Early Retirement Extreme

Update 1 – From the Windy City

Jacob — Sat, 31 Mar 2012 01:06:37 +0000

**Update on our budget near the end of this post**

If you read my last post a few months ago, you know that [and why] I decided to put a moratorium on blogging and instead decided to take up an interesting offer to go and do ‘rocket science’ as a quant in Chicago.

Let me tell you: Having access to all these trading tools, data, and computer infrastructure and spending the day developing financial models sure-as-hell beats discussing the exact meaning of the word “retirement” with some semantics-yahoo or having to see the “living in a van down by the river”-joke for the Nth time posted on some popular internet forum. Forsooth(<- I haven't used that word for a while), having a quad-monitor setup beats sitting with a calculator at home reading 10Qs and writing an occasional comment/post about it and potentially switching position to a new stock every 2-3 years. There's "reading and writing about airplanes and then there's getting a chance to fly them for real". I think I'm experiencing what extroverts refer to as fun-fun-fun. Here I hurry to say that my version of introvert fun-fun-fun involves something like the above; not lying face down in a pool in a Thai beach resort half-passed out from drinking too much beer after a particular masterful karaoke(*) impression. I'm more the type to lie face down on a keyboard after a particularly productive coding session.

(*) Karaoke --- a Japanese word that I think means something like "shamefully embarrassing".

Overall, changing track was a good decision.

Occasionally (maybe once a month or so) I get an email out of the blue (i.e. "Hi, I just discovered your blog ...") from someone who made some ERE- or YMOYL-like choices twenty or thirty years ago and who are still going strong. That is, they learned to live well without spending much money and then saved the rest to render them financially independent. Often these emails come with interesting stories about what said person has done. Anything from being a ski-guide to pictures of their home in the tropics, to living in a tent on Hawaii for a year, winning chess championships, going back to college, learning a new language, moving to other countries, studying the combined works of some philosopher, running a monthly marathon, to living on a boat.

We gotta keep in mind that 1) ERE is not rocket-science---any critically thinking person should be able to come up with the not-so-complicated concept that saving a much higher fraction of one's paycheck will allow one to retire (become financially independent of earned-income) much earlier than the default 10%; 2) For every writer telling his or her story there are 500-1500 non-writers out there independently doing what the author is writing about.

This should help some folks separate the message from the messenger. The idea that I should somehow be representative of living frugally and being financially independent and that everything about saving and investing money stands and falls with my personal decisions is therefore ridiculous. I'm a sample size of 1 out of 1500. (As any statistician will tell you, you can't conclude anything about the distribution from N=1.) Add to that the other dozen books that have been written over the past two decades and it suggests that there are 10000 people out there doing this or one in 30000 (I'm only counting Americans). This also explains why odds are low that you personally know someone who is FI/RE. However, much like the temperature in your backyard doesn't prove or disprove global warming, whether you personally know anyone who FI/RE'd doesn't prove or disprove the possibility of it. Math does that. Ask your CFP how the numbers work out.

The thing I've learned about writing/blogging is that some popularity is good [because you get to see some interesting people you otherwise wouldn't have met], but too much popularity is bad [because a lot of people you'd rather avoid get to see you]. For example, if you're living in the 16th century, discussing your round earth theory with fellow scientists is good. However, being publicly known as the round-earth guy will get you burned at the stake. In general, I don't think humanity has changed much since then. The life-lesson I've learned from this is to avoid politics or challenging the average person's assumptions. This is also why I don't really feel compelled---let's say, I’m rapidly giving up on the idea—to “save” [insert cause] anymore. Most if not all problems in the world today have economic or technological solutions which could be adopted if everybody just agreed to get it done. It’s just that those problems (e.g. starvation, war, species extinction, …) are not considered worthwhile by enough people.

However, with this experience I now know I’m not the one to get people to agree on what’s important. I’ll leave that to someone else who’s more skilled in salesmanship and politics. My sphere of competence is providing technical solutions, not psychological solutions, so I should stick to that.

Hopefully this lesson will stick.

So I guess I’ll just do what most people do: outsource the job to charity rather than personally suffer the abuse that comes with doing politics.

Some of you might be interested in how our budget has changed moving to Chicago.

Three words: Reverse sticker shock.

Health insurance dropped from $99/month to $85/month. I’m still using an HDHP/HSA for now. As has been discussed here many times before (yet a woefully large number of people still seem ignorant of this kind of insurance), the HDHP/HSA solution is ideal for a healthy person with massive (six figure) financial means. The deductible on those plans is typically $5000/year. This means that should you get cancer or something equally serious which will max out your entire deductible year after year (that is, you’re REALLY REALLY sick and likely to die), even a mere $100k will still last two decades.

Note: That we’ll switch to corporate (tax-subsidized) health insurance once I qualify. Unlike the last one, this company actually provides spousal coverage which is cheaper than two HDHP/HSAs.

RV insurance obviously fell away. The car insurance dropped in price as well—drivers in Chicago might be crazy but they’re apparently not as bad as the Californians. Gas is slightly cheaper, but the car is rarely driven anymore. We’ll probably sell it in a couple of months.

Food is cheaper.

The cheapest rent in Chicago starts at $600/month w/o utilities. It’s practically impossible to find anything under this(*). We’re at $875 in a 1BD apartment with heat and water included. With more time we could probably have scored one of the cheaper units—that is the cost of ignorance/not living in the area/having to find something quick (weighed against the higher cost of temporary living); we might move into something better (less expensive!) next year. Gas and electricity barely comes out at just a little bit over the connection fee. So housing costs have increased by roughly $300 total or $150/month per person.

(*) However, housing is cheap compared to the other places we’ve been looking (Oregon and New Hampshire, FYI). Non-fixer-uppers in Chicago proper seem to start at $125 with fixer uppers around $75k. Reduce by $25k if you’re in the burbs. This is certainly worth considering. We’d just pay cash.

Sports have been reduced to $0 whereas subway (my ticket to daily entertainment) has increased from $0 to $90 so that’s a wash. I should start biking soon.

So to be very conservative, my budget has increased by about $100/month standing at about $650-700/month.

Seeing as the market recently went up [to a point I now consider overvalued or bubbleishly bullish with analysts calling for low forward P/Es despite profit margins at a historical highs---shouldn't they know better?!], my withdrawal rate is still under 2.5%.

This means I can easily eat whatever increases in health insurance that may come along as I get older.

Actually, if we combined the household savings (as many more traditionally inclined (read: older than 50) folks seem to insist on), both DW and I would be FI now. DW is thus spending some time figuring out what she wants to do in terms of career, making the right choice, etc.

I’ll write a new update if/when something interesting happens …

(Keep your eyes on the forum for possible meet-ups around the country in the future. There’s one in LA tomorrow.)

A tale of three species

Jacob — Fri, 02 Dec 2011 00:45:47 +0000

Once upon a time in a galaxy far far away there was a strange planet upon which lived three different kinds of creatures, bulls, bears, and sheeple. The bulls were eternally optimistic risk-takers and speculators, always willing to strike a quick a deal, forever living in the present, and sometimes borrowing to increase their standard of living. The bears, on the other hand, were always pessimistic, never believing in the lofty promises of the bulls and generally thinking that things would turn out for the worse. The bears liked to call themselves realists preferring a steady paycheck and building up their nest eggs for their long hibernation.
The sheeple were the most exciting. They never had any opinions of their own. Instead they pretended to be either bulls or bears depending on the fashion of the season. Sometimes they wanted to speculate and sometimes they wanted to save all their money. Being more unpredictable they were the source of endless analysis and statistical forecasts and backcasts which was kinda boring, but hey, it’s a living. Contrary to another strange planet where one species eventually managed to eradicate all its competitors, the bulls, the bears, and the sheeple lived in a dynamic balance being divided into three almost equally large groups.

And so it came to be that some of the sheeple who had for a long time listened to the bears and learned to hoard their possessions noticed a group of bulls that after having built new haymaking factories seemed to enjoy plenty of hay, always chewing the cud, and also driving convertibles. As time passed, the last of the few bulls that sometimes fraternized with the bears also dipped into savings or borrowed money and built their own factories, and soon they too were driving convertibles and John Deere tractors as well (imported from a strange planet in a galaxy far far away). This lead to a growing demand for goods and increasing interest rates and the economy expanded.

After a generation of extraordinary increases in living standards, many sheeple also started getting into the new spirit of things and building their own factories so that they too could partake in the party. Previous hardships were forgotten, and these sheeple now believed along with the bulls that progress would last forever. It was a new era and soon everybody would own their own green tractor, yo!

As more sheeple joined the party this substantially increased the demand for credit. The bears which had plenty of credit due to their boring way of life obliged to lend their money out. While they would not speculate in stocks they were willing to lend at lower interest rates while new speculators as well as old speculators were expanding productive capacity at a rampant rate building factories, houses, cars, boats, and bridges to anywhere and nowhere.
At the same time the growing amount of money circulating in the system were driving up prices of fuel, corn, other raw materials and agricultural products, especially hay, and also green paint. Many, even some bears (well, not officially), believed that this would continue forever. However, the bears, being pessimistic as always, were focusing on the increasing cost of raw materials, the bulls were talking up a new era in capital expansion, while the sheeple just enjoyed their green tractors.
What nobody noticed was that real interest rates were dropping like a rock as inflation drove commodity prices up. This left less money for doing business while at the same time leaving less money in the pockets of consumers to buy hay. And thus the consumers could no longer afford all the capital goods from the factories.

Read part II here

This post was part of The Carnival of Financial Planning November 8th edition

Originally posted 2008-10-30 06:50:58.

Budget reduction survey results

Jacob — Fri, 02 Dec 2011 00:45:46 +0000

Here are the results, in a graph, showing which budget categories, responders have the biggest problems reducing. A few days after posting the survey, I realized that the question was a bit ambiguously phrased. For example, housing costs may be hard to reduce further because they have already been significantly reduced (why athletes will lose any fitness contest based on relative weight loss) or they may be hard to reduce because of some inherent quality, e.g. the unavailability of inexpensive housing.

The results are given below. I was not surprised that housing cost came in as #1. In the past, especially in the past decade, housing has been promoted as a sure-fire speculation. Real estate prices never go down. Buy as much house as you can afford. Over the past 4 decades, housing sizes have gone up radically. It is not surprising that people then a) find themselves with too much space and b) unable to find smaller places. It is not impossible though as this exercise shows. I urge you to go through it even if you have no intention of moving; just to prove a point.

One thing that did surprise me is that people have their stuff under control. We have no conspicuous consumption of gadgets and consumer junk. Does that mean that people are not living in large spaces because they need space to store everything? I used to think this was a primary problem: “I can’t move into something smaller, because my footprint is too large” or “I need to move into something bigger, because I’m running out of space”.

The biggest surprise to me was the eating out category. Wow! This is a bigger problem than car payments and health insurance which I had guessed would be on third and second respectively. I hate eating out, so I have no problem controlling it. It is interesting how eating out generally means eating less healthy (a cheap way of making things taste good is loading them up with salt and fat/oil) which in turn drives up health insurance costs in the long run. It is interesting to note that some of the biggest companies in the US are drug companies and junk food companies. It is a good investment strategy: making people sick and then alleviating their symptoms. But please try not to be a victim of it. Then, of course, there is the social aspect of eating out. This is a cultural phenomena. I should probably reserve a blog post for alternatives to eating when hanging out with other people.

The biggest surprise was transportation coming in at #4. Either everybody walks and rides a bike or the expensive car, accounting for around 20% of the average budget or $1,000,000 extra in retirement for someone who works their entire life, is considered nonnegotiable. Or you all drive 15+ year old cars.

Originally posted 2010-06-09 10:10:25.

The independence of money

Jacob — Fri, 02 Dec 2011 00:45:45 +0000

I had a minor revelation while reading through George Simmel’s The Philosophy of Money (*warning*: heavy reading).

You depend on other people in order to spend money.

This means, that money has no value outside a social system.

In a mature consumer oriented society it is usually taken for granted that

The customer is always right.
The customer is entitled to spend his money.

However, these are not necessarily true. One only needs to go as far as the price of a glass of water in a desert. It will likely be quite expensive in the first place—I remember back when I hiked (climbing would be an exaggeration) up Mt Fuji about a decade ago that the price of water sold at the way stations would increase in price the higher you got up because it all had to be carried up—but if I’m parched and dying of thirst, I might not sell at any price. Or to give a more realistic example. The guy next to you drops to the floor from a heart attack. He has $5000 to pay for the ambulance ride; however, it won’t be here for the next 30 minutes. Do you know CPR? (You can keep someone from going braindead for up to an hour this way.)

This leads to the interesting risk of what would happen if consumer culture would change. I may have a thousand bucks to wave around, but what if nobody will take it? What if nobody is willing to sell? What if there are no sellers?

I therefore think that despite how we’ve been trained by our culture that money is never the only answer. To wit, more money will never completely solve the problem of safety, convenience, and comfort.

I have actually observed that the more money one tends to have and the more one spends, the less resourceful one is. It makes sense.

When it comes to “financial independence” I think I’ve always focused more on the independence side than the financial side. In most cases, my answer is to “become more independent”, not “get more finances”. As a result, my need for the financial side has diminished. Consequently, I don’t worry too much about the finances as much as I worry about my independence. While money is fickle, independence is much harder to take away. Thus I urge you to reconsider “your money”. Is it truly and asset or does your relation to it actually create a “I’m so rich, I don’t need to know anything”-liability?

A quick measure of your independence is simply to stop transacting in money for a week. Just pretend nobody would take your money. How would you fare? Alternative scenario: Pretend that only a few people would take your money, say the government/landlord, the utility company, and the grocer. How would that work out? No need to run a real experiment, a thought experiment will suffice.

Such an experiment would reveal how many resources you have beyond money. This is actually your true wealth. I can give you a boat example. I race on two boats. One is almost exclusively coastal races. We’re never more than 30 minutes from shore. The other one is an ocean racer, where we’re sometimes hours from land. On the first boat, we carry almost no spares. If a shackle snaps, the sailing is over, we motor in and the boat yard fix it. On the second boat, spare parts are carried and solutions are improvised. The first boat is “financial” and the second boat is “independent”. The two different strategies are chosen because the inshore boat can leave the spare parts at the dock and thus reduce its weight and be faster. The offshore boat can’t risk this strategy.

Originally posted 2011-02-08 10:16:05.

Are we qualitatively different?

Jacob — Fri, 02 Dec 2011 00:45:44 +0000

If there is anything this country enjoys, it’s measuring things by numbers and then comparing numbers. We divide people into percentile according to net worth, credit score, GPA, GDP, IQ, etc. with the implicit assumption that it is possible to understand the entire scale simply by multiplying by a number. For instance, someone spending twice as much must live twice as well or someone with twice the IQ must be twice as smart.

However, all of these numbers are a function of something that is very complex and nonlinear. Therefore it makes no sense to compare two numbers which are very different. While it is possible to compare the expense level of persons A and B, say $40,000 and $39,000, respectively, and conclude that person B is slightly better with money than person A, it is impossible to compare A and B to person C who only spends $20,000. Here person C would live qualitatively different and make qualitatively different choices. For instance, A and B might have two cars each and here B would be driving a slightly more fuel efficient model, whereas C would not be driving a crappy car. More likely, he won’t be driving a car at all relying on other means of transportation. Hence it is impossible to make any conclusions merely based on comparing numbers.

So how do we compare?

When two things are scaled different, one usually builds ratios. Nobody but an absolute rookie would consider a stock priced at $30 to be twice as expensive as a stock priced at $15, say. No, the ticker price must be scaled by some value. Earnings per share is a very popular scaling factor. Suppose that the higher price stock has an EPS of $4, while the lower priced stock has an EPS of $1. Then the P/E ratios are 30/4=7.5 and 15/1=15 respectively. All other things being equal, the former is the least expensive. Stocks with high P/E values are called growth stocks and stocks with low P/E values are called value stocks.

If we go back to the car example, there are various ways to build a ratio (making up ratios seems to be a primary occupation of stock analysts by the way). We could divide by the number of cars. This would mean that person C would have a ratio of infinity. We could divide by the distance travelled giving some indications of mileage costs or we could divide by the time spent on transport. One or more of those ratios would show a substantial difference.

This is interesting, when one is comparing budgets like frugal vs frugal or when comparing food expenses. It is very likely possible to establish several classes of lifestyles. Comparisons should then be done within a class. For example, it does not require a genius to establish that all value stocks by definition are less expensive than growth stocks. But what about frugal lifestyles? Do some people exhibit a qualitatively different form of frugality. My answer is yes. I have a hard time using frugal tips and suggestions from most personal finance blogs, because they are out of my league. I simply can’t afford to follow their advice

In a future post I will hopefully have been able to develop some ways of classifying the different personal finance setups. Until then any suggestion is welcome.

Originally posted 2008-09-05 07:33:12.

Stoicism vs (Zen) Buddhism — preliminary conclusions

Jacob — Fri, 02 Dec 2011 00:45:43 +0000

I am currently looking into both in more detail to derive fortitude in the face of the permeating growth/consumerism mentality.

Stoicism and Zen Buddhism are very similar. They both try to deal with the problems of the ego. Conversely, consumerism is all about gratifying the ego.

I don’t think I’m qualified to comment in detail–however…

Zen Buddhism and Bud? eliminate the ego through “practice.” This practice can take the form of meditation or detailed repetition of, say, martial arts techniques or brush strokes. The goal is to reach the state of no-mind, also called enlightenment.

I find it interesting that one can replace “upgrading” and “acquisition” as the meaning of life with the act of “practice.” Of course, in some sense one can think of going to work as practice. What’s important, however, is the intention behind the practice. Just going to work or even practicing by going through the motions is not going to do anything. In practicing, one must strive for that one perfect move—I think “filing a form perfectly” does count in some sense.

Applying this concept, which in business is called Kaizen, is probably also why the Japanese car industry creamed the competition. It is also a good way to live–or at least it gives you an excuse to indulge your inner perfectionist.

Stoicism eliminates the ego through active rationality. It is not as time-consuming. I don’t think this can lead to the no-mind state, but I do think it can more easily render ego gratification less relevant. Stoicism seems to be quite appealing to the INTJ mindset. This may be because emotional appeal and external accumulation or status-by-title/status-by-stuff hold little natural value to the INTJ, so they are easy to replace with another framework. In fact, it only requires a hint–such as this blog–to do so.

The key difference between Zen Buddhism and Stoicism seems to be whether rationalization or the intellect is embraced or rejected. A student of Zen will study koans with the objective of eventually realizing that trying to rationalize an intellectual answer is futile. Conversely, a student of Stoicism will study logic to fine-tune his intellect.

I think that usually when two different “schools” of opinion or thought seem to achieve the same results or success but differ on a key issue, then that issue is actually not very “key” at all.

I’ve been pondering this for some weeks now. I wish I could expound on it in more detail, but this is what I have for now.

If you want to “study along,” A Man in Full by Tom Wolfe is a story in which two characters become stoic. You need to get to page 300 before anything relevant to this happens, then a long break, and finally some more development around page 650. I read that book after reading A Guide to The Good Life as referred to in the forums. Next I’m going to read The Stoics.

I don’t have any good references for Zen Buddhism. I have focused more on Bud?, ~~not having the patience/time for extended meditation~~being more of an active person. My favorite Bud? book is Budo Mind and Body. It is a very quick read and I try to read it every so often to reinforce my training and stay serious. This book also contains a very good bibliography of related titles complete with detailed descriptions.

Originally posted 2010-08-31 20:45:24.

What should my savings rate be?

Jacob — Fri, 02 Dec 2011 00:45:42 +0000

Most people (especially financial planners and pf bloggers) make the idea of retirement savings much too complicated talking about index funds, 401ks, and compound returns. Many people blank out and simply follow the well-intended advice without questioning these experts. However, it is really not that difficult.

The quintessence of saving is to spend the money while not working. Thus if you work for a month and save half your income, you can take the next month off. That should be obvious. So …

If you save 5% if your income, you can take 1 year off every time you work 19 years.

If you save 10% of your income, you can take 1 year off every time you work 9 years.

If you save 20% of your income, you can take 1 year off every time you work 4 years.

If you save 30% of your income, you can take 1 year off every time you work 2 years and 4 months.

If you save 40% of your income, you can take 1 year off every time you work 1 years and 6 months.

If you save 50% of your income, you can take 1 year off every time you work 1 year.

If you save 60% of your income, you can take 1 year and 6 months off every time you work 1 year.

If you save 70% of your income, you can take 2 years and 4 months off every time you work 1 year.

If you save 80% of your income, you can take 4 years off every time you work 1 year.

If you save 90% of your income, you can take 9 years off every time you work 1 year.

Interesting, indeed! Of course normal retirement plans use savings rates less than 20% and depend on something called the “magic of compound interest”. Now there is nothing magic about compound interest, which is simply exponential growth, but there certainly is a great deal of magic associated with determining the input parameters of investment returns and inflation. These input parameters, particularly when extrapolated over large time intervals (anything more than 10 years), crucially determine the end results.

Now this kind of magic is good in theory, but sometimes it is difficult to implement in practice. Capital assets (aka tools, incidentally, you should really click on that link and read that post if you have not done so already) will give superior returns if but only if the assets are purchased at a good price and only if the assets actually improve efficiency. It is easy to find examples of investments that were purchased for much more than their worth (are you paying too much for the in my opinion totally overhyped index funds? You probably are. How do you know? If the P/E of the index is higher than 18, 1.5 times the generational average, you definitely are! Currently, the value is around 17 which corresponds to an earnings yield of 5.8%. This means that future returns are not going to be as impressive as historical returns. Another problem is the reigning economical philosophy. What is the purpose of a company? Is it only to maximize shareholder value? The shareholders certainly think so. But what about the company’s effect on the workers, the consumers and the nation as a whole. If those values change, returns will change.

Therefore you gotta ask yourself a question: How much of your retirement strategy is based on things, like your savings rate, which you can control, and how much of your strategy is based on things, like the future return and inflation rates, which nobody know and which are out of your control?

Originally posted 2008-09-11 06:53:16.

Small cap value investing

Jacob — Fri, 02 Dec 2011 00:45:41 +0000

Today Early Retirement Extreme presents a guest post by Saj Karsan from Barel Karsan that introduces the concept of hands-on value investing in the small cap universe. I use similar strategies and Barel Karsan is one of the few blogs I read daily. If you want to watch value investing in action, you should subscribe to their RSS feed.

On the road to early retirement, one of the most important things you must do is to ensure that your savings earn a decent rate of return(*). Achieving better returns is easy to say, but how are you supposed to achieve it? It won’t be by pouring your hard-earned savings into the day’s hottest investment (oil today, housing yesterday, tech stocks the day before). Participants in these “hot” markets overpay for these issues, and thereby incur downside risk. Better returns won’t come from mutual funds either, which are known to underperform the market thanks to their fees and short-term herd mentalities, as discussed here. Instead, you’re going to have to earn your returns just like you earn your salary from working and just like you earn your savings from cutting expenses.

To illustrate, let me use an example. If you knew of a company that was for sale for $25 million, but had inventory and accounts receivable worth over $80 million, and total liabilities of just $40 million, would you be interested? You would be buying $40 million of liquid assets for $25 million…but who has $25 million lying around? Fortunately, the stock market sells you much smaller chunks of these types of companies, but the ratio of what you’re going to own to what you have to pay is just the same!

In fact, the stock market contains a plethora of small cap companies that no analysts follow and that no institutions hold…these small stocks are just too tiny for paid analysts and large funds to pay attention to. As a result, for the prudent investor who is willing to look for the handful of gems among these issues (and finding these do take effort, for such blatant mispricings are few and far between), the promise of better investment returns along with downside risk protection holds true.

At Barel Karsan, we try to find companies worth $1 that sell for 50 cents (see here for one such example). We identify such companies, we discuss them, and we hold onto them until the market recognizes their true value. This investment strategy has been practiced by Warren Buffett, Ben Graham, and countless other value investors and has served them all well. It can do the same for you.

(*) A 1 percentage point move in your rate of return can have a monumental effect on your savings over a period of several years. For example, $100,000 becomes $760,000 after 30 years at 7%, but runs over $1 million at 8%.

Much thanks to JH for the donation.

Originally posted 2008-09-15 00:54:48.

On nose blowing

Jacob — Fri, 02 Dec 2011 00:45:40 +0000

Kudos to the marketing people of Kimberly-Clark, the company that makes Kleenex. They somehow managed to convince all of us (by which I mean you guys, not me) that blowing your nose in a disposable piece of paper rather than a handkerchief is the proper way to dispose of snot.

Of course this provides a steady source of income for the company and a steady sink of expenses for everybody who haven’t learned the art of the snot rocket or consider snot rockets a breach of etiquette in a corporate environment, well, I guess that goes for all of us. Therefore I use a handkerchief. A handkerchief is, in case you don’t know it, a piece of cloth that is approximately 10 by 10 inches. For further details ask any old person over the age of 60.

Handkerchiefs are convenient and fit nicely in a pocket unlike boxes of kleenex which are somewhat uncomfortable and unsightly when stuffed into a front pocket. In addition I can easily blow through a kleenex whereas I have yet to perform the same demonstration of nostril directed lung power on a handkerchief. Another consideration is that the use of kleenex necessitates access to a trash can. Otherwise the snot soaked kleenex has to go into the pocket and fishing them out again in their semi soaked state is not nearly as pleasant as fishing out a used but dry handkerchief.

Getting around to costs. Handkerchiefs lasts a long time. The reason is that they can be reused – what a concept – and washed whereas the same is not the case for kleenex. This fact apparently escapes DW as she still leaves kleenex in her jeans pockets presumably for me to wash from time to time, hmm

The goods news is that unlike cleats, which make your shoe soles last longer, it is still possible to buy handkerchiefs in stores. I prefer my handkerchiefs to be white/light, solid and non-embroidered. Embroidery irritates the nose and does not absorb well and colors don’t do well when washed on warm or hot.

Apparently I am not the only one who has been blogging about Kleenex lately. Check out AllFinancialMatters. I think there’s a Kleenex meme going around.

Originally posted 2007-12-19 02:22:00.

Buying the best from the outset

Jacob — Fri, 02 Dec 2011 00:45:39 +0000

When delving into a new endeavor (house owner, car, sport, computer, … ) it is often recommended to buy a “beginner” version or a “starter unit”. The idea, as it goes, is to see if one is “really” into this new activity before committing a lot of money. Now, ab initio this sounds a good idea, except that it is an expensive thing regardless. There should be better ways to figure this out. The best way I have found is to start with units that cost time or commitment rather than money.

For instance, it very common to decide to get in shape and then order/buy some (cheap) exercise gadget. However, poor equipment rarely brings satisfaction. Instead what I do is to set a trigger in the form of commitment. For exercise, I would say, do not buy anything until you can run 5k straight, do 10 pull ups or 20 push ups or whatever you consider reasonable. This should be something that will take a month’s work to accomplish. After that point I would say commitment has been demonstrated and a purchase can be made.

At this point I would buy the best equipment I could ever see myself using. For instance, with the bicycle, there would be little difference for me between buying a $3000 bike and a $1500 bike. Even if I had a million bucks, I would not have the skills and strength to take advantage of the $3000 bike. The difference between a $750 bike and a $1500 bike would be equipment limited though. Therefore I would get the $1500 bike as the first bike although if you are only going to use it sporadically, I would consider needs vs wants and go a cheaper one, like this $1.38 mountain bike.

This avoids the upgrade malaise as there is no need to replace existing equipment with something better. It is simply not possible when you already own the best. This strategy has saved my thousands. Yes, so I’m wearing shoes that cost more than $200. However, these are very old shoes, so annual costs are closer to $20. Also, 10 year old $200 shoes look better than new $20 shoes any day.

It takes quite a while to replace one’s possessions with the best. Money has to be saved and also one has to wait until the old things wear out (or maybe that’s just me). After a decade, though, one will end up with a collection of really nice stuff.

There is less use of resources which is an added benefit.

Even better, should one decide to sell it, it tends to have a fairly high used price. For the very best, the used price is actually higher than the new price for a corresponding new item. This is true for HiFi equipment for instance.

Much thanks goes to CR and GH for the donations!

Originally posted 2008-07-27 15:23:40.

The $1500 bicycle

Jacob — Fri, 02 Dec 2011 00:45:38 +0000

I see it this way. I need something to get me from A to B. Why own a crappy $1500 car that needs to be replaced in a few years, when I can own a pretty smooth $1500 bicycle that could potentially outlast me. Why the obsession with size and power over quality and longevity?

If you live in a small house, you can pave the floors with gold. If you live in a large home, this is not an option. If you drive a bicycle you can afford to drive the best. Few car drivers can afford to drive the best cars.

Now it may be that finely crafted bikes do nothing for you. In that case, just get a free bike on freecycle or get a cheap used bike on craigslist. If you want to indulge yourself, though, these are some very classy looking bikes.

I’m sure I forgot some here. Any others?

Bikes are faster than cars

Originally posted 2008-12-19 17:09:12.

What’s the difference between a frog and a modern human?

Jacob — Fri, 02 Dec 2011 00:45:37 +0000

A frog is unable to regulate its internal temperature. It is what we call cold-blooded. If it gets too cold, it must seek refuge in the mud at the bottom. It is also unable to regulate its evaporation, hence it can never go far from a pond lest it dry out. Lizards are slightly more advanced. While they are cold-blooded as well meaning that their activity is regulated by whether it is cold or warm, they can regulate or prevent evaporation on their own and thus lizards can live in very dry areas. Mammals are more advanced still. Mammals are warm-blooded. They are, therefore not very dependent on whether it is warm or cold. If sufficiently dry, humans can live in temperature over 125F without heating up internally. Through the use of technology, modern humans are even more independent of the environment — whether it is dry or wet, cold or warm — using technology for heating and air-condition allows modern humans to live independent of the environment by using energy and resources to build and maintain bubbles viz. homes, offices, and means of transport that like bubbles completely isolate modern humans to the point that they become dependent on the isolation. Having forgotten how to live with the environment, forgotten how to dress for the rain, wind, and sun with sweat glands atrophied from disuse, they are fully dependent on maintaining the bubbles they live in at enormous costs both to the frogs (which are dying out) and the environment but also in terms of personal costs having substituted hard work for something that their bodies were once capable of doing naturally at less cost overall. Maybe it is time to relearn how to live right and more efficiently.

Originally posted 2009-03-20 16:03:44.

No need to save millions – here’s a quicker way to financial independence

Jacob — Fri, 02 Dec 2011 00:45:36 +0000

With a name like early retirement (extreme) I get a lot of inquires about how many millions one needs to become financially independent. A brief search in the personal finance blogging world reveals several bloggers that are aiming for the millions. Not this guy.

The idea that you need to be a millionaire is predicated on having enough investments to draw a retirement income of $40,000-$80,000. Studies based on long term market behavior show that one can draw down 4% of the principal and expect it to last 30-40 years if heavily invested in stocks. 3% would last a lot longer. Divide $40,000 with 0.04 are you get 1 million. $80,000 a year requires 2 million and there you have it.

However, I think time can be spent much better than working 15-25 years to accumulate millions of dollars. If you do like I do you can enjoy a $40,000 lifestyle for $11,000 instead. How is this possible? The answer is VERY SIMPLE.

Instead of buying everything as soon as I want it e.g. red peppers at $1.75, I wait and instead cook other dishes that don’t require red peppers. At some point the peppers will be on sale for $0.50 and then I cook dishes with red peppers with gusto . That’s 71% off or the difference between $40,000 a year and $11,000 a year.

Here’s another example. We recently got a fax/answering machine/telephone for $25. It took three weeks to find it, but if we had gone down to office max or ordered it on amazon, one of similar quality would have cost more than $100. So that’s 75% off for the same thing. Of course sometimes it’s less easy. We have been looking for a queen sized bed for under $200 for quite a while now. We got our present California king for $150 and sold the head board for $75 later for a net outlay of $75. What did you pay for your bed?

One may argue that it is not true financial independence to have to research one’s purchases, engage in comparative shopping, and then wait around for weeks. This takes time and effort. One has to be careful with the money and this is not what true financial independence is about, right? However, my counterpoint would be that if one has to spend 25 of the best years to save $2,000,000 just to avoid having to learn about quality/durability, bargain hunting, and how to be patient, then that is not exactly independence either.

Originally posted 2008-02-18 07:22:01.

Tools

Jacob — Fri, 02 Dec 2011 00:45:35 +0000

You, sir, are a tool. You are a tiny part in a big machine and you must do your part lest the machine fail. You are cog in a long chain of cogs that turn the wheels. A cog turns you and in turn you turn another cog like a well oiled machine.

You are a tool. You must be professional and not give any thought to anything else but doing your job. This is your life. Yours is not to reason why. Thinking is discouraged as it would distract you from your purpose of doing your part. Stick to your training and do what is expected and your career will proceed smoothly and you will be rewarded with the distractions that the machine produces to indirectly allow its own propagation through you. Quality distractions will keep you from thinking but not detract from your performance in serving the machine.

Living according to specification is what keeps the machine working. Imagine that a piston in a machine did not fit into the cylinder; imagine that a push rod did not want to push. If this happened too often, the machine would not function well and it might even stop working. Just imagine if you had a tool, like a blender, and it decided that it did not want to blend. This would be unacceptable and you would replace it. Tools must be dependable!

But do not worry, scientists and engineers are working hard to develop tools to replace you with more dependable versions even as managers and politicians are working hard to replace you with other cheaper and more desperate people.

As a cog, you must fit in and be a part of the machine to be useful. Voluntarily being alone and desiring solitude is a horrifying thought to a tool. How can it exist without depending on others and in turn being depended on? How can it be trusted to do its part if it commits to thinking on its own or acting deliberately? This is why individualism is discouraged. No, you must be social and the best way to be social is to seek out and consume the same distractions: fashionable clothing, TV shows, home renovations, … and support the machine in the same way, going to college, investing in funds, paying the bills, and pursuing a career as a professional.

Remember: Yours is not to reason why. Yours is to do your job and be successful, in the same way as everyone else.

The machine can only exist if you do your part.

This concludes today’s motivational speech!

Originally posted 2009-12-10 13:53:07.

Efficient markets have zero returns

Jacob — Fri, 02 Dec 2011 00:45:34 +0000

If markets were 100% efficient there would not be any trading. When new information was made available to the market, everybody would simply adjust their price expectations. Since trading happens, markets are not efficient.

The efficient market hypothesis can, therefore, easily be shown to be wrong. Yet it is still a good approximation which makes portfolio theory sufficiently mathematically tractable to write papers about it and win Nobel prizes, say.

Insofar efficient market theory is a close approximation of reality, the best trading strategy is not to trade at all (see paragraph 1). However, the more popular this becomes, the more difficult it becomes to estimate asset prices. Buy&Hold on a large scale, therefore, makes asset prices more volatile.

The more popular buy&hold becomes, the closer index returns will be to GDP growth, that is, around 3% in real growth. Any growth beyond this is rightfully attributed to investing becoming more popular, hence it is only possible to get the historic 10% returns, if you are actually part of the history where fewer people were equity investors.

When everybody becomes equity investors as part of their retirement strategy, buying and selling will not depend on whether business conditions are good (the prioritizing based on the individual merits of a business having already been destroyed by blindly investing in indexing) but on whether people are retiring(*). Hence, if large numbers of people are retiring, expect the markets to drop. If large numbers of people are entering the work force, expect the markets to rise. It would seem that retiring baby boomers can keep markets depressed for quite some time.

(*) This attitude is dangerous towards business conditions. Hopefully, professionals will keep trying to reward good companies insofar that they have the money to do so with more money being invested solely based on the stock price or current capitalization.

Originally posted 2009-11-02 07:17:13.

The true cost of coffee addiction

Jacob — Fri, 02 Dec 2011 00:45:33 +0000

When financial independence is a priority, it is very helpful to develop an idea of how much money one needs to support a particular expense. Consider a daily $1 cup of coffee. That is $360 a year. With the canonical 4% withdrawal rate, one would need to save and invest $360/0.04 = $9000 to support the $1 cup of coffee/day lifestyle.

Why pay that much when you can make a better coffee yourself?

What about food expenses? These can range from less than $50/month per person to more than $500/month per person.

Required savings for $50/month:

$50/month = $600/year food expenses. This needs $600/0.04 = $15000 in savings. Whereas $500/month = $6000/year needs $150000 in savings. That’s a lot!

Aiming for the lower figure of $15000 is doable in a foreseeable number of years. After saving $15000 one NEVER needs to worry about food again. One is financially independent of the food expenses.

My suggestion is to tackle recurrent expenses in this way one by one. How much does it take to become financially independent of food, housing, clothing, transport, health costs, internet, movies, cable, …

This results in a set of smaller goals to work towards. It will also create a certain discipline. More importantly, it will make one reevaluate whether the expense is really worth it. For instance, is a daily cup of $4 coffee really something one would want to save $36000 to support or is a 25c homemade cup of coffee good enough?

A 25c/day coffee addiction costs a mere $900 for a lifetime “subscription”.

Originally posted 2007-12-05 00:47:00.

Why Early Retirement Extreme is a bad name

Jacob — Fri, 02 Dec 2011 00:45:32 +0000

When I started the blog I debated what would make for a good blog name. One of the names considered was “Extreme Early Retirement” but I found that that name had already been “parked”. Early Retirement Extreme was free though and ERE also made for a better acronym than EER.

In retrospect, here slightly more than 3 years after starting the blog, the R-part of that name has turned out take have some annoying side-effects.

I found the crux of the matter to be that people have different and preconceived notions about what retirement means. Retirement has traditionally meant the part of life that followed a life-time of work. Retirement was for those workers who were broken down physically and sometimes mentally and unable to work further. The way industry had been set up meant that they could be replaced by a younger functional version much like a part in a machine.

As a more robust financial system replacement family dependence of having children, some people who managed to accumulate enough capital became able to retire a few years earlier than usual. A person could stop working even while being capable of continuing work. This was the first paradigm shift.

Traditionally households had a single income which meant that there were enough savings to support the household.

Recently, the idea of retirement has begun to change.

First, as households became poorer in real terms, single income households turned into dual income households. This now means that one person can retire while the other keeps working. This is the second paradigm shift. Here one person could retire several or even many years before the other.

Some people have also been able to push the age of retiring, that is, the age of no longer working for money far down. This is called extreme early retirement. This is somewhat different from using up one’s money until the pension rolls in. This is more akin to a lifetime of cash flows from investments that are not drawn down in value.

This is what I am talking on on this blog. This is the third paradigm shift. We have come pretty far away from the original definition of retirement: from someone who is too worn out to work to someone who has enough money so as not to need to work.

This is why early retirement extreme is a bad name.

Maybe financial independence extreme would be a better name?

Well, here the problem is that financial independence also has come to have many different meanings. For me it means having enough savings to pay for (finance so to speak) all my needs over a lifetime. Yet, for some it simply means not having any debt; for others it means having enough income to pretty much purchase whatever they want.

These definitions are even further removed from what I intend.

Another suggestion is “Independently Wealthy”. This is actually pretty accurate, except many people confuse “wealthy” (having money) with “rich” (spending money).

Consequently, I’m stuck with Early Retirement Extreme. Just make sure you don’t get stuck on your personal interpretation of what that’s supposed to mean, okay?

Originally posted 2010-12-12 20:48:47.

Children and early retirement

Jacob — Fri, 02 Dec 2011 00:45:31 +0000

Sometimes the question of children and how it factors into extreme early retirement comes up. Now we don’t have children, so what follows is purely my theoretical thoughts on raising a child and how it would impact on early retirement (and the child).

I believe that having a stay at home parent is a very good idea and I do not think I would do it otherwise. I had a stay at home parent myself. My mom stayed home full time for the first 6 years and after that she took a part time job, so we never came home to an empty house. This naturally plays very well into the idea of early retirement. Not only does financial independence and early retirement automatically provide someone who stays at home. It does not delay the working spouse in the sense that the spouse has to provide for two people.

I would not send my children off to cello lessons, travel soccer, or preschool where they could pretend to be intellectually stimulated at a rate of $1500/month by learning a few words of Mandarin. I suspect children cost exactly as much as you are capable of spending. You can buy their clothes at thrift stores just like you buy your own or you can buy designer outfits for them just as you buy designer outfits for yourself.

Their entertainment can match your own. I do not believe in the necessity of everybody having their own room. I think we could have two children and still stay in the RV.

Essentially, love and caring would be demonstrated through time rather than spending money. I would make sure they did their homework. I would encourage inexpensive and creative hobbies. There would be chores in the form of house work. I would certainly not try to fill their schedule with leadership activities and other brouhaha for their application to Princeton. I would make sure that they did their homework and no, I would never correct their math or their essays.

I do not think I would pay an allowance. Whenever they got a money gift (birthday, xmas) or any income whatsoever, I would make them put 50% into savings and let them spend the other 50% as they wished. I would let them spend the interest of their savings account hoping that they got the point. Success would be them voluntarily contributing to their savings account. In any case it should be very clear that money never comes for free.

Naturally I would give them the education in life skills that they do not get from their school. They would know how to read a balance sheet, double dig a garden, put up a shelf, and fix a flat before turning 18. Speaking of school, I would spend on the early years (primary) rather than the late years (college). The generalized skills such as work discipline and the multiplication table learned early are far more important than a course in Ancient Egyptian Algebra in my opinion. I would strongly encourage (insist) that they learn a trade before heading to college. I would probably not pay for a college education, but they would be free to stay here until they finish. I’d recommend a state university and make them fully aware of the consequences of being in debt to their eyeballs should they insist on a brand name college.

So, I do not believe that adding members to our household would materially change the possibility, form, and implementation of early retirement.

Originally posted 2009-01-28 13:09:05.

Why so few succeed

Jacob — Fri, 02 Dec 2011 00:45:30 +0000

If you want to become financially independent in 10 years, Todd over at the financialmentor.com makes a cogent case for how the math works. The extreme savings method is robust unlike other methods such as real estate or businesses which ~~require a good deal of luck~~has a high rate of failure due to causes beyond your immediate control. This means extreme savings will work in ~100% of the cases whereas real estate or business start ups will only work for a few, maybe 5-10%.
Still, not everybody succeeds with such a savings program and the post gives some reasons why. Having succeeded myself and seen others fail, I somewhat agree/disagree but I also have some understanding why an extreme savings approach can fail. Hint: It’s not the theory, it’s you

“It takes the self-discipline(*) of a celibate monk living in a brothel to survive on 20-30% of what most people earn in our current culture.”, said Todd. I would say it takes an extreme level of independence, confidence, and leadership to go against the stream. This is perhaps why extreme early retirement attracts so many INTJs as this personality type exhibits those traits more than most other types. “Surviving” is easy; it’s the “spending less than you earn” which is hard because it makes you different. To wit, consider two families. One earns $90000 and the other earns $27000. The latter is surviving on 30% of the former just fine. No problem. However, it would take a self-discipline and an independent streak for the $90000 family to not spend in the same way as their friends and colleagues. On the other hand, if those friends and colleagues were spending less, it would be no problem at all. It’s the “not fitting in” that’s hard. This is why the ERE forums have come to serve almost as a support group for what are typically highly competent people who “should” be spending 5 times more than they do, at least according to everybody else. Many of the questions actually deal with the grief caused by other “well-meaning” people who don’t get it, not by the actual “surviving”.

(*) Self-discipline is not that important. I eat take-out food on occasion. I sometimes buy things *gasp* new.

In defense of extreme frugality: First, it certainly does depend on your values. Those values are not always to retire early. For me my initial motivation was environmental having realized how much waste our consumer culture generates. It took me a couple of years to realize that with the high savings rate I had, I would be FI in just a few more years. I used to enjoy buying gadgets, a lot. This, incidentally, was what I enjoyed most about my stuff. Doing “consumer research” comparing specs, buying the gadget, and playing around with it for a couple of months after which I lost interest. Then I was onto the next gadget. Had I kept this up, I would still be working 60 hours a week, but I would have owned the newest iPhone and been driving a Prius or a Volt. It took a few months for my values to change but eventually I got as much joy out of not spending money as I did bringing home shrink wrapped boxes of new toys.

It is said that your need [for money] is inversely related to your level of skill. Money buys convenience but more importantly, it compensates for lack of skill. My favorite example is the malfunctioning toilet. Suppose your toilet fails to flush. Now, you could say that an extreme saver wouldn’t have the money to fix it and would thus quickly find himself in deep ~~shit~~discomfort. However, an extremely frugal person would likely learn (quickly) or have learned to fix the problem himself. The end result would then be the same: A working toilet. So both solutions are ultimately convenient. However, imagine that the toilet broke Saturday night (don’t ask!) and you couldn’t get a hold of plumber until Monday morning. Wouldn’t it be more convenient if you could fix it yourself?

It takes time and effort(*) to learn such skills. I’m reminded by another quote by Illich which I paraphrase to something like “a man is educated in proportion to his ability to understand and affect his immediate environment”. In this regard most of us are barely out of the toddler stage. If we have a problem, many of us just call an authority. We usually pay others to “understand and affect” our environment because we just never learned ourselves. We’re like idiot savants who only understand one thing, our job whatever it may be, but we understand that really well to the exclusion of everything else.

This can change. Fixing a toilet, knitting a sock, building a bicycle, installing a compressor to make a fridge, and similar projects aren’t rocket science. It can be learned by anyone who can read and follow instructions. It’s just in this society that nobody does it. On top of this there is a tremendous sense of satisfaction in being able to say “I made that” or “I fixed that” that, at least for me, far surpasses saying “I bought that”. For me the latter always comes with a sense of shame.

To illustrate, I will think that your new sports car is nice and fun to ride in, but what really impresses me is a heavily self-modded truck that gets twice as many MPG running on bio-diesel or an electric scooter built out of conduit pipe, old frame parts, and discarded golf cart batteries. Standard cars mean nothing to me. Conversely, I understand that the LA dating scene is entirely predicated on the price tag of one’s vehicle.

So I may only be spending $6-7,000/year but do consider the value I’m adding using those monies for parts and optimized living and location compared to someone who is spending $60,000 blindly. We may just be getting the same value out of it.

Sometimes it is argued that the absence of money excludes certain things. This is correct, but they also include things which are otherwise out of reach due to the absence of time spent on the job. When you’re FI, things change. Things are done differently. It would be too expensive for me to take the family to France for a month every year. However, it would be entirely feasible for me to move to France (yes, I got an EU passport) and stay there for years because I don’t need a job, the plane ticket would be amortized, and I wouldn’t be supporting a house in the states. If I had kids I wouldn’t be able to afford expensive private schools, but I would have 12 hours a day to help them with their homework. I don’t have the budget to shop at Whole Paycheck, but I do have the time to garden. The same goes for sports. I can dedicate much more time to an activity which usually beats having a personal trainer and all the latest gear. There’s a strong limit to what money can buy which is easily surpassed with time and effort.

Conversely, using the examples above, someone who works for a living can’t afford to go to France for 1+ years because they certainly can’t afford to pay for two houses (unless they were saving 50% already) and they might be underwater on the “biggest house they could afford” which would make for a hard sell. If they’re high earners they’re likely economically better off if they outsource the raising of their kids, because they need to work to pay for “fun-time”. And who has the energy for serious sports and gardening if one works 60 hours a week?

Much more important than confidence and independence is the ability to envision the possibility of doing things differently. If you can’t wrap your head around it, you can’t set the goal, and without seeing the goal, you can’t get there intentionally. Many can’t imagine doing things for themselves instead of paying others. I believe this is the source of all the “I can’t live on $10,000/year”. To illustrate, $1000 will buy you a good bicycle. However, $1000 will also buy you enough parts to make SIX bicycles which are equally good. Most can’t imagine doing that—don’t you need a degree in bicycling or some such?! (But many are willing to stretch their mind far enough to maybe get TWO used bicycles of the same quality.) In the same vein a hundred bucks in carefully handled seeds will feed a family for months, organically too. A hundred bucks spent in a restaurant will feed a family for a day.

I see this as the greatest barrier for most people are this is to a large extent why I’m putting my life on public display. Of course this is just meant as an inspiration. The point is not to copy what I do but to understand the principles and the philosophy. For instance, I’m not going to move to France, but some probably will. And you don’t have to live in an RV. That’s just what I do.

Originally posted 2011-03-09 10:20:33.

Sniping on eBay

Jacob — Fri, 02 Dec 2011 00:45:29 +0000

I usually buy tools on eBay. This way I get a discount by buying used, I free up space in other people’s garages, and we get more value from existing things without having some factory produce a new one: less pollution, resource suck, etc.

If you ever used eBay, you’re probably aware of the downsides. You might get outbid in the last second (more on that below) and if you’re bidding on several auctions for the same thing, you have to coordinate the bidding in real time. In addition, you may have a finite amount of money which is insufficient to bid on everything, yet putting in bids essentially means that you have to have the money somewhere.

Sniping solves all these problems. I’ve used gixen.com for while. The idea behind sniping is that you enter your bid using the sniping platform instead. That way you have control until the last possible moment. This means you avoid getting suckered into bidding wars possibly resulting in a lower final price. Also you don’t commit money several days in advance, which also means that you have until the last possible moment to delete your snipe. Furthermore you can group your snipes so that if you win one auction in a group, all other snipes in the group gets canceled. That way I can put in bids for, say, 5 different hacksaws and have a reasonable likelihood of winning one of them.

If you already use eBay but haven’t “advanced” to sniping yet, I encourage you to try it out.

Some arguments can be made that sniping is morally evil and not in the spirit of ebay’s auction setup. On the other hand, it’s legal and others use it so until ebay changes its policy, e.g. by extending the deadline for an hour past the last bid, you’re at a disadvantage by not using it.

Originally posted 2011-03-01 15:59:46.