Monday, March 30, 2020

Libertarians Are Wrong About Money (How money is created)

Debt is money. As I understand how the system actually works, my contempt for libertarians grows. (As if I did not have enough contempt already with their free trade/open borders problems.)

The ignorance of libertarians is exemplified by this meme:

Vox Day helps point out resources to how money is created:

I will post separately on how I've personally seen banks create money through debt.

Once you understand that debt is money, then you will come to this conclusion the same as Vox Day:
Now, perhaps you will understand why I am a deflationista. And so are you, if you believe that any of the current outstanding debt will be written off or otherwise go unpaid, even if you don't realize that you are. Debt forgiveness and bankruptcy-related debt write-offs are the literal destruction of money, and since deflation is a reduction in the money supply, any reduction in the amount of debt must necessarily be deflationary.

Tuesday, March 24, 2020

Why Debt is Bad

This is an incredibly hypocritical post for me to list as I'm only writing this after my family made wealth through the use of debt. Vox Day has brought to my attention the classical Christian perspective of debt:
This is why usury was banned by Christendom and is prohibited by the Bible. I warned everyone back in 2008-2009 that if the banks were not permitted to fail, the next failure was going to be more difficult. It's really not hard to see these things coming, as the patterns of the crisis developing are easily recognizable. And the bigger the bank, the more internationally interconnected it is, the more likely it is to be taken down by the "unexpected" collapse of the system which will likely begin with the failure or bailout of a massive, well-respected institution like Deutsche Bank.
I'm familiar with the Libertarian critique of debt. Primarily, that interest rates should be dictated by the market and that banks should be allowed to fail.

I'm also familiar with Dave Ramsey's view on debt. I always found it strange how he recommended that people pay down their home mortgage. To me, it seemed to make more sense to cash out at low interest rates, your home mortgage, and invest the money into other assets to make a larger return.

There was a time in college when I was able to withdraw about $20,000 in Credit Card debt as a cash advance, and plant it in a savings account that was paying more interest than my credit card was charging me for the promotional time. I made the minimum payments, but I made the mistake of making a purchase on the credit card. As a result, when I paid the minimum dollar amount, it applied FIRST to the older cash advance. My smaller purchases on the credit card were charged at the higher interest rate. They got me for that month, but I ended up paying the rest of the balance.

I do a lot of my business analysis on spreadsheets. The problem with spreadsheets, as you layout extra years, is that you cannot really calculate the "Black Swan" events that lead to your inevitable downfall. If a couple years of drought completely wipes you out, you can't come back to play. In that case, extrapolating "averages" over a long period of time means nothing.

I think I read the book "Rich Dad, Poor Dad" sometime right after college. I was also reading Fortune Magazine, Inc., or Smart Money, or whatever personal financial magazines. I knew from the beginning, that Index Funds were the way to go versus actively managed funds.

Let me explain a little about the hypocritical part. My parents immigrated to the United States with nothing. My father took over a body shop in Seattle that he used to work at. The owner was retiring. From my understanding, my father got a owner financed loan to take over the place. Eventually he flat out owned the place.

My mother took the proceeds from the auto shop, and reinvested them into duplexes and four-plexes through the Puget Sound area. Their primary method was through cash flow. Eventually, they may had given money to other kinds of businesses at that time. They were well off, because my mother did most of the repairs of the residential units she rented out. They invested in some hotel in Everett, or somewhere, that didn't pan out very well.

They never really filled me in on their businesses. I never looked at any tax returns, or looked at their profit & loss statements.

Eventually, my parents were divorced. In the settlement, my mother received all the investment properties, and my father remained with his body shop. My mother sold all her investment properties and bought a pizza shop. It's not very clear totally how that all worked out.

My mom eventually bought her first motel and worked the front desk while sleeping in it. From there she jumped to larger motels. Then around 2003, she made a huge leap to Orange County, California, to purchase a 131 room, Red Roof Inn. Each time she made these jumps to larger properties, she never really had much cash flow or reserves. She was always extremely leveraged.

In 2006, she got a CMBS loan that she cashed out to buy another hotel near Disneyland. She got cash out from that loan, and then got ANOTHER loan (second loan) to get even more money as a down payment to purchase that hotel. When I arrived in 2007 to help my mother manage the properties, I was completely alarmed, because I was analyzing the Profit and Loss statement and the debt service was HUGE. She was having negative cash flow and her cash reserves were almost nothing.

Thankfully, we had a buyer that closed on the 2nd hotel on October 2008. It was one month after the financial crash, and I thought the buyer was going to back out. I heard they were in a 1031 Exchange so they absolutely had to purchase the hotel or face the tax consequences. Lucky us. I heard they eventually had to give up their hotel to the bank.

Many Koreans ended up being in that situation. We would've been in that exact same situation if it weren't for the buyer who ended up taking the fall instead.

Around 2009, we purchased a mortgage on a hotel. We paid a down payment to get a loan from the bank, in order to purchase their loan that was on default for the actual hotel. DEBT INCEPTION. We foreclosed on the property, and the guy declared bankruptcy which stopped the entire process.

In the mean time, we are paying monthly to the bank that gave us the loan to purchase the mortgage note. If we didn't start making cash flow from the hotel soon, we would be in default of our loan for the mortgage loan we were trying to reposses on. My mom has bigger balls than me.

We lucked out because the debtor hired some notorious attorney well known in the courts for filing "bad faith" filings. The judge threw out the case in the first hearing.

I didn't know any better, so we setup a day to coordinate and go to hotel to take over operations. Under typical circumstances, you are supposed to obtain court permission to kick out a non paying tenant. Instead, we performed what is called a "self-help eviction."

On the day that I walked in asking if the managers still wanted to get paid, the debtor was in the hospital for heart surgery. The tenant's incompetent attorney, delay in acting, our competent attorney, and the grace of the Judge for our ignorance, granted us permanent possession of the property, rather than getting thrown out. They had to resort to case law from the early 1900s because self-help evictions aren't that common in California.

Keep in mind, this whole time, we were paying monthly mortgage payments to the bank for the loan we were trying to foreclose on. We were desperately low on cash. Maybe we were a couple months away from losing everything ourselves.

Even after we gained possession of the hotel, the cash flow wasn't mind blowing. Eventually, we were able to sell the hotel to some Chinese buyers in 2014 for an exceptionally good price. We went into something less risky, like shopping centers.

Having no cash reserves and being three months away from complete ruin is no fun at all.

In this current crisis, we thankfully have more than three months worth of funds. It'll be tight, but it's nothing like the anxiety I was having in the early days. I never want to go back to that.

Leveraging is the quickest way to making a lot of money in a short period of time. Lots of people experienced this in the booms. They believe that the down times will never come, because when they eventually come, they go complete bust because they have no cash reserves to support all the loans they have. They fall like dominoes.

I have a friend who has a house completely paid off. His monthly expenses are basically nothing. They have large cash reserves. They are completely fine. They'll get through this time and he's laughing at all the carnage around him.

I wonder what would Jesus' teachings be today for those who lust after things which they cannot afford. So they buy that bigger house with 10% down (assuming a VA loan), like I did.

The house had about a $2,600/month payment, but I purchased that house because I knew I could rent out half of it to make an additional $1,200/month in rent. The end payment was less than the rent I was paying for a crappy, two bedroom apartment next to the railroad tracks.

But, had I been in a situation where all the hotels went under, and I had purchased a house with a 10% down payment, I would had been chained to that house. I probably could've rented out the other portion of the house to make up the remaining $1,300/month. But still, it limits the flexibility.

I was only in Los Angeles because of the hotels, and with it gone and me having no family in the area, I may had found it better to move back to Seattle where my father, sister, and other family members lived.

Isn't that perhaps the other downside of readily available debt?

My brother was sent off to the East Coast while my father cashed out a home mortgage to pay that out-of-state tuition. I would calculate about $120,000. But what real good was that for my father? My brother married and now lives on the East Coast. He will never really have any substantial ties with his father again.

The money he's making on the East Coast is something he could've easily made had he stayed in Seattle.

What a shit deal.

If it weren't for the debt that allows people to expand beyond the natural support structure of family, would we see as many fractured families?

What I can say for my "empire" is that I don't think I like debt at all. I believe we are entering even more uncertain days. With the increased invasion of American society by foreign money and peoples, it is not the kind of future I would like to invest in for my children.

Having a large cash reserve would be optimal. Having a homestead is even better. I like the concept of gold, but it's not easily transferable over borders. Cryptocurrency has its own problems. It is very easy to bifurcate the Internet into Intranets.

So the only option, of course, is to diversify.

I could not had seen this coronavirus disaster hit the way it did and in such a seemingly rapid manner. It all makes sense now, but I could not had predicted any of this happening in this way.

I think ultimately we will recover, but after going through the 2008 financial crisis, and the 2020 coronavirus collapse, I think I'm in the season of risk mitigation for future generations, which means less debt and larger cash reserves.

It means slower growth, but it means less risk. I am not comfortable gambling away their inheritances to make them even more money than they could spend.

Now when my children get older, have higher tolerances for risk, I have no problem funding their high-risk ventures which I will encourage them to take. The question becomes how to encourage adults to have ambition to increase the value and services they provide to people when they are already so comfortable as is.

I think it will be highly dependent on the gifts that God gives them and their personality preferences. Then I will be able to help direct them toward a high-risk, high reward path.

Wednesday, March 18, 2020

Update of My Lazy Man Garden in Puerto Rico Tropics

Definite winner is planting food scraps from the grocery store! Lettuce, Green Onions, Bok Choi

This is the lettuce that grows super well in my garden from the Costco in Bayamon. The outer leaves may be a little damaged, but, leave the inner leaves and stalk intact when planting.

Monday, March 2, 2020

No Fap, Marriage, Orgasm Without Ejaculation, & Energy Management

It turns out a lot of my thought processes about managing sexual energy isn't new at all. The Indians (Tantra) and Daoists have known this for thousands of years.

Due to my Western mindset, I always equated Ejaculation with the Orgasm. It turns out that they can essentially be separated from one another.

This is from the Daoist perspective:

On research papers, it turns out that you will see about a 50% increase in testosterone levels on the 7th day.
The purpose of this study is to gain understanding of the relationship between ejaculation and serum testosterone level in men. The serum testosterone concentrations of 28 volunteers were investigated daily during abstinence periods after ejaculation for two phases. The authors found that the fluctuations of testosterone levels from the 2nd to 5th day of abstinence were minimal. On the 7th day of abstinence, however, a clear peak of serum testosterone appeared, reaching 145.7% of the baseline ( P < 0.01). No regular fluctuation was observed following continuous abstinence after the peak. Ejaculation is the precondition and beginning of the special periodic serum testosterone level variations, which would not occur without ejaculation. The results showed that ejaculation-caused variations were characterized by a peak on the 7th day of abstinence; and that the effective time of an ejaculation is 7 days minimum. These data are the first to document the phenomenon of the periodic change in serum testosterone level; the correlation between ejaculation and periodic change in the serum testosterone level, and the pattern and characteristics of the periodic change.
From the "pickup" artist community, it is well known that kegel exercises and "edging" are a must, and many of the techniques that have been taught for thousands of years from the Eastern Traditions.

Mantak Chia says about 8 days for your body to recuperate your sexual energy if you're 30 years old. 4 days if you're 20 years old.

Once again, I'm shown that the old ways are better than the new ways. Lindy effect. All the crap has been filtered out over the millennia, and this "porn" experiment will be revealed as absolutely destructive on human sexuality.

I'm not really sure how this kind of knowledge could had been passed down through the monasteries.