1st rule of gold

Some time ago I finished a book called Richest Man in Babylon. Basically this is a book about laws of money, how to wisely spend, save and invest your money. Although the book was written in 1920’s and it speaks about people and money in ancient Babylon all these ‘laws of gold’ still work on 21st century. Author gives us 7 basic laws of gold and I will try to write about all of them in good time. But first things first.

1st law: “Part of all you earn is yours to keep“. It is simple as that, but to many people this seems to be impossible goal to achieve. This rule says that part of your income is yours to keep, this means that whenever you get your paycheck, the very first thing to do is to take 10% or more from it and save it. “Yours to keep” doesn’t mean that you buy whatever you fancy or spend it on your hobbies. It means plain and simple that you keep it. And when you manage to do this you will see that your life isn’t any worse without that 10% of money. There are many-many places where you can be little more frugal and you won’t even notice it. Try it, it’s worth it. There seems to be strange and unexplainable law to money. Whenever you accumulate it little more, even more money is coming in and total saved money is growing even faster. From first hand experience I can tell that when you’ve a goal to save money and you’ve succeeded with that for a while you will start to think about lots of things – do I really need it or not. Mostly you discover that you don’t.

As of me, I’ve been keeping this law from the beginning of 2006 and all I can say – so far, so good. Me and my dear wife are blessed with very good (and relatively high-paying) jobs, so we both save from our salary about 25%. We approached this saving from a different angle. First we made our ‘normal life’ budget – added all our possible expenses together and all that was beyond that was meant for savings. One thing that really helps us to keep track of our expenses is Quicken. A software tool meant just for finances. We put there every penny we spend and categorize it. It gives really nice overview of our money flow. Sometimes this can be quite annoying to input every day our every expense there, but it really pays back. When month is over it’s so easy to see where we’ve spent more or less than out budget.

Second law that tells us how to become more wealthy, and this is from book inspired by God himself:

 9 Honor the LORD with your wealth,
with the firstfruits of all your crops;

 10 then your barns will be filled to overflowing,
and your vats will brim over with new wine. (Proverbs 3:9-10)

Like Jesus said: “It is more blessed to give than to receive“. Part of our salary is for tithing. And this is the part we’ve always done. Yea, it’s even more important than our personal saving. If I don’t have enough money to save, so be it, but I always want to find money to give. Trust me on this, I’ve seen this rule working out very well.

Joy of running

Couple of weeks ago I got myself a book called ChiRunning. It’s a book about running. It’s a book about smart and effective running and because I’m not very athletic and don’t have much muscular power, I’m happy to find ways how to run farther by using less energy. This book is all about it.

Word ‘Chi’ in title means ‘energy’, this meaning comes from eastern philosophy. While I don’t care much about all this philosophy behind eastern religions, I must say that there’s a lot to learn from this book. After I’ve read about 1/4th of the book and haven’t even done any exercises that come later, I already see progress in my running. When I got my knee injury from army few years ago, it has bugged me ever since. It was lottery during longer runs – will my knee hold on or will it start to protest and stop cooperating with me. But now, when using correct posture taught by ChiRunning I’ve no problem with that. When knee starts to hurt I know I’ve wrong posture and I adjust it – and voila, pain is gone.

Another good thing I’ve noticed. My “training zone” for usual runs is 70-80% of max heart rate (MHR), speed around 4.30 min/km, that was before book. Now, when posture is correct my speed “in the zone” is about 4.05 – 4.20 min/km, when posture is wrong, my heart rate goes above 80% of MHR and speed drops to about 4.30 min/km. This is truly awesome – using less energy to run faster and longer!

My 10k record time is about 41 minutes. Yesterday I ran 10.7 km, and inside this my 10km time was 43:00 and I wasn’t even trying that hard.

And it’s 66 days till marathon.

Being a Bug

Life so far has been just excellent. Spring was just wonderful and summer is even more. All nature is just living, green stuff all around and lots of food everywhere you look. Just a week ago I learned how to fly. At first it was quite hard – trying to coordinate both wings at the same time, man. Of course it wasn’t even half as bad compared to coordinating all my 6 legs when I learned walking. OK, so after few flight hours, many false take-offs, hard landings and 17 bumps against trees I finally managed it. Oh what a fun it is just hovering above the ground and getting ‘birds-eye’ view of life. Two days ago I and my 247 brothers did something crazy – we just went all together and stole some BBQ from monsters. Oh boy, did it taste good! So, now I’m just flying around and enjoying life. Bad thing is that very often during flying we have to run and hide from those mindlessly wandering monsters. It seems that they don’t even look when they trample around, just going… I wonder why they have ears, can’t they hear we’re here also.

Splash

…

Oh bugger…

…

As of today I have only 83 days till marathon. I. Must. Train. More. Why are there so much people, I have to run slalom every time I come through here. Hm, why is that I’m usually not content with my life? Winter is too cold, summer too hot, spring too slow, autumn too wet, salary too low, too little free time. It was nice to see sports instructor from my army time and he even said hello to me. The army time – every time I think of it, it makes me just happy it’s over… And those flying buggers. During last run I had 14 of them on my neck and I ate 3 of them. So far it’s been better, but I still got 20 minutes to go, everything can happen.

Oh. Man.

Seems that I just swallowed one of these bugs again.

Long term investing

I just made one interesting ‘what if’ investing scenario. Let’s say I bought 200 shares of Caterpillar (CAT) on 1970 for 640$ (share price was then $3.20). During 1970 – 2006 CAT had three 2:1 splits and one 3:2 split, which means that today I’d have 2400 shares.

During that time just dividends would’ve earned me $10029, which is 1500% of ROI (Return On Investment), which is 41% annually. Compare that with random banks long term savings account – they have interest rate of around 5-6%.

Here comes the fun part. As of today that 1970 year $640 stock would be worth exactly $174503 (2400 shares * yesterdays closing price was $72.71). If I’d used some options trading on that stock I’d get its cost basis down to 0 on 3-5 years (rough estimate) using just conservative trades like covered call, collar trade and protective put.

And, if I had been wise then I’d bought even more shares of CAT from its dividend earnings. Then I’d probably had 5000 shares which would be worth… well, a lot.

Makes you think what to do with your next salary, doesn’t it? Either go to cinemas and watch something like “Da Vinci Code” or buy one share of good company.

94 days – so far, so good

As of today I have only 94 days left to my first-ever marathon. If my training plan goes well, then during this time I have to run for training at least 500km (preferably lot more). It looks like quite a bit, but actually it's not so bad at all. That 500 goal should be filled with 4 times in a week training, averaging 10km. I haven't done concrete training plan yet, but if all goes well (without more injuries and my left knee doesn't get any worse) then I should be running about 70-80 km per week, longest runs will be about 30-35km.

Few days ago I had a little foretaste of what I could maybe expect from marathon. I did a 15km run one evening and temperature was about 24C. Man, was it hard. Total time was 1h 11min, but second half of this run was hard – seemed that I didn't drink enough before start, so dehydration kicked in. Legs were heavy, breathing was hard, during last 2km I actually had shivers and cold ran up and down (really weird experience in 24C summer heat). And it seemed like I lost 3 litres of water because of sweating. It's good that marathon will be in late September, when maybe it's not so hot anymore. I wonder how it feels to run Stockholm marathon at 4th of June at midday.

Anyways, few tips that I must keep in mind when doing harder workouts:

• I must get enough sleep (looks like 8hr per day is not good enough)
• I can't eat fat rich or foods that are hard to digest at least 2 hours before run (banana, yogurt and other easy stuff is fine)
• enough water – but not too much either, it's very uncomfortable if I need to take a leak during run
• I must watch my running posture – not to hop to much up and down, it kills knees
• controlled breathing – breath in and out when left foot hits the ground (idea is to breath not how it comes naturally, which for me is on right foot). It helps to prevent the stitch.
• Did I mention that I have to sleep enough?

Animal Farm, 1984 et al

Lately I’ve been reading quite a few interesting books. Right now I’m finishing “Animal Farm” from Orwell and just before it I finished “1984″. I must say, these are really-really good books and they paint, let’s say, ‘interesting’ picture of near would-be future. “1984″ is classic among such books and unfortunately it took me more than 2 years from reading idea to actually doing it.

It’s astonishing how much things Orwell got right when predicting future (now it’s our present). To me most interesting ideas were so-called free-will projects that characters in “1984″ took part of. These acts weren’t really mandatory, but if you didn’t do them, then you looked suspicious and guys from Love minstry could come and ‘ask a few questions’. So because of that everyone looked happy (trust me, it would be better to pretend you’re doing ok than to be sent to Love ministry for interrogation). Fortunately right now this is not so bad, but some hints of it I can find even in my own life – it’s much easier to look good and do the ‘voluntary’ things, rather than to show what’s really going on inside and ‘face the consequences’ like questioning from friends, superiors or whomever.

Second thing was this ‘it’s for your own protection’ idea. Big Brother is watching your every move, everything you do, because you might do some silly things and not even realise it. So, it’s better if we catch you before you might do something stupid, we ‘help’ you get rid of these unorthodox thoughts – and after that everyone is happy. You Just Love Big Brother.

I loved ‘hate minutes’. I think this is just spot on what’s going on right now in certain coutry. Idea of ‘hate minute’ was to get people hate Big Brothers enemy (whoever that might be at the moment) and get people to be in ecstasy when our army wins some battle somewhere. And because of war government can justify everything, why there isn’t food, clothes etc. Let’s take America’s war on terrorism – from 9/11 there has been less than 4000 deaths because of terrorism (at same time millions die in car accidents, cancer, AIDS etc), but they spend trillions of dollars for that war (what could that money do in medical research?). Why? I don’t know, but it seems really strange if you think about it for a while. And just like in “1984″ whole nation was in ecstasy when their army won some fight, mind you that news was always delivered via TV, so it is right now – everybody seems just jumping from happiness that terrorist miltary leader was killed. Does anything change because of that, let’s wait and see.

There were many more interesting ideas, but maybe I’ll write about them in future.

Movies and books that I really like from this genre (in no particular order):

• V for Vendetta
• Fahrenheit 451 – Ray Bradbury
• Equilibrium
• Matrix
• Brave New World – Aldous Huxley

The ‘why’, part 2

There are situations where we can ask why:

1. doing and knowing the ‘why’ – good guy
2. doing and not knowing the ‘why’ – dumb follower
3. not doing but knowing the ‘why’ (knowing the ‘how’) – problematic
4. not doing and not knowing the ‘why’ – rebel

Version 1 is the best one to have – I know the reason why I want to do something, I know the end result I want to achieve and then I just do it. I believe this is the ideal goal for every one of us – knowing the ‘why’ behind everything I do, even behind the bad things I do. If I know why I made that mistake, though the knowledge may also come later, then in future I could possibly avoid it or I get to know how I must change myself. And, like Bible says, when I see danger approaching I could just run away and avoid it (this applies to temptations).

Versions 2 and 3 are harder nuts to crack. While 2nd just requires a timeout and think about the reasons and actions, 3rd in my opinion requires some deeper digging in ones mind. Best example here might be some addiction I have. Let’s just say it’s weight (very real problem for very big part of population) or smoking (more destructive for other people). Here comes into play another question – how? If anyone ever has tried to get rid of some bad habit, then they all know the ‘how’. I know dozens of methods how to lose weight (not to eat fatty foods, not to eat before going to sleep, couple of hours of aerobic exercise every week etc), but the ‘why’ inside is not strong enough to actually go out and do it. I do know what I have to do to finish my school (take few exams and write diploma), but what I need is the ‘why’. And the why must be way stronger than my laziness and plethora of excuses that seem to come from nowhere (and very fast!). There are always multiple (and even very simple) solutions to problems – many are just ‘don’t do this’ (to stop smoking, I just do it – I don’t smoke. To lose weight – just don’t eat. How much easier can it be?), but ‘why’ behind it is not strong enough. I think this problem is an everlasting quest for motivation. And where do I find the motivation to look for motivation?

4 might be easy answer or hard problem, depending on situation. It’s easy when it applies to myself, or things I thought of doing for myself (building a 10m high matchstick-house). It’s hard when this is a thing you must do, but you don’t understand why. Could even happen in work. Then, I believe, you have 2 choices, you either (1) don’t do it and explain your action to your boss, or (2) be humble and do it (in this case the ‘why’ is the order from boss). In army usually good guys where in 2nd category (obeying orders, tho not knowing the reasoning) and bad guys where 4th category (rebels), though finally (maybe after 150 push-ups or so) you anyway obeyed the order.

The ‘why’ behind everything

Currently I'm reading David Allen's book "Getting things done". It's about organizing your life, doing right things at the right time, knowing when to do when – basically getting things done. After 62 pages it seems really promising and I've already found some ideas that have improved my planning and living according to these plans.

His main idea is that I have to get all things that I'm going (or just planning) to do someday, out of my head into some kind of external storage. And it really means everything – from buying milk and bread to building a house and retiring earlier. Because when I have to remember all these gazillion things, I'm just overwhelmed and can't really do anything properly and losing focus all the time (hm, that site looks interesting, hey, what's that news, uh, I forgot to do that yesterday).

His planning technique has five phases and first of them is asking 'why?'. Asking 'why' when starting a new project – why do I have to do this? Why do I want to save each month 30%? Why do I want to own a house? What is the purpose of going to that birthday? I believe this 'why' can give absolutely new quality to everything I do. And if I know the reason behind my every action (then I also know the result I'm looking for) then I won't do things out of habit (or I won't do things out of habit that really matter).

So, why am I writing this blog? Why are you reading it?

Living outside the box

It's interesting how learning process takes place. Whenever you start to learn something they give you a set of rules and say this is how you must do it. Then, after some time they add more and more regulations to these basic rules. And then, this is the most interesting part, they tell you that actually you can forget these rules, they're not so carved into stone as we told you, and if you're brave, then break 'em all. I guess it applies mostly for creative arts and not for natural sciences, but fascinating anyway.

This thought came from an investing course I take. I've studied all these basic options trading strategies for a while now (bull calls, bull puts, bear puts, bull puts, different calendars, straddle/strangle) and yesterday I took one more advanced class with title "Outside the box bull calls, bull puts" and there exactly this happened. Basic trades have primary exit about 20% ROI, short time period and relatively low-risk. But breaking some rules and doing your homework I could easily get ROI up to 200-600% (probably with a longer time period). Risking 500 bucks to get 2500. Though I wouldn't put all my eggs into this basket – it still is very speculative trade. Good part is that these trades are quite low maintenance, because of their long time period. Having a goal for a stock to rise 20 points during next year and a half can really give me a sound sleep even if the stock drops 5 points in a week. Of course the stock must be fundamentally sound and 'on sale' currently, so that I can have long term bullish expectation.

Now you might ask why I just can't buy stock if I expect it to rise so much? Because of capital requirements. Stock is way-way more expensive than doing the same thing with options. Using bull put is probably tens of times cheaper than stock itself. One thing to remember with bull puts – you must be ready to get early assignment from short puts. But by doing this trade I wouldn't mind owning a sound stock.

Even more fun trades are highly speculative "Vegas trades", which can earn you 500% of ROI overnight. But I haven't studied these yet.

Quote of the day: "I've got a plan so cunning, you could put a tail on it and call it a weasel" (from Blackadder)

Pain is so close to pleasure

Pleasure is so close to pain, painful pleasure, pleasureful pain, pain is pleasure? Why in the world did I came here to do this madness? These are the questions I asked during today 10k running competition. I got the answer at and after the finish. One of the answers was as simple as – because I can. After that follow plethora of other reasons that I know or some that I might not be even aware of – I like to find out my limits (hence the marathon thing), I like to beat other runners (egoistic, I know) and so on and so forth.

The race course was very hard. I guess the hardest 10k I've ever run. The race took place in highest place in Northern Estonia called Emumägi. During 10k we had 3 hills and the worst was the last, I almost had to walk it. Also I think this wasn't really 10 km, but more like 11. Because that is what my watch showed and running tempo felt like I should've finished with better time.

Anyway, my total time was 41:44 and I was third.

It was a good preparation for marathon, I'd say.