Tag Archives: investing

Just How Loco Exactly?

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After my last musing, SW, a close friend, texted me, “Please be more specific. I’m curious just how crazy you are.” Which made me smile.

The return text, “Where to begin?”

But then, I pressed pause. And thought about self compassion. And how I need to muster more of it given this most challenging chapter of my life.

And so I started to think about both sides of the ledger, the “irrational” and “rational”. The irrational mostly consists of what most objective observers would conclude is poor time/money decision-making. Meaning, I regularly do things that I could pay others to do for far less money than my increasingly limited time is worth.

But sometimes I just like popping the AirPods in, cranking up the Biebs, and washing my car in the driveway. Or washing the windows. Or cleaning the house. Which brings a documentary to mind about Japanese elementary schooling. When asked why young Japanese students clean their school at the end of each day, one Headmaster said, “Cleaning creates a calm and gentle spirit.” Love that. Sometimes there are less obvious, less tangible benefits to laboring yourself.

Without detailing the “rational” side of the ledger, suffice to say, there would be many more entries. In retrospect, I think I’ve done an extremely good job picking my parents, picking my in-laws, earning, saving, and investing. The first two highlight the role LUCK has played in my life. I wasn’t anywhere near perfect with respect to the other three, but I have made disproportionately more thoughtful decisions than thoughtless ones.

In my early twenties, when I was gifted some money from my parents for the first time, I had this deep-seated impulse to make the most of it. As an educator, I knew I’d never make bank. As a result, I educated myself about investing, and as our assets grew, we assiduously avoided lifestyle creep.

So much so, that family and friends get infinite amusement from teasing me about being too frugal for my own good. Yeah, I admit, often I am, but we still have lived posh lives, even by Western, late 21st century standards. And what my “friends” always fail to mention is that I’ve done a very good job growing our assets and taking the long view.

Which means now, we can pay for 24 hour care for The Good Wife without losing sleep. Which is a real blessing and one of the clearest indicators that my rational side has more than compensated for my irrational quirks.

For SW, here’s a lil’, lil’, on the quirk front. Yesterday, I traded in the Elonmobile for a new rig. I concede, I have a car prob, specifically, churning through them. The new rig comes in eight colors. I ended up with only my fifth or sixth fave color because it was the best deal I could find in Western Washington. By about $3k. I consciously told myself, configure the rig in whatever way will increase the odds of keeping it longer than my sad (sick) average. So I got the top trim, points for that. But deduct the same points for settling for a bottom-half color.

Also, SW, I spent way too many hours watching reviews, thinking about alternatives, and alternatives to alternatives, and then ultimately, interacting with dealerships.

Now, my “friends” are ripping me for being an ICE ICE Baby again. Mr. Fossil Fuel. A retrograde. To my many critics, take a number. Two of my fave “new car” texts today were, “He is milquetoast and has completely given up.” And “Your car matches UCLA’s performance” which was just mean.

Shifting gears, pun intended, I aspire to be more like my mom and wife, meaning way more generous. I took a baby step two weeks ago when I gave Olga a $3,000 (the money saved on the dud color?) bonus for being such an amazing help with Lynn over the last year. Because she lives check-to-check, it was like I had given her $30,000. As tough a Russian-Ukrainian woman as you’ll ever meet, at least on the surface, she broke down in tears.

So, forgive me if I cut myself some slack. Savings to soften the devastating blow of MSA. Savings to help the hijas and lighten others’ burdens. Savings to enable Olga to breath a little easier for a few months.

Just not enough savings for a bitchin’ colored rig.

Un Poco Loco

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I need help testing out the idea that I’m unique in that I’m keenly aware of the fact that a lot of my behavior around saving money is irrational. And yet, despite that keen awareness, the same irrational behaviors endure.

Most people, I think, are resistant to labeling any of their behavior irrational. They are convinced they’re entirely rational. Right?

I also have a strong suspicion that the outliers like me who are in touch with their irrationality are better at remedying their behavioral quirks. Correct?

Why, I wonder, does my money saving lunacy endure despite its obvious irrationality?

Do This Before Retiring

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I don’t care that my personal finance posts never resonate, I will continue to write about it when the spirit moves me. Deal with it.

Nick Maggiulli could teach me a lot about how to write about personal finance. His first book, Just Keep Buying, sold 400,000 copies. And his brand new book, The Wealth Ladder, is getting tons of attention on several of the pods I listen to.

The inspiration for this post is a friend, let’s call him, IE. IE is planning to retire in the spring of 2027. He appears to have his personal finance shit together. Good paying job. Lots of passive income. And he’s been riding equities up.

On the downside, he’s showing signs of irrational exuberance. He seems to think the stock market, near all-time highs, will continue its run. Or maybe he’s just trolling us in the group text?

His target retirement date was carefully determined based upon his normal “spend rate” combined with lots of planned post-retirement traveling.

I’m guessing he hasn’t modeled exactly what a market worst case scenario might do to his plan. Before retiring, model exactly what a market worst case scenario might do to your total net worth. Put differently, don’t tip-toe around “sequence of returns” risk, dive head-first into it.

How to do that? Calculate your net worth, excluding your residence(s)* because as the saying goes, you have to live somewhere. Adding in any home equity only makes sense if you plan to seriously downsize upon retiring.

Next, take the total amount of money you have invested in equities and divide it by two as if there was a 50% correction. So, in IE’s case, let’s make a wild ass guess and say he has a net worth of $3m, $2m in equities, $800k in fixed income, and $200k in cash.

IE would create a second spreadsheet showing his adjusted net worth after a 50% correction in the stock market. He’s “post-market correction” net worth would be $2m or one-third less than today. Print the “Bear Market spreadsheet” and let it sink in.

Only then can can IE determine 1) whether his asset allocation makes sense and 2) whether the spring 2027 timeline still makes sense.

Because he’s a friend, I will not be charging him for this advice. Some, no doubt will say, my advice is worth what I’m charging for it.

*plural if your DDTTM and have an extensive real estate portfolio

If You’re Under 50 Years Old

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You should be a fanatical Bear fan. No, not the hapless football team in Chicago, the bear stock market. You should be rooting for further losses, more blood letting, a crash for the ages even. For several years, it’s been impossible to get the first half of the investing equation right—buying low. Stocks are still fairly pricey, but if you’re a youngster of say 29 or 39 or 49, and you have any savings, do what you can to maintain the downward momentum. Don’t just sit there. Use your “go to” personal curses on the Fed. Write JP and tell him to raise interest rates to 10%. Start a war in a distant land and wreak additional havoc on supply chains.

Similarly, mobilize with other youth to pop the housing bubble. Get JP to raise interest rates to 10% so no one can afford a mortgage. Then go full-Amish and build a bunch of homes together to increase supply.

Down, down, down go equity and home prices. You got this.

How I Game Stock Market Corrections

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A blip in the spring of 2020 aside, U.S. markets have steadily risen for 12 years*. So a lot of younger investors are panicking this week because they’re totally unaccustomed to market volatility. History tells us many of these investors will sell at the exact wrong time. Actually, history tells us many investors of all ages and experience will sell at the exact wrong time. Instead, right now investors should be buying low cost index funds with all the coins they can find under their sofa cushions.

Vanguard has an excellent forum of savvy investors who help one another with investing decisions and with staying the course. It’s a model on-line forum because it’s moderated so well. You don’t have to be a Vanguard client to lurk (like me) or even participate.

This morning on the forum participants are reminding one another of the best way to deal with market volatility and downturns more specifically—turn off the t.v., stop reading the business news, and only check investment balances one or two times a year.

Solid advice, that I don’t follow, even remotely. As per usual, I’m consuming a lot of business news this week and I check my investment balances every Friday**. And yet, despite all the noise I consciously subject myself to, it has no effect on my “buy and hold” self discipline. Why is that?

Maybe it’s because I have devised a mind game that enables me to blunt the general panic of others. Here’s how it works. Let’s say we have $500k saved for retirement, and that $500k is equally divided between stocks and bonds. When I look at the stock side of my net worth statement, I don’t see $250k. Instead, I pre-plan for a 50% correction in the stock market. Put differently, I build it in in advance, so instead of seeing the actual $250k, I see a range of $125k to $250k. Since bonds rarely loose more than a few percentage points any given year, I don’t engage in the same mental gymnastics on that side of things.

So given our hypothetical starting point, I would think of my net worth as somewhere between $375k (assuming a 50% correction in stocks) and $500k. Like an athlete, I visualize the possible, no make that probable downturn of the market, so that when it happens, I roll with it. Despite actively watching investors panic.

As it turns out, the stock market roller coaster is rising today, so the S&P 500 is down all of 5+% for the year. So in our scenario, our current net worth is approximately $487k (250k – 5+% = 237k in stocks + 250k in bonds). $487k looks and feels pretty darn good give our $375k floor. Removing any need for panic selling.

My advice to newer investors is to know that the correction could get A LOT worse. My suggestion, do both/and, tune out the noise and mentally prep for a real, live, sustained bear market.

*in large part, thanks to the Federal Reserve

**I aspire to do it monthly

The ‘Can’t Miss’ Investment I Missed

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Dammit. I wish someone had pulled me aside at a dinner party when I was in my early 20’s.

And told me the two words that could’ve changed my life. Self-storage. Apart from AAPL, I double dog dare you to find a better investment.

From this week’s Wall Street Journal:

“Self-storage pulled ahead of other property types in the reopening trade as the real-estate business rebounded this year during the easing of pandemic restrictions.

The storage facilities around the country have brought the biggest returns to investors in public real-estate stocks this year. Many people moved, and for those who stayed put, a desire to have more space in their homes because of remote learning and working also spurred demand for self-storage.

As of June 30, total returns from self-storage real-estate investment trusts reached 36%. . . . Over the same period, the FTSE Nareit Equity REITs Index gained 22% and the S&P 500 climbed 15%.

People generally haven’t been able to tame their consumerism, increasing the need for storage space. The self-storage industry sees demand when people’s lives are disrupted, such as relocating for a new job, marriage, divorce and education.

‘Self-storage thrives when people experience change, and Covid disrupted norms across all generations,’ said Drew Dolan, principal at DXD Capital, a self-storage developer and investor. He added that many customers who needed self-storage in 2020 were first-time customers.

Operators moved quickly during the pandemic to offer customers more choices for reservation and move-ins, including online rental agreements and kiosks that limited contact with other people.

‘What used to be a 45-minute transaction can now be a six-minute experience,’ said Natalia N. Johnson, chief administrative officer of Public Storage, in a recent presentation to investors.” 

“People haven’t been able to tame their consumerism.” My vote for understatement of the year, decade, century. I should’ve bet big on American consumers not taming their consumerism years ago. I coulda, shoulda made bank on your neighbors’ conspicuous consumption.

No it’s not too late, but the crazy recent gains have to moderate, don’t they?

How To Stay Together

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My amazing playwriting aside, the Jeff Bezos/MacKenzie Scott divorce is an illuminating tale for people committing to one another for the long haul.

The conventional wisdom is that a lack of money and related money fights explain why so many relationships fail. That’s certainly true, but not the whole story. Even people with money can have devastating money disagreements because everyone has a unique money history and no two people will ever think about it the same way.

The bottom line. Couples don’t explore their “money compatibility” nearly carefully enough in the early stages of their relationships. The key is to figure out whether you and your partner are more similar in your thinking about saving, spending, gifting, and investing than not. No, that’s not particularly sexy, but do you want to measure your relationship by decades or not?

One little complication, by which I mean, huge complication. People change over time. Maybe MacKenzie didn’t know Jeff wanted to be the richest person in the world because he may not have wanted to be until his first or one hundredth billion.

What to do about the unknown? Anticipate that your thinking about money will change over time, not radically, but moderately. Similarly, anticipate that your partner’s thinking will change too. Meaning “money compatibility” is always a work-in-progress. Talk about saving, spending, gifting, and investing with some regularity or run the risk of serious differences creating dangerous cracks in the foundation of your relationship.

Friday Assorted Links

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1. Estimated car cost as a predictor of driver yielding behaviors for pedestrians.

“Drivers of higher cost cars were less likely to yield to pedestrians at a midblock crosswalk.”

What are your theories for this?

2. Olympic swimming champion Sun Yang banned for eight years. Long suspected. Eight years though, talk about swimming dirty. How to make amends to the numerous clean swimmers that lost to Yang?

3. The darts player beating men at their own game.

“She’s going to stand out. It’s great for the sport. Stereotypically, it’s associated with the pub, beards and beer bellies. But that’s changing.”

4. iPhone 11 Pro vs. Galaxy S20 Ultra camera comparison: Which phone is best? Damn, kills me to write the conclusion:

“. . . the iPhone can’t compete with Samsung’s zoom king.”

And only $1,400.

5. What’s happening with the stock market these days? A beginner’s guide to investing.

 

We Are Overdue For A Stock Market Correction

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How bad was the Great Depression?

A timely, eye-opening Wall Street Journal article by Jason Zweig.

“The Dow peaked at 381.17 on Sept. 3, 1929. It finally hit bedrock at 41.22 on July 8, 1932, down 89.2%. In less than 35 months, a dollar invested in stocks shriveled into barely more than a dime.”

How wrong were the experts?

“In a newsreel from Oct. 30, 1929 . . . Irving Fisher, the nation’s leading economist and a Yale professor, proclaimed: ‘It now looks as though the bottom of the market had been found.’

The market found the bottom, all right—84% lower and almost three years later.”

How long did it take for the market to rebound?

“The Dow didn’t surpass its 1929 high until Nov. 23, 1954, a quarter-century later.”

How many people held their stock investments long enough to break even? A clue.

 “A 1954 survey by the Federal Reserve found that only 7% of middle-class households said they preferred to invest in stocks over savings bonds, bank accounts or real estate.”

How are we still getting the lesson of the Great Depression wrong?

“No one who lived through the crash of 1929 would agree with the view, advanced in the late 1990s, that stocks become riskless if you hold them long enough.”

Zweig’s cogent conclusion:

“To be a long-term investor in stocks, you have to be prepared to lose more money for longer than seems possible. Anyone who takes that risk lightly is likely to sell out, in the next crash, near the bottom.”

The investors first task, know your time horizon. If it’s less than 10-25 years, proceed into equity markets with due caution.

 

Double Your Money—Guaranteed

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The worst of the Humble Blog’s 1,504 titles fo sho, but stick with me.

One morning, a few weeks ago, I was listening to National Public Radio’s Marketplace show. They were telling the story of a 20 year old dude who discovered that his Legos, collecting dust in plastic bins in his parent’s house, were worth a lot of money. Why? Because (mostly) men in their 30s and 40s are nostalgic for their childhoods. Thus began a small online business with his mother who cleaned the Legos and readied them for sale. The two of them thus began buying discarded Legos on Ebay and then cleaning and reselling them for twice what they paid.

Which got me thinking. About alternatives to stock and bond index funds and certificates of deposit. What about investing in nostalgia.

My question for you is buy and hold WHAT for decades? I forgive you if you’re thinking I may not have decades, because life is fragile, so suggest something my daughters wouldn’t dread inheriting. Which of course complicates things because they may not be as enamored as me with men’s watches, air cooled Porsches, Ping putters, or late 80s Toyota Landcruisers. The car references raise another issue—storage and ease of transport considerations. Let’s assume my heirs may not have a detached garage like me and that they’re going to move from time to time.

With those parameters I turn to you loyal readers. I rarely ask anything of you, but what say you on investing in nostalgia? Where should I put my spare change to work? The only thing I ask is that we at least double my money*.

*goes without saying, adjusted for inflation