guitar player's journal

[chenda]

I personally would pay off the mortgage first, especially in the current climate. That said, if you did invest I think @Stasher's approach is a good one. Alternatively consider a FTSE dividend investment strategy.

[guitarplayer]

I have been coming to the realisation that in the face of my lack of aptitude I would follow Lars Kroijer’s advice and buy the market since I don’t have any special information to outsmart it. Why would you choose particular investments, do you know something others don’t know?

[guitarplayer]

I think one contributor to why learning to invest never clicked for me is that I don’t mind putting up with nonsense so long it does not affect my life or if it does, I can freely walk away. But this last condition is accomplished just with a good emergency fund. I mean, investing cannot be that hard, I am a bright guy. So there’s got to be something about temperament. I wish it clicked for me, but it doesn’t.

[loutfard]

I recognise there is a correction going on, or what other technical term you have for it. We have now $40k cash (not counting an emergency fund cash) and there will be another $40k cash released from one savings account in the summertime. We also generate surplus cash every month (that is the post tax cash that does not go to retirement accounts etc). We have a mortgage of about $40k and were planning to pay it of in the summer. I see variable interest rate on the mortgage after the current fix is 6.74% but I can remortgage to 4.5-4.3% fixed for 2-5 years, and even take some of the equity out. Our place is cheap but also we currently have well over 50% of it paid off.

Now, recognising that we might be experiencing another of these 'rare (yet becoming more common) moments', I want to put my mind to doing something smart with the cash. S and P 500 is over 20% down from where it was less than 2 months ago. Now a blanket question: what would you do or what would you read up on in this situation?

You've said yourself you don't want to wade into investment strategies too deeply. Paying off your mortgage is a valid option. That is, if your fiscal authorities don't punish you very harshly for doing so. It yields you 4.4% nominal gross. Also, it frees your mind of yet another unimportant thing.

The alternative scenario of remortgaging to 4.4% fixed buys you two things:
1) an inflation lottery ticket. With some luck, inflation might pay for a significant part of your mortgage. Who knows where the current volatility will lead us in terms of inflation? In the very short term, slight deflation is a possibility, but longer term, volatility tends to bring inflation.
2) 40k to drop into the market. Knowing your very ERE expenses pattern, you can easily afford to get into the market for the very long run. If (!) the market withstands the incompetence and malice of current and future political leadership, you have a very good chance of coming out ahead.

P.S. My personal scenario is becoming fairly similar to yours in many ways, except I was lucky and opportunistic enough to lock in a 1.23% long-term fixed mortgage rate...

[ertyu]

Now, a) I don't know if this historical pattern in the data would hold going forward, and b) I don't have an eidetic memory for what I read where so I am unsure of the source, I want to say Wade Pfau but ?, but the stock markets of countries other than the US have delivered around 1 - 1.5% SWRs to match the US 4% -- I seem to remember a 0.9% in the data, too. The article was arguing that this is too conservative because surely most people also have an allocation to the US, which would have brought them to a 3 % or so.

The policies currently in place in the US will reduce the inflow of foreign funds into the US stock market + geopolitically, one can argue that the era of US exceptionalism and expansion that gave rise to the elevated levels of US stock mkt performance is now over.*

*Will it be actually, who knows. At least in my view, billionaires who made their money in the stock mkt have now converted this into real assets (a very aggressive policy of buying up agricultural land is going on in my corner of eastern europe, for instance) and are now pulling up the ladder. But in the end, I am as much a muggle as the next guy.

Anyway, tldr, investing ex-us, at least historically, will have majorly hurt swrs. Of course, the question always is, will that historical pattern of performance hold going forward.

[chenda]

but the stock markets of countries other than the US have delivered around 1 - 1.5% SWRs to match the US 4% -- I seem to remember a 0.9% in the data, too. going forward.

I think many stock markets have had much higher returns. Iirc Australia and New Zealand had the best performing stock markets of the 20th century, slow and stable growth.

[ertyu]

diversifying into australia might not be a bad idea - might provide indirect exposure to ASEAN countries that are uninvestable for westerners due to political risk. australia supplies lots of raw materials to the region. Iirc, they have a trade surplus vs. china for example - so idk whether chinese money will be flowing into their stock market any time soon - but raw materials finish at some point. So maybe.

[chenda]

diversifying into australia might not be a bad idea -

Yes I agree, a low risk way to expose oneself to Asia.

[sky]

Do you have an option to invest in a money market fund? 4% is what I am seeing available here.

This crash is policy based, not economics based. Policy can change overnight. Maybe hold cash/money market until the future is more clear.

[Scordatura]

Yes I agree, a low risk way to expose oneself to Asia.

To misquote @Henry, I wouldn't want to follow you in a double entendre contest. Or Asia, apparently.

In more serious terms... Is no one bullish on this?

I was writing a long, detail filled post about how influenced I was by Benjamin Graham's school of value investment.
Then I realized it was boring as sin. The most interesting things about Graham are 1) He and his followers have consistently made money at decent rates 2) He swapped his wife for his secretary.

I guess my question is, does no one else think this is an opportunity? Do you think these policies will hold when the President and Company leave office?
Because if you say no, that implies to me that stocks are taking a temporary hit.

Every value investment bone in my body is screaming "Stock Sale!!"
Doing the opposite of everyone else is often profitable, long term.

What do you think?

EDITED: I used colorful nicknames for the people in charge. Though I pretty well dislike the political elites regardless of jersey color, I recently read Jacob's 2025 politics post. I'm self moderating, in case it's a problem.

[loutfard]

Every value investment bone in my body is screaming "Stock Sale!!"
Doing the opposite of everyone else is often profitable, long term.

What do you think?

This was either:
1) colossal incompetence at the very top of the pyramid
2) a front-running raid shorting the market

My bet is on 2). In that case, there's lots of loot in unscrupulous hands now. Who will stop those from coming back for more of our wealth? Why would I want exposure to that now then?

Some recession proof European firms with very limited US exposure and a healthy balance sheet might have been oversold. Trying to identify those might be interesting if you have lots of cash available.

[Stasher]

This was a front-running raid shorting the market. Lots of loot in unscrupulous hands now. Who will stop these bullies from stealing more of our wealth?

Why would I want to be in any part of the market exposed to the US now then? They have us by the procreative spheroids. 3.75 years to go.

I'm with you, anything I do when reinvesting my dividends for the rest of this term or any new money will 100% be going everywhere but the US. To add to that final comment, we all hope only 3.75yrs.

[chenda]

More practically, this is probably a good time to stockpile any imported products you can't easily substitute. Like my medically necessary made-in-US skincare, which is expensive enough without been hit by import duty or no longer been available from domestic retailers.

To misquote @Henry, I wouldn't want to follow you in a double entendre contest. Or Asia, apparently.

[Scordatura]

Why would I want to be in any part of the market exposed to the US now then?

So this a moral response, rather than a numbers based one?

The moves made recently indicate to me "autarky" rather than "free market". Quotes are because highly politicized arbitrary definitions, but I'm ignoring that. (Wtf is a free market, even? Etc, etc, turtles all the way down) Assuming the States ARE moving to a more autarky based model, this poses a problem for those of us in the states and associated countries. (I'm dead center of the empire, and if I've read correctly @guitarplayer is in Scotland. I would consider that associated).

What do you invest in when the government imposes tariffs and high costs for outside trade? The country you live in, right? That's the obvious choice?? So... American stocks for an American? The economy is still functioning to my best knowledge, they've just added 80 grit sandpaper to all the sliding surfaces, and replaced Air Force One with a flying clown car.

I'm still bearish on cash because it is a store of value that the people in charge love to tap via inflation (regardless of party affiliation). And I thought bonds were now correlated moderately with stocks in modern history.

Since I'm taking up elbow room in @guitarplayer's journal, I'll answer from that perspective: Assuming you are still in Scotland, the mortgage payoff sounds like the most consistent bet. I would be remiss if I didn't tell you what I was doing though. I'm foregoing my accelerated mortgage payoff and putting more in stocks. Again, dead center of America, and I think the downturn is likely temporary based on term limits. Call me optimistic if you like, I don't have a crystal ball.

@chenda Way ahead of you. Stockpiling is my love language.

[Jean]

If you want to hold cash, and still entertain the idea of moving to switzerland, maybe hold swiss francs ?

[zbigi]

Every value investment bone in my body is screaming "Stock Sale!!"
Doing the opposite of everyone else is often profitable, long term.

The counterargument is that the prices aren't discounted enough to justify holding struggling companies for almost 4 years. Your money could make much more money elsewhere during that time period.

[Scordatura]

The counterargument is that the prices aren't discounted enough to justify holding struggling companies for almost 4 years. Your money could make much more money elsewhere during that time period.

I'm open to that argument.

Where is elsewhere?

[loutfard]

So this a moral response, rather than a numbers based one?

Not at all. The current US leadership is unpredictable, to put it very mildly. That is relatively new, and I see it as just starting to impact valuations. Until very recently, US and heavily US exposed valuations were based upon implicit trust in and predictability of the US leadership.

I meant "why would I want exposure to this" more as damaged trust not yet fully transpiring in stock prices. We're definitely not in the lead-up to rebuilding trust yet.

The moves made recently indicate to me "autarky" rather than "free market".

That's certainly the message thrown at the general public, but I read something different in US government actions.

What do you invest in when the government imposes tariffs and high costs for outside trade? The country you live in, right? That's the obvious choice?? So... American stocks for an American?

Living between a small and a tiny country, worldwide diversification would still be my preference. For an American, confining oneself to domestic-only investment is less risky than for me.

I'm still bearish on cash because it is a store of value that the people in charge love to tap via inflation (regardless of party affiliation).

Strong agree.

I'm foregoing my accelerated mortgage payoff and putting more in stocks. Again, dead center of America, and I think the downturn is likely temporary based on term limits. Call me optimistic if you like, I don't have a crystal ball.

I certainly wish you the best of luck. I would like to see the current US leadership gone or kept accountable, whatever comes first, before making a similar calculated bet.

P.S. Guitarplayer, sorry for hijacking your journal. I should probably have moved this to a separate new topic in the money and investment section of the forum...

[zbigi]

I'm open to that argument.

Where is elsewhere?

For example, companies that weren't affected by tariffs, are not particularly discounted, but will likely be profitable over the next 4 years.

[guitarplayer]

It amazes me what volumes of text the topic of money generates. But hey I asked for it, so thanks all!

I have the 40k in a tax sheltered account where I pay no tax on earnings so my first choice at the moment to do what @sky suggested, keep cash at 4.58% and see what’s going to happen.