This week’s newsletter is sponsored by ProjectionLab, a fantastic DIY retirement planning tool that helps you build more wealth and confidence in your future.
Dear Financial Samurai,
I’m back from Honolulu with mixed emotions. On the one hand, it’s nice to no longer be sticky and sweaty, given a tropical storm was brewing and the trade winds disappeared the last few days. On the other hand, I miss those small interactions with my parents and the serendipity that sometimes follows. For example, my dad shared with me his nickname in high school! Please call and text your parents if they’re still around.
Another perk of being in Honolulu for the month was getting to sleep through the market open at 3:30 am. I’m an early riser, but not that early. It was nice to break the addiction of waking up before the market and then watching it for the first 30 minutes like it needed me.
Margin Called And Liquidated
And what a market it was to sleep through. The Korean stock market (KOSPI) plunged about 44% from its high, and more than 1.2 million Korean retail traders reportedly got margin called, with an estimated 320,000 to 360,000 accounts fully liquidated, per Goldman Sachs.
Even wonder boy Leopold, an ex-OpenAI researcher who started a hedge fund called Situational Awareness, got margin called and supposedly sold $10 billion of his book to Ken Griffin at Citadel, at a big discount. Instead of being up 400% year to date, he’s “only” up 80%. Pour one out.
Then the markets rebounded handsomely on July 30, leaving behind everybody who was forced to sell at the bottom. July was a cautionary tale about maintaining a proper asset allocation between stocks and bonds. It’s also a reminder that buying stocks on margin is a bad idea, especially with interest rates back up.
Speaking of interest rates, the 10-year and 30-year yields are back to 2006 highs. That’s a problem for the economy as borrowing costs surge. Rates did plummet starting at the end of 2007, but only because the global financial crisis was unraveling. Be careful what you wish for.
Please control your risk exposure. The last thing you want is to give back a bunch of your profits, or all of them, after a stunning run since 2023. In America, we don’t have Squid Game, where you risk your life to pay off gambling debts and win millions. At least, I don’t think we do.
Adulting Is Hard
The closest thing we have to a financial bailout is the Bank of Mom and Dad, who are likely wealthier than you think if they’ve been saving and investing for decades. But given we all have some pride and a desire to make it on our own, depending on your parents as an adult can feel off.
At the moment, my line in the sand is 26, three years after graduating college. Until then, you can lean on them for food, shelter, transportation, and groceries. After that, you gotta go independent. I’m sure my views will soften once my kids are older and giving me the sad eyes, but not today.
So when I saw a fellow writer bravely admit that she still depends on her parents to pay her childcare bill and cover housing at age 37, I was fired up. Thirty-seven is three years after I retired from a 60+-hour-a-week grind fest that lasted 13 years. But then I thought about her situation some more, and my fire cooled.
What do you think? With so much wealth getting passed down, this kind of dependence is only going to get more common. Check out: Real Adults Are Not Financially Dependent On Their Parents (But That’s OK)
Taking Financial Matters Into Your Own Hands
Still, deep down, I feel like something must have gone seriously wrong if my kids are depending on me 19 years after becoming adults. And one of those reasons is a failure to plan.
This is why it helps to use a tool like ProjectionLab to map out your financial future. You can build what-if scenarios and actually see how your financial life might turn out, instead of guessing and hoping.
For example, one dilemma I’ve been struggling with for over a year is whether to buy a new car for $60,000 to $100,000 or keep fixing mine to the tune of $1,500 to $3,000 a year for the next three years. With ProjectionLab, I can clearly see that I’d be an absolute donkey to splurge on a new car given the hundreds of thousands in capital calls I face from several traditional venture capital funds I’ve committed to.
There is simply no room in my budget for a new car. The old one will just have to keep rattling.
And I’m quite sure that adults still depending on their parents have never modeled out a single financial decision to see where it leads.
Here’s a new post on ProjectionLab’s powerful features to help you navigate a better financial tomorrow. I used the $408,000 household viral case study to help them optimize their budget.
FIRE Doesn’t Let You Fully Break Free
Finally, on cue, I got a reminder that FIRE doesn’t solve all your problems.
We got home at 2 am after United delayed our flight back to San Francisco by an hour. I took the car out for a test drive to charge the battery, did some unpacking, and went to bed at 3 am. Then I slept in until 8:15 am, watered the yard, did more unpacking, and prepped for a personal finance consulting call at noon with a reader in Virginia.
After lunch, I took my kids to play tennis and go biking since they hadn’t done either in over 10 days. So we went to a nearby park, where I briefly thought I was going to jail. Very exhilarating for a first day back!
To find out what happened, you’ll have to read: You’ll Never Be Fully Free From The Government: Introducing The Leash Ratio. Of course, as a personal finance writer, I had to turn my brush with authority into something constructive for all of us. The incident was even written up in the local paper, which I link to at the end of the post.
Ah, nothing like a warm welcome home.
To your financial freedom,
Sam
Thanks again to ProjectionLab for supporting Financial Samurai. If you want to take better control of your financial future, and not have your adult kids still asking you for money at 37, I highly recommend you give it a try. I only highlight what I use and invest in myself.
If this newsletter was forwarded to you, join 60,000+ readers and subscribe here. I’ve been helping readers build more wealth, and ultimately, more freedom since 2009.