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

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  • Archive for May, 2006

    My experience of 100,000% of inflation in 4 years

    Posted by Frugal on 31st May 2006

    Do you know what it is like to experience an inflation of 100000% in four years?  Oh no, I did not mis-type the number of zeros.  It’s 100000% or 1000X in four years, or 562% in 1 year, or 1.4% daily.  It sounds crazy, but that was in the late 1980, once when I lived in a Latin America country.

    When I first arrived at the country, the government just crossed out three zeros in their currency bill.  The numbers were getting too big that you often needed to buy things using a million dollar bill (I bet you can be a millionaire at 11 if you lived in that country).  So their government figured that they will cross out 3 zeros in the old paper money, and gave the new currency bill a new name.  Let’s called it the new peso for the purpose of this article.  The very first month when I took the bus, I was paying about 30 cents of new peso for the bus fare.  Gradually, the bus fare increases to 40 cents, 60 cents, 1 dollar, 5 dollar, etc.  The price hike of everything was pretty much constant and endless.  For the local residents (and I), it was just part of life.  And for all wage earners, they would immediately spend all of the money to stock up on consumer goods, or else they risked losing major purchasing power.  No one saved money in the local currency or in the bank.  If there was any savings, they needed to be in foreign currency or local physical goods.

    There were two friends of my father’s over there in this country.  One opened a laundry store.  Another opened a small grocery store.  Because of the constant inflation, pretty much at the end of everyday, they exchanged all of their local currency for US dollar in the black market.  Every couple of days, they needed to re-adjust all the pricing.  If they didn’t adjust the prices, pretty soon they couldn’t even recuperate their costs.  The inflation was not constant throughout the year, but average about 10% every week.  So prices of everything needed to go up by 10% every week on the average.  It was simply incredible.  Obviously, for the merchants to anticipate the inflation, they simply sold the goods at even higher than inflated price so that they wouldn’t run the risk of selling below cost.

    One time my mother took the bait of opening a certificate of deposit in a local bank in local currency.  The interest rate if I remembered correctly was 30% for one month.  So she took the US dollar and exchanged for local currency, and opened the bank CD for 1 month.  After 1 month when she exchanged back to US dollar, I remembered that she lost some 5% of the money.  Sounded like a good deal at 30%?  Well, there is always some reasons for a too-good-to-be-true deal.

    By the time when I was leaving this country after 4 years of living there, I was paying 300 new pesos for the bus fare.  Compared to 30 cents just 4 years ago, the bus fare had increased 1000 times.  Yes, 1000 times.  And interestingly, the government crossed out three zeros again on all the paper bills right after I left the country.  I guess the factor of 1000 seemed to work well for them.

    Still don’t believe in me?  Check out the exchange rate in the link, and this article.

    Note: I changed some of the details to hide my identity, but I have tried my best to leave most of the details as they were.  If/when you comment, don’t bother mentioning the name of this country.  I will edit them out to make this post less conspicuous to my close friends.  Thanks for your cooperation.

    Posted in Investing, Miscellany | 2 Comments »

    Market Update:Contrarian to the Contrarians

    Posted by Frugal on 30th May 2006

    So the market falls again today.  The key gauge that I look at is still $US dollar & US bonds, both of which fell today.  This is simply not a good sign, because it indicates that foreigners overall are bailing out of US market, and in a big way.  Initially because Bernanke is the “trusted helicopter pilot”, I thought that he will definitely inflate at the critical junctures.  Could it be he is simply too arrogant to intervene this market?

    Although I’m glad to see precious metal markets catching bids, I have held onto my company holdings in the expectation of general inflation and gushes of liquidity to push the general market higher.  I believe that Jim Puplava and McClellan are still in the camp of market pushing higher.  But the market is telling otherwise.  The character of this market has changed to a bearish tone.  I wonder whether I have become a contrarian to the contrarians as described by James West.

    Has the precious metal market bottomed?  I hope not.  I have not deployed my almost 30% cash pile at all.  I am still expecting spot gold to fall to $620 +/10 range.  As time goes on however, it is becoming more advantageous to precious metal market because the moving average is moving up gradually.  I believe that there will be another dip after this temporary bounce-up.

    Has the curse of Hindenberg Omen ran its course?  I don’t know.  But with Ike Iossif calling a potential drop of S&P 500 to 900ish, there is probably a substantial battle ahead in this market.

    Posted in Market Pulses | Comments Off

    Engineer Salaries in Silicon Valley

    Posted by Frugal on 29th May 2006

    The following 2006 salary numbers are from  (Took me a long time to pull all these numbers out).  The salary is defined as total cash compensation (cash + bonuses). From my personal contacts & experiences, the numbers seem to be fairly accurate. All the experience levels are defined as follows:

    1. Level I: 0 to 2 years experience after Bachelor’s degree.
    2. Level II: 2 to 4 years experience
    3. Level III: 4 to 6 years experience
    4. Level IV: 6 to 8 years experience
    5. Level V: 8 to 10 years experience

    A master’s degree I believe counts as 1 or 2 years of work experience, and a Ph.D degree counts as 2 more years of experience beyond the master’s degree.

    I have used San Jose metropolitan area, and only looked up job titles related to IT, software, and hardware because they’re the more commonly held positions. Other good sources of salary surveys include, and IEEE salary survey which you need to sign up. Somehow was giving a smaller salary number.

    Job Title

    25% percentile

    50% (median)

    75% percentile

    Software Engineer I




    Software Engineer II




    Software Engineer III




    Software Engineer IV




    Software Engineer V




    Software Engr Manager




    Programmer I




    Programmer II




    Programmer III




    Programmer IV




    Programmer V




    Network Engineer I




    Network Engineer II




    Network Engineer III




    Unix Administrator








    Electrical Engineer I




    Electrical Engineer II




    Electrical Engineer III




    Electrical Engineer IV




    Electrical Engineer V




    Hardware Engineer I




    Hardware Engineer II




    Hardware Engineer III




    Hardware Engineer IV




    Hardware Engineer V




    Design Engineer I




    Design Engineer II




    Design Engineer III




    Design Engineer IV




    Engineering Manager




    Engineering Director




    If there are any missing entries, such as Design Engineer V, it is because it is not available. The last two entries, Engineering Manager and Director didn’t seem to be specific enough. I expect that the data may be mixed with all kinds of engineering.

    After my recent salary raise, it appears that I am still underpaid by about 10% to 18%, which will take a 11% to 22% salary increase to adjust to the market. Obviously, it is fairly unlikely to get such a big salary raise from the boss. The fastest route of adjusting your salary to the market price is still changing jobs.

    Add to Digg it Flog it Seed it

    Posted in Career/Salary | 1 Comment »

    Royalty Trusts – Get Paid Royalties w/o Paying (Much) Taxes

    Posted by Frugal on 27th May 2006

    This is the third article in the my dividend investing series.  Actually most of these current income investments do not pay out the so-called traditional dividends.  For royalty trust companies, they pay out royalties to the owners, instead of dividends.  For investing purpose, there is not much difference except the origins of the income.  However, for tax purpose, they are very different.  The royalties that you receive, you need to file Schedule E, and pro-rate your gross royalty income, severance tax, administration expenses, interest, and depletion.  It is quite involved when you deal with the taxes.  However, the upside is that more often than not, you won’t pay any (current) taxes, besides the tiny amount of interest on Schedule B.  You will pay taxes in the form of capital gain when you sell eventually (or not sell).

    Assuming that you don’t have the problem with the tax complexity, many of the royalty trusts reward their owners with usually 8% to 12% yield.  Most of the royalty trusts are based upon their production of the natural resource assets, such as oil, gas, or coal.  The advantage is that these stocks will be tied to the corresponding commodity prices much more compared to MLPs (Master Limited Partnership), under the assumption of no hedges are taken by the company management.  This correlation to the commodity price gives you added performance when the commodity is performing well, but will give you additional downside when the commodity is not doing well.  In any case, it is more of an inflation hedging investment compared to MLP.  Also, because of the fluctuation in the commodity price of their production, the royalty trust pay-outs can also fluctuate and are less stable.  The fluctuation may be smoothed out by the company management, but it will fluctuate nevertheless.The other problem with royalty trusts is that as the resource base of the commodity is produced and depleted, they face the definite need of repleting the resource base.  The success of the repletion relies on a good management to either raise capital in the stock market or in the debt market to finance purchase or exploration of the new resource base.  And it needs to be done in such a fashion that the existing shareholder interests are not uneconomically diluted.

    One of the most mentioned royalty trusts is SJT (San Juan Basin) which I have owned since 2003/2004.  It is recommended time after time on many internet articles because of its vast resource base.  SJT has a forward yield of 7.6% (assuming that the next 12 monthly pay-outs are $0.233 x 12 = $2.796), or a trailing yield of 9.3%.  The stock price I used to calculate yield is based on the closing price $36.98 on May 26, 2006.

    For more information, here are two very informative article links on both MLP and royalty trusts:

    1. MorningStar Investing Classroom
    2. Financial Advisor Magazine

    To read my previous two articles on dividend investing, here are the links:

    1. My dividend investing ($11775.91 in 2005)
    2. Master Limited Partnership – Great Dividend Savers

    I will probably have two more articles, next one on REIT.  In the last summary article, I will give out some past/current stocks that I have bought, most of which have dividend yields north of 7.5% (except MLPs), with additional upside from the increasing energy costs.

    Posted in Investing | 8 Comments »

    Below Median Household Income of $120K

    Posted by Frugal on 26th May 2006

    This is the seventh year of my family earning below the median household income of the city at which I work.  I have pretty much given up on the hope of ever reaching the median household income, unless my wife starts to work.  Despite my desires of living closer to the majority of my work colleagues and my workplace, I have never been able to catch up with the housing price.  I always wonder how people around me earn so much money, or buy such expensive houses of $600K to 2 or 3 million dollars.  Unfortunately, I have not found out how they do it.  I guess somehow they do earn more money.

    Actually, to think of myself below the median or the 50th percentile in anything really hurts my pride a little.  My wife always comforts me and tells me that it is because she is not working yet, and that most of other family are dual-incomes.  I guess that may be possible to a certain extent.  Still, a $120K median household income is anything but high, and really high.

    And sometimes, the hallway chats at my workplace are just a little bit too much for my ears.  People will talk about they’ve got more than $500K house gain that exceeds the federal tax exemption amount on the primary residence sale.  Or some may talk about playing $100 golf courses.  Or their long vacation to Europe.  Or buying their next million dollar home.  The truth is that I could care less about their extravagant spendings.  The only thing that I’m concerned is to buy a decent size (~1800 sq ft) condo or single family house that hopefully costs less than $650K for my family.  I haven’t been able to find a home that I like, simply because my budget of $650K is usually not enough.

    I guess one of the primary reasons that I cannot afford the house that I want is that my household income is below median of $120K.  Or maybe I just need to bite the bullet and become another 30-year house slave.

    Wealth is relative.  And I’m still hunting for that elusive house for my home.

    P.S. Here is my information source on the median income.  I found several zip codes of median income that is about 120K or more.

    1. Saratoga, CA 95070, $138530
    2. Los Gatos, CA 95030, $117839
    3. Los Gatos, CA 95033, $119925
    4. San Jose, CA 95120, $120398
    5. Newport Beach, CA 92657, $124850
    6. Irvine, CA 92602, $123092
    7. Mission Viejo, CA 92694, $114229
    8. Santa Monica, CA 90402, $129144
    9. Yorba Linda, CA 92887, $113813

    If the above links don’t work, go to, and click on any property, scroll down to neighborhood profile, and click on it.  Enter the zip code for a new location.

    Posted in Miscellany | 21 Comments »

    Gold Battered Before Treasury Auction

    Posted by Frugal on 25th May 2006

    Does anyone know where to look up the dates of US Treasury Auction?  This is not the first time that I read from Financial Sense about gold price hammered right before Treasury Auction.  Yeah, gold went down by some $30 in just two sessions.  However, creating a mirage of paper money better than physical assets is getting harder as the gold price goes higher and higher.

    In any case, it looks like both US dollar and US bonds are temporarily under controls again.  Looks like Fed is back in business.  So I believe that the general stock market (not necessarily including energy or precious metal) should bounce up from this point on (at least for a little while).

    If you know where to find out dates and schedules of the Treasury Auction, please let me know.  The best pointer that I could find is at, but it is often too short of a notice to prepare my trading plots.



    Posted in Market Pulses | 4 Comments »

    CashBack of 3.67% on American Express

    Posted by Frugal on 25th May 2006

    It appears that one of the easiest way to get a cashback offer on American Express TrueEarning credit card for Costco is not to use the card too much except at Costco.  I have got this offer every year since I signed up the credit card.  My shopping pattern for this card is I only use this card at Costco, and very occasionally I use it besides at Costco.  Then during the summer, American Express will mail me this offer of “spending $750 outside Costco in two month to get $20 bonus rebate” which is in addition to the regular cash rebate of 3% for dining out, 2% for travel, and 1% for everything else.

    Such high percentage rebate amount doesn’t come by often.  So I’m going to put all of my purchase on this card, besides grocery/gas/drug which I can get 5% back on Citi Platinum Select Dividend Card.

    Hmm, spending $750 for two months besides grocery/gas/drug is a little high for me.  At such time, I may simply prepay some of my bills that are payable by American Express, stock up on miscellaneous items, or take the penalty of paying a fee of $5.95 to buy the Simon Mall Visa gift card which I can always use anywhere later.  If you have any other good ideas on pre-spending without wasting money, please do let me know.  Thanks.

    Posted in Credit Cards | 2 Comments »

    A Trip to Other Personal Finance Blogs

    Posted by Frugal on 24th May 2006

    I am a relatively new blogger, and have been too busy blogging.  The past two weeks I decided that I want to pay some tributes to all of my fellow personal finance bloggers, all of them are both my dear fellows and my fierce competitors.  In fact, I really wish that I had more time to visit as many sites as I could, and read as many articles as I could. Unfortunately, time is the only one thing that you just can’t buy more.  I have been really staying up late until 2am, and getting up really early in the morning, sometimes 5am for either my 9-month old baby or for my blog. My wife said that this will be one of the most stupid and/or the least profitable venture that I undertake in my life. I kind of agree, but still hope to prove her wrong. Yeah, so far, after 49 posts almost daily in about a month and half, I have finally earned some $5 from AdSense.  I don’t even want to calculate my hourly rate on that.  However, I’m pretty proud of myself of what I have achieved so far on my blog.

    Actually, I must confess here that I should have visited all of my fellows’ sites long time ago, and more often too. But I rushed my website out before April 17 tax deadline, because I had been working day & night for almost two months on perfecting my java codes to get the tax, housing, and retirement calculators to work.  I simply don’t want them to “miss” the tax deadline, and be left in oblivion. Well, you know what happened. Limbo is where they belong, as least right now. Once my PF site was up and running. It’s like there was no turning back.  It’s post after post after post, and daily scratching of my head and hoping that another great white rabbit will jump out.  Is this the blogger’s life or rather no-life?  Well, as you can see from my website, that there hasn’t been much time spent on graphics or aethestic appeals and very few ads. But since this is a blog, I am determined to be disciplined, and stick to roughly one post per day no matter what. I will fix up my website as time goes on.  Okay, enough of my confession, I want to share my random personal finance web surfing with you:

    Hey, Clint, if you’re still out there, my sharing proposal to you still stands.  I haven’t deleted the account that I created for you, and you know the password.  Send me an email if you lost it and need it.

    I admire every site that I have visited or will be visiting.  All the PF bloggers out there are the most hard-working people that I’ve ever encountered.  Having coming so far as to have a PF website, already puts the owners of the blogs as one of the rarest breed among the general population.  I will collect the best articles on various PF sites, and put out a link post as time goes on.  But if you are in the list of, you can surely count on my visit. Big or small, new or old, I admire you all.  (On my last count, I still yet to visit 59 PF sites that have pfblog star attached to it.  And I haven’t counted several hundred others that don’t have stars.)

    P.S. By the way, I sincerely apologize to anyone who is offended by the name of my website.  I never intended to piss off any of my dear fellows.  It was simply a marketing whiz based on a true story.  And for the lack of a better name, I picked it.  As you are aware of, there are so just certain financial words and permutations. And so many creative names are already picked and assembled.  Mine probably ranked quite low for the creativity.

    Posted in Miscellany | 1 Comment »

    Scary Market

    Posted by Frugal on 23rd May 2006

    Just when you thought that it finally finds some short-term bottom, the market swan-dives in the last hour.  The last hour are usually filled with institutional trades, and more meaningful than other hours.  It just doesn’t look good for tomorrow.  My company holding is really hurting my networth.  I’ve lost so much money on paper now that I’m really afraid to tell my wife.  This time is different from the days in TwoMillionsAt28.Com days.  I had the chance to sell, but I’m still holding on to lots of my options of my new company.

    Boy, I feel my gray hairs sprouting like grass in springtime.

    Posted in Market Pulses | 1 Comment »

    Portfolio Tune-up: Gradual Shift to Mutual Funds

    Posted by Frugal on 23rd May 2006

    Today, I sold some of my HMY, and bought the same amount in GOLDX.  My precious metal portfolio consists of too many individual stocks, but not enough in mutual funds.  Since precious metal sector is VERY volatile, it is very important to diversify sufficiently so that you won’t be stuck with underperformance due to incorrect weighting or selection of the stocks.

    I sold HMY to take the advantage of my child’s tax bracket.  I will be paying some kiddie tax, but paying a very low tax on his first $1600 investment earnings is a good deal to me.  If I am not wrong, his first $1600 investment earnings only has a $80 tax liability ($800 deductible, and $800 long term capital gain).

    HMY management really pissed me off one time, by trying to buy GFI, a much bigger and better company, at the BELOW market price.  HMY dragged down GFI with it, and I ended up holding both stocks all the way down (a long way down of some -40%) and back.

    I will probably be doing more adjustments to my portfolio, using this downturn as the opportunity to sell for less capital gain.  It sounds almost funny, but it is actually quite tax-effective.  I only do this at the downturn.  I shift among different stocks, mutual funds, and accounts, but still staying in the same sector.  This way I can shift the tax and capital gain around, and properly allocate for my tax and capital gain budgets.  Of course, every shift needs to be examined very closely, because the goal often is not just paying less taxes, but achieving a higher return/less risk when the market rally next time.

    Posted in My Portfolio | Comments Off