Hacker News new | comments | show | ask | jobs | submit login


This is long, so I apologize in advance, bare with me.

A 401k is NOT a safe investment. People constantly mistake prior history to future events yet there is no causality here. In fact, with QE3 in the wild, the value of your employer matched dollar continues to degrade.


The question I ask myself is "What will my dollars be worth at the age of retirement?" and the scenarios I paint continually are ones where I do not like the outcome, should I continue down a traditional 401k path.

@Saryant and @wikwocket's advice is reasonable, if the current model is sustainable. I have personally decided that it is not. This is just me. No hard feelings guys/gals. I just don't trust someone who manages my account making a gain in the good times, but suffering no losses in the bad times.


I really really love practical advice. And so you are in luck, because I have a practical "betting on myself" story.

When I moved to Bend, Oregon it was 2005, I was 24, and it was shortly after my brother had passed away. I was pretty emotional and wasn't in a rational state at the time.

So when friends, family, every-freakin-person was saying the following mantra.

"Buy now or be priced out forever"

And with this chant ringing in my ears, I went to a mortgage broker. This broker proceeded to approve me for up to 415k dollar loan, in Central Oregon, with my wage of 45k annually. (If you have been following the mortgage crisis this isn't the worst atrocity)

And sitting there with my young wife, wanting something solid to cling to, a small mechanism clicked in my brain, despite the emotion. It didn't feel right. So we walked away. I said to my wife

"I'll perform some research and we'll come back."

And so what did I do? I did what any solid nerd would do and went out to gather data. How? I learned all about scraping (screen scraping, web crawling, etc) from my new buddy Matthew Turland (plug his book not mine, which had not been written at the time but I'd like to think my quesitons helpd him realize his expertise. Yes it's all about me ;-) http://www.phparch.com/books/phparchitects-guide-to-web-scra...)

Using this knowledge I scraped and regexed the county records (http://www.deschutes.org/Assessors-Office/DIAL-Search-Form.a...) and do you know what I learned? I saw that on average the annual increase in real estate prices in Central Oregon hovered around 3%. Yet by the time 2005 rolled around, 50% YoY increases were the norm.

"Whoa" I thought channeling a Matrix style Keanu. "This is Not sustainable"

And so this is the beginning of "betting on myself". By analyzing the data, I knew that this growth was not going to last, so I convinced my wife (bless her for trusting me) that housing was a malinvestment, even though ALL our friends were arguing our stupidity.

It was almost like the biblical story of Noah, where everyone thinks you are crazy for saying a flood is coming. With everyone thinking you are crazy, you eventually just shut up.

Then the RE market stalled. This were slowing down, but no one was putting it together.

Then Lehman Brothers Crashed. And the World was like "WTF Lehman? Alright this sucks but the losses are limited."

Then the market frickin crashed. By March of 2009 it was beyond ugly. http://www.google.com/finance?chdnp=1&chdd=1&chds=1&...

And here is where I bet on myself again. I poured half our savings into GOLD.




This really is gambling. But the data and the research I had, helped me see that there was this crazy opportunity. Buying into everyone's fear.

One thing I'd like to point out, is that I consulted with my wife. I told her my thesis and she concluded.

"Well you were right about housing, I'm going to trust you. If we lose the money, we will move on."

The last bit was really important. I only risked what WE were willing to lose.

Ok. Where was I? Oh yeah...

So I buy gold, then I start tracking foreclosures. But I get really bored of tracking them by hand. So I write this sweet bot that scrapes the county records and converts the PDF documents to readable text using tesseract (<== so much badassness, I love tesseract)

https://github.com/jfolkins/Deschutes (<== teh codez)

Finally, last year, I reasoned that it was decent enough time to buy (Rent VS Buy argument and data to support it given our local environment) and cashed out our gold and bought RE.


Quite the rant, I realize. But hopefully it articulates the "betting on oneself" philosophy that I've taken.

It may not pan out, I'm ok with that. I like my odds better than the 401k folks.

One thing that sets me apart is that I've learned a crap pile about a ton of different topics I never knew anything about. (Scraping, Economics, etc) and am leveraging what I consider expertise into hopefully long term gains.

Take care -jared

(This is not investment advice. blah blah blah)

You reached the correct conclusions empirically, but you could have saved a lot of time and effort by having the philosophy that would lead you to them. Or more specifically, an understanding of economics. I don't mean this to sound smug, or anything like that, I'm just saying that I went thru the same process you did- only I did it in 1998! and then because I didn't believe it, again in 2001. By 2001 I knew there would be a housing bubble, even though there were (at that time) no signs of one. Hell, 911 was the news at that time.

Some pointers to help you be able to make these kinds of predictions (and thus maybe look for better data for more interesting and profitable investments)--

The book "The creature from Jekyll Island" by G. Edward Griffen (?) is the history of money in america, the federal reserve, and the "bailout cycle" that happens over and over every 20 years. (And people act outraged at the "bailouts" in 2008, as if it hasn't happened dozens of times before.)

And "economics in one lesson" by henry hazlitt-- you can find a free copy of this out of copyright book online if you google around. A great overview of economics, starting from the premise of the broken window fallacy and how it illustrates why so many efforts that sound plausible totally fail (like keeping interest rates low and making banks loan money to people who can't repay - the Clinton and Bush policies that led to the housing bubble.)

Also the topical articles at http://mises.org are great and that site also has around 900 free economics books you can download.

I went the options-spreads on canadian junior mining companies route, and I got out of the market in the summer of 2007 when I felt the crash was imminent. (I was a year early, but for that kind of deal you don't worry about not nailing the absolute top!)

Spreads might be something good for you too-- "Options as a strategic investment", by McMillan is the bible. (Using spreads I get better returns at much less risk than people who buy stocks directly.)

Economics is a lot like programming- the basics are easy but there's no end to what you can learn, and it gives you such great power-- especially when the rest of the world has as much understanding of the science as the average person does of writing software-- essentially none. And, even better, the people who create economic opportunity for you telegraph what they are going to do years in advance- they campaign on it, even!

Thanks for the great suggestions Nirvana! I was only seventeen in 1998, so I was kind of hung up on teen spirit, girls, and rock'n roll.

> Or more specifically, an understanding of economics.

You are very correct. I had no frickin clue about economics. I kinda feel like you have to have the experience and wisdom to judge books. I didn't have that at the time. I needed to fill that gap in. So although it may appear I wasted a lot of time, I feel that I have a really solid grasp on many things that were mysteries to me before. And I can't really put a price on what that is personally worth to me.

> I went the options-spreads on canadian junior mining companies route, and I got out of the market in the summer of 2007 when I felt the crash was imminent. (I was a year early, but for that kind of deal you don't worry about not nailing the absolute top!)

Heh, that is awesome! Nicely done.

One of the things my data has also brought me is friendship. Usually from people many many years my senior. One of them who has really helped me in life and I consider a mentor, also pulled this exact same thing. Getting out in 2007. I was always impressed by that.

I didn't mean to imply you wasted any time- you exhibit the one trait that I find exceedingly valuable: the ability to think for yourself. This is way too rare. And so I wanted to help you with some things that you might find useful. (I'd also recommend Atlas Shrugged, there's a reason it's a popular book, and if it's wrong, there's no harm in reading it, right?)

Economics in One Lesson is so cogent that it will, I think, let you absorb a great deal. And then the Creature from Jekyll Island, which is really a history book that reads like a thriller, will let you see how the departure from economics has had an effect on the country-- an effect the most recent version of which you correctly identified. (Which was impressive, frankly, can't tell you how many times people argued with me about house prices between 1998-2007. Sadly, going back to them in 2008-2010 and saying "See, I was telling you this!" didn't earn any kudos for my having called it correctly... I think their worldview is plastic and easily gets remapped by TV news.)

Anyway, the departure from economics is for very sound reasons-- it profits the people who are peddling the bad stuff. But that also means we can profit from it too.

Anyway, I just wanted to give you the books I thought would be most effective for you. I read a lot of investment books when I needed to learn how to invest (Vick's books on Warren Buffett I found particularly interesting-- now I calculate what my return will be before I make the investment. People assume that buying stocks is really risky, but the reality is risk is quantifiable. I can buy a stock and know that I will be able to sell it for a specific price at a specific time-- you can calculate this!)

Anyway, good luck! I admire your datamining-- there's a lot of opportunity for you out there if you keep that up.

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | DMCA | Apply to YC | Contact