Double Journey

I was having lunch with a former colleague from Microsoft. She was telling me how she was reading the book Rich Man Poor Dad and thought of me as she read it. In that book, Richard Kiyosaki describes how each job he took he took more for the experiences he would have and the lessons he could learn rather than the money he could earn from the job.

It is true. Each job I have taken I have taken with purpose. I have done this because I know that life is much more a marathon than a sprint. It is like my lesson on compound interest. Small sacrifices now can have a big impact down the road.

Now, that being said, I’ve been pretty lucky.  It’s not like any job I took forced me to live in a box and survive on Top Ramen.  But as I was considering whether or not to take a certain job, I definitely focused much more on the characteristics of the company and the job than on what my paycheck would look like.  This continues to pay off with each subsequent job I take as I’m very easily able to articulate why I took the job and what I gained from it.  This actually means I can generally get a job that paid me significantly more than what I made previously because I have had great experience and have a career with purpose.

So I am not advocating ever taking a significant pay cut just to get a job that gives you slightly better experience and learning opportunities.  Doing so has other bad side effects later on down the road.  But never ever make salary your primary concern.  Working to learn not earn will keep your career trajectory aimed very high.

I KNEW we had a housing bubble. On another blog, I called the top of the market in October of 2005. I was dead on in California. I was tempted to short the stocks of a few homebuilders and mortgage insurers but never did. I figured that Wall Street had to know that these businesses were in trouble and had already priced it into the stocks.

I KNEW that the Wii would take off. In fact, I told my friend Scott to buy Nintendo stock. I didn’t myself because I was too lazy to call my broker and place an order since Nintendo only trades on the Japanese exchanges. I knew how hard it was to get a Wii. People were snatching them up faster than they could be shelved, and I knew Nintendo had something special. I figured Wall Street knew too so, and I was lazy, so I did nothing. Stock doubled in a year.

I KNEW that Guitar Hero 3 was the must have item of the year. I was actually going to buy it a few weeks ago, and then Vivendi announced that it would purchase them. The stock jumped over 20% that day and hasn’t looked back.

There is the theory that the market always perfectly prices in all news to a stock. That’s a bunch of bull. Wall Street will often over react or under react to news. It’s up to you to figure out the real story and play things correctly. If you know deep down inside that the so-called-experts have it wrong, chances are, you are correct. There is a fantastic book by Peter Lynch called One Up On Wall Street where he talks about advantages that individual investors have on the street. One of the many advantages you have is that you see things at the ground level. Much easier for you to spot the trend starting than the analyst on Wall Street.

Happy New Year everybody!  I hope we have a great year going forward!

Wow, what a ride. I honestly didn’t think I would be in and out of this stock so quickly, but that’s what happens when you play in the small cap space. So overall, this was a pretty bad trade for me. Jamba opened higher but then traded down all day on pretty much no news, but the bears were firmly in control.

I actually didn’t check on the stock until it was down around $4.90 today. I should have sold there, but I was waiting for a better price. It didn’t happen. Like I predicted, as soon as it broke through its support it was straight downhill from there. Good to know I was right, but bad because I didn’t get out of the stock in time. Truth be told, I did not think that the stock would hit my stop loss point in one day, but it did. At $4.54, my stop loss executed, netting me a 10% loss in just under two days. Yikes! Lesson learned.

So that means I took a loss, including commissions of $243.42. Kind of painful.  Probably won’t trade rest of week and remain in cash.  I’m on my way down to California to start a new job.  Wish me luck.

Every once in a while, I’ll talk about something I learned along the way that has helped me build a pretty sizable nest egg at a relatively young age. So to start things off, I will give you my best tip. The secret to building wealth is to start building wealth.

I know what you are saying. What? Well the secret to building wealth is recursive. For all you non computer geeks, this basically means that the definition of something is contained within its own definition. As soon as your head stops spinning let me explain through my own personal story.

I wasn’t always on the path I am today. I started out of college with a good job that paid well. However, living in New York City, I had a lot of expenses. The two bedroom apartment I was renting was $3400 a month. My share of it was basically eating up half my paycheck. Somehow though, I managed to save some money and even put a little away in my 401K, almost $5000. After a year, I left my job and had to pay for my own move back to California, and that ate a big chunk of my savings. However, I still managed to keep enough for an emergency fund.

Over the course of the next few years, I was careful with my money, always remembering that sometimes, unexpected things like leaving your job and moving across the country can pop up and you need to be prepared. I still managed to max out my 401K every year and slowly but surely it was growing to quite a bit of money. As I became more successful in my career, I continued to see promotions and pay raises, but each time I kept my lifestyle pretty much the same. In fact, I began living more frugally. I’ll explain why.

The effect of getting more income and spending less money was VERY POSITIVE on my bank account. The higher I saw it go up, the more I wanted to see it go higher. The more money I got, the more interest I could earn from my savings account. As I started investing my money, I realized that the more money I had, the faster the whole pile would grow. This became almost addictive. I would find ways to save more and more money so I could funnel it toward these accounts. The power of compound interest is really displayed when you have a big bank account, and it just starts to snowball on itself. It almost becomes a game as you try to find more ways to save money or earn income to see the wealth grow.

So this is the best tip I can give. Just start trying to build wealth by any means you can. As you do it, you will find you really like it, and you will find other ways to increase your wealth. You will start getting into a feedback loop and you will soon realize that building wealth just becomes a habit. I now earn well over 2.5 times what I used to when I lived in NYC but I probably spend less money. All because I have become addicted to building wealth.

So one of the things I was thinking about doing was to buy some shares of E*Trade. I actually own shares in my regular portfolio, and have been getting KILLED lately. The stock has probably lost about 80% of it’s value over the last year or so. So why the heck would I want to continue with the pain?

Friday, a Citibank analyst came out and declared that there was a chance that E*Trade would have to file for bankruptcy because it had several bad loans, many tied to the subprime mess. The stock instantly went down 60% from its already low price. Now, It’s not that I don’t believe they are in a mess, but I thought the selling was a bit overdone. This blogger seems to agree with me. I was contemplating taking another, short-term position in the company, and wait for a dead-cat bounce. For those that aren’t that involved with stocks, you should think of this phenomenon as something that happens when a stock gets pummeled in a very short time. It tends to “bounce” back as people cover their short position (they sold the stock without owning it, and have to buy back shares, hopefully at a much lower price, to pay it back). I wanted to get a few percentage points and then get out, and I would have sold if the stock dipped another 7% or the very next day, whichever came first.

But I’m not quite set up to do this yet. I’m holding off trading stocks for another week or two. If I had taken a position in E*trade at $3.70, which I was planning on doing, and held on to it until right now (which I would sell) I would have made a tidy profit of almost 50%. I would have taken a position of $5,000, so that would have given me $2500 toward my goal. Oh well, it could have easily gone the other way.