Learning Through Failure in Investing

I have failed hundreds of times. Some notable examples since I started blogging: Janzen Gear (Part 1), most of my initial M.S. thesis research, running (constantly a mix of failure and success), unemployment, and my personal relationships. I am here tonight to add another to the list of failures: investing.

The stock market is a lot of fun, but as with many endeavors there is a learning curve and a difference between understanding what you are doing and understanding what you are doing. In Spanish "saber" is to know (informally) and "conocer" is to know (intimately). I wish English was as descriptive. So we begin with the story...

I read Joel Greenblatt's "Little Book that Beats the Market" about formula investing, and while I still think that the system works, I thought I could do better than his mutual funds with less than an hour of research. I scanned the stocks on the list and came up with several I was interested in investing. The one that formed my learning curve is Jiangbo Pharmaceuticals (JGBO). All of the financials that I saw looked good, the idea of a pharmaceutical company in China, where everything is exploding, sounded great. The numbers did not seem too good to be true, but they seemed the best compared to the other companies on the list. I was hooked. I bought 105 shares at $4.58. Including the commission that was $490.85.

Mistake #1: I bought stock in a company that I did not understand. I know nothing about pharmaceuticals, especially pharmaceuticals in China. A few days ago I mentioned that I traded USO (Oklahoma oil futures contracts) this summer. Oil I understand. By looking at charts and graphs and listening to the news I knew that when USO was around $30 (52 week low of $29.10), a 52 week low and at the end of summer when oil is the least expensive and after 3% of the US reserve was announced to be released, chances are very strong it would go up (it's at $38.92 tonight). Oil futures contracts in Oklahoma I understand; pharmaceuticals in China are a total mystery to me.

A few weeks later the CFO resigned effective immediately. When it comes to a company's financials you want the CFO to be a stand up, honest, long term person. The kind of person who notifies the board of directors months in advance of leaving the company. When a CFO leaves abruptly chances are that person realized that there is a financial problem at the company.

Mistake #2: When the CFO leaves abruptly, sell everything immediately! Even if you take a loss on it, at least you will probably still have some left. CFOs are not the kind of people you want dropping off the face of the Earth. I've never seen this "rule" written anywhere else, but after this experience I will not soon forget it. I would have only lost about $100 had I sold then.

A few weeks later Jiangbo Pharmaceuticals was investigated by the SEC and trading shares on Nasdaq was stopped. Several weeks after that the results were that there were major problems at the company and the stock was delisted from Nasdaq. Now the shares are traded over the counter on the "pink sheets". I waited until 2012 to sell my stock so that I could use the loss as a tax deduction. I sold the stock last week for $0.15 per share. After commissions that means I lost $485.05.

Lessons to take away:

1. Invest in what you understand.
2. If the CFO leaves abruptly, sell everything!
3. When investing in foreign companies that trade domestically, make sure you know what you are doing. As of now I am invested in nine stocks and ETFs. Only one is foreign and it is not in China.
4. Market capitalization of 2/3 net assets + insider buying + 52 week or 104 week low = worth looking into as a buying opportunity (it's probably a bet-the-house situation if you understand the company). That has nothing to do with everything above but it's genius. 

Lest people think I am throwing my money away, January 10th and 11th (yesterday and today) I "made" over $500 in unrealized gains. Particularly today I had a huge day. It was the first time I "made" more on the stock market than I did at work. I had four stocks that went up over 3.5% and one of them went up over 10%. By the way the markets were up about .9% Tuesday and about flat today. Which brings up the typical rich person problem, "should I quit my job to play the stock market full time?" No of course I won't, this year. 

Sophisticated...

Anytime someone uses this word, be wary. They use this word to describe the financial sector often and take it from me, you don't want to invest in anything sophisticated. When someone describes something as sophisticated it is code for "I don't entirely understand it." Since a good talker can convince you of the way it is without actually telling you how it works you are at risk of buying into an inflated facade. Be wary my friends.

The Banks! The Governments! ...The Farmers?

In 2008 banking got a makeover, at least we are told that. In 2011 governments are getting a makeover. It started in Egypt and Madison, Wisconsin before turning to budget issues in Greece, Italy, and the United States. We have not seen the end of this. In fact, when it comes to government budget recovery, we are at the very beginning of this cycle. It will possibly involve a decade or more of limited growth.

The question just popped in my head while I was eating dinner, 'who will fail next?' while I have no idea I am afraid that food will become the next crisis. There is already an official famine in Ethopia and Somolia. As China, India, Pakistan, and Indonesia continue to expand they will want more food and more energy intensive foods, like meat. Add that to an El Niño cycle and add some insect in the mix and before you know it food costs twice as much (wholesale) and all of the sudden 3/4 of the world is unsure of their next meal.

Obviously, I hope that there are no major failures for the next 70 years of my life, but given two big ones in three years, something else will probably come up.

Not to sounds paranoid, although I do consider myself paranoid about unemployment, I spend time running and reading thinking about the future and crazy scenarios such as massive famines. That amount of preperation helps me run races and climb mountains because I have already thought through most of the scenarios and all I have to do it react according to one of my scenarios instead of panic.

So I'm not hoarding canned food and weapons and gold, but I do have a garden... I guess I was brainwashed as a young kid. They said 'Be Prepared' and I listened. For the most part it is all mental. The key is not to panic I suppose. Those that sit down on the mountain sometimes never get up. Those that get dropped in a race during a surge either work their way back up, or go backwards. What you do on the rebound after the fall really does matter. Will you try again with your new knowledge or end the pursuit? Some pursuits are too valuable to me to stop regardless of the number of failures.

Here come More Layoffs

With the new legislation to cut spending rest assured that the government will be laying more people off. Many in the media (NPR) are saying that this most recent bill does not go far enough to pay off debt and reduce the future deficit. In fact, I read on NPR's iPhone app that one of China's major credit rating agency recently down graded the US to A from A+. That sounds good but it is a number of steps down from the AAA rating that all of the US rating agencies are giving the US. What is significant is that China owns something like 1.2 trillion of the US debt, so we might care what their rating agencies think if we care what our rating agencies think. Also, remember that US rating agencies gave subprime CDOs Investment grade ratings (A or higher) even after the bottom fell out. In other words, they screwed up in 2008, they could be doing it again.

Being unemployed was terrible. I felt as though no one would give me a chance. With the government set to cut more spending more people will be out of jobs. This means the government will not collect as much income tax or sales tax because unemployed people do not spend as much money.

It is so sad for me to read about this and listen to it. I don't understand why we cannot raise taxes. It seems to me that with 100 millions workers at an average salary of $50,000 a 1% tax increase across the board could fund 1 million jobs. I will take a 10% tax increase if it means 10 million people will be gainfully employed by the government clearing beetle kill or repairing roads or getting kids involved in positive programs.

I still think we need to cut spending but I don't think congress should be the ones to determine how it gets done. They don't know how any of the money gets spent. Perhaps we should ask the various departments to cut spending by a target amount without layoffs and see what they come up with. It worked in one medium size California city that was featured on NPR.

There are tens of millions of households with larger incomes than me, and I understand they have kids and other expenses I do not have, but they are getting so much money it makes sense to tax them (and me) more. I am in favor of some sort of equality among people because inequality breeds violence, and the thought of that terrifies me. I have been reading about the Rwanda genocide. What makes Rwanda so different than the United States? Sure there was a decades long process that led to those weeks of violence and there is a slew of cultural differences specifically relating to growing up in poverty, but they are humans just like us.

I learned last week that 1 million high school students drop out every year. They will surely be the first to be unemployed. It is all so sad. I am not sure why I read the news or study history. I feel like we (congress included) are just going to make similar mistakes to those made by others in the past and we expect different results. Perhaps there is a dumb.

Fixing the National Debt

Half a year ago when I started writing my unemployment book I looked into the national debt so that I could include several pages about it in my book. With the current battle in Washington I have to say it is no surprise we are where we are. Of everything I have listened to, seen, and read the most educational was a podcast segment of NPR Money. If you listen to one podcast this year, make it this one. The speaker/professor/author they have on is great! He is seriously the most educated person I have ever heard from on national debts.

While I highly recommend you listen to the podcast I'll summarize it using words they are too afraid to use in the show: the US is in a mess of trouble and there are going to be unhappy people for years and probably decades because of it. What demographic suffers more is left to be seen, but rest assured, there will be suffering. He gives several example including Romania in the 1980s and I think France in the early 1800s. I especially like how he refers to an event 200 years ago as if it is relevant and the hosts laugh. We like to think we are the smartest people that have ever existed and as soon as you think you are smart you are admitting that you are dumb. I despise the words smart and dumb for reasons too lengthy for this article. Suffice to say we are no greater than our ancestors although we have probably complicated things so it will take more of us to figure out how to fix things, job security for some I guess.

So in the interest of solving a problem I came up with my solution to the national debt:

1. Raise the debt ceiling. I don't care what the number is but give us one or two years to pass the bills necessary to make a permanent fix.

2. Raise taxes. How? Create another tax bracket for million or two million dollar earners and give then a higher tax rate yet. For the rest us raise the percentages, except for 10% earners because seriously those people have no money anyway.

3. Cut spending. This is the hard part because it will involve extremely detailed organization to do correctly otherwise we will end up with tens of thousands more lay off and the same inefficiencies. Possible areas for improvement: education because we spend more on students and score worse on tests than most of the rest of the developed world, military because we are overseas so much that it becomes a burden on Americans, and especially social security. The goverment needs to raise the minimum and maximum age limits in a hurry. People can start collecting when they are only what 62? That is ridiculous! I get beat on the bicycle every Wednesday by a 55 year old theology professor. I have trouble believing that in the younger 60s people are no longer physically or mentally capable of contributing. On the contrary, many of the best professors and one boss of mine were in that range and they were extremely good because they have a story and example for every situation. We young people are missing out on that experienced insight because people retire early. However, after all that I say I'll probably retire with my millions in my 50s as a hypocrite.

4. Put Americans back to work. How? For starters, log all the dead pine trees in Colorado and throughout the west, including Canada. We have something like more than 50 million acres of dead beetle kill trees waiting to burn and cost us hundreds of millions of dollars. Or we could be proactive and cut them down because the wood is beautiful and we will save millions of acres of topsoil and tens of thousands of homes from destruction. Plus, logger jobs can employ the less educated, who are hurt more by the recession than most. How else to employ Americans? Agriculture is key. The US has much of the best farm land in the world. We will probably never have to worry about food the way than Somolia and Rwanda have. I also think we should raise the price of food but that's a more lengthy topic. A third way to put Americans to work is offer them jobs at minimum wage instead of outsourcing factories to Asia.

So those are my thoughts in a nutshell. I don't have many answers so please leave a comment below if you have a better idea.

My New Trek Madone 6 Series

2011 Trek Madone 6 Series (50 cm)

There it is! Look at how light it is, it's like 17 pounds. Maybe less. The statistics:

• Frame: Madone 6 Series OCLV2 50cm H1 fit
• Fork: I'm not sure but there is a Bontrager and XXX on it
• Components: Sram Rival with a 39-53 crank and 23-11 cassette
• Wheels: Bontrager Race (I think) they were $300 less than the wheels Trek recomended
• Pedals: Look (I think)
• Saddle: Affinity RL
• That little white thing between the handle bars and the fork stem: 120mm (I'm pretty sure)
• Handlebars: aluminum
• Computer: the cheapest DuoTrap compatible
• Bottle Cages: Bontrager carbon (c'mon I had to get carbon cages too)

It flies! I mean Friday I did 46 miles at an average pace of 18.5 miles and hour and it was not flat. Tuesday night, after running a workout on the track I did a little over 25 miles in an hour and a half that is a 16.9 mph average that was very aerobic. I am noticing that I am going up hills in bigger gear ratios than ever before. I'm going up hills in 3rd and 4th gear. That might not sound impressive, but thats a solid 15-18 mph. Of course, when the hill get steep enough, I still have to get off the pedals in first gear. 

Why did I spend all that money on a bicycle, when I already had two? I have wanted a fast carbon bicycle for a long time. Why? Because going a little faster and getting uphill a little easier is thrilling to me and when I am on the bike, I usually spend a lot of time on the bike and those extra five pounds is a huge amount of weight to take off the bike. Especially considering the rotational moment of inertia and air resistance of my new wheels versus my old wheels. Plus, after being unemployed for so long I am have strong fear of being unemployed again and having a physical thing that I could either spend hours on or sell is valuable to me. In other words, if I have money I'll just pay down my debt, but if I have something physical I have some collateral that I will not sell, but I could if I had to.

Top speed so far is 46.5 mph and I was in top gear pedaling at the bottom of a steep hill. I'd like to take it over 50, but it might be hard to find that kind of hill around here.

Wait One Day

Warren Buffett apparently calculated that the money to spend on a haircut when he was young would be equal to $300,000 when he was older. His solution was fewer haircuts. Similarly, waiting to pay a bill so that you can earn interest in the meantime earns you money. By waiting even one day you can end up saving serious money. For example, at my bank I earn $0.01 per day on every $350.0 in my saving account. If we say that I spend $7 at the coffee shop on a latte and a muffin, if I do that twice a week, but I delay each purchase one day then I would earn $0.02 over the course of the year.

Where this gets better is the compound interest and frugality at the same time. What if I go a week without going to the coffee shop? I would save like $13. If I went four times the next week, I would spend all of the money I budgeted, but that $13 ($.50 cost of coffee at home) would earn a weeks worth of interest.

This all seems like small potatoes but if you are spending several hundred dollars per week on food, clothing, entertainment, and other things and getting any better than 1% interest (like 8-9% from international corporate bonds) then suddenly waiting a day or a week to go out sounds like a good idea. Of course, if you can go one day or one week without something, maybe you can go two weeks? If you can do that, then maybe a month. If you did not need that thing for a month, maybe you don't need it at all.

A Month Without Internet or Cable

Well, I did it, I went the month of May without a cable or even an Internet subscription. The results:

• Redbox: 10 rentals for a total of $10.17
• Coffee Shops: 2 visits (I may have missed a third) for a total of $10.52
• Best Buy: One season of Entourage and the Wall Street double pack for a total of $57.76
• iPhone usage of 1.6 GB of data, the most I have ever used by far

The result from this experiment is that I really do not miss access to the Internet that much. I miss it of course, but I still can not justify $55 a month for cable Internet.

My iPhone Data usage May 2010 to May 2011
(the month listed refers to last day in billing cycle, usually the 1st or 2nd day of the month)

The implications are that I do not plan to have cable for a long time, while I miss having quick access to the Internet, I have it on my phone, at work, at the public library, at the laundry mat, and at a number of coffee shops. The interesting thing is that I probably used my computer less since moving to Dubuque than I have in the whole time I have owned it. I suppose that is not surprising considering that I spend 8-9 hours a day in front of a computer at work. Sitting in front of the computer at home does not always seem like relaxing.

So the trend will continue. With the money that I save, I'll probably buy a down suit. No kidding.

I bought it...

Thursday I went to the bike shop to get my pedals and rear wheel. I was asking the nice manager some questions and over an hour later I had 20% down towards a new Trek Madone. Baaaghh! It will be two or three weeks before it gets here, but rest assured that I will write more and take pictures and list stats and talk about stuff.

Consumerism

I spent my Tuesday lunch break on the Trek Project One website building and pricing different bicycles. I have done that in the past, but this time I might actually buy something. As I consider buying a third bicycle, albeit far better than my other two, I feel a little evil. There are so many other things in the world I could spend my money on. Furthermore, I get excited by not spending money. I still don't have cable or Internet at my apartment. My preferred vehicle is a 1993 Toyota Previa with 270,000 miles on it.

It seems to me like a really nice bicycle is a waste while people around the world starve and die. I have a friend from college and he would say, "I never want to have any money." The meaning is that there are people in need who could use his money. It took me awhile to understand that, but it has made an impact on my life.

Related to the title, I overheard a conversation recently between two people complaining about the high price of insurance and taxes on "old" luxury cars, specifically the years 2002 and 2004. In some ways it was appalling and in more personal ways it was representative of my life and specifically buying a new bicycle.

Five months ago I was passing the year mark for unemployment. It is amazing how quickly the money seems to be changing me. Because now it is just a bicycle, that once I buy it I never have to pay more for it. Next year it's a car with gas, insurance, and taxes. Then it's a house. Then it's a pool in the backyard and a huge tv, a newer car, a second property, and an endless list of material junk.

On the other hand, my bicycle will contribute to dozens of peoples paycheck and employment, I will surely ride even more, and if regular use of my bicycles allows me to delay buying a car for a year or more, then it would be worth it. Plus Trek gives their frames a lifetime warranty, so basically this is a one time, until I either do Ironmans or am in my 40s, kind of purchase.

To Buy a New Bicycle

It may seem appalling or crazy that a month after buying a second bicycle I am talking about getting another one while I am still massively in debt and already have two that work (for the most part). I shall of course explain my thinking.

My road bicycle is a 1980s Miyata Professional with Shimano Dura-Ace crank and Campagnolo other components. I started riding it in high school after my dad traded a car for it when I was eight. In it's day it was the top of the line bike. My limited research years ago indicated that this particular model was ridden in the Olympics and Tour de France. It's hot stuff, but it's 22 pounds of unaerodynamic and flexible steel. People say it is not about the bike but I have been dropped going down hills and on moderate sprints by carbon bikes and I have to say, when seven locals drop me like I'm standing still and I'm a 2:34 marathoner, I feel I am at least in a little better shape than my bicycling performance shows.

I have been shopping for a top of the line road bicycle since at least the summer of 2007. I have put thousands of miles on my bike and I have no plans to ever get rid of it, but I want something that will allow me to go faster and in a race of some sort be competitive. Basically for the price of a used car I can get a brand new top of the line bicycle that has a frame that comes with a lifetime warranty. Let's see Ford do that.

So this isn't a whim, entirely. After four flats and a broken spoke in six days over maybe 120 miles I am a little frustrated. Secondly, no one drops me in an endurance sport that easily. I may be very aerobically strong, but I am not strong enough to keep up while on my 30 year old bike. Third, the whimsical part is that my uncle gave me a pair of aero bars last weekend, and I think they are the greatest thing. I plan on doing an Ironman or several when I get done with my more serious running and to be competitive you need a triathlon bike.

So as I browse the local offerings I see that about $2,500 gets a nice tri bike with most of the good features like carbon frame, internal cables, aero specific handle bars. However, on the road biking side you have to go up to about $3,200 to get the internal cables. I know it is just one ridiculous feature compared to the overall like frame material and choice of wheels, but I think it shoes the comparison between bicycles well. The problem is I already have a road bike, it just weights 22 pounds and is too flexible.

Then there is my general attitude of go big or switch hobbies which has a voice in my head telling me to shell out another $1,000 to get the next step up carbon frame, which I felt in the store and it is lighter. Because the truth is whatever I buy will thrill me on every ride, this summer. But what if next summer I get a little more serious and do more races and those 14 ounces of weights and extra flexibility slow me down noticeably compared to my competition. Then what do I do? Get another new bike?

Then there is the miser in my head which says thing like, 'if you save the $4,000 you could retire six months earlier or spend a month at the Trango Towers basecamp.' I have all sorts of loans and other financial goals that buying an expensive bike seems crazy. On the other hand, every year I am getting older. Now it means I am coming into my prime, but in 10-15 years I won't be getting faster. If there is ever a time to be using the best athletic equipment in my life it is now.

How is this going to play out? I don't know. I do know my current road bike is very nice and I enjoy it. My new cyclocross bike is great and I run errands on it probably four times per weeks or so, especially on the weekends. Finally, I am going for a test drive. Wednesday night the local bike shop is letting me take out a carbon mid grade (women's) bicycle for the weekly group ride. So we shall see how that goes.

I have not gotten around to writing about instant gratification versus delayed ultimate gratification yet, but any bike purchase at this point would fall into the instant category, which is often not the best category.

A Month Entirely Wireless

As I was searching for Internet service in Dubuque I was astounded at the prices. With only a one year commitment the price of Internet through the cable company is $55 per month. With cable television (including Starz and Cinemax) it was $100 per month. There is no way I am going to pay that kind of money so that I can sit on my couch and watch reruns. There are several other options I am entertaining. I get 1.5 Mbps 3G at my house, which is incredibly fast, the fastest I have ever measured on my phone. I might get a limited plan so that I can plug in a USB device and get Internet that way. Plus, I would be far more mobile than using a local wireless router. Secondly, there is the chance that one of my neighbors, who has a wireless signal that reaches my apartment (there are four, all encrypted) might be willing to let me use their connection for a small fee every month. Third, I might be able to bundle DSL with my cell phone bill and save money but I might as well get 3G for the speed that DSL has. Fourth, is a rather novel idea that I am going to try for the month of May, not pay for anything more than I already am.


I currently pay $30 a month for unlimited data plan on my iPhone 3G. While I have never used more than 500 Mb in the two and a half years that I have had it, I have kept the unlimited plan because when 4G (and I mean true 4G not HSPA+ or LTE) becomes available in a few years there will be no need for anything beside a phone. Netflix already allows video out connections from an iPhone 4 and iPad to a television. Of course when you can connect a wireless keyboard and monitor to your phone and use the phone processor and Internet connection for everything, there will be little need for average people to have computers, aside from their phones. Of course, while hardware and software people are on the ball, the wireless and cable companies are way behind the ball so the transition to fully wireless will probably involve whole bunch of legal problems.

In the spirit of experimentation and innovation, I have decided that for the month of May I will not pay for more Internet than on my cell phone, which I planned to pay anyway. In keeping with any value proposition, I am going to track of my Internet usage. AT&T meters my data so that will be easy to track. I typically go to coffee Saturday morning so I do not consider those $4 costs to be directly related to Internet usage, but I will be counting all coffee shop Internet uses. I will be getting a library card so that I can use the Internet there in the evenings, although I have to use their computers. I can also use the Internet at work, and they track usage as well so I will figure out how to check my usage there as well. Since I went to Redbox three times last week I am going to keep track of how many movies I rent or buy that I might have streamed from Netflix or Hulu. The goal is to see what volume of Internet I consume and if that is something I am comfortable with or not. In other words, if I miss Wikipedia, Facebook, and other websites or not.

As I thought about it more and more the thing that is likely to suffer the most is my blogging. Without my computer my ability to edit my posts will probably be a little limited. I will probably not be the most active emailer either, although I can still send and receive everything. Basically, every dollar I manage to save and invest now will be ten dollars by the time I will worry about retiring. So if I can save $100 a month that is like saving $1000 a month that I can use in 45 years. Alternatively I will be saving $100 that I can use to buy something more enjoyable than reruns.

Bear with me. I will still aim for four or five blog posts per week, although central to the entire blog theme is having new content to discuss, so no guarantees.

My 7 Year Old PowerBook G4 Computer

April marks seven years that I have owned my nice little laptop. In April 2004 I bought it as a graduation/college gift to myself. It was a good investment. For about $1,600 I have managed to get 84 months of use out of it, minus a few months I was away from electricity in the mountains. That comes to less than $20 a month. Considering that this little machine helped get me two engineering degrees including a master's degree, I think it did alright.

Seven Years Strong! (...and vainly checking my website stats)

The world has accelerated in that time so that programs are larger and my 768 megabytes of RAM is no longer able to speed through applications. The 1.33 gigahertz single core processor is quite slow and a 1x DVD burner leaves something to be desired. The little 12.1 inch screen reminds my back every so often that leaning over a tiny screen is not ideal.

Seven years and hardly any scratches!

I have gone through two hard drives as I toted my computer around campus in sleep mode. A mistake that I will never make again, fortunately we have flash memory available with no moving parts so we can bounce and twist without damaging new computers. I've taken this thing with me everywhere. In the fall of 2007 the battery kind of gave up and I have been limited to about 10 minutes since then, which is usually enough to find an outlet.

A year ago I was planning on getting rid of it, selling it to a friend. However, as I near it's end, I am having some trouble thinking about letting it totally go. I still have the box. I mean such a large portion of my life has been spent behind this thing. It is strange to think of not being able to open it and find a file of mine from four years ago that suddenly seems important. There is also the matter of computer software that I have that might not be transferable, thanks to engineering school.

Now that I am gainfully employed I am saving a little bit of money from each paycheck so that in four to six months I will be able to afford a new computer. I have already decided on the Macbook Air. Although, the processor is too slow now to last another seven years I am hoping that in the next few months they will come out with a refresh, which is likely considering that Intel recently released a new 17 watt sandy-bridge processor.

Seven years! When I say it like that I am astonished that I have been out of high school that long. High school was so influential on my personality. As I think about the future I think, where will I be when I am close to turning 32? Will I live that long? I must say, the last seven years have been amazing! If the next seven increase in excitement, as I feel they will, I can only dream of how well they will go.

One piece of advice for everyone, there is a reason I am using a seven year old computer and most people are not. I bought high quality with the goal of this computer lasting at least five years. Generally speaking, when you go with quality, you only have to shop once. That might apply to other aspects of life as well... Anyway, I am big on quality. I like things that last because I am unfortunately hard on most of my stuff. Plus, much of the energy cost of a computer is in the initial construction so a computer that lasts longer is more energy efficient and less damaging to the environment.

Everest vs. Lohtse

Well, the votes are in. The better value between Mt. Everest at $44k and Lohtse at $20k is Everest. It was a close vote seven to six. Interestingly that result mirrors my own feelings at this point very well.

The tallest is the tallest. Is that simple fact worth an extra $24,000? I happen to think so. That being said, I don't have the kind of money right now so perhaps my opinion will be different when I do have that kind of money. Everest and Lohtse share the same basecamp and camps 1, 2, and 3 along the route, at least on the Nepal side. In other words, for a 60 day expedition the difference between the two is probably about 30 hours.

The reason I ask is that when I was a little 18 year old I decided that I liked climbing mountains. I  had more or less taught myself how to use crampons and an ice axe. I had started reading climbing lore through some of the classics, such as Into Thin Air. One of the questions that often came up during my formative high school summers in the mountains was, "would you climb Mt. Everest?" I decided in the summer after I graduated high school 'yes, I would like to climb Mt. Everest.' Being a goal-orientated person who likes timelines because it allows me to break the project into smaller pieces I set the arbitrary date of ten years from then for me to go to Everest. That is 2014. This is 2011 and I have already missed out on the spring season this year, that leaves three chances for the spring season on Everest to meet my goal.

What is stopping me from doing it as low budget as possible, go-into-more-debt, and used climbing equipment? I want to give myself all reasonable safety advantages. I'm not planning on getting any frostbite and I will gladly pay another $160 for another pair of mittens if it means I get to keep my fingers. Additionally, mountaineering is a hobby of mine. I am an engineer. As long as my brain is intact I can do that. Mountaineering is dependent on my body as much as my mind. In other words, I want to engineer now. I also want to run because I can only run to my potential for about the next ten years in distances of a marathon or less while I can climb mountains well into my 50s and be competitive in ultra races into my 40s.

I do not think I have been quite as bold with my plans on the blog before, but this has been in my mind for some time and well, I'm shopping around right now. If I live that long (age 28) you can be assured that I will show up at Everest basecamp with my gear sometime between now and then.

To the question about oxygen some of you might be wondering. I plan to go without. I have a huge aerobic capacity and an incredibly efficient metabolism which should greatly help my ability at altitudes from 23,050-29,035 ft. Up to 23,050 ft. I know that I operate decently well. That being said, after spending more than 40 grand I will spend the extra 1-2 grand to ensure that high altitude porters (typically Sherpas) carry a few bottles high on the mountain so that if I hit the wall on summit day or even the day before I can start sucking Os from a bottle. Honestly, above 23,100 ft I am not sure what to expect. At 23,500 ft would I be a useless pile of bones, muscles, water, and down feathers? I don't think so, but I don't know for sure.

To the other question that some of you might be wondering, 'am I qualified?' Yes I totally am. I am relatively light on time spent at high altitude, but I have a night spent above 23,000 ft, which is more than is required by most outfitters. I also have more technical experience than many commercial climbers.

Finally, to the question a few of you might be thinking, 'how am I going to willfully take two months of work off and re-enter unemployment?' I have a few ideas, like leave of absence, going back to school, contract work, a second book, a speaking tour, or a new job. In other words, I'm not going until I am confident that I have an income source lined up for my return or at least half a year after my return.

I can read about what others have done, but I want to do it! Reading is not the same as doing it. Do you want to know what it is like to run the Wonderland Trail? Go run it! Go be adventurous! Yes, it will hurt sometimes, but you can handle it because you had what it takes to take the first step.

Economics Week: Globalization

It's kind of a big deal. Patagonia, one of the foremost leaders in sustainable production, created a webpage called the Footprint Chronicles, to detail the manufacturing of their products. If a company is open and willing to talk about their production line, what are the other companies that are not open and willing to share their production doing?

It is no secret that people in the United States are paid far more than our counterparts in Asia. Several times more in some cases. While the prices are also greatly elevated in this country, the fact remains the salary is high. Regarding low prices, while I was in Pakistan our High Altitude Porter asked me how much my Old Navy jeans cost and I said, "Not much, about $25." He was appalled because in Skardu nearly identical jeans would sell for $5-6.

With the recent union "event" here in Wisconsin the question has been asked "What direction are we headed?" The unions in this country have made huge strides against child labor, hours of work per week, bathroom breaks, and especially factory safety conditions. While most of those problems are behind us, what future battles are ahead that we do not know or understand? In other countries it is well known that working conditions, wages, hours, and child labor are relatively common. The United States has gotten where it is because about 100 years ago unions wanted to avoid getting killed at work. The unions may be a little more complicated now but the point remains the same, better working conditions and a larger share of the benefits.  Millions of people in Asia and other less developed parts of the world build products for US consumers and do not enjoy the standard of living that we enjoy.

I feel that ultimately, for the better, with the aid of mass instant communication the standard of living across the world will on average increase, although that may mean a decrease for us in the developed world. That being said in recent history the wealth of the richest has increased while the wealth of the "poor" has stayed the same. In short, we are moving closer to serfdom than away from it, but we are doing it with better sanitation, electricity, more education, infrastructure, and the ability to own more than in the past. More than one college drop-out is on the Forbes 400 list that probably employs highly educated doctors. The point of all this is that, now everyone can click on that list and see. There is no doubt about how well a few people are doing. The world can not hide from knowing about the richest and their follies or the poorest and their plight. Communication is not going fast yet, it is only accelerating.

By the way, it's April Fools Day, watch out.

CDO: Collateralized Debt Obligation

Well, isn't that a fun word? Collateralized! It means that the loan is backed with collateral, typically a house. CDOs are most of the reason that we are where we are economically. For an in depth understanding of CDOs start reading the CDO Wikipedia page and then read the references. For starters, let's call this the The Two Trillion Dollar Meltdown (and I'll offer another opportunity for you to buy an Amazon book).

$2 Trillion in Lost Money

The other figures that you see aside from CDOs are Asset-Backed Security (student loans, credit cards, car loans, etc), Commercial Mortgage-Backed Security (commercial mortgages for Target and Starbucks and the like), and Residential Mortgage-Backed Securities (your parents mortgage). All of these things are related, specifically the CDO was typically composed of MBS (either RMBS or CMBS). It was basically hundreds to tens of thousands of MBS bundled together. As long as the people were paying their mortgages, everything was fine. 

Then some people got greedy or "smart" and decided to split the CDOs based on the ability of the homeowners to pay, based on their credit score more or less. The advantage of this is that while the people are paying you are making more money on the sub-prime CDOs than the prime CDOs. Secondly, there is a little thing a called selling short, which means you borrow shares to sell then at a later date you buy those shares back and return them to the lender. In other words you make money when stock prices go down. With so many sub-prime CDOs available when the market started to go south just about anyone on Wall Street would probably have the insight to sell short on bad CDOs, even though other financial institutions. In other words, people got rich using CDOs and then by watching the market like a hawk, they  stayed rich while people across the county lost their homes and retirement savings. 

In short, when Warren Buffet says it's a bad investment, it probably is. 

The Fear of Unemployment

The first chapter in my new book is titled: "Unemployment Is Good". I realize that might be debatable to many people, but I believe it. A little bit of unemployment can go a long way toward changing a person. Unemployment made an impression on me that no other lesson or life experience ever has. Now that I am getting paid I appreciate the money so much more. There are other reasons unemployment is good which I won't cover in this post. They will all be in my book!

Since getting my paychecks I have been putting away half of my pretax and other fees income. In other words, somewhere around 2/3 of my actual paycheck has gone to my savings account. It is building rather rapidly. While there is a temptation to spend some money and buy something like a motorcycle, the truth is I am afraid of being unemployed again. That fear is still so strong that I have not bought anything over $100 since being employed for over two months. No 15 year old Laphroig, no new computer, no new cell phone, no new car, no new flat screen, no new iPad 2, or even a set of ice tools. All of the things a year and a half ago I planned to buy once I had a job seem immaterial now. I hope to just be able to pay my bills for the next year.

The fear of unemployment drives my purchases. The fear of unemployment drives my savings account up. I feel that I am taking a much more active role in lowering my expenses and raising my income than I did before I was unemployed. Although, Janzen Gear has not sold anything yet and my Amazon sales are one total sale for a commission to me of somewhat less than $0.50.

One of the benefits of this blog is that a number of times my friends have said something like, "Isaiah, I read your blog and... it's depressing sometimes." They are of course referring to my unemployment posts. While I hope that the general attitude here is far more positive now, I am happy to know that my experience can vicariously teach others who are still in school. I had no idea that I could possibly be unemployed. WPI is too good for that! Yet it happened. Now I know that it can happen to just about anyone. You are not protected entirely by the name of your school or your GPA or your patents or your software expertise.

While I fear future unemployment and I diligently plan for it, I do not worry. Whatever happens will happen. I am working now and will be for some time. With quite a bit of help from those who care about me I made it through unemployment once, I will be able to do it again, if I must.

Buy Amazon! Buy Through Me!

Many people buy things using Amazon.com. Their product selection continues to get larger and larger. What started out as a book store is now the World's largest online retailer and 16th most popular website over all. One of the things that has helped Amazon grow is the support it has in the online community. Many people, such as myself, participate in the affiliate program. That means that if you click on one of my Amazon product links you will get taken to their website and if you buy something I receive a small percentage of that sale. The nice thing is that as long as you don't close your browser, from my understanding, whatever you buy will be credited to my account. In other words I can advertise a Dan Brown book but after clicking the link you buy a J. K. Rowling book instead I still get a percentage of the sale.

This is my shameless plug for myself. I know that most of the people I know have bought something from Amazon at one point or another so I encourage you to buy from amazon after clicking on one of my links. You don't have to pay anything extra, and I get a small percentage of the sale.

Why should you spend the extra minute of your life to click through my website before buying something on Amazon? First, because this site does actually cost me a little bit of money. Due to coaching and DVD sales in 2010 I made money but we are about 10 weeks into 2011 and I haven't made a cent despite the largest rate of visitors yet. Second, buying Amazon products after clicking through my links is a way that you can support Learning to DO without spending any more money then you would have already. You spend the same amount of money and I make some money. Third, this website is free and not password protected. Unlike a book or newspaper, you get this information free. Buying a product at Amazon after clicking on one of my links is a way that you can say "Thank You" without much effort and requiring no extra money.

Perhaps you are interested in buying the Amazon Kindle Wireless Reading Device. Simply click on that link and then buy it! It is their number one selling product after all.Or perhaps you are interested in clicking on a picture. You can do that as well. By clicking on the picture or text below and then buying something.

If you are not into digital reading there are other options, such as books made from paper. For example perhaps you have not read the third Robert Langdon book, The Lost Symbol by Dan Brown. It sold over 15 million copies in hardcover, so you know that it wasn't a terrible read.

Or perhaps you are interested in the Acadamy Award winning film The King's Speech. I actually went to see it in theaters recently and it is a very good movie.

If you take pictures or video on anything other than your cell phone you probably need another SD flash memory card. Who doesn't need another one, right?

On the other hand Amazon sells many other products besides books, media and electronics. Perhaps you need to buy your sixth pair of Saucony Grid Fastwitch shoes.

More than likely you are interested in something else all together. That's fine, if you simply click on one of my links and buy anything without closing your browser in between I still get a few percent of the purchase.

If you read all the way to the bottom, thank you for listening. It is strange for me to ask people to buy something. I feel that this relationship (sharing the story of my learning) should not be built around money. Money comes and goes but friends and family will, hopefully, be there either way. It is similar for my readers and I. My goal with this website is to provide information so that some people will learn something that will help in their life, hopefully at the price of free for them. To that end, it does cost me money and if people are going to buy things on Amazon they might as well contribute a few percent of their purchase to me. Thank you again for reading and if you buy something, thank you even more.

The Life of a Contract Engineer: Week 7

Seven weeks! It is still surreal that I have the opportunity to go to work and get paid for doing something that I enjoy. I spent the majority of my week learning how to use HyperMesh, which is part of the HyperWorks finite element suite. This is the third finite element software that I have learned. First it took me a year (working part time) to understand Abaqus and DANTE, then it took me a month to understand ANSYS and in less than a week using HyperMesh I have made significant progress. I now feel more valuable as a finite element engineer than I ever did in graduate school. I just need CATIA and NASTRAN to round out my repertoire and I'll be more qualified than most of the tech support for all of those companies.

Secondly at work, I enjoy the people I work with. I think that is an important factor. I have never really been in a bad working situation, but I can imagine and I have heard stories. Even five minutes of socializing with my coworkers per day is a nice mental boost.

My running injury just took a ginormous (that is an actual word!) leap forward! I went to a massage therapist and had fingers and thumbs pressed into my knots to the point that I was in significant pain and the knots started to release. I continued to do my exercises and I even bought a foam roller so that I could work on rolling out my tight muscles. In total I ran about 77 miles including a 3.3 mile tempo at 5:54 pace and a 12 mile and 10 mile run at 6:55 and 6:50 pace respectively. Those are three very pleasing runs compared to the amount of pain that I was in for two weeks.

Foam Roller

In other news I started an account with mint.com at the recommendation of a friend who is traveling in Laos right now. It is pretty cool. It updates all of my account information every time that I log in so that I can see how my net worth or paying off my loans is going. I am worth negative tens of thousands of dollars. That's old news, but it's nice to see it change for the less negative. For me simply seeing the numbers helps me make the numbers a little less terrible to look at by applying money where it makes the most difference.

Additionally relating to money, I've done some reading about history and it is not that hard to make substantial profits in the stock market. From a mathematical point of view there are a number of quarterly published variables which indicate that certain stocks are worth more than the price that you have to pay for them. It's not physics, so you will not get the same reaction every time. However, it is statistics, and if you play the numbers in enough quantity for long enough, according to the history of the stock market, you will make money. I'll write more on that in the future.

I hit a deer with my van. It has a huge dent in it and I would take a picture except that it's dark out right now. I'll do a post about the six accidents I have had in the last nine years.

Finally, in news relating to the book I am writing, I passed 48,000 words and 100 pages this week. That's 100 pages of single spaced writing with only four pictures and four pages of contents and title stuff. I am very excited about how well that is going. Although, I don't have an agent, much less a publisher, and I have not done any speaking engagements yet. So I have a long way to go, but I feel I am on the right path. My goal is to have a rough draft finished in the next few weeks. I do not have too much more left to add. I am sure that things that I have written thus far could be a huge help to others in their early 20s tackling unemployment, underemployment and misemployment.

Oh and one more note along the investing lines, about a year ago I solicited investors for Janzen Gear. I had a few bites but did not reel in the kind of investor that I was looking for. I am thankful that I did not find an investor at that point in my life. I learned a lot about product costs and failure. The hangboards are a much better situation. I am able to fund the costs out of my own pocket, and thus will put all the profits back into my pocket, or rather into manufacturing more. This product has a much greater ability to generate profits from batch one (ten hangboards). The ice axe would require huge batches (hundreds and ideally thousands) and even lower profit margins (although not much lower) and required safety testing. I just did not understand all of those challenges a year ago, yet it makes a huge difference in business. Also, running this as my second job allows me to think small. I am not relying on Janzen Gear to pay my bills. It allows me to deal in smaller volumes with lower profits than the big boys. Which means a high value product for the price and the prestige of limited quantities.

Loan Payoff Parties

One of the questions that people ask when someone gets that first "adult" job is what you plan to buy with all of your newfound money. Aside from three books on Amazon, a rain jacket from REI, and a new pair of Saucony Fastwitch shoes I haven't really bought anything. The nice thing is I make enough money in a day and a half to afford all of that stuff yet I am on my fifth week.

I have obviously thought about all the stuff I want, or would at least enjoy having. However, after thinking about all that I might want and all of the debt that I already have for my education and vacations and patents that I have decided that I will reward myself with something every time I pay off a loan. I have 11 loans. I hope to pay the first one off by the end of March. The advantage of paying off a loan is that then my required minimum monthly payments will be much lower. So I will be able to pay off subsequent loans at a faster rate than I pay off the first loans. As of now just the interest on my loans is about what I earn after taxes in a month. That's 1/12 of my year spent paying interest! What about food, insurance, housing, gas, and the principle on that loan!

There is no guarantee that I will actually have a party every time I pay off a loan, but I am sure there will be a few along the way. I mean what better thing to celebrate that not being in debt? Of course it will probably take an entire week of work to pay for the final get out of debt party...

I am massively in debt. I would rather have $100 and no debt than to have $10,000 with $50,000 in debt. Alas, I am learning from this experience. I will forever view debt in a different light. Not as an entirely terrible thing, but I will view it with restraint in terms of what it allows me to afford immediately.