On memory of Wales...

It's amazing how sometimes just a simple smell or picture or short reading would bring back floods of memory. This morning, when I caught glimpse of the word Cardiff, then read on in the New York Times article on traveling to Wales and Cardiff, it did exactly that.

Years ago, I did a trip to Wales with college friends with fond memory. It's a pity I never jog down the route that we traveled. All the photos taken and the negatives were lost when I moved houses. I've lost touch with those college friends. All I have left is my memory of it.

It was the start of summer holidays from college, shortly after all the final exams were done. We started driving out from Coventry. I don't remember much of the food. But I remember well the castles that we visited, one of which was close by the water. We had walked up to the top of a castle tower, one of the few that had been restored at the time (since the rest of the castle were in ruinous shape and not fit for visitors, lest they might collapse, I bet). The sky was clear blue; the vista over the water never-ending. It's beautiful.

When we got to Wales, we stayed at the local B&B which were quaint English cottage and rowhouses (no pun intended about the English reference), one of which stood next to a running stream which is most lovely, with trees and grass so green, it's a feast to the eyes. The roads, as anyone who has ever traveled to Wales knows, are narrow, but everything was just so quaint. I love it. 

We stopped quite often along the way, with rolling green hills. It's rather deserted, but I never felt lonely. Perhaps it's the occasional stone walls or wooden fence that were put up to mark territory which bears indications of humanity and civilization. 

One of the places that we visited was a former coal mine that has long since been closed. We donned coalminer's helmets (with light in front), took the cage-like elevators straight down. The tour guide taught us a song that we sang on our way down. The sounds provided some cheeriness in an otherwise very grim environment where everything is black - it's coal everywhere afterall. When we reached the coal shaft, one of the things the tour guide asked us to do, was to turn off our headlights and to feel how dark it was. That complete darkness, albeit just half a second in duration, is suffocating. One can't help feeling claustrophobic. We proceeded to walking along dark tunnels, seeing more of the same black coal that stretch deep into the earth. 

That coal shaft tour didn't take too long. I was only too happy to finally come back up to the ground and see light again. I could not begin to fathom how it must have been like, to spend most (if not all) of one's life with the coal underground, which was exactly what happened to some animals and donkeys that were brought down to the coal shaft for transport and to reach low coal beams too small for adults. In those days, children routinely worked in coal mines since their smaller size allowed them to reach some hard to reach places via small tunnels. Life must have been awful.

After that, we went to visit the museum nearby where the history of Wales, impacts of coal mining (for good and ill), and how politics came into play (in particularly, the rise and fall of coalminers' union), were on display. I was not well-versed in that part of the Welsh history and how coal is intertwined with it, neither did I realize how the coalminers' union came about until that point. Truth be told, I never have too good an impression about unions in general, but as I read through its history, I've come to a better appreciation of how tough the livelihood of coalminers were, and how much exploitation went on before coalminers finally organized to fight back. Unions did serve its purpose, before Margaret Thatcher broke its back eventually.

The coalmining in Wales and unionization have stuck with me even to this day, even though that trip to Wales was long history to me now. It's educational as it gives me an appreciation and a different perspective of how unions were born out of the needs to level the playing field between coalminers and their mine owners, in the form of collective bargaining. Although unionization does not make sense in all industries, I do recognize the need for it in low-paying jobs that workers have no bargaining power at all.

Some day, I'd love to go back and visit Wales and England again. Those are places with some of my fond memories.

On actively managed funds vs passively managed funds...

I was reading this article today on LA Times about how actively managed funds have come up short (again) when it comes to performance since the big rebound of the market from its financial crisis in 2008, compared to passively managed funds.

I have always been rather cynical about actively managed funds, not only on how much higher the management fees are (compared to index funds), but also on how mediocre (or worse) their performance have been. The meltdown of the market in 2008/09 is perhaps my last straw, no doubt it's the same for most people who have money to invest. One of my IRA (rollover from 401k in one of my previous jobs) that I have left it as-is in actively managed funds had been "decimated," erasing ten years' worth of value that were added, effectively putting it on par with just the contribution amount from myself and my prior employer.

I've pulled out from those few funds, not because I panicked at the time (in 2008/09), but I was so fed up with the fund managers. I kept asking myself, what's the point of paying all these "managers" all these high fees all these times, delivering just mediocre returns even during the best of times (when the bull market was flying high), and performing far worse than the market and the index funds when the financial crisis hit. In the best of times, when literally every boat got lifted during high tide of bull run, I pay those high fees; in the worst of times, my portfolio takes the hit but these "managers" still take the fees. Effectively, the managers have all the upside, and I take all the downside. I realize at that point, that it wasn't me who panicked, but it was these darn fund managers who sold everything with the panic button. By selling when the market went down, these idiots had ensured that there's no way to rebound. If they have truly believed in the assets that they're holding, rather than just following the market, why selling them, and why selling them now in a fire sale? If they're just following the market, I can easily do that myself or use index funds.

This fund manager of mine, is Fidelity. Apparently they're not alone, because the same happened to my husband's holdings. His fund manager? Janus. Given how the actively managed funds in general had performed historically and since, I don't think Fidelity and Janus are alone in their sheep mentality to blindly follow the market.

'nuf said.

So then, I decided to withdraw all the money from all my other actively managed funds and consolidate, again not out of panic but out of this total weariness of how pathetic this whole fund industry is. I should have done this long time ago, but complacency and laziness got in the way - yes, lame excuses but when nothing blows up, rebalancing one's portfolio seems to be the last thing on my to-do list back then. To a large extent, the market meltdown in 2008/09 was a godsend since it prompted me to finally do something.

There have been so many other issues with the fund industry concerning transparency, including the issue of pricing of the funds, frontrunning their own clients, etc. There's just no way I would entrust my money with them anymore.

For a time, the Janus funds that my husband has had were doing alright - yes, it's just alright compared to the index, but he's lazy for a while, like myself - but something happened. The Janus funds had had change in management, and the new fund managers were even more mediocre than the predecessors. That's his last straw. I suppose in fund management, the funds are only as good as the managers who oversee them. I'm sure Peter Lynch would attest to that.

I should say though, that selective hedge funds could still thrive. They have the advantage of being totally non-transparent (which is counter-intuitive), allowing them to make all kinds of bets in all kinds of industries. But with big up's, it always comes with big down's. I don't feel like gambling anymore. I would rather settle for lower but more sustaining growth and yield.

~~~~~~~~~~~~~~~~~~~~

Since 2008/09 when I pulled and pooled all my money out from the funds, I've managed them myself with self-brokerage. I spread them out over ETF (with more transparency in pricing in open market than mutual funds), index funds (with very low fees), and day-trade on selected stocks.

For a while, it works quite well. The markets have bottomed out from such low that they have nowhere to go but up. I built back up my portfolio a little bit for about 25-30% a year return, net of fees (brokerage fees for trades) for a couple years. Then again, even a dog can make money by going in with both feet during those two years. It doesn't take any genius at all.

Starting 2010, something occurs to me. It didn't feel right to me anymore since it felt more like casino gambling. Even good companies can get through gyrations of ups and downs in prices within short span of time that are totally without reasons. I'm sure the algo traders have a lot to do with it. I don't feel like gambling away those retirement dollars and praying for the best. Anyone who has some ability to spot trends and patterns in charts can easily see through this; that's what the algorithms do best anyways. The charts of almost 95% of the companies I look were all trending down, pointing to an inevitable pullback of the prices at some point. It has to. I don't want to be the one holding the bag.

About the time, some properties in a few choice neighborhoods around where I live came on the market, and I like them. My husband isn't so thrilled. He feels that properties are too illiquid, with too much maintenance needs for his taste, and the financial burden is too long term. To be sure, they are all valid points; but they are also the usual talking points for why any investors should choose stock market over properties. Just talk to any financial advisors who want to invest your money to stock markets for fees and commissions, and you'll hear the same talking points. Anyhow, I went ahead anyways, and bought a few properties since 2010.

No one would have foretold exactly when the bottom of the property market would have been. Anyone who told you that they knew, is lying. It's simply impossibly to time the markets because no one has the crystal ball. In hindsight, property market pretty much bottoms out around the time I pull back from stock market and start buying properties around 2010 in my area. I would be the first one to tell you that I have absolutely no idea when that bottom might be; but it just feels right to me at the time. The prices were right historically. The properties are good (great property in great location and in great shape). Rental support is strong. The economy around my area has never gone down in the worst of times. The public schooling system also provides great support to the demand for properties in the area.

Looking back, buying the properties is a great move. Without the financial crisis, I would never have been able to buy so many good properties in good location in such short timespan, with strong rental and capital value that has increased between 10-30%, among the few of them. The mortgage rate is lower than ever. I can't be happier.

Better yet, the net rental return is 10%+ which is way, way better than plunging in the stock markets and hope for the best. I don't want to have a retirement portfolio that relies on dumb luck or leave it at the mercy of some dark pool manipulation. In fact, I could have quit my day job now, manage the properties, and have yet more monthly income than my current day job (high income bracket notwithstanding).

An added bonus is the ultra-low mortgage rate. It's almost like free money from the bank to fund my retirement. Amidst all the talk and blame game about the Fed under Bernanke for leaving the mortgage rate too low for far too long, and for not ending the stimulus program (now in its third incarnation in the form of QE3), I would have Bernanke to be thankful to. That said, I do feel there's certain truth in it, in that, the ultra-low rate environment is once again encouraging people to take unnecessary risks that they might not have otherwise been able to take, endangering others along the way (hello, big banks!). Am I one of those on this bandwagon? I might have been, I'm afraid.

One thing has to be said about the low mortgage rate: It's great only if you can get it. Banks have become such a pain to deal with, but I've come to appreciate that's what it should be. Banks should have vetted borrowers more stringently; back in the go-go days in pre-2008, even a dog can qualify for a mortgage. Federal government has fed the illusion by propositioning ownership nation (as George W Bush has advocated it so adamantly, much like he did with the Iraq War). For all the valid points that my husband has raised about the illiquidity of property market and the very long mortgage term, one has to have sufficient buffer to absorb any system shocks, rather than just praying and expecting property prices to always go up, as most subprime borrowers did, pre-2008, for either refinancing or flipping the property to bail them out. When markets turn against you, all these options would dry up, as a lot of people have painfully found out. Instead of simply talking up property ownership, these folks need serious education to learn the severe downside that comes with it.

In any case, my husband takes a different tact. He continues to hold his faith in stocks, though he has been burnt enough times now. I'm not so sure about relying on paper gains for retirement portfolio. It doesn't feel right.

On the brouhaha of government shutdown and looming debt ceiling, and the fight of them all...

I have not wanted to write about the now three-day-old federal government shutdown, the debate (or lack thereof) about it in Washington, and the looming debt ceiling (again!) that could throw many fish out of the economic water, but such is historic times and I feel certain compulsion to at least write down a few things to mark the time.

So, everyone right now knows about the federal government shutdown. Why? Because a small but very vocal minority in GOP - in the form of Tea Party a la Ted Cruz, Eric Cantor, and some such - has decided that they need to take the last stand against humanity (!!!). In order to force the defunding of Obamacare (which finally came into effect this Tuesday on 10/01/2013), they are willing to withhold passing the federal budget unless the line item of the defunding is attached. The Obama White House and Democrats would not budge. Afterall, Obamacare (more formally known as Affordable Care Act, or ACA) is a regulation that has passed both the House and Senate of the Congress, signed into law by Obama the president, and upheld by the Supreme Court.

Problem is, the more the rest of the country is coming to accept Obamacare, the more Tea Party hates it. (Actually, they hate everything that is remotely related to Obama anyways, so never mind much of the reason why.) The more validation ACA gets, the higher the poll numbers ACA gets, the deeper Tea Party digs in.

So, how do you stop a legislation from taking effect? Pulling the purse string, of course, which is exactly what Tea Party is trying to do now. Never mind that the government and the whole country are held hostage by it, Tea Party wants no part of the government anyways. To them, the government might as well shut down and go to hell. Instead, they prefer to deal with line items (like funding the continual opening of national monuments, while not caring about other vital functions like food safety, childhood programs, and research). Such is the irrational and unreasonable behavior of a two-year-old; apparently, Tea Party has topped that.

Perhaps the saddest part of it all, is that, the leadership in the House (with GOP majority) is unable to control these petulant Tea Party children. Those moderate and reasonable voices in GOP are being crowded out by the vocal histrionic and vitriol, who worries that if they don't pander with the Tea Party, they won't survive their next primary election. John Boehner, being speaker of the House, no doubt has the added worry about losing his speakership, should he fail to placard to these small minority group.

Personally, I cannot stand all the blatant lies on ACA that the GOP spread, and how a lot of average joes in America are stupid enough to believe all the lies they're told without even just cursory check. ACA is in no way perfect, and to me, it's not the kind of universal care I would love it to be (the same as, say, Australia), but people should at least give it a chance, the same way everyone is required to get car insurance if they want to drive a car.

I'd also be willing to bet, that the other main reason why Tea Party wants to stop ACA before it can take effect, is that, they fear that the public would come to love ACA the same way Medicare and Social Security had been. This will surely kill a key element of their platform of Tea Party and GOP, if they still have one, apart from being The Party of No. Apparently, the killing of the public option from ACA is not sufficient for them.

Thanks to Tea Party and the inept House leadership, we have a government shutdown that has no end in sight. Anything short of a market revolt from Wall St will not be enough to force their hands. And why not. With an increasingly self-sorting electorate in which these Tea Partyers got elected by their petulant (and oftentimes ignorant and very arrogant) electorate who wants no part of government, except to keep their medicare and social security and any other federal assistance (eg. underwriting of their flood insurance) alone, there's no political ramifications for them to behave in a more reasonable manner. In fact, the more hissy fit they throw, the more their electorate seems to love it. It's become their electorate's blood sport. In short, there's no adult left in the room, all that is left is a bunch of very petulant children.

That's why I was laughing out loud when I read this parenting tip to dealing with GOP tantrum which is timely and most pertinent. And that's exactly the response that any parenting experts would have advised Obama to do, which is to not negotiate (since there's nothing left to be negotiated) and to not get upset. If Tea Partyers think that they can get a rise out of this angry black man, they fail most miserably. For that, I applaud Obama, even though I'm not really a fan of his.

This is particularly true when the debt ceiling is looming in just a couple of weeks. If Obama or Democrats are to yield to Tea Party, what would become of the debt ceiling debate? I don't dare contemplate that prospect, of pandering to the tantrum of a child. It's simply wrong on all counts, morally, legally, politically.

I feel for those folks ("non-essential" federal workers being the first hits) who have to pay the price for the Tea Party's tantrum. I'm getting so sick and tired of hearing all these in the news that I'm starting to tune out.

~~~~~~~~~~~~~~~~~~~~~~~~~~

Why should I care about all these white noises? The ACA actually doesn't impact me, at least not at this point anyways, and I hope not in the future either. Being covered in an employer's plan, ACA has no impact to me personally at all.

What I do not want to see, is the way in which this government is being run, and how easily it can be hijacked by such small minority, and how spineless the GOP House speaker is in reining in these remnants.

All the hypocrisy and grandiosity that GOP and Tea Party claim, that they're speaking "for the American people" really makes me sick in the stomach. How dare they speak in such general terms. How dare they claim to represent all "american people" because certainly they do not speak for me on this issue. They can rightly say, yes, they're representing a few hundred idiots back home who are on unemployment benefits and medicare disability and food stamps, and who also do not want to have anything to do with federal government; but no, they do not speak for the american people.

What I most want to say, is to tell these people to just shut the feck up, and go back to their own rabbit hole. They can drink beers all day till their liver gives. They can shoot live human targets (of themselves), as Dick Cheney did to his pal, until they all die out as a mutant species. That would do humanity a great service, and Darwin will no doubt smile warmly to that. Oh wait, but they would want Medicare or Medicaid to cover for their hospital bills, wouldn't they.