mt1VSWZmYWpGbG1OWtfcLhyphenhyphencYWz6fzGjKRaySn/s320/Brake+color+mismatch.jpg" alt="" id="BLOGGER_PHOTO_ID_5317609293322942642" border="0" /></a><br />While on the brakes, the controller had only one brake connector but of course there's a front and rear brake. I ended up splicing the brake wires in parallel so that applying either brake would cut off power to the motor.<br /><br />So, all the connectors fit and the wires matched up by color and it was time to go for a test ride.<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEia64lYoYCrkqA73SeSErnCx6g_b-ydnrjWxhPrxIeVjxtSIerbsuuvimPo2D_wIShdYf3X1R0dONjF_ZV3ECD6KD2OMMuygoqBijC7UO-GFQXg7yOxPwAVPy9-oNw_oxxJSTn36hbwhOEx/s1600-h/connectors+match.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEia64lYoYCrkqA73SeSErnCx6g_b-ydnrjWxhPrxIeVjxtSIerbsuuvimPo2D_wIShdYf3X1R0dONjF_ZV3ECD6KD2OMMuygoqBijC7UO-GFQXg7yOxPwAVPy9-oNw_oxxJSTn36hbwhOEx/s320/connectors+match.jpg" alt="" id="BLOGGER_PHOTO_ID_5317949387373456050" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiq9xTWdgFxYTI_54F84NEwtL_yYbeHdLzJIP7L2_Gr5SQ8DJyDr3z83Cz2cSHcWvwmHLPnYMUUtRqFjCstQi_OJaGQyDDfvENZgbcSrbzp676kN8BdXASsumKolrVnqfU6bmCzg1O_Y0FV/s1600-h/colors+match.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiq9xTWdgFxYTI_54F84NEwtL_yYbeHdLzJIP7L2_Gr5SQ8DJyDr3z83Cz2cSHcWvwmHLPnYMUUtRqFjCstQi_OJaGQyDDfvENZgbcSrbzp676kN8BdXASsumKolrVnqfU6bmCzg1O_Y0FV/s320/colors+match.jpg" alt="" id="BLOGGER_PHOTO_ID_5317949382203916802" border="0" /></a><br />It worked! It ran little rougher than I expected and there wasn't much pull, but it pulled--for about two blocks then it cut out. That wasn't very impressive, but whoa did the motor get hot! It turned out that I succeeded in burning out the motor on the very first test run.<br /><br />With the help of John Robert Homes from <a href="http://holmeshobbies.com/">Holmes Hobbies</a> we were able to determine that the problem was that the proper way of hooking things up is connecting the green wire to the yellow and the yellow to green. What? That's right, the motor manufacturer and the controller maker obviously weren't talking to each other when they made their products. In any case, <span class="blsp-spelling-error" id="SPELLING_ERROR_10">JRH</span> replaced my burned out motor stator assembly at no charge and once I got the wires switched over it finally delivered as promised.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSW03xzoyJtkWx1Da_q55-SIYD11ttffW10k4SF6OHxu_kZRWsraaURbXYeXK2BOBcyjTl2VKGeGTlELSTkTig1IdxBoRbTaxwu0XyYb66JP4pKEi88Ebl6qL2hDgBchLPl35QRBiwLtM5/s1600-h/colors+mis-match.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSW03xzoyJtkWx1Da_q55-SIYD11ttffW10k4SF6OHxu_kZRWsraaURbXYeXK2BOBcyjTl2VKGeGTlELSTkTig1IdxBoRbTaxwu0XyYb66JP4pKEi88Ebl6qL2hDgBchLPl35QRBiwLtM5/s320/colors+mis-match.jpg" alt="" id="BLOGGER_PHOTO_ID_5317949390215665938" border="0" /></a><br />This time I made it a few blocks before encountering yet another problem. The hub motor attaches to the front fork with a sort of "key" in the axle:<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgf0SETDmqq0c5Qa9Vg0ukj9TrFyN7uDhqNvd38C7P3YdXhzMsV8U5aP2jc5YKD3Oq9WaBvaGI4jFe_TfrfefCAYb6jK6RkJIJdMZdas4XN8LNP0o-CKaPP0fCenE-NCPn1XILSWyNov0UO/s1600-h/Hub+Motor+Axle.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgf0SETDmqq0c5Qa9Vg0ukj9TrFyN7uDhqNvd38C7P3YdXhzMsV8U5aP2jc5YKD3Oq9WaBvaGI4jFe_TfrfefCAYb6jK6RkJIJdMZdas4XN8LNP0o-CKaPP0fCenE-NCPn1XILSWyNov0UO/s320/Hub+Motor+Axle.jpg" alt="" id="BLOGGER_PHOTO_ID_5317986472683468898" border="0" /></a><br />The fit was nice and tight but after just a few accelerations--wow that was cool, it has so much torque that the front wheel spins when I take off. Oops:<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcYAnti525d1QRTXNf7yoXWhsl-gd0AK_VuwZeWxpsIjqF0-xC5HmEf4Cy2cnah8zyNetpCvTq0sEuAZTSIa5W5RXWpxn1jhtg1ZJ5iW-3S0durDxRkSf6wAJ8oE4fff1KPueCkkVcPHZ1/s1600-h/No+Torque+Arms.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 213px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcYAnti525d1QRTXNf7yoXWhsl-gd0AK_VuwZeWxpsIjqF0-xC5HmEf4Cy2cnah8zyNetpCvTq0sEuAZTSIa5W5RXWpxn1jhtg1ZJ5iW-3S0durDxRkSf6wAJ8oE4fff1KPueCkkVcPHZ1/s320/No+Torque+Arms.jpg" alt="" id="BLOGGER_PHOTO_ID_5317986478941477218" border="0" /></a><br />The fork dropouts deformed and the axle spun around a few turns and nearly broke off the cable! It turns out that what I needed was a set of torque arms, another hard learned lesson. Gee, this would be so much easier if it came with instructions!<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifzKBDiobcgHRZCRjJby-XSKhhn8AAXF08GOgWlIlUN21kG94bauRBrkbhzLC3vpsOn59PWgwvsFhVUGibC7fbJRQj9iUGkm6hqAk0FYq8PghT5-5oz0EEG2xa0wcbakf8XumNSyCElqcM/s1600-h/Torque+Arm.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifzKBDiobcgHRZCRjJby-XSKhhn8AAXF08GOgWlIlUN21kG94bauRBrkbhzLC3vpsOn59PWgwvsFhVUGibC7fbJRQj9iUGkm6hqAk0FYq8PghT5-5oz0EEG2xa0wcbakf8XumNSyCElqcM/s320/Torque+Arm.jpg" alt="" id="BLOGGER_PHOTO_ID_5317987961895968754" border="0" /></a><br />I didn't have the facility to fabricate anything beefy enough so I ended up Googling around and found some made specifically for e-bikes made by <a href="http://ampedbikes.com/"><span class="blsp-spelling-error" id="SPELLING_ERROR_11">AmpedBikes</span></a>. Just to be safe I bought a pair and put one on each side.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhu2zXcFwQCLvwFwBaSNI-mBR9b7QhB93SGjZ8sMeZE97eZwd8_BJLqzcgFvQaJ0jYxo0kFmFbjBj2jrD6aLZ9jCg3HdW5PZXxcs6TC8WM18Rs897zEPhqUPeMyDBArhvBjaRBmmZvlURJc/s1600-h/Hub+Motor.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 213px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhu2zXcFwQCLvwFwBaSNI-mBR9b7QhB93SGjZ8sMeZE97eZwd8_BJLqzcgFvQaJ0jYxo0kFmFbjBj2jrD6aLZ9jCg3HdW5PZXxcs6TC8WM18Rs897zEPhqUPeMyDBArhvBjaRBmmZvlURJc/s320/Hub+Motor.jpg" alt="" id="BLOGGER_PHOTO_ID_5316914763550237490" border="0" /></a><br />Finished, finally--or so I thought.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhcCOWWeXCUHBD33UnUOIC3WFzaZgNFR5R6vVd1nC3JGsfo786-KSWa1-Wum3q_RWP9b03Wpt0DkN4MKrabDDxlwOi9FOzwUozuaVhXxP9-zsrErOtqH7vl1xDxaWkZOy2n5ZPTihWFmDAD/s1600-h/Full+View.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhcCOWWeXCUHBD33UnUOIC3WFzaZgNFR5R6vVd1nC3JGsfo786-KSWa1-Wum3q_RWP9b03Wpt0DkN4MKrabDDxlwOi9FOzwUozuaVhXxP9-zsrErOtqH7vl1xDxaWkZOy2n5ZPTihWFmDAD/s320/Full+View.jpg" alt="" id="BLOGGER_PHOTO_ID_5317989959289097602" border="0" /></a><br />The spinning front wheel was annoying so I put on my extra large <a href="http://waldsports.com/">Wald</a> front basket. I was planning on using the removable battery feature for bus rides but technically, you're not supposed to mount a bicycle with an "<span class="blsp-spelling-corrected" id="SPELLING_ERROR_12">over sized</span>" basket on a bus bike rack. However, as it turned out I got to work much faster without having to use the bus so it didn't make a difference. Besides, I now had a cargo bike capable of carrying three bags of groceries--and then some with the panniers on the trunk bag <span class="blsp-spelling-corrected" id="SPELLING_ERROR_13">deployed</span>.<br /><br />I did take the bike on the metro rail system regularly for the ride home--no need to remove the battery for that.<br /><br />The <span class="blsp-spelling-corrected" id="SPELLING_ERROR_14">cruising</span> speed on the flats was a rather quick 22 miles per hour. Yeah, I know, that doesn't sound like much but believe me, on a bicycle without any suspension it is plenty fast. Even the hill that had me huffing and puffing before the conversion was an easy 18 MPH on the uphill side and coasting downhill, geared motor so no drag, was the same scary 35 MPH. I burned out a few brake pads on that route!<br /><br />One thing that was a problem was plugging in the battery, the connector would always arc. If the pins were not lined up properly it could make a rather loud pop. Of course this wasn't very good on the connector so I tried this trick:<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiogVx5e2YpvBTL8JEl3yzFU72r7lT86wqTD_k8GERrAx2AU8WInsb6Pz7vAziMMvo8I7_sLCIVYg8l09IV3PVKtMGOfOPaVuQZEsoLJ0YeUVsv_KOEbJa_g_tasVjG9QEzlbX26fV-Dix0/s1600-h/nospark1.gif"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 82px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiogVx5e2YpvBTL8JEl3yzFU72r7lT86wqTD_k8GERrAx2AU8WInsb6Pz7vAziMMvo8I7_sLCIVYg8l09IV3PVKtMGOfOPaVuQZEsoLJ0YeUVsv_KOEbJa_g_tasVjG9QEzlbX26fV-Dix0/s320/nospark1.gif" alt="" id="BLOGGER_PHOTO_ID_5317995590701293634" border="0" /></a>I used <span class="blsp-spelling-error" id="SPELLING_ERROR_15">XLR</span> instead of Deans connectors and it seemed like it would work.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheCZhEh68-e8WSdlc3PIqqxOIPkBKPlb8M2yqC_I1Lr92UPx6dUjYU9LsWjOlzXFoS8glTEWkAusf36miEqLGYcMnZmiu5Z5QbBWV9JVSVrOQAxnHp5T8qkzOyuyhh4lqHVdhLU_88tYnF/s1600-h/anti-arc.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 320px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheCZhEh68-e8WSdlc3PIqqxOIPkBKPlb8M2yqC_I1Lr92UPx6dUjYU9LsWjOlzXFoS8glTEWkAusf36miEqLGYcMnZmiu5Z5QbBWV9JVSVrOQAxnHp5T8qkzOyuyhh4lqHVdhLU_88tYnF/s320/anti-arc.jpg" alt="" id="BLOGGER_PHOTO_ID_5317996032568167538" border="0" /></a><br />But it didn't stop the arcing so I removed it. I think a better solution would be to put a heavy duty switch on the power line but I got used to the spark when connecting the battery, though it did blacken the pins on the <span class="blsp-spelling-error" id="SPELLING_ERROR_16">XLR</span> connector it didn't seem to affect performance.<br /><br />I rode the bike daily for a little over a month through wind, cold and even rain over the brutal Los Angeles winter--OK, it wasn't all that brutal but I rode the bike when my bike riding co-workers wimped out.<br /><br />There were a few problems, like the time I got off work late and I was in a hurry to get home so I decided to ride over the hill instead of take the train. There's several miles of rough road without street lights and I hit a huge pot hole at full speed. I usually don't get flats but with the extra weight of the battery my rear tire didn't stand a chance. My wife came to the rescue so I wouldn't have to do a repair job on a dark road in the rain--glad we kept one car, and the bicycle carrier!<br /><br />The only other problem that I had was when the brake levers got wet they would short out. It wasn't all that bad, just a quick brake and release would shake them dry enough to continue. That problem went away after one day without rain.<br /><br />All stories have an ending and this one ended one morning going into work. After crossing the <span class="blsp-spelling-error" id="SPELLING_ERROR_17">Cahuenga</span> Pass the motor lost most of it's power and it was feeling very rough. Did I wear out the gears? Did the motor burn out? I'm not really sure. It might be repairable but the quick fix would be to replace the motor--or get a <span class="blsp-spelling-error" id="SPELLING_ERROR_18">Vespa</span>. Since it was my dream all along to get a <span class="blsp-spelling-error" id="SPELLING_ERROR_19">Vespa</span> and the e-bike was just an experiment I decided to end the experiment and put the bike up for sale.<br /><br />The motor might be shot, the bike abused but the battery is in even better shape than when I bought it. Turns out that <span class="blsp-spelling-error" id="SPELLING_ERROR_20">LiFePO</span>4 batteries need a break in period of about a month before they can stand a deep discharge without damaging the cells. How far will the bike go on a charge? Only the next owner will be able to answer that question.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-47823421639606935922009-02-27T14:50:00.001-08:002009-02-27T16:54:58.909-08:00Making Animated MoviesAlthough I have signed a non-disclosure agreement with DreamWorks Animation, I think it is OK to post this clip showing how animated movies are made.<br /><br /><br /><p align="center"><iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.blogger.com/video.g?token=AD6v5dz6Y1QKi4YNeMBftkb63toA7nL436y1cBlbtFdNkcleElErmf62QIgU3TRHFyl7Jsj9krrKOoUokxd42db9ag' class='b-hbp-video b-uploaded' frameborder='0'></iframe></p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-51444009826958126832008-12-30T22:07:00.000-08:002009-01-03T21:30:22.494-08:00One Gear, No Coasting<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgwx6MpCHw13-SoZHDT1lyKcbEzx-u92xwXxEKhX-VHhfb-yQeSKDOK2cU9biHIrsTmm2T9_Th53sunWGkjp6gzHrI_YEFWHpd8lBStv4_iImAA4CHi3jY5dZgmAwzGGPFFreioyb4Nc7IG/s1600-h/DSC_0087.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5285833053397236770" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgwx6MpCHw13-SoZHDT1lyKcbEzx-u92xwXxEKhX-VHhfb-yQeSKDOK2cU9biHIrsTmm2T9_Th53sunWGkjp6gzHrI_YEFWHpd8lBStv4_iImAA4CHi3jY5dZgmAwzGGPFFreioyb4Nc7IG/s320/DSC_0087.jpg" style="cursor: hand; cursor: pointer; display: block; height: 213px; margin: 0px auto 10px; text-align: center; width: 320px;" /></a>I'm finally getting the hang of bicycle commuting around Los Angeles and the solution was to get an old bike and "fix" it. This particular bicycle was a high school graduation for my little brother, nearly 30 years ago. He was cleaning out his apartment and when he decided to get rid of it I snapped it up.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1bNnfql0pXjc4esvmKpF9y_AL6jXA-03imtHfZyv2hu4KjJWrPTW7lL4yg3mIqDAwv_HoNRrn4WA-Kos-lD9Izu_nMkTprmPr7gTcJDJcKkU4OA_EG1Mp0NRMYXbMvyUbQTLzQg0V9BOH/s1600-h/before_fixie_conversion.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1bNnfql0pXjc4esvmKpF9y_AL6jXA-03imtHfZyv2hu4KjJWrPTW7lL4yg3mIqDAwv_HoNRrn4WA-Kos-lD9Izu_nMkTprmPr7gTcJDJcKkU4OA_EG1Mp0NRMYXbMvyUbQTLzQg0V9BOH/s320/before_fixie_conversion.jpg" /></a></div><div class="separator" style="clear: both; text-align: center;">Former life as a 10 speed.</div><br />
The next part of this project was to clean it up and "fix" it. It wasn't really broken, it's just that the current trend in city bicycles is fixed gear, aka fixie. A fixed gear bicycle as defined on <a href="http://en.wikipedia.org/wiki/Fixed-gear_bicycle">Wikipedia</a> is:<br />
<blockquote><span style="font-family: '-webkit-sans-serif'; font-size: 13px; line-height: 19px;">A <b>fixed-gear bicycle</b> or <b>fixed wheel bicycle</b>, is a <a href="http://en.wikipedia.org/wiki/Bicycle" style="-webkit-background-clip: initial; -webkit-background-origin: initial; background-attachment: initial; background-color: initial; background-image: none; background-position: initial initial; background-repeat: initial; color: #002bb8; text-decoration: none;" title="Bicycle">bicycle</a> without the ability to coast. The <a href="http://en.wikipedia.org/wiki/Sprocket" style="-webkit-background-clip: initial; -webkit-background-origin: initial; background-attachment: initial; background-color: initial; background-image: none; background-position: initial initial; background-repeat: initial; color: #002bb8; text-decoration: none;" title="Sprocket">sprocket</a> is screwed directly on to the hub and there is no freewheel mechanism. A reverse-thread <a href="http://en.wikipedia.org/wiki/Lockring" style="-webkit-background-clip: initial; -webkit-background-origin: initial; background-attachment: initial; background-color: initial; background-image: none; background-position: initial initial; background-repeat: initial; color: #002bb8; text-decoration: none;" title="Lockring">lockring</a> is usually fitted to prevent the sprocket from unscrewing.<sup class="reference" id="cite_ref-Circle_0-0" style="line-height: 1em;"><a href="http://en.wikipedia.org/wiki/Fixed-gear_bicycle#cite_note-Circle-0" style="-webkit-background-clip: initial; -webkit-background-origin: initial; background-attachment: initial; background-color: initial; background-image: none; background-position: initial initial; background-repeat: initial; color: #002bb8; text-decoration: none; white-space: nowrap;" title="">[1]</a></sup> Whenever the rear wheel is turning, the pedals turn in the same direction.<sup class="reference" id="cite_ref-1" style="line-height: 1em;"><a href="http://en.wikipedia.org/wiki/Fixed-gear_bicycle#cite_note-1" style="-webkit-background-clip: initial; -webkit-background-origin: initial; background-attachment: initial; background-color: initial; background-image: none; background-position: initial initial; background-repeat: initial; color: #002bb8; text-decoration: none; white-space: nowrap;" title="">[2]</a></sup> By resisting the rotation of the pedals, a rider can slow the bike to a stop, without the aid of a <a href="http://en.wikipedia.org/wiki/Bicycle_brake_systems" style="-webkit-background-clip: initial; -webkit-background-origin: initial; background-attachment: initial; background-color: initial; background-image: none; background-position: initial initial; background-repeat: initial; color: #5a3696; text-decoration: none;" title="Bicycle brake systems">brake</a>.<sup class="reference" id="cite_ref-Circle_0-1" style="line-height: 1em;"><a href="http://en.wikipedia.org/wiki/Fixed-gear_bicycle#cite_note-Circle-0" style="-webkit-background-clip: initial; -webkit-background-origin: initial; background-attachment: initial; background-color: initial; background-image: none; background-position: initial initial; background-repeat: initial; color: #002bb8; text-decoration: none; white-space: nowrap;" title="">[1]</a></sup> A fixed gear bicycle can even be ridden in reverse.</span></blockquote> At first this may seem like handicapping the bike, going from 10 gears to one, but riding a fixie is a whole different experience. Maintaining a fixed gear is ultra simple because there are no derailleurs to oil and adjust.<br />
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Many fixies have just one front brake or even no brakes at all, applying back pressure on the pedals is all you really need. However, it takes quite a bit of well developed leg strength to make an emergency stop so I opted to keep both front and rear brakes and I'm glad I did, especially going down hills. Remember, there's no coasting so the faster you go, the faster you need to pedal and if your feet slip out of the clips--you're in deep trouble!<br />
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My biggest surprise riding a fixed gear was going uphill. You'd think that it would be a weak point but my bike is geared fairly low, 39 tooth chain ring and 16 tooth cog, so that combined with the absence of extra gears, cables and levers makes for a very lightweight climbing machine.<br />
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Perhaps the popularity of fixed gear bicycles is an anti hi-tech statement, maybe it is just a fad. It isn't for everyone. I wasn't sure it was for me but since I had a perfect bike to experiment with and lots of inspiration from the posts on <a href="http://fixedgeargallery.com/">fixedgeargallery.com</a> I thought I'd give it a try. As it turned out, it fits perfectly on an MTA bus rack, is easy to carry up and down stairs at the train station and I've been able to conquer every hill I attempted. In fact for the past several months, this bike has been my primary means of transportation to and from work.<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHEc1OL4OnbvAOX-6wlHa5EPYYbfFKjBRvd5S-luuC2KbyYLxQQRRbWEFGURLAcp2hfufiaUlMF0uXVSJnJhiLxHm6Rg6Ct7yIG6pRyiljX5qKGIZpKigdqZhZA7PePLk_tnP0IyCfjfAs/s1600-h/after_fixie_conversion.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHEc1OL4OnbvAOX-6wlHa5EPYYbfFKjBRvd5S-luuC2KbyYLxQQRRbWEFGURLAcp2hfufiaUlMF0uXVSJnJhiLxHm6Rg6Ct7yIG6pRyiljX5qKGIZpKigdqZhZA7PePLk_tnP0IyCfjfAs/s320/after_fixie_conversion.jpg" /></a></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-65503730135373202192008-11-19T16:37:00.000-08:002009-01-03T12:53:19.271-08:00Optimum Health Institute<div class="separator" style="clear: both; text-align: center;"></div>Time out. I had a break from my job but I wanted to find a way to have a much longer break, an early retirement. We were thinking about making this life changing move but first we had to clean out the clutter that was holding us back. Like many homeowners our clutter seemed to be concentrated in the garage. Great, our plan was to remodel the garage so we could either rent it out or move into it ourselves and rent out the house. Of course what was taking up all the space in the garage was just the physical clutter, there was also the mental clutter that was not visible but real nonetheless. It seemed like an insurmountable task but we had an ace in the hole, a trump card, an upper hand--we had just taken our health to a new high, an optimum high, we had just returned from a week at the <a href="http://www.optimumhealth.org/">Optimum Health Institute</a> (O.H.I.).<br />
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We visited the institute a few years ago and had friends that have gone there. My wife, Rosie, went there for a week with a friend while I was on an extended job and she had a wonderful experience. Many of the visitors go there when an illness, or excuse me, a health opportunity, has eluded traditional medicine. Still others go as a cleansing ritual. My reasoning was that if we could learn a few new things about ourselves and push the limits of what we would do to optimize our health, it would be worth the $1,000 apiece for the week. Of course coming back with the energy to clear out the garage would be ideal.<br />
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<a href="http://www.optimumhealth.org/">Optimum Health Institute</a> is <span style="font-size: small;">a </span><span style="font-family: 'Gill Sans Light'; font-size: small;">healing ministry of the Free Sacred Trinity Church. I'm not much into faith based organizations but people that have gone through the program there assured me that it wasn't a "religious experience" at all. In fact on several occasions the instructors/missionaries emphasized that you go with whatever you're comfortable with be it a belief in God, karma, Chakras but just come to class with an open mind.</span><br />
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<span style="font-family: 'Gill Sans Light';">About half of the classes and activities are mental, somewhat new age, meditation, self-reflecting and even group psychotherapy. The other half is very much physical. There are exercise classes every morning and afternoon. In addition, there's a popular daily yoga/stretching class. </span><br />
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However, what seems to be the main focus of O.H.I. is wheat grass.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgl7-nrMIzkz58yBM7-GGA21C_7GMG9TLKc46YNXsndb4iD0Mox43_Zt-zAj7dt5Fd7UJPUmVcEdbC_SymJoa0t-lJMynO9Ef7Cr7yM5j7ExEuH9PLiFaUNOn18L1x5KPFd_nXmgSLnxtag/s1600-h/The+Real+Thing.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgl7-nrMIzkz58yBM7-GGA21C_7GMG9TLKc46YNXsndb4iD0Mox43_Zt-zAj7dt5Fd7UJPUmVcEdbC_SymJoa0t-lJMynO9Ef7Cr7yM5j7ExEuH9PLiFaUNOn18L1x5KPFd_nXmgSLnxtag/s320/The+Real+Thing.jpg" /></a> </div><div class="separator" style="clear: both; text-align: left;">So what do you do with wheat grass? To start with, you juice it and I mean <span style="font-style: italic; font-weight: bold;">you </span>juice it, nobody does it for you. Once it is juiced it is only good for a few minutes, maybe an hour at the most.</div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiidBqfZrMdxtSHjhzk4IvLeo-uN3ZjqaiSPmp1G6BtWFG6lCxmCvwxM8jDv7rfhh0VrpQsCHCg0wrFlui69uQDGEcYYXfHY1-lIvIGG1w9T-SsZNIrmd7MSRJ0ylOpZSR_9lghOFs5y6IB/s1600-h/Juicing+Wheatgrass.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiidBqfZrMdxtSHjhzk4IvLeo-uN3ZjqaiSPmp1G6BtWFG6lCxmCvwxM8jDv7rfhh0VrpQsCHCg0wrFlui69uQDGEcYYXfHY1-lIvIGG1w9T-SsZNIrmd7MSRJ0ylOpZSR_9lghOFs5y6IB/s320/Juicing+Wheatgrass.jpg" /></a> </div><div class="separator" style="clear: both; text-align: left;">O.H.I. is one of the largest consumers of wheat grass in the nation. They have to grow it from seeds and harvest it just before juicing. In addition, since the highest quality juice comes from young grass cut only once. Their crop never matures enough to seed.</div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF6GwU77z3ijXm5Mume_Se1pBxGpATNEOYfVfsxqjNXrbjWdfv3fyVeT9Cqlh9TR02FlPOSJO1ZXW7zhsGDRQVH6VmTxC9XcDYrKpL_Jh3NJy07fsaqxWk0van8wqiwvFyMrJbhPw6-5OI/s1600-h/Wheatgrass+Factory.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF6GwU77z3ijXm5Mume_Se1pBxGpATNEOYfVfsxqjNXrbjWdfv3fyVeT9Cqlh9TR02FlPOSJO1ZXW7zhsGDRQVH6VmTxC9XcDYrKpL_Jh3NJy07fsaqxWk0van8wqiwvFyMrJbhPw6-5OI/s320/Wheatgrass+Factory.jpg" /></a> </div><div class="separator" style="clear: both; text-align: left;">So how did it taste? Well, like grass. If you swallow it quickly it burns your throat, much like a shot of tequila. I found the best way to drink it was to swish it around my mouth with saliva to take the "edge" off and after a while it actually tasted slightly sweet. Some people never got the hang of it. Rosie could take it at first but as the "detox" started taking affect she couldn't stand the smell of wheat grass and I had to do the juicing for her.</div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: left;">Besides drinking the juice the staff suggested putting the wet pulp on the skin in areas that need healing. I saw people taping wheat grass pulp on dried, cracked skin and heard stories of how a "pulps bra" cured some womens' breast cancer.</div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: left;">Drinking and wearing wheat grass was only a part of the wheat grass regimen it goes deeper, much deeper. Don't forget your E's and I's is a mantra at O.H.I. which stands for enemas and implants. Enemas clean out the toxins in the colon and what they mean by an implant is once your colon is flushed out with water, pour in about four ounces of wheat grass juice into the enema bucket and, yep, suck it in. If you thought holding down a few ounces of wheat grass by mouth is a challenge, wait until you try it in the other end. They suggest holding it for about 15 minutes, good luck. Of course an amateur E and I isn't nearly as effective as a professional one and there are several well equipped colon hydro therapists on the O.H.I. grounds. Of course each session will set you back a few bucks. When we were there the going rate was about $80.</div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: left;">Another focus of the program is "live foods" meaning raw, uncooked, unprocessed and preferably, organic. It can be as simple as either a slice of watermelon or some oranges for breakfast but notice the either/or and not both at the same time. According to the O.H.I. diet, melons should be eaten alone, acid fruits and vegetables shouldn't be combined with alkali veggies and--well, there's a whole class with handouts and charts that cover the proper way to combine food for optimum digestion.</div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgs03M6CrGoHhkU7r-cGqf9L3V0a4te2c21WoHXORcnY4aW5Qr9Vvp3H6q8AociQxQR1MlnRfrJoE3mxWvpLtQTjlZQoi3_XWT6z5K28W7IfjoSPoK2MERrO-MLwqNgDNzLIp95il75uPm0/s1600-h/Typical+Breakfast.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgs03M6CrGoHhkU7r-cGqf9L3V0a4te2c21WoHXORcnY4aW5Qr9Vvp3H6q8AociQxQR1MlnRfrJoE3mxWvpLtQTjlZQoi3_XWT6z5K28W7IfjoSPoK2MERrO-MLwqNgDNzLIp95il75uPm0/s320/Typical+Breakfast.jpg" /></a> </div><div class="separator" style="clear: both; text-align: left;">That's not to say that the food is boring, in fact it is very tasty. However, since many people are there with a rather weighty "health opportunity" the servings are somewhat on the small side. Well, there's the three days of juice fasting in the first week of instruction and once that's over, the food not only taste great but the portions are filling.</div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: left;">What about that cracker in my lunch? It is actually sprouted unlevated whole grain bread prepared in a dehydrater that never goes above the magical 150 degrees farenheit which kills the active enzymes and thus turning "live" food into a "dead" meal.</div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgX5S-Yg5H6vbpblUoXB6VQ7T-Tbk8gc-XM3kK_ZSt-MrQj7nKZ4p88i7fXREBtfPH3Iq1YYoav_7AmbwG6GGgL-UraWsPMeFOnkoKaPPjsGOC6jgLCYn6CCWDVDTpuu-jjvZvHst_gUcAJ/s1600-h/Dinner.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgX5S-Yg5H6vbpblUoXB6VQ7T-Tbk8gc-XM3kK_ZSt-MrQj7nKZ4p88i7fXREBtfPH3Iq1YYoav_7AmbwG6GGgL-UraWsPMeFOnkoKaPPjsGOC6jgLCYn6CCWDVDTpuu-jjvZvHst_gUcAJ/s320/Dinner.jpg" /></a> </div><div class="separator" style="clear: both; text-align: left;">How do you know you're getting the highest quality food? Grow it yourself. On the O.H.I. grounds there's an organic garden where they harvest fresh veggies, salad greens and herbs. They don't have enough space to be self-sufficient, but it does serve as a laboratory for teaching small scale organic farming.</div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNATvIWHPkmkAfPGl-6_S9gEuruhB2hsNfgnI5K1dWkW4FQbievmok-MB3gyVmhTTQM90d4f5FDjstXuM4huuv1Yb2H8GMnoBlGOC5bH8It4unXN_uEBh-K6G2xkblAqKKLZOo-FyjuCdP/s1600-h/Organic+Garden.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNATvIWHPkmkAfPGl-6_S9gEuruhB2hsNfgnI5K1dWkW4FQbievmok-MB3gyVmhTTQM90d4f5FDjstXuM4huuv1Yb2H8GMnoBlGOC5bH8It4unXN_uEBh-K6G2xkblAqKKLZOo-FyjuCdP/s320/Organic+Garden.jpg" /></a></div><div class="separator" style="clear: both; text-align: left;">There's Rosie, short red hair, in compost class.</div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiapRuLHHQ5rQ6Pf5iajjgy4A6rCzWsteCTJ8R3VolD6t7Mb3ZYdp_rh98_LPaBL8cOJYbTtcbh8uhkOFs-cjyGznKb4brOvaXLkyBAcSENttPZEUCK7De8km6QEisX9duiylSgPe1I3QLK/s1600-h/Compost+Class.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiapRuLHHQ5rQ6Pf5iajjgy4A6rCzWsteCTJ8R3VolD6t7Mb3ZYdp_rh98_LPaBL8cOJYbTtcbh8uhkOFs-cjyGznKb4brOvaXLkyBAcSENttPZEUCK7De8km6QEisX9duiylSgPe1I3QLK/s320/Compost+Class.jpg" /></a> </div><div class="separator" style="clear: both; text-align: left;">There's also some surprises at O.H.I. like George's Nature Walk. George is one of the missionaries there who likes to forage for food. The walk is done entirely on the grounds and he points out what at first looks like weeds growing in the flower beds and around the organic garden. In fact, many wild native plants are not only edible, they are tasty and nutritious.</div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQ7As9FTCCeRf4oiyEk_iQEjN0NFwsgMS2sTbb7L-Dg-mlA1dhEy3qKv3sDy8yD3idK38FygfCiHLdsqk524pgAzHqM9WacEe8wZwS4SLFvIqUIZlmB0ExxG-xvrWif8nYprsw6DZSwICx/s1600-h/Hunting+Class.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQ7As9FTCCeRf4oiyEk_iQEjN0NFwsgMS2sTbb7L-Dg-mlA1dhEy3qKv3sDy8yD3idK38FygfCiHLdsqk524pgAzHqM9WacEe8wZwS4SLFvIqUIZlmB0ExxG-xvrWif8nYprsw6DZSwICx/s320/Hunting+Class.jpg" /></a> </div><div class="separator" style="clear: both; text-align: left;">What if you don't have the time or space for a garden? Then sprouting class is for you. All you need is a tray of dirt, some seeds and water and in just a couple of weeks:</div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0bjsqxrV9FRo-IjT66XTjgsYXWEuHmzdhDnKmNQYtjfW8gbu0jZkUXx2Gyfa5-FeNMe00ts383rKSxMjDO8_Orak3GdZYr36SQBs8_iqw4-dlSTWwsPhwAc2mB60K2PCygDfFO9uPac0k/s1600-h/Sprout+Class.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0bjsqxrV9FRo-IjT66XTjgsYXWEuHmzdhDnKmNQYtjfW8gbu0jZkUXx2Gyfa5-FeNMe00ts383rKSxMjDO8_Orak3GdZYr36SQBs8_iqw4-dlSTWwsPhwAc2mB60K2PCygDfFO9uPac0k/s320/Sprout+Class.jpg" /></a> </div><div class="separator" style="clear: both; text-align: center;">Home grown sprouts.</div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJTud4GmSJfs-JOP3wkhpsoHHsUY9tNOOeFG13Bkg97jT520GdlNN64zmhsm-wgrCWQvENIf0Cd4X-O7GhNskuK_0Em8gjvt8Vo4m7N29k6Z1bS-B-8CKbaKTLNjZVdqO-zOhQJDJGJ-GZ/s1600-h/Sprout+Bounty.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJTud4GmSJfs-JOP3wkhpsoHHsUY9tNOOeFG13Bkg97jT520GdlNN64zmhsm-wgrCWQvENIf0Cd4X-O7GhNskuK_0Em8gjvt8Vo4m7N29k6Z1bS-B-8CKbaKTLNjZVdqO-zOhQJDJGJ-GZ/s320/Sprout+Bounty.jpg" /></a></div><div class="separator" style="clear: both; text-align: left;">Alright, I know that I've mostly dealt with the diet portion of the O.H.I. experience and that's only half of the program. There's the affirmations, sharing, harmonizing with various chakras colors and tones and well, there's plenty of left and right brained activities to get wrapped up in. I had my share of doubts at the start but by the end of the week we both felt great, both physically and mentally. </div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: left;">The middle of the week was another story. For three days all we consumed was water, wheat grass juice, watermelon juice and green juices. Oh yeah, and a concoction called rejuvelac made from soaking rye or wheat berries in water until it ferments. With all the cleansing going on rejuvelac acts as a probiotic, building up some beneficial bacteria in the gut.</div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: left;">Some people couldn't make it through the juice fast. Some crashed. Then again there were the ones who drove into town for some tacos--like Rosie and a friend she made on this visit.</div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: left;"></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-91761578820425676922008-11-06T14:14:00.000-08:002009-03-27T06:38:24.096-07:00Something to blog aboutI'm back working full-time at DreamWorks Animation and my free time has been reduced to next to nothing. However, a timely item came up and I wanted to blog it.<br /><br />There was a "health fair" at work last week. One of the most popular tables at the fair was the cholesterol checking station and I waited in line nearly half an hour before getting my finger pricked and blood checked. Of course it was a just a quickie test that didn't measure HDL and LDL but what was very satisfying was that the result came back as "Lo" which the nurse interpreted as under 150 total cholesterol.<br /><br />Wow, and I did it without drugs. Just for comparison:<br /><pre> January June August October<br />Total Cholesterol 289 215 183 >150</pre>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-44612265966203833192008-10-21T17:24:00.000-07:002008-11-09T10:25:02.391-08:00What the Blog?There are lots of blogs out there, active, dead, interesting, dull, profit motivated, just for fun, you name it, there's something for just about everyone. The way this blog started was, to use a tired cliche, the horse followed the cart. I built a Linux server to learn something about computers, I used it to handle all of our email services then I found it was also useful to backup the other computers in our home, keep documents on an ftp site, start experimenting with web pages and finally check out some blogging programs. Having a blog with nothing to write about is pretty useless so I started using it as a personal training log when I decided to racewalk the 2006 Los Angeles Marathon. I posted not only my daily training walks but also started posting some research whenever I injured myself. Eventually my posts started going in all sorts of different directions. At times I would post several articles and sometimes, like now, I keep to myself. However, things have been quite active around this household and it is about time that some of our experience gets documented.<div><br /></div><div>The other day I made a list of some things that should get blogged on this site:</div><div><ul><li>O.H.I. - Rosie and I went to Optimum Health Institute for a week. We only ate "live" food, we fasted for three days, we meditated, we juiced wheat grass, we put wheat grass juice up where the sun don't shine...</li><li>Neti Pot - About two years ago I listened to a broadcast on public radio about the benefits of nasal irrigation. It turned out that the Yogis in India have been doing it for years using a simple vessel called a Neti Pot. Since I started using a Neti Pot I have been sick only once for a few days while my colleagues at work were out of it for several weeks...</li><li>Fixed-Gear - Bicycles are back in style and at the top of the bike culture is the simplest of all, the fixed-gear. You don't need a high priced high-tech, carbon fiber, computer designed frame, that old abandoned rusty steel bike will do just fine. In fact, you're not in style unless you rescued your bike from the dumpster. When my brother was getting rid of the bike my father and I gave him when he graduated from high school 30 years ago, I snapped it up and turned it into a fixie...</li><li>E-Bike - I'm becoming a hardcore bicycle commuter but when it gets late, the weather isn't cooperating, or if I'm tired and need a little help, an electric assist is welcome. I did some research and bought the parts to convert my old reliable commuter bike into something more than just a motorized bicycle or moped, at least by California law...</li><li>Riding the Bus in L.A. - There are buses all over Los Angeles, but trying to get from point A to point B isn't all that easy. My brother has been riding the bus for years but I'm a newcomer thanks to a program at work that issues bus passes to anyone that asks for one...</li><li>Downsizing - We own a house that has a detached two story garage. No, you can't park on the second story, in fact we never put a car in our garage. The upstairs was the previous owner's design studio which we turned into a comfortable apartment. What was missing was a kitchen and a living room. We decided to remodel with the intention of moving into the garage and rent out our house. That meant turning a huge storage space into a living space. Basically we have to downsize from our house to an apartment, even though that apartment happens to be a few steps away...</li><li>Home Server to Google - I've been a computer junkie for years but when it came time to decide what to get rid of when we started downsizing it was a no brain er, everything but our laptops had to go. Since we switched to Google we've enjoyed great up time and have most of our data and applications online and available to us anywhere in the world on any computer with a connection to the Internet and a browser...</li><li>Motorcycle School - Once we decided to become a one-car family I decided that it wouldn't hurt to keep my transportation options open. Then again it might be that I've always wanted my own Vespa...</li><li>Alternate Car Expo - This year I made it to the Alternate Car Expo in Santa Monica. Surprisingly, electric motor scooters and bicycles were included in this year's exhibits...</li><li>Toxic Jobs - My father worked most of his life and had a relatively short retirement. Maybe we should think about working less and playing longer. Part of my financial plan is to at least semi-retire at 55, that's just a little over a year away...</li><li>Walking - Last Sunday I volunteered to videotape a racewalking event where competitors walked around the track at Cal Tech for an hour then went to an after race party where the major attraction was to watch the video of themselves walking around a track for an hour. It might sound crazy but walking is the most accessible of exercises yet most people don't know how to get the most benefit out of walking...</li></ul><div>Hopefully other people will find these articles as interesting as I do. After all, if a blog falls in the Forest and nobody hears it...</div></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-34201501547201496742008-09-02T13:15:00.000-07:002008-09-02T14:50:01.486-07:00The Human Race<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNqti6Lj_j5f3Q8eLfXuliybvGiGw9PQJw2WZDZ1wOi2fTiRhMh4E3lC9YePlkI0hOBIVsMqAKKqQkcyuFlC63ZXYvNSNJnPkDv36WWJP0piiHHY2lepo-ILNbiYoT5zKOkHbIsempAlcm/s1600-h/Rosie_Dan_Nike_Human_Race.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-69_ZJ2Op_8TIT-vJK5Yw2vG_R47m69Z7WbZ-z8R9ihJb4JWJwCMTQvzm6sGQyO1Czv3vNAY61sb9gBhZf_RAltZ-sTbVl33uVQaGrjOl1qeh_FqAGB7M2kGyzE5Cy_OMJN8-Rkj4NxjO/s400-r/Rosie_Dan_Nike_Human_Race.jpg" /></a></div><div class="separator" style="clear: both; text-align: left;"></div>On August 31, 2008 at 08:31:08pm the Human Race began at the Los Angeles Coliseum. This wasn't done by divine intervention but by a shoe company - Nike.<br /><br />A friend in Israel told me about this event, runners from all over the world would be participating in this, the largest 10k race in history. It was scheduled to be run on the same day in several major cities and if you couldn't get to a major city you could run on your own and post your results. It would be a way to join my friend in a race even though we live half a world away from each other.<br /><br />After I signed up my wife thought that we should do more activities together so she decided to join me. We planed to walk together and although we didn't do any training before the event, we went with the Nike motto: Just do it.<br /><br />We did it and lots of other people also walked it, though many of those were probably pooped out runners. We were happy just to be out there and complete the course. I'm so proud of Rosie for being such a good sport.<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhpOpLBGbdC2_2prYpB1Jg7lMl4Tiz8FmdU1n_9gjETNUhPQFIvqsQMCRqfd9coIHGaB38a-_O7q6Nfcvp4mCMOuIhIi4s0jSVlgXQOYd6ZpDgYRAehW6A5yDyTV4O0GAY3eHxXBiZ5F8-t/s1600-h/Rosie_Human_Race.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiW-m6s4SPDBWzdtijpFXBGwsqxfNSqt06ffR1s1rSBSWpjWxzCki6lVjPmkwW0yTX381k3lf_wHiaqkSbhCcMTb_wnQ2uT7k5obYHCsxx202CAAq6iqQIV1NrA8_wR2q39xiSBNwm5W_GF/s400-r/Rosie_Human_Race.png" /></a></div><div class="separator" style="text-align: left;clear: both; ">What really mattered here was doing something that is within our capability and have fun so we'd want to do it again. When I ran the L.A. Marathon in 1993 it took me 13 years before I forgot about the pain and to try it again. For most people running a marathon takes to much of a time, mental and physical commitiment. However, there usually lots of 5k and 10k "fun runs" that welcome walkers. Of course you've got to be in shape and the best way to prepare is to get at least 30 minutes of aerobic exercise, like walking or biking, three or more times per week.</div><div class="separator" style="text-align: left;clear: both; "><br /></div><div class="separator" style="text-align: left;clear: both; ">I know this sounds entirely unscientific and it won't put you on the winner's podium, but believe me you'll feel great and who knows, maybe your cholesterol level will fall and you'll drop a few pounds too.</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-26247628194255809632008-08-26T10:02:00.000-07:002008-09-02T14:57:21.178-07:00The Experiment ContinuesWe're doing some experimenting recently in an attempt at creating a healthy, financially independent lifestyle for ourselves.<br /><br />We moved our email, blog and web pages from the dedicated server I've been running in our garage to Google. We sold our 10-year old Mercedes and bought a newer used Prius. We're cleaning out the garage in and we'll be converting it to a rental unit. I'm riding my bicycle to work whenever possible. We switched to a low fat vegan diet.<br /><br />Whoa - what's that? Vegan?<br /><br />Being vegetarian isn't something new to me. I've been pretty much meat free for about 15 years. Of course it wasn't always easy. There's the peer pressure to deal with and just because you're a vegetarian doesn't mean that you're eating healthy. After all a veggie pizza is loaded with cheese and I know all too well what that can do to my cholesterol level.<br /><br />Call me a tree-hugging hippie, I don't care, I feel great and my blood test shows just how far I've come since cutting out cheese, and fish--after all aren't we supposed to eat salmon to get enough Omega-3? Not!<br /><br />Here's how it went so far this year.<br /><br /><span class="Apple-style-span" style="font-family: 'courier new';"> January June August</span><div><span class="Apple-style-span" style="font-family: 'courier new';">Total Cholesterol 289 215 183</span></div><div><span class="Apple-style-span" style="font-family: 'courier new';">LDL Cholesterol 214 121 115</span></div><div><span class="Apple-style-span" style="font-family: 'courier new';">HDL Cholesterol 48 56 42<br /></span><br />On January my cholesterol was sky high so I cut out the cheese, started eating more fish and began running every morning. On June 27 through 29 Rosie and I took a Celebrity Chef weekend seminar put on by Dr. John McDougall and decided to follow his low fat vegan recommendations. I also started riding my bicycle to work as much as possible for exercise.<br /><br />Oh, but not eating meat-that must really limit my food choices. Well, I thought I'd document my meals, just to prove that a low fat vegan diet doesn't have to be boring.<br /><br /><div style="text-align: center;"><span style="font-size:large;"><b style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">Breakfast</b></span></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVzK4IoxCbJ1CAlopfJZ0VNXD3Ebe2kgkSnXE3MQNwJDy5tqIb4qxXb7IFkzieQICeY2D81J_SDaPOZKm7_JlWqyFPu_1QdGZ2h4sRYX418CJa5-OHZBZnyIzpP44yBKIxxUCZNvZK1jQh/s1600-h/Breakfast_at_DreamWorks.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhOFqmKR9M2tsMeSEi3o8sa8aXKyD1OeNKiQ3n3p82pANZrWWbHa7qhyphenhyphenLAJzi8yFIx4PVlXv6htAJrIiFGfleLGoSvltf56TX0-8mOUIZuUBgfJSGHD1phNJLOhv3UJ5MemvbGTiVGHdMDJ/s320-r/Breakfast_at_DreamWorks.jpg" /></a> </div><div class="separator" style="clear: both; text-align: left;">Skipping the donuts, pastries, eggs and yogurt, I went for a bowl of oatmeal and a plate full of fruit at the studio commissary</div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: center;"><span style="font-size:large;"><b style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">Lunch</b></span></div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhz0jsV_jyncgkFzU1zAzUwQPKVjy-c1SWaVmq1OJx8XqCWl6JLWwh-iAHvm1P5Kp3t9qs_4nZSVdZRVF7wobprkHYTzcJ-2g8bYEJPlODQYthhvGwzoel9fsY68QNAYQH59_qjLepSCP-L/s1600-h/Lunch_at_DreamWorks.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhL0zDE-wpDVwDy5dQfU7KGeKJ-kLVkzJTXFrF_yJbMVKqsEt3nThN_cM1aNxlw-ZBFW3-2-4iC4JiQdEm86dy4B7iFQqeYZLxX4hug5KEN0WrVDbJ2qyf1FbUbq3pbcvpXxKN2VHgdAdwX/s320-r/Lunch_at_DreamWorks.jpg" /></a> </div><div class="separator" style="clear: both; text-align: left;">Cucumber salad with peppers and couscous, pasta salad, curried vegetables with brown rice and yet some more pasta. What can I say, I like pasta and as long as it isn't loaded up with Alfredo sauce or oily marinara or smothered with cheese, pasta isn't fattening.</div><div class="separator" style="clear: both; text-align: left;"></div><div class="separator" style="clear: both; text-align: center;"><span style="font-size:large;"><b style="font-family: "Helvetica Neue",Arial,Helvetica,sans-serif;">Dinner</b></span></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1R-9v81bByKbckR6BZcWqETUqYYa2fCbexqs3NBJLRxTWnd1OiJhZhk3KQupUkTArM1AvqXOSux4cRUSf6dlhZJh_tx754oQQ5povdWJ73HO1Tz60TGoy29ef63nU384QJQSJn_fcXidr/s1600-h/Dinner_at_DreamWorks.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9a_PoJ1vu3Z38Ea9CsU2c7tp9s2-zNf2olWuzGiJAe6FwDeLsje-uySNyd1lvisGaMlt1eLMhAVTFx_R2rEPvSlLeymgjzN5Hcu67Is9S99ovW88CydCXatwuyzi6M0yE0rZk6mMsVU0O/s320-r/Dinner_at_DreamWorks.jpg" /></a></div>Working in the movie industry isn't all that glamorous, I often have to work through dinner. This is the time when trying to pick something out of a "Restaurants on the Run" menu can get quite challenging. No pizza or chicken wings for me, here I went for lentil soup and white bean hummos with pita bread.<br /><br />You might notice that there aren't any drinks with my meals. Even though I do like a glass of red wine with dinner every once in a while I don't generally drink with my meals anymore. I heard that digestion is hampered by too much liquids, especially cold liquids and the usual cold soft drinks, especially sodas, does not do a body good. Oh and of course milk is out of the question. However, I do take in fluids during the day. I always ride my bicycle with a full bottle of water so that's a couple of liters per day just on my commute. In addition, I sip some herbal tea while working so my toal liquid intake is about 4 liters, about a gallon.<br /><br />What about snacks? Motion picture studios are notorious for having lots of junk food on the set but if you look hard enough there's also fruit. My favorite snack is a banana. Not banana chips or banana flavored jelly beans or choclolate covered bananas, just plain peel and eat bananas.<br /><br />So, the experiment continues. Up until now this blog has been just a personal exercise log and scrap book but we're turning a corner and expanding into other areas. In future posts we will be publishing articles about personal finance, healthy living and even some of our favorite recipies. Hopefully it will attract the interest of others looking to improve their health, wealth and life in general.</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-32016001473913064842008-08-09T17:05:00.000-07:002008-08-09T18:14:31.894-07:00Moving the BlogAfter years of running my own server I thought it was about time I downsized and simplified my digital lifestyle. As of today the Digiola Blog is moving from the computer in my garage to the Google servers located who knows where.<br /><br />I tried several tools for moving old posts from the garage server running Gentoo Linux and Wordpress to Google's Blogger. The one that worked for me was <a href="http://www.miian.com/en/blogsync/1.1e">BlogSync</a>.<br /><br />At this time Google has a limit of 50 posts per day and BlogSync is showing the posts in alphabetical order instead of chronological order so things will seem a bit wonky until all the posts are moved over.<br /><br />After moving the posts I'll have to move the photos, videos and other media before I can pull the plug on my server.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-54926617369222425442008-08-04T22:15:00.000-07:002008-08-12T14:44:47.943-07:00Almost Fell off the Bus<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgo7XL5VYjtADU99t843Jg8fz4QoLusfhbWfM6X6W0b_4IXS_sSHfpBI3wcSlvYzquJIUWvCECYG6t-2nML3-qM-b2UQHTryxzq7zf0LsPCXHSoQqmWmvVJgPSly8Cz6KIpq09yqAzlS7m4/s1600-h/bus_bike_rack-247x300.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgo7XL5VYjtADU99t843Jg8fz4QoLusfhbWfM6X6W0b_4IXS_sSHfpBI3wcSlvYzquJIUWvCECYG6t-2nML3-qM-b2UQHTryxzq7zf0LsPCXHSoQqmWmvVJgPSly8Cz6KIpq09yqAzlS7m4/s320/bus_bike_rack-247x300.jpg" alt="" id="BLOGGER_PHOTO_ID_5233728330187469810" border="0" /></a><br />In my quest to become a "green" commuter while staying out of the bicycle unfriendly roads in Los Angeles, I tried riding the bus with my bike today. It seemed like a good idea, ride the bike on the wide flat roads and get on the bus to go over the hill with the narrow roads. The buses here have racks that can carry a couple of bicycles. Well, I never used one of those things but how hard can it be?<br /><br />I timed my commute, just to see how it compared with mashing my way over the hill. First of all it took me a while to find the bus stop. I found one at the Warner Brother's Studio main gate, turned out that there was another bus stop closer to my usual route but I guess that I never noticed it even though I go past it every day. First leg, DreamWorks Animation in Glendale to Warner Brothers in Burbank, about 20 minutes. Next came the wait at the bus stop, there were a couple of kids there asking me when the bus is coming, (I didn't know but I figured that one should come by every 20 minutes or so) how much does it cost to ride, (didn't know that either, I got a bus pass from work) and how much for a taxi (no help there either)--they got tired of waiting and went off looking for another way to get to their destination. I guess I must have just missed a bus because I had to wait about 30 minutes until the 222 showed up. Getting the bike on the rack was no big deal, I just followed the instructions from the <a title="Bikes on Metro, A Rider's Guide" href="http://www.digiola.com/metro_bike_guide_eng.pdf" target="_blank">Bike Guide</a> I got from the <a title="L.A. Metro website" href="http://www.metro.net/" target="_blank">Metro website</a>. I flashed the pass at the driver and took a seat where I had a clear view out the front windshield so I could keep an eye on my bike. It started out fine but it seemed to sway back and forth a bit more and more each time the bus would brake and accelerate. About halfway into the ride the driver stopped the bus. He was quite visibly angry as he honked his horn and said, "Sir, you bike is about to fall off." I jumped out and sure enough the retaining bar that is supposed to secure the bike in place slipped off the back wheel and it was a miracle that my bike, didn't turn into road kill. I flipped it around and tried the bar on the front wheel and it looked like it would hold a bit better. So much for using the bus to keep from building up a sweat--I worked up more of a sweat than riding over the hill! Total time for the bus ride, 9 minutes. I got off on Cahuenga and Franklin and rode down Cahuenga to Melrose, which was a much better route than Highland with it's narrow traffic lanes and traffic that obeys no speed limits. Last leg, about 28 minutes.<br /><br />Total commuting time: 1 hour 27 minutes.<br /><br />That's about 20 minutes longer than biking over the hill and fighting L.A. traffic. Not great, but it's an option when I get off work after dark and want to improve my chances of living through the commute.<br /><br />All I've got to do to make this work is to figure out how to use those bus bike racks. I think the main problem was the big, heavy, steel, front basket on my bicycle. In fact the Rider's Guide states that:<br /><blockquote>Tandem bikes or bikes with motors, solid<br />wheels, large racks, child seats or other<br />attachments are not allowed.</blockquote><br />Oops. I guess I should either remove the basket or get another bicycle just for bus commuting. Hum, that bike my brother gave me could make a cool fixed gear conversion.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-64946200962546310002008-08-01T15:43:00.000-07:002008-08-12T14:00:00.129-07:00Sign of the Times?<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhn8ZaZQmBNdj1g1vqvdW3CHvSrJVQv2yApyfSD4xPruOUjk3GzJUg1TSAtWbvX1X8bXwpGBbZhUYWdYJ5N9Pw3ybl7eUnDTWJaQIxNx7VQj9LIyU4Dyf66o0XI3eoOLXfgzyYR8HJCvGfE/s1600-h/ecobike_vatavio.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhn8ZaZQmBNdj1g1vqvdW3CHvSrJVQv2yApyfSD4xPruOUjk3GzJUg1TSAtWbvX1X8bXwpGBbZhUYWdYJ5N9Pw3ybl7eUnDTWJaQIxNx7VQj9LIyU4Dyf66o0XI3eoOLXfgzyYR8HJCvGfE/s320/ecobike_vatavio.jpg" alt="" id="BLOGGER_PHOTO_ID_5233727410182362866" border="0" /></a><br /><br />I'm interested in all things somewhat off the mainstream, recumbent bicycles for instance. One of the best recumbent bike blogs, <a title="The Recumbent Blog" href="http://www.recumbentblog.com/" target="_blank">therecumbentblog</a>, recently closed down and the author went with a more "mainstream" bike blog, <a title="eco velo" href="http://www.ecovelo.info/" target="_blank">ecovelo</a>. Furthermore, long time make of long wheelbase recumbents, <a title="Easy Racers recumbent bicycles" href="http://www.easyracers.com/" target="_blank">easyracers</a>, has started distributing folding electric bicyles that they have built or designed.<br /><br />Of course it does make sense. I'm planning on combining the bus with the bicycle for my daily commute but there is only enough room for two bicycles on the bus bike rack. A folding bike would take care of the rack problem and the electric motor will be a blessing should I miss the bus and have to ride the bike all the way.<br /><br />Besides, the <a title="Ecobike Vatavio" href="http://ecobike-usa.com/vativo-folding-electric-bike.html" target="_blank">Ecobike Vatavio</a> is cool!<br /><br /><div style="text-align: right;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4SbwgqcCjWzfOFsw_vObI-hIjhjX7W9HhkS2sE5v7C3cpLeRJX8gXNy8xtL3vw7hBLv8Dzs2JChWW8qEU__N-w9fbvsSjlovk634KSwwbozC08t7oeLLzi12Qg9-IryKZL1F_OzRvuIaX/s1600-h/vataviofoldedone.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4SbwgqcCjWzfOFsw_vObI-hIjhjX7W9HhkS2sE5v7C3cpLeRJX8gXNy8xtL3vw7hBLv8Dzs2JChWW8qEU__N-w9fbvsSjlovk634KSwwbozC08t7oeLLzi12Qg9-IryKZL1F_OzRvuIaX/s320/vataviofoldedone.jpg" alt="" id="BLOGGER_PHOTO_ID_5233729904741326178" border="0" /></a><br /></div> <a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhp_oipsrUwqnZkjWRN8PFnCzwwo3Z9hvQATHVnGYRfXnMaysg7CX9Pojx-rhmA4JWi8uEuihJ89l-yYLdtrUbnjSI9bxKZWPPWGDHiosIUOln19-fEFJjROVbC4z3vgvBfrIgLv013ShFL/s1600-h/vataviofoldedtwo.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhp_oipsrUwqnZkjWRN8PFnCzwwo3Z9hvQATHVnGYRfXnMaysg7CX9Pojx-rhmA4JWi8uEuihJ89l-yYLdtrUbnjSI9bxKZWPPWGDHiosIUOln19-fEFJjROVbC4z3vgvBfrIgLv013ShFL/s320/vataviofoldedtwo.jpg" alt="" id="BLOGGER_PHOTO_ID_5233729905787380402" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiGkPoIDO5vUGa5My6f0EmyzPhkMDOUhjZA_ZdapTnFiod9WyqjxBAuArLku0dSkwOQLPx91ml_QhXzxZVLfY7YGDfDBOlEog8h2v2Jp6K8kcHxUXC8Z2R8zYrVE4a21G88df1WHgrh-YlP/s1600-h/vataviofoldedthree.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiGkPoIDO5vUGa5My6f0EmyzPhkMDOUhjZA_ZdapTnFiod9WyqjxBAuArLku0dSkwOQLPx91ml_QhXzxZVLfY7YGDfDBOlEog8h2v2Jp6K8kcHxUXC8Z2R8zYrVE4a21G88df1WHgrh-YlP/s320/vataviofoldedthree.jpg" alt="" id="BLOGGER_PHOTO_ID_5233729909491629458" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEu1yVpTf_lWnIdBF-SWYu26vyFLoVYbsRu_B7ObweH4nMlETA3hkovmwDIVfShmBWAVeDm4-RKc_r5lAk0oxzpRKFjUNNWq1ka5UrudQl0r7FrQUJm_BC4twTA6Z-2gQhS1gqHRXQGPE3/s1600-h/vataviofoldedfour.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhEu1yVpTf_lWnIdBF-SWYu26vyFLoVYbsRu_B7ObweH4nMlETA3hkovmwDIVfShmBWAVeDm4-RKc_r5lAk0oxzpRKFjUNNWq1ka5UrudQl0r7FrQUJm_BC4twTA6Z-2gQhS1gqHRXQGPE3/s320/vataviofoldedfour.jpg" alt="" id="BLOGGER_PHOTO_ID_5233729913858275938" border="0" /></a>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6168396440348934057.post-84490307971063159472008-07-29T16:03:00.000-07:002008-08-26T15:50:21.256-07:00Vespa LX50 HyS - Hybrid Motor Scooter<div class="separator" style="clear: both; text-align: left;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-fKrmzNRch9KIIgHiQO-nPngJPpFqU-7dpGgsYHQZmrNKQ4ftx-63VZTX0dc2hTJaDhlCu4LMETzFnT-RD7wnIYwAoIJeWOzAvr-7IePRdf3NcWuFmzEVEtQawZ1u6kFAZZZTKlSDeMcM/s1600-h/vespa-lx-50-hys-01.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEinXw0w1lGPvUr9wswUduymuhnGXZQuPmeYKUprc1fs6q39ia3lQFiP722tHVEM2K-YBWp-2q-INwoPt8Gr_Ktc7z8UG6a8UMz22FvZGLhCoLYBRV5ps-67FC-9XLqPchtEu0AwfyioXDVF/s320-r/vespa-lx-50-hys-01-150x150.jpg" border="0" /></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhuvfefeAvhlpRc9fVYmqK2qpj1A17EiHWSvVVIiAxLkNLQiBWoScAn49D9nQdxBNnzgFXTIL1V5jvh50Fn7nfDSWWWJSqQ4-I6j5r1s4rW1gWoCOKOuc4RayTZbpWmUquazWgVVKKmJX7U/s1600-h/vespa-lx-50-hys-02.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgptQ0Ymu7FCIo-UZ3uN_pFgfivLKsBbbpK0TLEdzGdNt4LSKuHYvp_dL2wPwqX1UKPP_k_QOnZ2Hs29fqMxtFXC4T6PupdmOrfdvbXllR6KPpIouqJpjK-82mimjyz-zldpmY1Q137jhSh/s320-r/vespa-lx-50-hys-02-150x150.jpg" border="0" /></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLcYd90dP66pWyRnMf4JABv5yJYW0opU5H95TUihi71eTeB8uHKVsarwuuykyoJ-dFe8zJmsP2BB88yxzYEpMoJfRPABMRjZFGKFOgXIvVAtwdjAdkgucPfBuIHyokOWb0H8MLMPwx26eS/s1600-h/vespa-lx-50-hys-03.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhETYWtrTCeQPs9yE9_3LFg6evPsOF9gjGv-iitXCr9I4lsOT2ED7jlI_OLv7sX_wzafBAdybujHec57tdWdt2KmjIpq0Y4nx_C4Blf0U_wpaHrv5gXAYJtxYsDXacm5w83m7XCyjBb2fE-/s320-r/vespa-lx-50-hys-03-150x150.jpg" border="0" /></a> </div><div class="separator" style="clear: both; text-align: left;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFzcrXiGQj1umTMHMfDXdnMEY-x5aczfauFhDFnNwVUni2tUlycVx4C3jRagq05G_zkuH62dJ-POxEr827bVy7ap4m5xQqslv0hhRKEgVHxFqamLQbE5wiaCgZ_Bw7dMFI7OkJ9_dcTlcD/s1600-h/vespa-lx-50-hys-04.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhuTPtuUxZwhgsH1NPomHnFEt8A5ihXAzkBF-oGrQMvR41dS3OHfMvwX-_cfp05oaXIXNEQ5_yfU1M2E_Mz2SB1m9Sw_sqsPiMtrfD1fJb7jGGvbkF4LIJeaQyZ3CGWl2epm-Er5xgX3EJt/s320-r/vespa-lx-50-hys-04-150x150.jpg" border="0" /></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhR6Mlyez9L-TLvGzuJKvJNjamxII5wB22-w-Nf_qoAwL2-vMKJqQwevki8UQqyoFjOt1unkUifVY_xfz6UcmzvIWKOarcHbjS9Chv-38OzhYcaiitgiJhD-q7aeNsXsSAYGrQN0jWnLc-F/s1600-h/vespa-lx-50-hys-05.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjr-TcMUnvLC6AJp3GXlQGtTc7FQsd5-SYpd6riERCqsIqP4ZvKed6nlV7cuB-BpICkbhNCaewf3zKlfeW809HzvAIQHP3YV2zbS6XHrBBGE-sH7QWy_Jjet8dnkfwOuPd9qOQMrN3ecj4G/s320-r/vespa-lx-50-hys-05-150x150.jpg" border="0" /></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZq7MieqNzliNkpWkwUGbMhctKZRXmFR0xs24G0zQ8qfsTZD2o5SB9IZKfeSzx5iRRzf_llf8OIT7jOEhp61EOe6O5BRFpB9FmSUbAnI6X3-_7eNTkzrcRWXk9PgaukouRAfaAZ-_Xlly5/s1600-h/vespa-lx-50-hys-07.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUCq6lNXhZJ5RznW21s9rWk7Dh1AZ9V-FGmyIWfoRLQDnkfKLAQYpRbS80Q2Z5SqlmzjblRvxu2ySNLhmrXm_YxoFEm_7dGSByMgsrj4Z5Q-ElwQ_4ebmeKgtKf48wYfmmiU2zMRTZ_go5/s320-r/vespa-lx-50-hys-07-150x150.jpg" border="0" /></a> </div><div class="separator" style="clear: both; text-align: left;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgVQs2zdvt16JOG_T6VTuGnWiu56IaIebXHG6C8D9CVQLXb1qkwo7BM7pkmm2B4uLzaxmdd_Kpy-bchFoAHzZTXMS18JvnqBOKX1C541IbfFrgBoMkDI7ycyR-4Q_VgdsvwVuA3vH5hRYoJ/s1600-h/vespa-lx-50-hys-08.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzZbCtgXCs-ruHGONhVHOl7Ia7fTHWb4HnvfGORqjHlht2cDb_IZ6Y3T1FdwDoi_YTZsGcFSHpVp7kBk9nzKkwDKEjE6XWYEmePelM80P_kPBVDJAJUn6z4LkwZVg9QRYad3QUMZdW0_qy/s320-r/vespa-lx-50-hys-08-150x150.jpg" border="0" /></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjrSAvR5eRKDJBnBhZncH_Ci4cPnvy_P0iekmv5-mpjUj49l-ckBO-q3cByiYIK9GCjoTAoXyu1ZFB0Evi0x85fZWlsMQa-Ta7RJxxExAnoLHpPdcAF7wW5jwDtn2SeK1UFu9WG16e0MzS6/s1600-h/vespa-lx-50-hys-09.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6uBgdG_bzBiKGQkKhlcT46OWSZJcgmhMditL9dslwB63uwo6-Y2jB1k-UOM2qVIOFWcl22wM3edmhNzV7rC4-EZPvW5PS1oBs9GijxOYH1a9c7X6ejv-weaeR8DMaUpqcl0NR1UsHTkz-/s320-r/vespa-lx-50-hys-09-150x150.jpg" border="0" /></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiazuApu3rRQJQG38G6chCXdRJoAmUVqyh2KwS3xwKLexaixEjithkBZlu25vF3H6n0M8RPk46WeqDr8fOVu9zsAxKN9joXEn29QtO6LcVkdxo3Xm-e5w0Mtkj0Syw_41JUC6VlAurj4rok/s1600-h/vespa-lx-50-hys-10.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgd3nNVw90O6F5DuXnG1WBjsF3giGaN3SVW8D5zNA2xSBKps0zukZw2YwZLRFa8798ua55vw9AzBiUeZ1IymtY-9Ivb6vgZE-NOawstzKS2OwCnPcD7AnS_dj1rclkk7_XRdYo87NyoSD6d/s320-r/vespa-lx-50-hys-10-150x150.jpg" border="0" /></a></div><div style="text-align: left;"></div><br />I'm getting to like being almost car free. Last week the only day I took a car to work was to show it to a co-worker who wanted to buy it.<br /><br />Although I'm really liking bicycle riding and I just got a free bus pass from work, there's still something holding me back from selling my car. What about when crunch time hits and I'm going home late at night? How about when we have to take our one car to the shop and I've got to pick up my wife? I can't have her ride on the handle bars of my bicycle and although the bus system in Los Angeles is quite extensive, we're spoiled after so many years of owning our own cars.<br /><br />A motor scooter is one possible solution--I just got my motorcycle permit just to keep my options open. There are some interesting all electric scooters, but what if I run out of juice on the road? Recharging the batteries takes longer than filling a gas tank. In addition, the electricity in our area is generated by burning oil so it isn't exactly clean energy. The old two-stroke scooters are dirty, noisy and don't get great gas mileage, but the new 4-stroke models are a big improvement.<br /><br />Of course the Vespa is pretty much the standard when it comes to motor scooters and their smaller, 50cc engines, reportedly get up to 80 miles per gallon. However, Piaggio, the company that makes the Vespa, announced a hybrid model that get something around 140 miles per gallon.<br /><br />So when I'm not riding the bike or the bus I might be running around town on a Hybrid Vespa and saying, "Ciao!" (<a href="http://auntiemomo.com/cakeordeath/">Eddie Izzard</a> reference.)<br /><br />Here's the lowdown on the little Vespa Hybrid scooter.<br /><blockquote>The HyS (Hybrid Scooter) models are parallel hybrids, combining four-stroke combustion engines with electric motors. The electric motor provides power assist, supplying a 25% boost in power for acceleration over the first few meters (a good feature for lunging through urban traffic), while at the same time supporting a 20% decrease in fuel consumption.<br /><br />The rider uses all the normal controls (accelerator, brakes and additional handlebar commands) as well as a specific switch to choose one of four operating modes:<br /><br />* Standard hybrid<br />* High-charge hybrid<br />* Low-charge hybrid<br />* Electric-only<br /><br />In the first three modes the HyS manages power output from the engine and the motor using a drive-by-wire type system. The electronic management system interprets the rider’s request for more torque and selects the assist ratio based on the battery’s state of charge.<br /><br />Regenerative braking recharges the batteries.<br /><br />In standard-hybrid mode the battery charge is maintained at optimal traction levels (batteries at 75%). The high-charge hybrid function is geared to maximize the range of the electric motor (batteries at 95%).<br /><br />If, on the other hand, the rider wishes to recharge the batteries using the 220V battery charger by plugging into a power outlet, he or she can use the low-charge hybrid mode (batteries at 20%) to obtain maximum performance with minimum consumption. (Charging time is about three hours.)<br /><br />In electric-only mode, the Piaggio HyS shuts down the combustion engine and turns into a silent, zero-emission electric vehicle—an important consideration for those European cities that are increasingly placing restrictions on emitting vehicles.<br /><br />The control system not only manages the combined power output of the engine and motor, but also forces the engine to work when it can be most efficient, thereby reducing specific consumption, with advantages in terms of lower consumption and emissions.</blockquote>Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-6168396440348934057.post-62434003181225205602008-07-29T09:57:00.000-07:002008-08-14T09:34:39.139-07:00Why did the Snake Cross the Bike Path?<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhinPHd_LX5ZvVrLAZcZncb6Yx63LTMU5o6fNdbDtScWD8f354VgU3JOwEHbobfC4b6DlQtsK6Q2fQyspGU-62cJQ0OWZxFafDuazZOnfoN2Yz4-mB6tLbjrTEKLQx-qjGurMIuMlSWk6UX/s1600-h/Rattlesnake_in_bike_lane-1.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhinPHd_LX5ZvVrLAZcZncb6Yx63LTMU5o6fNdbDtScWD8f354VgU3JOwEHbobfC4b6DlQtsK6Q2fQyspGU-62cJQ0OWZxFafDuazZOnfoN2Yz4-mB6tLbjrTEKLQx-qjGurMIuMlSWk6UX/s320/Rattlesnake_in_bike_lane-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5234412203462867634" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjS7phq5_pPba7JGiA8Mh7RC0IcMR_7ElbpTj11loazJDbiliTEdr3TkAiTQHOCCpotD5Rm9DFPaVvk9mgtQ-53AX-_Wgj1_S1pE1rDSmVCVdPAdothQB1cFC-Xg0iJNyUi90QTeMivzt1K/s1600-h/Rattlesnake_in_bike_lane-2.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjS7phq5_pPba7JGiA8Mh7RC0IcMR_7ElbpTj11loazJDbiliTEdr3TkAiTQHOCCpotD5Rm9DFPaVvk9mgtQ-53AX-_Wgj1_S1pE1rDSmVCVdPAdothQB1cFC-Xg0iJNyUi90QTeMivzt1K/s320/Rattlesnake_in_bike_lane-2.jpg" alt="" id="BLOGGER_PHOTO_ID_5234412208475810482" border="0" /></a><br />When commuting by bicycle you get to see all sorts of weird stuff laying on the side of the road. I had to stop and take a photo of this rattlesnake that almost made it accross the bike path.Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-6168396440348934057.post-566773018119094022008-07-20T21:27:00.000-07:002008-08-12T13:53:50.824-07:00Picking up my Car with my Bicycle<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhf5NKQZaCLuNv73T8nWzDqOVuJmdpvrcARU9BvxLm9Vm4YXT2lXsZjqFicEmFRBpPlbSMr1tM35BJfDBxR4yidseITuoNwQwxgdNWqUW06K59dglaOfWqCjeedviHR6Nm1mqL-mc52xJRZ/s1600-h/bike_car_carrier.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhf5NKQZaCLuNv73T8nWzDqOVuJmdpvrcARU9BvxLm9Vm4YXT2lXsZjqFicEmFRBpPlbSMr1tM35BJfDBxR4yidseITuoNwQwxgdNWqUW06K59dglaOfWqCjeedviHR6Nm1mqL-mc52xJRZ/s320/bike_car_carrier.jpg" alt="" id="BLOGGER_PHOTO_ID_5233737190405387122" border="0" /></a><br />I've been trying to ride my bike to work as much as possible. Sometimes I've got to use the car--like when I took the car into the shop for service. However, I decided to pick up my car with my bike but how to bring the bike back? Here's my solution, just strap the bike car rack on the bike!<br /><br />I discovered a glitch with my setup. Notice that the basket doesn't attach to the front hub. That's because the bike is a bit large and has a quick release hub. I thought I had it figured out with the metal and rubber straps I found in a hardware store but as I was getting close to my destination the weight of the bike rack caused the straps to slip down the fork. I've got to figure out a better way to attach that huge basket.<br /><br />In any case, I did manage to ride my bike twice all the way to work and back and once to the car dealership--which was realtively close compared to my regular commute. I'm not really keeping track of distance, heart rate, etc. like when I was racewalking and running, but even with this low mileage week I rode at least 54 miles. That's about 5 hours on the saddle without doing a weekend ride. When I was racewalking/running in the mornings I'd be lucky to get that much exercise in a week including the weekend.<br /><br />Hum, getting this much exercise and saving on gas. It all seems great so far, as long as I keep a good safety record.Unknownnoreply@blogger.com0