Financial Samurai 2010 Year In Review
I’m sad to see 2010 go because it has been one of the most fun years of my life. I’ve discovered new friends and found a comfortable work / life balance that has eluded me all decade until now. The one thing that’s so fun about blogging or journal writing is that you get to go through your archives and re-discover what you were thinking some time ago.
I’d like to go through some of the predictions and resolutions I made on December 31, 2009 and see how they turned out. I’ve gone ahead and pasted the meat of the December 31 post and highlighted the results in gray.
FIVE PREDICTIONS OF 2010 – MIXED RESULTS AND ONE SPOT ON
1) Inflation remains tame and therefore interest rates remain low. There’s really only one figure I check frequently, and that’s the US 10-year government treasury yield. The 10-year yield tells us so much: sentiment of the bond and stock market, inflation outlook, fear or greed, mortgage rate direction, and what foreigner’s are getting in return for funding our debt. The 10-yr yield will not breach 5% this year, and credit will therefore continue to be very cheap.
Result: Inflation is nonexistent as the Fed prints billions upon billions of dollars to counteract worries of deflation. The 10-year yield dipped to 2.3% and is now hovering around 3.3%. Money is incredibly cheap to borrow. Unfortunately, savings interest rates are horrible as a result.
2) The US dollar strengthens. Literally nobody agreed with the post “A Weak Dollar Doesn’t Matter Folks!” and that’s fine by me. Now you know why a weak dollar doesn’t matter, because I’m bullish on the dollar, and the weakness is only temporary! Look for the USD to strengthen against the Euro and the Yen in particular. Given the Yen will weaken to 95-100, I’m bullish on Japan as a macro trade as well. And no, I’m not biased because of the word Samurai!
Result: The US dollar has been surprisingly strong in light of all the QE2. The USD against the EURO has been solid thanks to European debt issues. The Yen has not depreciated surprisingly and is hovering around 85/$1.
3) The US markets do not double dip. Instead, they continue to rebound. Specifically, look for the S&P 500 to rise 13% to 1,265 and the Dow to 12,000. There is still hundreds of billions of dollars in money market funds which have missed this rally, and 2010 is when liquidity rushes into the markets. You don’t have to be too cute in this market recovery, since it is largely liquidity driven.
Result: The Dow and S&P 500 are up around 12% each, making this one of the most accurate forecasts on the street.
4) The most hyped IPO of the year will be Facebook, creating several new billionaires, and hundreds of new multi-millionaires in the San Francisco Bay Area. SF-based Twitter doesn’t go public, but instead, gets bought out with the richly valued stock of Facebook or another media titan. There’s no doubt once Facebook goes public, they will go on a buying spree, enriching even more innovative companies around the Bay Area. SF-based LinkedIn is the dark horse, with a current perceived market valuation of $1 billion. Seems pretty paltry compared to FB, and so I think they wait another year to ramp up more subscribers until analysts value the company closer to $2-3 billion. SF property prices continue ticking higher as new wealth seeks multi-million dollar homes, and dollars fall from the sky!
Result: Although Facebook did not go public, it might as well be with a private valuation of some $45 billion from just $20 billion at the beginning of the year. As a result, competitors such as Google have upped the war on talent stakes by giving their entire staff 10% raises at a cost of US$1 billion. Twitter stays private, as does LinkedIn and their values continue to grow to some $4 billion and $3 billion as well. SF property prices have remained very sticky and are resuming their upward trend with cheap money and the wealth effect from Facebook and other companies. Nobody needs to sell in SF, which creates a dearth of inventory.
5) The Samurai Fund outperforms the S&P 500 index by 300 basis points (3%)! The 15+ entries so far are wonderfully unique, and everybody has done a great job in putting their synopsis together. With controlled randomness in picking names, each team member has a critical roll in keeping abreast of their names and providing opinions on whether to add to their positions or reduce. Due to the outperformance, the Samurai Fund gets noticed by finance sites we never imagined would care about our tiny corner of the universe, and the team achieves fame!
Result: The Samurai Fund is up 18.8% YTD, outperforming the S&P 500 by 7%! We’ve blown away expectations simply by randomly picking stocks based on the permutations of our names and blogs. 18.8% up puts us in the top 5% of all funds. We’ve done absolutely zero work, and this just goes to show the randomness of it all. Given our massive outperformance, if we really had a $1 billion hedge fund to start with, each participant would have made $15 million in salary on average! I need to go pitch this performance to some major media outlets.
GOALS FOR 2010 – LOTS OF FAILURES
1) Make a million bucks. Yes, it’s a lofty goal that I’ve failed every year, but that doesn’t stop me from trying! The income can come from private equity investments, stock market, salary, rental income, and other, such as winning the World Series of Poker. Setting lofty goals forces the mind to constantly think of new ways of surviving, while motivating me to work hard everyday.
Result: Fail. Had a job offer that came close, but turned it down. Guess I love what I do in SF so much. Call me crazy but I truly believe after making a certain amount of money you are no happier. Side net income has blossomed to equal the average GDP per capita of Germany, but still remains a minor portion of overall income. It would be great to increase side income to 25% of total income by 2017. It’s funny how not blogging for money leads to money.
2) Win a tennis tournament. I got beat by a 60 year old (!), ex Davis cup player in the semi-finals of a tournament this year due to a right calf cramp. If I beat him, I would have won the tournament. Disappointing, because my opponent was about to keel over at 5-5 in the 2nd set and give up. It’s not good enough to have skill, and mental fortitude if your body can’t hold up. So really, winning the tennis tournament is a physical health resolution of eating right, working out, and staying injury free.
Result: Fail. Entered two tournaments and got to the semi-finals twice. Physical fitness let me down as I had a difficult time playing two consecutive matches at the same level. Very frustrating and will work harder on fitness for 2011, and my backhand.
3) Meet 36 new people, or 3 every month. It’s really a joy meeting new people, be it in person or online and hear their story. We can learn so much from others, no matter their background or age. I will keep a log of who I meet, and write 3 things I’ve learned and admire about each new person. The solution to “If I knew then, what I know now” is to simply seek people who’ve been where you are heading already and listen to them!
Result: Success. I’m not sure exactly how many new people I’ve met, but the Yakezie alone is 60 Members with 40 more in the wing. Meanwhile, I’ve met at least 25 new people in real life. I even met Leo Babauta from Zen Habits, a kind man with a fantastic site who I longed to meet when I first heard about his decision to move to San Francisco a year ago. There are three other people who really stand out and now I wonder how many friends you need to be happy?
4) Try and always see the good in others. In “Everything Is Rational, The Answer To All Things Irrational”, I highlight a more peaceful way of thinking that soothes my raging soul. It’s important to stop taking slights/rejections personally, and just keep having fun. It’s very easy to be overly critical of others and act like a meanie, which is not the way I want to live my life. We shouldn’t try and impose our will on others. Avoid associating with “black clouds,” those people who are naturally pessimistic and grumpy by nature!
Result: Ongoing. I continue to work on my patience while trying to help other people think for themselves. Every year I’m a little bit more relaxed and a little more mellow. I do not associate with black clouds and people who would rather complain than try harder. I’m very proud of the Yakezie Scholarship initiative we’ve created. To see a concept turn into reality is one of the most gratifying things. Please show your support and register and vote for your favorite.
5) Stay consistent, but not obsessive with this site. Any publisher will tell you that producing consistent content over the long run is hard. This is why I really admire all of you who have started a website, no matter how big or small, as well as those who comment regularly! It’s also important not to get addicted to blogging to the detriment of family, friends, and work. From 7am-7pm on weekdays my personal e-mail and Twitter account will continue to be off.
Guest post submissions are always welcome. And even if they are declined, know that someone will accept it. You can always publish on your own site too, like I plan to do for one of my rejected submissions from 3 months ago (too controversial they said)! There are no subscriber, comments, revenue goals for the site. The only thing I wish for is progress, my one word definition of happiness.
Result: Semi-success. For 52 consecutive weeks, I’ve been able to average 3.3 posts on Financial Samurai. As a result, readership and activity continues to grow. We’re talking growth of over 1,000 subscribers and 60,000 page views a month although I don’t keep track of the specific numbers. There’s been some really good guest posts that have straddled minimalism to becoming a Certified Financial Planner. I’m not addicted to blogging, but I very much enjoy the activity. I bought an iPhone this summer which allows me to send out the occasional tweet during the day and keep up to speed with blogging related e-mails. The launch of Yakezie.com forced my hand to get more involved, which is why I say semi-success because I don’t want to get too involved.
6) Put an acoustic album together of 10 songs I can play, sing and record. I’ve had my Martin Acoustic D-16 guitar for 10 years now, and it is in perfect shape because I don’t practice enough! Current songs on the list include: Black Bird by Paul McCartney, Every Rose Has Its Thorn by Poison, Five String Serenade and Fade Into You by Mazzy Star, First Day of My Life by Bright Eyes, Nothing Left to Lose by Matt Kearney, More Than Words by Extreme. Need three more!
Result: Fail. Recorded three four five songs. I recently recorded Paramore’s The Only Exception, but I’m disappointed in my vocals and strumming. It’s hard to sing a song that’s originally sung by a woman. I need to get some singing lessons and get out of my limited baritone range. A lot of work to do! Here are the other two: Name and Five String Serenade. Thanks to some supportive comments after this post, just recorded: First Day of My Life and Landslide.
7) Learn to cook three delicious dishes for each meal of the day and put together a menu. Breakfast is easy. Lunch a little bit harder, and dinner the hardest. A resolution I talked with my wife about two years ago since she was so gung ho about cooking then. Unfortunately, the enthusiasm sputtered out, so I’m going to do it on my own, and hopefully inspire her to make her own menu.
Result: Absolute non-starter. I made hardly any attempt at cooking at all. It’s just not in me. I’d rather go out to eat for the convenience, experience, and quality. I have begun to eat better and cut down my meat intake though.
8) Save at least 50% of my 2010 gross income and build the “Freedom Fund” to at least $200,000 by year end. You can consider the Freedom Fund as a net worth barometer since the inception of the site. The traditional net worth calculation is an illusion. Cash and cash flow are the only things that matters. Note: The goal for this particular fund is to reach $1 million five years after inception.
Result: Success on both counts. I saved more than 50% of my gross income due to a raise in January, no lifestyle inflation, and mortgage refinancing which lowered my payments for my primary and rental. Thank you Bernanke! I had a “Freedom Fund” tracker widget in the beginning, but found it somewhat obnoxious and distracting, hence took it down. I’m surprised I gave out a specific figure because I’m a fly-below-the-radar type of person. Who wants to know the details of some of my finances anyway? Boring! More interesting to look at other blogger’s net worth calculations and how they got there.
I’m pleased to see many predictions come true, which has also resulted in some decent wealth creation given I invested accordingly. As for my resolutions, it’s interesting to see so many failures. Earning a million bucks and winning a tennis tournament were admittedly stretch goals, however they were goals I failed to achieve nonetheless. I’ve discovered cooking doesn’t interest me one bit (just eating), but making music does so greatly. I’m most proud of the fact that I didn’t burn out blogging and in fact upped the ante with the launch of Yakezie.com.
Hopefully for those of you who’ve followed along all year, you’ve been able to broaden your thoughts on the multitude of subjects on this site. I also hope you’ve made a good amount of money by refinancing your mortgage this summer and going more aggressive into riskier asset classes thanks to so many positive anecdotes revealing a very strong recovery. Stay tuned for my predictions and resolutions for 2011!