My 1st Million At 33 – yes, you can do it too

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  • Turning down Apple’s job offer

    Posted by Frugal on July 16th, 2014

    Turning down Apple’s offer was one of the hardest decision that I had to make recently. I’m optimistic about Apple’s future, but I’m getting too old to sacrifice my family life quality and take a significant net loss in after-tax income after adjusting all the additional expenses for relocation.

    A 11% increase in base salary, which easily gets offset by bonus at my current job, just simply won’t cut it. Although I may have better career prospect, the life quality for my family & kids would be significantly worse. I was wishing that Apple could make a better offer to me, but I guess that there is just no middle ground that would work for Apple & me.

    I have already watched Apple run up by 7% since then. I guess maybe there may be even more percentage difference going forward between Apple’s stock and the stock of my current company.

    Life is all about choices and tradeoffs. And this choice was a tough one. While 5 to 10 years down the road, it could be much better by going to Apple, but my kids just won’t be at home anymore by then. Family life quality wins over money & career this round.

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    MtGox offline due to the biggest theft in Bitcoin

    Posted by Frugal on February 25th, 2014

    First you can’t withdraw your cash, and then you can’t trade, and then the site is offline completely. It’s sad & ridiculous that a company of this size can have the theft going on for years (90+% asset stolen), and doesn’t notice it. I think the brand of MtGox is permanently damaged.

    Bitcoin unfortunately will be setback along with the biggest exchange at MtGox. What’s most amazing about the Bitcoin is not how it goes from cents to over a thousand dollars (and now at about 500ish), but rather how much computational power goes into all of the SHA-256 hashing in the network. I’ve been wanting to buy an ASIC hardware for mining, but the spec of the hardware can never catch up with the increases in difficulty. The difficulty & computational hardware is increasing at the exponential speed. The current network hash rate is now at 27000 Tera Hash per second. I don’t know how long it can increase exponentially, sooner or later, it will hit the global semiconductor fab capacity. After that, it can only increase linearly.

    Since there are not a lot of ASIC players in the space. I fear that when a few players can control such big percentage of computational power, down the road, there may be another MtGox.

    If you want to read further about MtGox situation, here is the unofficial crisis strategy draft. The part 1 strategy using arbitrage is the same as insider trading. If MtGox knows that it’s not going bankrupt for sure due to a buyout deal, and is buying up low price Bitcoin from their customers to erase their debt, there won’t be any reputation or trust left at MtGox.

    Is Bitcoin dead? Probably not. Is MtGox dead? Probably. Should you make any online payment using Bitcoin? NEVER. Bitcoin payment is the antithesis of using credit cards. Once it’s paid, it’s gone and untraceable. The only thing standing between the non-delivery of goods or services is the fragile business trust, and that trust is only as good as the monetary difference how much the business can generate in the long term versus how much the business can get/cheat right now.

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    Over $2000 Cashback/Reward on my credit cards

    Posted by Frugal on December 15th, 2013

    It’s almost year-end. Just doing a tally on my credit cards. When you use your credit cards everyday, it’s wise to pick the right cards. Wonder what’s in my wallet?

    1. $375 cashback from 5% rebates on all of my grocery/gasoline/pharmacy stores purchases. I have applied a HSBC card long time ago but it’s not available now. The extra bonus for using this card is that you can get 5% off on ANY gift cards that you purchase as well in grocery/pharmacy stores. That includes Amazon, Paypal, Home Depot/Lowes, etc. It’s an extra hassle, but will surely quite help for a big purchase. Plus towards the year end, MANY grocery stores have gift card purchase promotion. Before Xmas, Vons/Pavillion has 15% off for selected gift cards. I’ve got another $20 off just last week from a grocery store for $100 Amazon gift card purchase which I only paid $95 effectively.

    2. $138 from Costco TrueEarnings Card. Most of the rebate were coming from my airline tickets for visiting my parents.

    3. $416.50 from $1600 spent on Premier Reward Gold card from American Express.

    4. $602.44 from Chase Sapphire & 1% back on Chase Freedom. Got the bonus of $400 on my wife’s card this year, and got $400 on my own card last year (not included).

    5. $500 bonus from Chase Ink Plus.

    So the total is $2031.94 on some $35K credit card expenses, averaging out to be more than 5% off.

    As far as I know, Sapphire & Ink Plus are both available. I think you need an invitation for Premier Reward American Express card. A dollar saved is two dollars earned (for 50% marginal tax bracket).

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    Recent market updates

    Posted by Frugal on June 27th, 2013

    Many things have changed a lot since just three or four months ago. I’m going to keep it brief here.
    1. Stock market is a hold or even a short term sell. Should add more on pullback.
    2. Real estate is a hold, changed from a buy. Only add if ROI is bigger than the mortgage rate. The buy vs rent decision is very hard at this point, because most people won’t sell in less than 5 years. The short-term bottom is definitely behind us, but I’m not too sure about longer term.
    3. Gold is a trading buy. Scale in gradually if you want to buy. The short-term bottom should be just around the corner, but even if you miss the bottom by one day, it could cost you a lot. You should probably trade it out once it bounce.
    4. Bond is a sell. I haven’t held bonds for years (and I was wrong). The interest rates kept going lower and lower. Now with QE tapering coming(?), bonds have sold off and mortgage rates have risen to put a stop on the housing market. It’s hard to imagine that US interest rate would go back to the recent low from last year, but I was wrong on this for quite some time. If US becomes like Japan, then it’s definitely possible that interest rates will go lower. The best way for regular folks to play this is to lock the mortgage rate for longer term, and keep doing zero-point zero-fee refinancing whenever the rate drops. I’ve locked two of my loans close to the lowest points (just about 1/8 from the lowest). That’s the best way to participate.
    5. Bitcoin? Bitcoin is a scam, just like any other un-backed currencies. But it doesn’t matter however whether it’s backed or not backed by some assets. The only thing that matters is whether people are willing to continue to value Bitcoin, and my answer is a YES. Unless government totally shuts it down, I think Bitcoin is going stay around. By the way, not all virtual currencies are like Bitcoin. For example, OpenCoin is a scam among scams, despite having Google & Marc Andreesen behind it. I think OpenCoin will go down to the drain, simply because it’s just NOT an open standard. You just can’t have the cake, and eat it too, giving yourself billions of monopoly money, and expect others to exchange real money with you.

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    My rental portfolio

    Posted by Frugal on May 23rd, 2013

    Housing market in most area of the California has experienced 15% to 30% price increase in just the last year. I have bought about 1.3 million worth of real estate in the last year (through mortgage leverage), and caught onto the ride. I am managing all of five rental properties myself. To get everything fixed up and rented is quite a lot of work. My real estate investment portfolio brings in about $60K income (before mortgage interest and depreciation deduction). The actual rental income however is less, due to all the mortgage interests that I need to pay.

    After the big rise in the housing market, it’s close to impossible to find any investment property that will give you an ROI of 6%. Even for what I bought, the average return was not more than 6%. However, if I didn’t lower my ROI target a little bit, I wouldn’t be sitting on several hundreds of thousands from capital gain right now. I didn’t expect the price to rise so quickly. I’m still shopping for deals but it’s about 1 in 100 homes that you may find a deal, and possibly 1 out of 50 deals you may get. So the chance is about 0.2% or less for you to actually get some deal. I go through about 100 listings online myself on a daily basis. That obviously take effort and time. The fact is that if there is a deal, your real estate agent would buy it before you do. So either you find them yourself, or you don’t. Nobody is going to give away something to you.

    Even if you don’t have a lot of money, you can still invest in real estate. My smallest acquisition was just $60K, and the ROI is 10.1%. Obviously far better than 1% for the idle cash in the bank.

    What makes real estate investment better than other investment besides its stability and leverage? What I’ve learned from sifting through tens of thousands of homes is that real estate market is not an efficient market, and there are always deals that are priced below-market. If you try often and hard enough, those are some potential gains that you can get. Your competitions are going to be as crazy as you are. 99.5% of the good deals that I found get sold in the first two days, if not the first day. This is not a game for the guys who sit back and relax. If you don’t make a move, somebody else will.

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    Stocks may pull back, but will break new high

    Posted by Frugal on March 12th, 2013

    As I have said last year, stocks will be going up. It’s not going to be a triple top formation on S&P500 as some technicians are saying. It will be a solid new high. In general however, the volatility of the market will still be big, meaning that occasionally, the pullback can be as much as 10% if not more. I look forward to those pullbacks to increase my stake.

    I believe the housing bear market that started in 2007 is still with us despite the recent big increase of 10% to 25% in various local markets. Yes, I just bought 4 homes, but that’s going to be just a trade. Economy will continue to be tepid, due to state/city government cut back and international bond market instability. I don’t know what all these talks on QE ending this year are about. As I see it, Fed won’t be raising interest rate nor ending QE this year, possibly the entire 2014. The earliest that I can see is early 2015, and it will be baby steps. I think no more than 3 steps will be applied before the end of 2016. Eventually bond market vigilantes will be back, and Fed will lose the control of the interest rates (if not already).

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    I bought 4 homes in the last 9 months

    Posted by Frugal on February 6th, 2013

    Housing market has temporarily bottomed last year. Chasing up the market, I bid on probably over 50 homes, and I got 4. Basically all of the homes that I put in a bid are sold within the very first week. Some homes I bid with all cash over the listing price in the very first 30 minutes, and I still couldn’t get them. Those that get sold in the first hour appeared to be structured illegally by the listing agents as insider deals.

    I have been so insanely busy with everything. It takes so much more than just cold cash to get the homes. Markets are hot, and the listing agents are kings. Most of the time, if I can get a return call from the listing agent, I call that a good success already.

    I will detail the housing market strategy in the second part of my eBook, but for now, I’m just too busy to write it up.

    All of the homes that I bought are basically in-the-money on the first day, if not a good 15% profit. I actually only bought “3″ homes, because two of the four homes that I bought, I got a 50:50 partner who was lucky to ride up the housing market with more than $70K profit with me already. I had to get a partner because I didn’t have 1.5 million cash in the bank to bid on every terrific deal without financing.

    I used to dislike housing flippers, but I will become one by buying these homes. After seeing how this lawless country is, with all the Wallstreet people not even indicted, and all those “home” owners or rather loan mowers who signed with perjury on their loan docs, still squatting in homes for free, I have to say that I’m disappointed about ethics in general. For now, I’m just going to grab the profits if they exist.

    I have a lofty goal of donating at least half a million in my lifetime for charitable causes. I really would love to donate one million, but I will be realistic for now, and set my goal to $500K. It’s a lot of money, and I wish I could reach my goal. And there is no other way to reach my goal besides by becoming rich. Actually, let me take it back. It’s not me donating any money, but rather I’m just “re-distributing” the money from God to the poor.

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    Posted in Real Estate | Comments Off

    AMT tax permanently patched after fiscal cliff deal reached

    Posted by Frugal on January 1st, 2013

    The tax deal has been reached in both Senate and the House. There were very little spending cut, and some tax increases for the people earns the highest income above $400K. Here is the summary on the tax changes:

    1. 2% social security tax cut is reverted. This affects everyone who has an income. You will see payroll tax increases (or rather reverted back) by 2%.

    2. The Bush tax cuts expire for income higher than $400K on individual filing, and $450K for filing jointly. Marginal bracket rises back to 39.6% from 35%. Most people including me get to keep the same brackets from Bush tax cut.

    3. AMT (alternative minimum tax) exemption amount is now $78750. Without the fix, it would have been reverted back to $45000 which has never been indexed to inflation. Going forward, this exemption amount will be indexed to inflation. With this change, some tens of millions of US households won’t be hit by AMT. Because it’s indexed to inflation now, it would reduce my federal tax by a couple of hundred dollars (while paying $2000 more in social security tax).

    Essentially, there has been no changes, except the 2% social security tax reversion for everyone. The additional 3.8% medicare tax on capital gain will only apply to income higher than $400K/$450K for single/joint filing I believe.

    For more details, you can follow this link for original text.

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    Fiscal Cliff? Don’t sell due to the headline news

    Posted by Frugal on November 28th, 2012

    As a general rule of thumb, whatever news that is in the headline news is not new anymore (for stock trading). In the USA especially, the traditional media all seems to flock to the same topic, taking the same side of the issues mostly. News in the US drives the emotion of the crowd, but smart capital knows better.

    The stock market probably hit a tradable low point already less than 2 weeks ago. I will be a gradual buyer here and scale in. The fiscal talk may continue to linger at the headline through December, creating more volatility throughout. However, I expect an okay-to-good first quarter next year. Two to three years out from now, I expect the stock market to break the high point since rising from 2009 low, while at the same time, the bond markets may trade lower. Mortgage yields may bottom this year or next year. Once it starts to rise, it will no longer serve the housing market by lowering monthly cost.

    The world economy sucks right now, but US will be the last domino to fall. It will fall nevertheless, but not just yet. The stocks will always reach the high and low points without the headline news people knowing. If it’s in the headline news everywhere, you can be sure NOT to bet on it (but the opposite trade is not guaranteed until it reaches the max swing).

    Best luck trading.

    Frugal at 1stMillionAt33.com

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    California real estate markets are RED HOT!!

    Posted by Frugal on September 21st, 2012

    I would think that you’re crazy if you tell me this statement six months ago. Frankly, RED HOT is not even enough to describe the current market. Here are some of my personal anectodes, based on my bidding in the market:
    1. Most listings go into pending on the first two days, or after the first weekend.
    2. ALL homes have multiple offers at or WAY above listing prices. It’s getting common to have some 20 to 40 offers if the listing doesn’t get pulled down in the first month.
    3. If you don’t work with listing agents, it’s end-of-story for you.
    4. Grand opening at new home sites are PACKED!!
    5. The bidding frenzy is extending some 60 miles away from the center of the metropolitan area.
    6. Even handyman or contractors for flooring/carpeting, etc. won’t answer or return your phone calls. I tried to call a handyman for flooring. Not only that he doesn’t return the calls, he has requested his carrier to post a message: “On the request of the subscriber, this phone number does NOT accept incoming calls.” Frankly, that is just NUTS! And this is not just an isolated experience on one handyman, but my experiences with several handymen are like this as well.
    7. MLS inventory was 40% down year-to-year several months ago. I wouldn’t believe this if I didn’t see this myself, but MLS listing inventory is going down to essentially absolute ZERO probably in the next one or two months within the 60 miles radius of my search. Just go to redfin.com, and punch the city names. On the upper-right corner, you can see the inventory plots. It’s a straight line heading down to zero, since last October/November.

    With Fed buying 40 billions of MBS mortgage securities every month thru QE3, which will tend to close the spread between treasury bonds and mortgage bonds, it is possible that mortgage rates may go even further down. FHA also may waive the 3-year waiting period after short sale/foreclosure. If that happens, in conjunction with even lower mortgage rate, the housing markets can easily go up by another 20%. FHA down payment is only 3.5%. That is basically nothing, and won’t even cover the transaction cost of buying and selling. Taxpapers are essentially subsidizing all the future defaults (again)!

    So where do we go from here? I’m a long-term bear on the housing market, and I have called the short-term bottom five months ago this year. I’m not changing my view (yet). But it is surprising that how much intervention can do to the housing markets. I expect the next short-term peak at about 2016, and the next bottom to come at about 2018 to 2020, but that is at least 6 years away from now. If you need a home, but you cannot wait for 6 years, it may still be better to buy now rather than later. I think the prices at the next bottom may be slightly higher than the bottom that was made in 2011/2012. But you would have saved on rents for sure. Given the current pricing, with the exceptions of being right at the center of metropolitan area, it is certainly cheaper buying than renting.

    Best luck on your housing hunting trip, because you will need A LOT of that.

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    Posted in Real Estate | Comments Off