It's time to face the moment of truth. After a lapse of six months (which all of us want to forget), let's pick up again the monthly ritual of reporting my net worth. Here comes our balance sheet at the end of the year:
The worst market performance since 1930s caught us as a victim too. After this carnage, our net worth is 80 grand less than the last time we reported. We also closed 2008 with almost $90k lighter than what we started the year with. What a year!
Several note on this:
1) We are introducing a new balance sheet format. The old format has been around for almost five years and hasn't been very useful now that our net worth and future income will be more dominated by investments (instead of job income and savings). The current view now clearly illustrated how much is at risk (i.e. investments that can lose value) vs. our cash pile.
2) Quite obviously, we have been cutting our investment portfolio since the summer -- back then, we have almost $600k invested in stocks and mutual funds. One important change I made is to drop all my individual stock picks with the exception of Berkshire Hathaway, which behaves more like a mutual fund (considering the diversity of the businesses the Oracle is holding).
3) We took our own share of (substantial) losses throughout the year too. If you recall that Money Manager Co., Perfect Future Publishing Co. and Expat Services Co. (all nicknames for our different income streams) still collectively yield a five-figure monthly net cash flow, it doesn't take a genius to figure out that our loss is much more than the absolute net worth decline of $90k since the beginning of 2008.
4) Our stock option is completely under water now, wiping out our paper gain of $98k at the end of 2007. Who can believe shares of the software behemoth is changing hands at less than $20 a pop?
5) The above losses explains the big tax asset line of $27,837 we have. It will take years for us to fully realize the tax benefit of our capital gain losses -- the tax law, as it stands now, only allows cash-out of a mere 3 grand of capital loss a year. Of course, I will be able to offset that with future gains, or otherwise I will still need to carry over the losses into my 60s :-)
So here we are, after our first-ever annual net worth decline is finally in the book. But 2009 will be a new year and will we have more luck?