Lizard King Discusses the Financial Independence Retire Early (FIRE) movement

I want to talk about lifestyle choices and how it relates to ecology and building a better future on this planet and others. This talk is going to take a detour and I hope you will stay with me.

I retired early from the corporate world on 5OCT2012. I was 40 years old. I set a plan to retire early in 10 years in the summer of 1998. I was finishing up an undergrad and just discovered the Living Universe Foundation. I knew intuitively that my academic choice to study Business, Economics, and Accounting was not going to lead to my best life, even if it paid the bills. I like to say I “failed well” because my 10 year plan took 14 years.

The standard bearer of the FIRE movement is Pete Adenay, more commonly known as “Mr. Money Mustache“. This man is the first of many internet celebrities in the early retirement community thanks to his popular blog. Pete combines snark, common sense, frugality, minimalism, an ecological mindset, and hard cold math to champion the cause. He has turned Longmont, Colorado into an improbable Mecca for financial independence. Pete is a Canadian transplant who held a short career in coding and retired at the tender age of 33 to life his best life.

For me, an essential part of happiness is living according to my personal Core Values. Having time to reflect since 2012, I’ve come to recognize that most people can’t even define what their own personal core values are. It is no wonder so many people are unhappy with their corporate careers and the pressure to conform to an external set of core values that are provided by the company. It is also unlikely that the young 20 somethings who finish university with the pressure of a ton of student debt and no clue who they are as a person can successfully choose a career that is consistent with who they are as a person. There is a lot to be said for finding a career that is your passion – if said career pays the bills. If not, there is quite a lot to be said for beating the corporate system and living your best life on your own terms thereafter.

One of the things that has become important to me is Frugalism. This is a recurring theme within the FIRE community. Anyone with some basic math chops and a spreadsheet can quickly model that the fastest path to early retirement is driven primarily by savings rate and not by rate of investment return. It is a two fold driver in that learning to live on less both means you save more and need to save less to retire. There is also a deep current of ecological mindfulness running in the community. Rejecting consumerism, producing less trash, not buying worthless plastic crap, living lighter on the land, and reducing, reusing, and recycling aren’t just good for the environment. They are good for your pocket book.

Another common element in the community is minimalism. I don’t personally take this to the level as some hard core early retirement enthusiasts do. For some inspiration check out Early Retirement Extreme for an amusing set of guidelines to retire within five years. While I applaud the people who have found success with that method, I prefer to take everything in moderation. It might be for you and you might be a little less extreme and decide to retire in only 7.5 years (you slacker!) I have figured out that the Native American proverb is right. We don’t own stuff; it takes possession of us. I still get a little grief from friends and family for not having “enough” furniture. But I’m living my best life.

Quite a few early retirees adopt Stoicism. We have a lot of time to reflect. And it is fairly common to come to the conclusion that there is a lot in life we can’t control. But that to live your best life, you must take care of something that is always within you control, which is manage how to react to adversity. This is perhaps sort of a cop out. I feel like I have two reasons to take things in stride that people who aren’t me don’t. The first is the medication I take to suppress the symptoms of my Tourette’s Syndrome. The second is it is basically impossible for me to have the kind of hardship that will leave me homeless at this point. It is easy to shrug your shoulders when you know ahead of time everything is going to be OK. It is just one of the reasons I champion Financial Independence.

I have a lot of free time these days. I honestly believe now that humans are not meant to toil away for long hours, especially for years at a time. There isn’t enough art or music or beauty in this world. And there isn’t enough charity or activism. Surely, one of the things that keeps obnoxious forces in power of commerce and government is the masses do not have the time to organize a proper resistance. These days, I have time to spend with the Living Universe Foundation, the National Space Society, my local Water Board, and local Homeowner’s Association. I have yet to radically change the world. But I’m convinced a few hundred thousand people with my freedom and a like mind could do amazing things. The ability to pursue a passion is reason enough to pursue Financial Independence.

Freedom of choice is a wonderful thing. I now think of my career days as my “wage slave” days. I had to be at a certain place at a certain time, do certain things, conform to someone else’s expectations, … or else … Americans like to pride themselves on their Freedom. Very few of them realize how precious little of it they actually have and what they give up to have the latest gadgets and fashions. I’m exploring some employment options after almost 7 years of Early Retirement. Salary isn’t going to be important. But flexibility and making a difference and autonomy are. I wasn’t in a negotiating position to ask for those things before. I’d lay odds most of you reading this right now are in a very weak negotiating position with your supervisor. You probably can’t negotiate a raise or a 9/80 schedule or additional vacation. That would change if you literally didn’t need the salary any longer.

I hope I’ve persuaded you that pursuing Financial Independence is a worthy goal. I’d like to also persuade you that it is also fully achievable. First up is a video I’d like share. Mr. Money Mustache gave a Ted Talk about the “Shockingly Simple Math of Early Retirement“. He had some great things to say about getting off the Hedonic Treadmill. But he also had some solid research (academically oriented types are encouraged to Google the “Trinity Study” and the works of Dr. Wade Pfau) that define what has come to be known as the 4% rule. This is the generally accepted wisdom among academics who study personal finance and retirement that the sustainable withdrawal rate over more than a century from a portfolio has been at least 4%. Once you have 25 your annual budget saved, you are done! That will seem impossible to many but don’t forget the power of compound interest. Your portfolio will grow slowly at first and then mightily later. You can do this. And I hope you’ll join me so we explore the stars together.

Lizard King

The Trillion Dollar Investment Opportunity In Renewable Energy

Today, I’m covering the renewable energy sector and making a buy recommendation. There is room for Wind and other alternatives at this company but the primary focus is utility scale solar photovoltaic plants.

A primitive selenium photovoltaic existed as early as 1839. During the early atomic age, Bell Labs improved on the design by using much more efficient silicon. The efficiency was still below the 6% deemed to be commercially viable. At any rate, there has been over a century of research and development into making better solar cells. If you were to buy a typical residential system today, you’d expect to get cells with an efficiency of about 20%. The technology exists already however for efficiency up to 26%, with 30% projected in just a few short years.

An exiting thing is happening with solar power and it is clear the adoption will be similar to other breakthrough technologies such as the digital camera. Adoption is slow at first but then it accelerates and becomes the dominant technology. The price of solar is falling rapidly and is now at the point where it is cheaper to add a new megawatt of solar to the grid than coal.

Solar becoming the cheapest form of energy

I think that soon, the cost of building new solar capacity will be lower than the cost of maintaining existing coal plants. When that happens, there will be a phase change in the mix of generation. Thus, it will not be climate change that drives adoption of renewables, but cost-effectiveness.

In 2018, the mix of renewables in the US had already hit 17% of all generating capacity. The Energy Information Agency expects that essentially ALL growth in electric production capacity going forward to come from renewable sources with coal, gas, hydro, and nuclear all declining.

So why haven’t solar cell manufacturers become market darlings? It’s simple. Each firm’s cells are about as good as their competitors and thus they must compete on price. At the same time, millions in R&D is needed to keep up with advancing technology, and the manufacturing process is capital intensive. Capital intensive industries with weak margins make for poor investment opportunities. I’m going to propose a different approach and recommend you get in on the financing of a portion of what the International Renewable Agency estimates will require $100 trillion in capital over the next few decades.

Here is the skinny. There isn’t enough capital to finance all the projects that are proposed at the moment. But it is a sure bet the money will become available over time. You see, a solar plant is a remarkably safe and stable investment that is a lot like investing in commercial real estate. You have an upfront expenditure and a well-nigh guaranteed cash flow stream that rolls in almost effortlessly for decades. And there are corporate structures to make the cash stream tax advantaged. Capital flows to where it is treated best and solar plants treat capital well.

I’m going to recommend banking on the opportunity to take advantage of the capital shortage by investing in Hannon Armstrong Sustainable Infrastructure Capital (HASI). In most cases, HASI will purchase land and lease it back to a solar operator that has locked in long term agreements with electricity customers to guarantee cash flow. It will focus on middle market lending for projects between $10 million to $75 million that are too large for simple credit financing but too small to entice the big banks to float a bond. This is a niche of lending that is very safe but earns a superior interest rate.

It isn’t just solar plants. HASI also lends to wind projects and major energy efficiency projects. There are multiple approaches the company can take. These include funding a project and keeping it in its portfolio to earn interest over time. Or Hannon Armstrong can bundle several projects and sell them as a bond to other investors. This way HASI unloads the risk and collects a lucrative management fee for its efforts.

The company also has existing relationships with key vendors such as Honeywell (HON), SunPower (SPWR), Johnson Controls (JCI), and First Solar. If a company approaches Johnson Controls with an energy efficiency project for one of its plants, JCI will likely turn to HASI to provide the mutual customer with the financing for an effort with a clearly defined benefit and that pays for itself in savings over time. Once again, HASI picks up a very safe stream of income that pays an above market interest rate and is fully collateralized.

Thanks to the relationships above, Hannon Armstrong has a backlog of over 2 billion in deals it could do today as soon as the funding becomes available. It did over 1.2 billion of such deals in 2018. The pipeline is an estimate but you can see from the graph provided by HASI below that there is strong growth to power increasing revenue, income, and dividends.

Revenue, Income, and Distributions are growing at a healthy clip

I want to talk more about safety. A company like Hannon Armstrong could grow 100% a year if it lost discipline and loaned money to poor credit risks. Doing this kind of business takes discipline and I want my readers to know current management has it. They have to loan money to the right borrowers to grow and profit. Take a client that is financing an energy improvement project. A project with $1 million a year in savings might pay HASI 800 thousand in interest and principal a year. The loan actually improves the credit worthiness of the borrower. Likewise, with utility scale lending projects, it is essential to lend to borrowers that have long term agreements with customers to lock in cash flows and ensure they can cover financing plus profit.

Hannon Armstrong has lent out about $4 billion in capital in its lifetime. In that time, there has been exactly one credit loss of $11 million. That is a rate of 0.03%. The CEO has worked in energy and finance since the 1980s and has one of the best track records around. I’m comfortable placing money with this management team.

But what is in it for YOU the investor? Let’s look at the financial track record of the company. I think the key metric here is Return on Equity. See the chart below to see that results are strong AND steadily improving.

ROE is moving in the right direction

As far as financial safety, the following chart demonstrates that the company is become safer by lowering its leverage over time, even as profitability soars.

Management is managing debt and risk well

Shares yield a little under 5% today but that is a good return for a growing Real Estate Investment Trust (REIT) – [That is a legal corporate organization scheme that allows the trust to be exempt from federal taxes by distributing substantially all of its cash profits to share holders as dividends]. In today’s low interest rate environment, safe yields this high are hard to come by. And it should be noted the company has established a history of growing its distribution. You can see the history at the NASDAQ history page.

ACTION TO TAKE: Buy Hannon Armstrong Sustainable Infrastructure Capital (NYSE: HASI) up to $28 per share. Put no more than 5% of your investable capital in any one idea. Protect yourself from losses with a 25% trailing stop loss. Reinvest your dividends to maximize compounding.

Lizard King

Introducing Tom Hanson – Mars Society Correspondent

2019/09/20 Cornerstone for NewMars Updates

Since participating in the 2011 Reboot of Lufteam in Yahoo Groups, I’ve been invited into the posting community at NewMars.Com/forums.

Because settlement of Mars was one of Marshall Savage’s objectives for the Millennial Project, I am hoping activity on the NewMars forum will (occasionally) be of interest to readers here.

The NewMars forum started as a function of the Mars Society in (about) 2001, and it has been operating since then, with occasional interruptions due to outside forces, such as equipment failure and attacks by hackers.

I am currently supporting two initiatives which may be of interest to the LUF community:

  1. My Hacienda
  2. Asteroid Miner’s Navigation App

My Hacienda is a topic evolving from the “creation” of a (mythical) Sagan City (2018). It envisions 2750 plots of one square kilometer each laid out around a location on Mars arbitrarily chosen by a member named “Louis” in 2018. The intention of the topic is to bring together 2750 people who will accept responsibility for Division of Labor and Open Market trading to build a virtual community able to deliver comfortable living at the level of first tier cultures on Earth in 2019. The environment is considered to exist after the initial hard scrabble colonization phase, which is explored in great detail elsewhere on NewMars forum.

The Asteroid Miner’s Navigation App undertaking arises from the presence in the NewMars community several veterans of the American space program from the 1960’s forward. The expertise of these veterans is a perishable resource, and I am hoping to capture that expertise for posterity, by capturing it in software that can be run on a smart device to plan a trip between celestial objects, the way first tier citizens on Earth today can plan a trip between cities using GPS.

(th)

Who is Caycee And What is Open Knowledge?

Introduction

My name is Cacyee Dee Neely, or as many people do, just Dee. I am a programmer, CAD designer, ethicists, philosopher, and researcher with a focus on the application of open source, or open knowledge, applied to the area of space settlement. I have an Associates degree in Computer Science and almost done with a Bachelors in Artificial Intelligence and Robotics from Southern New Hampshire University. As an obsession, I am also a taxonomist working on developing a complete ecosystem of all knowledge and information. I am the Open Knowledge Correspondent for the collective blogging effort of the Living Universe Foundation.

I have been a space exploration advocate for a long time. As long as I can remember and the birth of that fascination was, as it was for so many, Star Trek. The principles of egalitarianism, tolerance, and science promoted by Gene Roddenberry provided a firm foundation for my entire life’s philosophy. Of course, there are also many other influences on my work. One of the most significant factors was reading The Millennial Project: Colonizing the Galaxy in Eight Easy Steps by Marshall T. Savage. Which, naturally, led to my connection to the Living Universe Foundation. The question, however, is how best to achieve those goals. I believe that Open Knowledge is a critical aspect of that work. What is Open Knowledge?

Continue reading “Who is Caycee And What is Open Knowledge?”

Introducing Lizard King – Finance and Economics Correspondent

By way of introduction, my name is Lizard King. I am the new Finance and Economics correspondent for the collective blogging effort of the Living Universe Foundation. As a matter of my credentials to weigh in on these matters I hold an Associates of Applied Science in Accounting, a Bachelors of Business Administration in Economics, and a Masters of Business Administration with a concentration in Finance. I am a little peculiar among my peers in that I retired early on 5OCT2012 at the age of 40. I blog about my trading strategies and the early retirement lifestyle at Financial Velociraptor.

In my short career, I spent most of my time doing close, consolidation, and the preparation of financial statements as required for SEC reporting for huge faceless corporations. I’ve several times been on the corporate insider’s list and have had the displeasure of rubbing elbows with the sort of psychopaths who rise to the C-Suite titles of such companies. Likewise, I’m well versed in the silly little games corporations play and the rampant conflicts of interest that exist in the external auditing framework for public companies.

This misfortune did not however sour me on capitalism. I remain keen on leveraging the power of the markets to preserve the environment and conquer space as a frontier for commerce and habitation. I expect to be the primary cheerleader for promoting capitalism as a solution to humanity’s problems. This may make me unpopular sometimes here at the Living Universe Foundation as the group has become populated with quite a few people who are sour on capitalism. I will not silence their voices and ask only that they do not attempt to restrict my communication in return.

To that end, I’ll be examining individual companies in the green and space industries to evaluate them as potential investment opportunities. It is my sincere hope that more people can leverage capitalism in their personal lives the way I did to become independent of a wage. I believe the world would be a much better (and more profitable) place if there were more people who had the time and resources to explore passion projects. Mine has me blogging for the FIRE community, here at LUF, and busy with the National Space Society, and Moon Society.

When I set a goal to retire in 10 years in August 1998 (I like to say I “failed well”, it took me 14 years), I was heavily influenced by the Millennial Project. It was clear to me at that time that the goals of that ambitious project were unachievable by wage slaves. For that reason, I will also be writing about frugality and how it relates to personal independence with a side benefit of benefiting the ecology of the planet.

I do not though have a singular focus. I hope to also discuss topics of general economic interest here. That might include Universal Basic Income (UBI), Modern Monetary Theory (MMT), blockchain, central bank policy, activities of sovereign wealth funds, and discussions of how capitalism could (and should) work in space.

At any rate, I expect to contribute between 500 to 1,000 words here about once every two weeks. I hope you’ll read and I hope you’ll share vigorously on social media. Sharing and caring and we succeed better when we work as a team to get out the message about ecology and space.

-Lizard King-