Grand Member
Member Since Aug 2013
Posts: 853
4 hugs given
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Mar 05, 2023 at 12:39 PM
What great things might happen out of this misfortune.
Own example still leaves a residue of if only hadn't X happened and I could have pulled off my plan.
So, quick summary, I happened to let myself run into overdrive mania and lost $20,000 of money I could not afford to lose manically trading options. I was new to options and had had overwhelming success paper trading. Feeling like Dostoevsky writes of. I commented on this in a book I wrote for boards of directors. Mr. D's comments in red.
Escalating situations resemble gambling. Though a gambler might play dozens of spins of the wheel at the roulette table in an evening, after the initial decision to play at all, subsequent bets are not genuine decisions, merely a continuation of that first commitment. Dostoevsky described this moment before the plunge in The Gambler:
I confess that my heart was pounding in my breast and that I didn’t feel at all cool and detached; probably I had felt for a long time already that I would leave Roulettenberg a different man and that something was about to happen which would radically and irrevocably change my life. I felt that it was bound to happen.
One can see in another Dostoevsky passage what Janis called overestimation:
I believe I had something like four thousand gulden in my hands within five minutes. That’s when I should have quit. But a funny feeling came over me, some sort of desire to challenge Fate, an uncontrollable urge to stick my tongue out at it, to give it a flip on the nose.
Note the “funny feeling” Dostoevsky’s gambler gets. Here literature points to a facet of escalation some researchers miss—there exists something in the emotion-action-results process of persistent gambling which feeds a hunger beyond material success or failure. The gambler, confronted with losing at the wheel, dice, horses, cards, etc., confronts reality’s mismatch to his or her intense feelings of confidence. He or she attempts to regain both the confident feeling of precognition and external success by increasing his or her betting. The gambler continues until all is lost. Yup. From this crash, I secluded myself as much as I could manage and keep earning money. Externally, just a few people knew of my disastrous trading. BUT, Phoenix guided me to looking at drastically saving money. My original intent was to trade well enough to pay off the mortgage and then keep trading to save enough to travel the world. Well, I abandoned traveling the world and focused closely on paying off the mortgage.
It was then I noticed a flue in the financial patchwork (system grants too much thought to the interactions of financial organizations). Our main mortgage (mtg) was $130 K. Our secondary mortgage line of credit was $50K. What if we pulled out $80K from our savings (including retirement accounts) and paid down the $130 K to $50 K. Then borrow the $50 K from the secondary mortgage, pay off the main mortgage to $Zero, and pay back the 2nd mtg as fast as we could. The 2nd mtg had 2 great features: 1) the total was lower so any interests added would be lower; and 2) the interest rate was lower as well.
Well, we did all of that, after acknowledging we were screwed if a dramatic life event needed lots of money.
Two funny things happened. First when we deposited the $80,000 against the main mtg our credit union gave us a friendly call. Apparently they had never seen anyone do that before and wanted to double check.
After another 3 years of paying down the principal on the 2nd mtg, we went to the credit union for the last payment. Apparently, interest accrued by the second, so we had a couple of funny rounds where our transfer to pay it off returned with a few pennies of balance still due. We had to say, figure out the final balance in 5 minutes, and pay that. They said next time to give them a heads up and they would have it figured out before we arrive. Next time? Not in this lifetime!
Monthly housing payments before paying it off: $900 a month for 18 remaining years. Minimum payments for the 2nd mtg paydown: $160 per month. Monthly payments now: zero. We're still on the hook for property taxes which run under $80 a month because we qualify for the lower income exemption/benefit.
So, Phoenix, thank you.
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