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Archive for February, 2011

How I (mostly) missed the chance of a lifetime

February 26th, 2011 at 06:54 pm

It was March 2009, and I looked at the markets and the S&P500 was at 700. It was insanity, the economy had shrunk by 50% in less than 6 months, at least according to the markets and I convinced myself that it couldn't be right. I did a lot of research and I bought big (into 3 stocks, 60% of my liquid assets), for the first time in my life. Then two months later, the S&P was at 950. The market rose by 35% in two months! I thought I had hit the jackpot, I got nervous, I sold everything and cashed out. Today, the S&P is at 1300.

I bought SOL at 2.86 and sold at 4.04 (+42%), today it's at 11.54 (+303%)

I bought TXT at 3.87 and sold at 7.07 (+83%), today it's at 27.15 (+603%)

I bought PMI at 0.67 and sold at 1.39 (+107%), today it's at 3.03 (+352%)

On a smaller scale

I bought JASO at 3.07 and I still own it at 7.35

I bought AAPL at 164.25 and I still own it at 348.16

I bought C at 2.70 and sold at 4.10 (+52%), today it's at 4.70 (+72%)

Like a coward, I sat out the second half of the rally (May 2009 - August 2010), and only started buying "conservative" large caps last September. I estimate I left $50K out there by selling early. I don't know if there is a moral to the story, or whether I did the principled thing, but there sure is some regret.

Prosper.com - A final evaluation

February 26th, 2011 at 10:12 am

3 years ago, just before to economy took a huge $#@!, I decided to give Prosper "a try". I had enough emergency funds to allocate $2000 to the experiment. I had high hopes because I rationalized that borrowers borrowing from other people as opposed to banks would be more motivated to pay back the money. My allocation was 15% AA, 70% A, 20% B and 5% C credit ratings. In my view a very "safe" investment. My own credit rating is "A" and I tended to put myself "in their shoes" as a judgement of their ability to pay, a very naive approach. What I learned was this:

Trust people that admit their mistakes and put forth a rational plan to remedy them.

Do not trust people that allege they make X amount of money and only have Y amount of expenses and therefore have an incredible Z amount of monthly surplus to pay the loan. In the end it doesn't make sense

It really sucks when the economy takes a big ol' $^@!.

Collecting agencies are useless. They got me back exactly $0 of the charged-off balance.

People lie. A lot.

Women pay back loans more than couples and men (sample size = 40)

So, here are the results of the "Prosper Experiment"
My nominal yield: 12.9%
My actual yield: -4.2%
Charged-off notes: 25%
Fasted Delinquency: 4 mo
Money Invested:$1971.82
Payments Received: $1888.44

No more car payments

February 25th, 2011 at 07:32 am

I'm making my last car payment this week. I can't believe I've had it for 3 years now. I will have an extra $330 to save each month. In the 3 years I haven't had to make any repairs on the car, I put 26,000 miles on it, got 7 oil changes (4 of them DIY; I don't do oil changes myself in the winter), and it has been rated one of the top greenest cars as well.

Mortgage Refinanced for the 2nd time

February 24th, 2011 at 11:12 am

I've only owned the house for 4.5 years now, and I've already refi-ed twice. The house price has dropped by 17% so far.

My initial mortgage was 30 yr fixed rate @7.00%.

My last mortgage was 15 yr fixed rate @5.50%.

My current mortgage is 15 yr fixed rate @4.25%.

Total cost of financing this time around was about $1200. My payments will drop by $213/mo while extending the mortgage by 24 payments. Good deal or bad deal, what do you think?