Social Security approved

I applied for Social Security on June 1, 2024 in advance of turning 70 later this year.  If I recall correctly the website said it would take 30 days for a decision.  However I didn't hear anything until yesterday, August 31.  I received an email saying a decision had been made and upon logging into their website found out that my application had been approved.  This was expected as my case was pretty straightforward having worked for two big employers a combined 40 years.  Nevertheless it took them three months to approve the application.  This made no difference to me as I had applied as early as possible (four months in advance) and am not due my first check until November.  And I have no urgent need for the money.  However if you do need the money or your application is at all complicated it would probably be a good idea to apply as early as you can.     

The amount of your Social Security monthly benefit depends in part on when you start taking it.  You receive the smallest benefit if you start taking it as soon as you are eligible which is when you are 62.  Past age 62 each month you delay taking it increases the amount until you reach age 70.  Further delay past age 70 is pointless as your benefit stops increasing.  I have read (but not verified) that taking the benefit early or late makes little difference from an actuarial stand point. Based on this, I decided to take it as late as possible as that would give me the biggest benefit if I lived a long time and might need it.  Also I tend to procrastinate.

My full retirement age is 66.  According to Social Security this means that starting your benefit four years early at age 62 costs you 25% compared to starting it at age 66.  Whereas waiting until age 70 increases your benefit by 8% a year or 32%.  In practice it is more complicated as there are various inflation adjustments made each year.  In my case I had maximum earnings each year.  Social Security has computed a  table  giving the initial and current monthly benefit based on your age and year you retired for maximum earners like me.  If I had started taking the benefit at my full retirement age in 2020 I would now be getting $3623 a month.  But by delaying until this year I will getting $4873 a month.  Which is  34.5% more.

WCBS 880 RIP

Last Sunday night I listened to the last few minutes of WCBS 880.   It was one of two all news format radio stations in New York City.  It shut down forever at midnight to be replaced by WHSQ an ESPN sports format station which began broadcasting on the AM 880 frequency one minute later at 12:01.

I was a bit sorry to see it go as I had been listening to it since I moved to this area in 1983.  First in Ossining NY and then in Princeton NJ.  I preferred it to 1010 WINS the other NYC all news format station.  I thought the connection with CBS improved the national and international news coverage.  Also I listened some to Yankees games during the years they were broadcast on WCBS (in a bit of an exception to the all news format).  Mostly while driving but sometimes at home as well.

In recent years WCBS and WINS were owned by the same company and I expect they concluded  that two all news format radio stations was at least one more than NYC really needed.  I suppose I will get use to 1010 WINS soon enough but still this was an unwelcome reminder that nothing lasts forever.    

2023 Portfolio Review

Compared to 2022 my main portfolio in 2023 did better absolutely but worse relative to the market.  As usual I will use VOO, Vanguard's S&P 500 index tracking ETF, as my market benchmark.  In 2022 my portfolio lost 10.79% but outperformed VOO which lost 18.17% by 7.38%.  In 2023 my portfolio was up 15.66% but trailed VOO which was up 26.13% by 10.47%.  For the two years combined I trailed slightly up 3.18% versus 3.21% for VOO.  

In October 2023 I doubled my positions in SCHD and VIG (two ETFs that buy stocks with growing dividends) and increased my position in VPU (Vanguard's utility sector fund).  In what follows I will account for these purchases as if they were made by borrowing from my cash position and repaying the loans without interest at the end of the year.  This is simple but a little biased.

At the start of 2023 I was 45.55% invested in VOO, 30.01% invested in individual stocks, 13.83% invested in ETFs (other than VOO) and 10.61% invested in cash.  During year my VOO position matched the market.  My stocks returned 5.44% underperforming by 20.69 contributing 6.21% to my overall underperformance.  My ETFs returned 11.20% underperforming by 14.95% contributing 2.06% overall.  My cash position returned 5.28% underperforming by 20.85% which contributed 2.21% overall.  This adds up to 10.48% overall underperformance in good agreement with the actual 10.47%. 

Only two of my stocks (JPM and KD) beat the market.  Seven had negative returns (ED, CVS, XOM, MET, NSC DGX, SOUHY and WDS).  One of my ETFs (VGT) beat the market while two (VDE and VPU) had negative returns.

Over the long term I continue to trail the market but perhaps with less volatility as I tend to outperform in bad markets but underperform in good markets.  This may be safer but leads to underperformance in the long bull market we have seen since the 2009 bottom.  Fortunately my approximately 50% position in VOO has kept me from trailing too badly.

Elon Musk

 I recently read Walter Isaacson's lengthy (670 pages with notes in hardcover) 2023 biography of Elon Musk.  This is a narrative account of Musk's life from his childhood in South Africa to his takeover of Twitter.  In my view while not without some points of interest the book is far too long and neglects the big picture.  I don't recommend it.

Elon Musk is of course an important and controversial figure in contemporary American life.  Among other things he helped create and grow Tesla and SpaceX two very successful businesses.  More recently he purchased Twitter.  But at times he seems his own worst enemy behaving erratically and constantly getting into trouble for little reason.  So far he has avoided disaster but his luck may run out at some point.  The purchase of Twitter seemed particularly ill-advised and could be a sign that he is having trouble keeping his life together.

Musk was born in South Africa in 1971.  At 18 he emigrated to Canada to attend college and soon moved to the US.  He was entrepreneurial cofounding Zip2 in 1995.  The company was purchased in 1999 for $305 million of which Musk's share was $22 million.  Musk then cofounded X.com which became part of Paypal.  Paypal was purchased by Ebay for $1.5 billion in 2002.  Musk next founded SpaceX and in 2004 was an early investor in Tesla which he soon came to dominate.  After some early struggles SpaceX and Tesla have both become very successful.   

What are the factors in Musk's success?  A lot of it was luck of course but on the other hand Musk gave himself chances to be lucky by taking risks.  It is hard to win the lottery if you never buy a ticket and Musk bought some tickets.  He was a tough sometimes abusive boss and that can encourage employees to work harder and accomplish more.  He had an advantage here in that rockets and electric cars are the sort of things many engineers want to work on and are willing to tolerate some workplace abuse for the opportunity.  

Another Musk insight is that products and organizations often contain a lot of fat, unnecessary parts and people that can be eliminated in the interests of efficiency.  If carried too far this can be idiotic as in the episode from the book covered in my previous post but in a lot of cases there are major savings available.  Musk also seems to have had reasonable good judgement about what people will find attractive in a product.  However his record here is more mixed as some features like the gulf wing doors on some Tesla's just aren't worth the trouble.

All of this along with Musk's chaotic romantic life are covered in the book but mostly in anecdotal form.  It is often hard to tell what is important and what isn't.  I would have preferred a shorter book with more analysis.  The book has some value, it does provide some insight into Musk and his good points and bad points.  The book is divided into 95 short chapters so you don't have to read it all at once.  Still in the end I expect most people can find better ways to spend their time.

Coverup

I recently finished reading Walter Isaacson's massive biography of Elon Musk.  I plan to give a longer review but for now will just relate one anecdote from the book.   Musk is trying to cut the cost of installing a solar roof.  So according to the book (p. 370-371) Musk advised his people that "... they should question the requirement that installers must work around every vent and chimney sticking up from a house.  The pipes for dryers and ventilator fans should simply be sheared off and the solar roof tiles placed on top of them, he suggested.  The air would still be able to vent under the tiles .."

This is of course idiotic advice.  The air won't vent efficiently if at all.  And more importantly in the case of a dryer exhaust the lint won't find its way out.  It will get hung up and block what little air flow is left.  Which could cause the dryer to overheat and start a fire.  Since lint is extremely flammable this is not good.  

Also even if this solution wasn't dangerous it isn't code which means Musk's company is likely to be eventually forced to fix any solar roofs installed in this way.  Which will cost them far more than if they had done it right in the first place.

In fairness to Musk it isn't clear that this method was ever actually used.  Sometimes his people were able to ignore his stupider suggestions.  And if it was used I expect the additional costs of being forced to redo installations in a code compliant way would have quickly caused the method to be dropped.  Musk in fact expected some of his cost cutting ideas to prove impractical when tried and have to be reversed.

Still this episode shows why some people find Musk easy to dislike.  And also why many people are reluctant to buy houses with solar installations on the roof.  Who knows what problems are lurking.

Leave a Light On

 I got my monthly gas and electric bill a few days ago and was wondering why my electric use was up 64.6%.  Eventually I thought to check my basement.  It wasn't obvious from the top of the stairs (although it was night) but as I started down it became apparent that there was a light on.  Which I eventually located in a far corner.  I don't go down in my basement much so it could have been burning for months.  This was a little annoying as I have done this before.  I believe I actually checked a few times but only from the top of the stairs.

Assuming a 100 watt bulb this is 2.4 KwH a day.  Which amounts to about $.50 a day which isn't a huge amount amount but does add up.  This by itself doesn't explain the full increase in my bill.  Another factor is the billing period was 33 days this year as opposed to 29 days last year which the utility didn't adjust for.  This still doesn't account for the entire increase so possibly there was some other factor.      

 Anyway if you have an attic or basement or closet that you don't use much and that has lights in it it seems to be a good idea to check every so often that you haven't left a light on. 

Election Night Bet

 I recently reviewed "Going Infinite" Michael Lewis's book about the rise and fall of Samuel Bankman-Fried (SBF) and his cryptocurrency exchange FTX.  The book contains some stories about SBF's time at Jane Street Capital.  One of these stories is about trades Jane Street made on election night 2016.

As related in the book (pages 67-71) Jane Street had noted that the financial markets were moving in response to events seen as changing the odds as to whether Hillary Clinton or Donald Trump would win the 2016 US Presidential election with a Trump victory seen as bearish.  Jane Street decided that if they could figure out on election night who was winning faster than anybody else this would give them a profitable edge as they could trade ahead of (front run) the markets. So with SBF playing a major part Jane Street set up a team to rapidly analyze the returns on election night as they came in, update the odds on who would win, and trade on the new information.    By the book's account this worked well with Jane Street acting on updated information minutes before the rest of the market got the word.  To quote the book "... Around one in the morning, after twenty-four thrilling hours without a break, Sam left the trading desk to get some sleep.  The markets seemed to have fully digested the news of Trump's victory.  Jane Street was sitting on maybe the single most profitable trade it had ever done.  ..".  

But then things go wrong.  Again quoting the book "Three hours later he returned to find that the markets had changed their minds about the likely effect of Donald Trump on the world's stock markets.  .. "What had been a three-hundred-million dollar profit for Jane Street was now a three-hundred-million dollar loss," said Sam ..".

But this account leaves an obvious question unanswered.  Why didn't Jane Street nail down their three-hundred-million paper profit by closing out their positions at one in morning after the markets had "fully digested" the fact that Trump had won?   They no longer had an information edge on the rest of the market so leaving the positions on was taking a risk without any expected gain.

Possibly the markets at one in the morning were not liquid enough to easily close out their positions.    However this would suggest the markets had moved in their direction because of their trades and not because the markets were belatedly realizing that Trump was winning.  But then their three-hundred-million dollar paper profit was at least in part an illusion as closing out their trades would inevitably  move the markets against them and they would not be able to realize the full paper profit.

Or possibly there was another reason.  But as told the story doesn't really make sense.  This is one of the weaknesses of Lewis's book, for whatever reason he seems unduly accepting of SBF's view of the world.