Sean Ongley

Tag: Robin Hood

  • Know What You’re Worth

    Know What You’re Worth

    Self-knowledge is not only the intrinsic value of your existence, the spiritual powers and carnal qualities of your being, nor is it merely the sum of your productivity as a working human, it is also the superficial measurement of your net wealth.

    Not to elevate our finances to the highest value, but this analysis is one that can help guide you toward a life plan. To carry out a life plan will elevate your will power and imbue your life with purpose. This will lead to a greater good in your life, if you’re a good person.

    My financial writing is not meant for the wealthy. It is for the average person just beginning to get their boat afloat, if you like. I am myself just beginning to sail, and I am not wealthy.

    As soon as you embark on the journey of long term investing and retirement planning — no matter how old you are — it is good to have a sense of your net worth.

    There are probably lots of people who make more money than me who never bother with this. The structure of their finances are probably very similar to mine, so this spreadsheet would help them too.

    I bet there is an alarming number of medical doctors whose overall net worth is in the red.

    That prospect is simple. Say you’re a doctor. You’re 30 years old. You have a six-figure income, but you have $100K in medical school debt accruing interest, and you bought your first home adding $300K to your debt, again with massive interest charges. Assuming you lease your car (no debt), you’ll need home equity and investments valued above $400K to hedge against your great saddling debt.

    To look at the interest charges you’ll pay over the lifetime of a mortgage or student loan payment is frightening. Best to ignore it for now and focus on the idea of net worth in the event of liquidation.

    In terms of ratios, the person with no college, starting out at Walmart, in the short term will surpass the net worth of the doctor. The doctor is highly leveraged and carries liabilities out the gate in life.

    The 17-year old cashier could save at least 50% of their income at first and draw it down to 10% as they become independent, relieving the parents from the cost of hosting them. Out the gate, this worker has the opportunity to build their net worth in the green.

    If the cashier rises up to General Manager after ten years, they too can earn a six-figure income. If they learn how to invest their portfolio, they could end up living next door to the doctor in a cul-de-sac. Who gets there first is a tortoise versus hair scenario. The doctor will rapidly earn more money once they enter the workforce, but the entry level worker can build their wealth debt free.

    This is why everyone should plan their finances, not because it is a race or competition of some sort, just because anybody can elevate their situation with focus and planning. I am speaking from experience. I was raised poor and until age 34, I held myself down in poverty. I’m starting later than the doctor, I am low-income. With planning, I believe I will retire before age 60.

    Once every quarter, I go through all of my financial accounts and enter the balances into a spreadsheet. I am including it as a download here. It is a straight forward net worth analysis. Also notice that I have formulas in the cells. These are calculators. I did the work so you wouldn’t have to.

    There is a primary goal for this spreadsheet. It is to predict the maximum liquidity of all my assets, literally all of them, imagining a scenario where I want to reduce my debt to zero and unload my possessions down to a backpack full of cash and nothing but a change of clothes. This figure is my true net worth.

    When you see these celebrity and CEO net worth articles, most of them are highly overvalued. There is no way Elon Musk can cash out on his shares and retire with $100 billion in a duffle bag. It just is not that simple.

    It kind of leads to a gross misunderstanding of the term net worth. I call that gross worth. Net worth to me is simply my liquid assets minus the sum of liabilities. It is easier to figure than Musk’s money.

    In the process of building this spreadsheet, I decided to include net credit limit into the gross worth figure. If I started cash advancing my credit cards and pulling my balances as quickly as possible, what would be the maximum cash I could liquidate? For this, the spreadsheet adds up total available credit, cash on hand, investment accounts, inventory, and home equity.

    Inventory is important for understanding net worth. Considering the minimal time required to keep an inventory of your possessions, with model and serial numbers, I would say it’s worth it. You can even point that cell on the analysis to your inventory total so that it will update your net worth when you manage your inventory.

    By the time you go through your house, add up your car(s), furniture, computers, and devices, depending on how far you want to go with it, your cookware and knick knacks, with modest resale values associated, then you can track an ongoing inventory of your estate.

    The minus debt field simply deducts my credit card balances and all other debts from the gross, giving me the post-debt figure, which means I pay debts off but run my credit cards to the max to go off the grid. It’s a weird figure, it’s almost pointless, but I like it.

    Liquidity is the final figure for net worth in this spreadsheet. It is also the only realistic number. This time I leave the credit limit alone as if I’m cutting up my credit cards. I total up cash on hand, investments, inventory, home equity, and deduct all debts. This scenario would have the maximum cash I can stuff into a bag after selling all possessions, investments, while paying off all debts.

    The truth of your liquidity is still not revealed. There are costs every step of the way. If I sell my house, I’m out thousands in closing costs and fees. Some people still pay brokerage fees to sell their stocks. If you sell your inventory in a hurry, you probably will get a fraction of its top value. I bear all that in mind, but I don’t have a calculator for it.

    Finally, there is one more figure that I realized I should know and estimate for the sake of my parents. My parents will depend on me as they grow old, so I want to know how much they could potentially get from my estate if I suddenly passed, God forbid.

    I do not presently have kids, so I don’t have a serious life insurance policy. Mine is free through the credit union and it pays one grand, which amounts to a basic cremation process.

    The better news about this total, even though I don’t benefit, is that it adjusts for student loan forgiveness. The only person legally responsible for my students loans is myself. This is the case whether I’m single, or married with children. So long as I keep my credit ratio well below cash in the bank, and my other debts below my home equity, then there will be enough of my capital remaining for them to reinvest into their portfolio.

    Prepare for the worst, work toward the best.

    In addition to this template, I have sheets that reference investment balances to chart growth (or loss). I have a very simple sheet that I will update annually for 20 years to ensure I am meeting or exceeding my goals. If I exceed, then I should at that point own my property and inventory outright and be able to bring my monthly obligations down to negligible figures.

    My entire collection of sheets that work into the analysis and projections include a budget. I update this annually to estimate my income and factor in expected costs, everything from taxes to recreational drugs. 

    The whole jawn is a comprehensive tracking system that no third parties have access to. Don’t leave it up to corporations to provide your financial analysis. They use and sell your data. They might even mislead you. Learning this template will earn you the skill to track it all on paper if you want to.

    I have included three versions of the Net Worth Analysis template. It was built in Apple Numbers, exported to PDF and Excel. I replaced my figures with basic numbers and generic labels. You are meant to personalize it and refer to your accounts.

    It is simple, just start adding your bank accounts and what not into the fields and watch the numbers update. Many of the cells contain formulas. Drop a comment if you have any questions about it.

    Download the Spreadsheet

    PDF VERSION

    APPLE VERSION

    EXCEL VERSION

  • Hedging Against the Machine

    Hedging Against the Machine

    My first appearance on 2 Bulls in a China Shop!

    Two Sunday mornings ago, I joined a conference call with 2 Bulls in a China Shop co-hosts Dan Leeson and Kyle Hedman. The episode can be listened to for free in this post, and you can find a bunch of ways to subscribe at their official website.

    Dan is a friend from high school, one of the few that I have kept in touch with. If I was more active in high school, were I guided by my natural interests and talents in those years, we might have been in the same television broadcasting program in which students produced a morning news program that transmitted official school business. There would be many mornings in which I watched Dan deliver the news on our closed circuit television network.

    Today, he is a podcaster. I am a former community media producer and podcaster as well. We are discussing collaborating more on this program, myself a repeat guest perhaps focused on cryptocurrency. Both of us have been living the odd job life of going broke and pursuing music and random ideas. Many paths one summit, they say.

    Podcasting has been a new universe since the day I launched Horizon at End Times, in 2013, which was meant to be an artist-on-artist interview program, discussing topics from a creative perspective, providing commentary on the madness of our social and political times. 

    If there was a way to invest in podcasting, like an ETF, the market would have quadrupled over by now. In that growth, many podcasters jumped in and drifted off into the noise of obscurity. Dan and Kyle seem to be finding a way to pop their little heads above the noise. I look forward to joining them for their continued success.

    Before the pandemic, I started to write blogs aimed at capturing the lessons that I was learning in the process of investing my savings. It has been a year since my last finance post, a lot has happened, so I think I am ready to get back on that train and take it to the end of the line.

    One of the major educational processes that I went through was more vicarious than personal, as I persuaded my father to move his annuity fund into a personally managed portfolio. I gave him a number of good picks and jumpstarted his path to profit. This will be the topic of my next finance post.

    A Few Thoughts on GameStop and the Finance Economy

    The financialization of our economy is rapidly disrupting stock markets, monetary policy, industries, technologies, and truly the whole social fabric. To hedge against the machine today is to play the game and try to beat the machine using its own tools.

    The weekend that we recorded this was the one leading into a major market activism event in which GameStop (GME) grew by 222% over the week, and by 1,476% over the month, from about $19 to $312.

    There is nothing about GameStop that can justify this valuation, the company was disrupted by lock downs and was shuttering locations. Like record stores, the media can be transferred more efficiently online. Its revenues were only declining.

    That is why the market was broadly betting on GME to decline. There are ways to do this. One common method is options.

    I don’t play options. This is the casino aspect of our markets. I’m a bad gambler.

    I don’t like options. It turns stock valuation into a speculative game rather than a rational valuation based on revenue over loss, supply and demand.

    These are basically just bets that you place with regards to the movement of a stock, up or down. There is more to it but that will do. You don’t actually invest in the company like when you buy a share.

    Options are part of this story, but short selling caused this whole mess.

    Short selling is a little hard to wrap the head around, but this is a common bet in the big investor class, the hedge fund world. One of the best of all the analyses of this short squeeze event that I have heard is, ironically enough, from Speaking of Bitcoin podcast.

    Speaking of Bitcoin Podcast Explains Short Selling and GameStop

    The arrogant move on the part of the investor class was that GameStop was so heavily shorted that 138% of all available shares were being shorted. That means there were 38% more shares than exist floating and would need to be called if the price went up. This means that a large contingency of small investors could call the bluff and force their hand simply by going long on GME.

    It was a movement of retail investors organized on Reddit that forced this whole situation. These are regular people with brokerage accounts who jumped in as a swarm to drive the price of GameStop upward against the hedge fund bets locked and loaded to crush the company. Short sellers were forced to accept losses or hold the bet by raising their position. That is why it is called a short squeeze.

    Tesla is a company that picked up massive momentum in a short squeeze. The valuation is still inflated, in my opinion. Tesla might hold because the outlook for the company is much better than GameStop. Tesla is at the frontier of something while GameStop is comparable to Blockbuster Video or Tower Records, it is simply obsolete.

    The problem lies in the fact that Wall Street has the dangerous ability to crush a company and accelerate its demise. In a world where the balance of power isn’t so top-heavy, GameStop could carry on a number of years without even changing its business model, employing thousands of people, filling hundreds of retail spaces on Main Street.

    Anyone that educated themselves over the weekend will realize that the only position for GameStop ultimately is down. R/Wallstreetbets continues to call for a hold.

    Here is what I would have done, had I been following this Reddit forum. I would have bought GameStop around $20 and did the old halving on double strategy, so when it hit $40, I’d sell half of my shares and hold the remainder from that point until collapse. Even selling those shares at a loss would be a profit.

    Retailers should have liquidity as hedge funds eat the loss. This is actually a major transfer of wealth from the elite downward, largely into RobinHood accounts, Cash App, and other tools that are free and easy to use in the hands of the masses.

    This rare transfer of wealth from the rich to the poor happened on the platform named after Robin Hood, the mythic character that steals from the rich and gives to the poor. 

    Even for the platform’s coordinated effort to control the losses, at the behest of its financiers, enabled the situation by innovating a platform that onboarded millions of first-time traders.

    More importantly, it is a mass public education about big finance and how the dirty business works. There are now millions of people that just learned what options and short sales are.

    This is a peoples’ movement in the truest sense of it, as far as it looks from my angle. The more people that own stocks, the more the people have leverage over companies.

    Democracy is built into the market system. Rather than a single king own Coca-Cola, there are millions of investors that own it, and they can organize. Every stock counts for one vote and every year these votes determine major decisions.

    Millennials are jumping into the markets and today it might be possible for a social media group to remove a CEO, breakup accounting monopolies, inflate a stock, even short their own stock to buy up more shares.

    We are living in a world where personal finance is most likely to become more integral to people’s lives, just like social media, year over year.

    As jobs are lost to automation, even as manufacturing comes back to domestic operation, which it is, automation is changing the landscape of the now passing industrial age, and factories with great productivity will not employ people en masse the way industry did a hundred years ago.

    Social interactions are no longer limited by locality. Tribes form and coalesce in global ways with their own language, to make huge moves. GameStop is one example.

    Or this could all be a set up. It is easy to manipulate the masses into seeming social movements. History has repeated this over and again.

    Right now, silver is at an all-time high and the mainstream news is blaming the Reddit group. I look at the group myself and see flat denials that they are doing anything with silver. This seems like a tug of war, for real.

    The real ending to this story will be the bankruptcy and demise of GameStop, unless it can somehow receive a wave of support in real sales. Lots of naive first-time investors jumped in at the height of this stock and they will lose money. This will be a wealth transfer upward and sideways, from the most naive and late coming players to the game.

    But let the buyer beware. This is a free market, after all.

  • Democracy and Personal Freedom in Big Finance

    Democracy and Personal Freedom in Big Finance

    Photo of Slovak Radio Building, an upside down pyramidal structure for me represents how we need to build society.

    This is a freewheeling introduction to what should be a series of articles designed to walk a beginner through the daunting field of personal finance. I want to make my motivation, and in a sense, my qualifications clear in this introduction.

    As bad as the outcomes of our economic system have been for average working class folks in the last several decades, including myself, the average American is confronted with greater access to financial investment products than ever. I would advise any young person today to get their first job in High School and start that portfolio before they enter college. It is not a college fund, it is a post-college fund. Or, I would say, “Skip college!” But that’s another argument.

    I am a great example of what is possible for a low-income person. Here is the short of it: I went from, at the beginning of 2017, flat broke, on food stamps, bad credit, and crashing in someone’s basement for free, to, by the end of 2017, keeping thousands of dollars in the bank, a good credit card, and a credit score around 700. I even had a vacation that year. I only made $1,500 a month. By January of 2019, I owned my first home, had a second credit card, a credit score of 750, and several thousand dollars in the bank. I made just a little more that year. We are approaching 2020 and I have my finances diversified over several investments while maintaining an emergency fund, a third credit card, and passive income as a landlord. At this rate, I could retire in twenty years, especially if I stick to a full-time job. I haven’t!

    Beyond personal financial liberation, there is a social-political motivation for me to develop a portfolio. Our capacity to engage with corporations as shareholders is greater than ever. The opportunity to grow personal wealth while supporting companies that we can believe in is also greater than ever. Numerous social challenges confront us, but if each to our own utilize finance as democracy and democracy as finance, then social solidarity can make a difference at the core of the corporations, and possibly spawn startups that would not otherwise see a market without our investments flowing toward positive ends.

    I’m not going to take the time to source my claims here, but I am sure of the following statements: Average incomes have fallen against inflation, homeownership rates have fallen, workforce participation rates have fallen, average household costs have risen, wealth disparity has risen, and corporate profit has risen. Feel free to verify these observations. I am stopping myself from going into climate change and health care. If we each practiced finance correctly then I am positive this would improve.

    There are many problems facing us. We can engage directly from the mature position of shareholder, or we can stand on the sidelines and complain from a social media feed. When you are a shareholder of a company, you have the right to complain. When you are not, you do not. For example, the difference between a regional credit union of which your membership represents a share of ownership versus a major corporate bank of which you are just a customer: One directs profit back to account holders and into local communities more effectively than the other; I will let you guess who.

    If the product you consume from the company, as a customer, does not meet your satisfaction, you may complain, but as far as how that product is produced, you have no leverage. Perhaps a can of coke is just as satisfying as ever, but you want to reform Coca-Cola’s corporate practices. How do you do that? Activism generally includes boycotts, strikes, picketing, and journalism, in the tool box. How about adding participation through investment?

    The stock market is a public, democratic system. Most of the biggest companies are publicly traded: Coca-Cola, Microsoft, Ford, U.S. Steel, etc. If you own just .000001% of Coca-Cola, you still have .000001% of the annual votes. There are votes every year, and various positions are adopted by the Board. Commonly, Board members hold more than 2% of the shares.

    There can be an upside down pyramid so that the masses are directing policy up through the Board rather than what we are accustomed to, where only the wealthiest investors hold influence.

    The more people that own shares the more diverse the set of owners. If ten million Americans own .000001% of Coca-Cola, together they own 10%. They have massive sway, assuming there is solidarity between them, they could even organize and put an activist on the Board with that kind of leverage. 10 out of 300 million, that is only 3% of the populace; they ought to find at least partisan solidarity.

    Fact is, it is easier to open a brokerage account and invest small amounts of money than ever. Only fifty years ago, a single market transaction would cost the equivalent of one week’s average median salary. Now it is free at a range of established brokers.

    I personally use Robin Hood. They offer exactly what I need: a good web-based interface with instant access to my deposits and fee-free trading, including cryptocurrencies. In future blogs I can dig into features within Robin Hood, such as stop and limit orders, fractional shares, and financial management tools.

    It’s not just about opposing a company’s practices, it is also about engaging with a company you believe in. I personally try only to purchase from companies that I care about. I hope my stocks are held in companies that are working on the solutions to climate change and social inequity. Whatever aspects about them I do not like, I feel better voicing that as a shareholder than just someone standing by.

    When you rent your housing, you’re throwing money wherever the person or company you rent from is throwing their money. They may be shareholders in companies you adamantly oppose. There are all kinds of externalities, social and environmental ramifications that we cannot see immediately in the production or consumption of a product or service, associated with our consumer behavior. I believe you should spend your money where you feel good about it, but only after you’ve funded your investments, and your investments should make you feel good.

    My next post will take you through how I evolved from chronically broke to constantly growing my assets. If you have more spare income than me, you’ll be wealthier than me in no time by following my advice.

    If you would like to support my personal finance content then you can join Robin Hood and hook us both up with a free stock.