Financial Samurai Newsletter April 28, 2024: Stagflation Problem

Below is the April 28, 2024 Financial Samurai newsletter. You can join 65,000 others and sign up here for free. If you want to be more knowledgeable and increase your chances of achieving financial freedom sooner, follow along.

Financial Samurai began in July 2009 and is the leading personal finance website today with over 1 million organic pageviews a month. Everything is written based off firsthand experience because money is too important to be left up to pontification. 

Sam is the pioneer of the modern-day FIRE movement. He attended The College of William & Mary for undergrad, got his MBA from UC Berkeley, and worked at Goldman Sachs and Credit Suisse for 13 years until he retired in 2012 at age 34. Sam is one of the rare personal finance writers who actually has the background and experience in finance. 

You can learn more about Sam Dogen by clicking his About page.

Financial Samurai Newsletter: Uh Oh, Stagflation?

In the first quarter of 2024, GDP growth came in at an annualized rate of 1.6%, down from the 3.4% annualized rate recorded in the fourth quarter of 2023. While this slowdown alone might be manageable, the Personal Consumption Price Index saw an increase to a 3.4% annualized rate in the first quarter, compared to 1.8% in the last quarter of 2023.

When economic growth decelerates while inflation rises, it creates a phenomenon known as stagflation, which is particularly concerning for central bankers.

One of the most severe periods of stagflation occurred in the 1970s, triggered by a surge in oil prices following the Arab oil embargo on the US and other nations supporting Israel during the 1973 Yom Kippur War. This sudden increase in the cost of living led to significant economic challenges. When the Fed attempted to curb inflation by raising interest rates, it inadvertently plunged the economy into a recession.

While it's important to note that a single GDP and inflation report doesn't establish a trend, these recent figures suggest that the current period of prosperity may be coming to an end. Consequently, I advise everyone to review their asset allocation and ensure that their investments haven't strayed too far from their desired asset mix.

U.S. Misery Index - Financial Samurai newsletter

All Cash Home Buyers Increasing

According to Redfin, 46.8% of luxury homes were purchased entirely with cash in the three months ending on February 29. This marks the highest share of all-cash luxury home purchases in at least a decade, up from 44.1% a year earlier.

What's intriguing is the resurgence of intense bidding wars in the $1 million to $5 million price range here in San Francisco. Many final sale prices have either returned to their early 2022 highs or have exceeded them significantly. I'm currently compiling a post for this week, detailing specific examples of these trends.

If you've recently triumphed in a bidding war or were advised by your real estate agent to bid well above the asking price, I'd love to hear your perspective. Did you perceive it as risky to emerge as the winner in this competitive market? How did emotions factor into your decision-making process? Why did you opt against underbidding on stagnant listings or purchasing during the quieter winter months when demand typically wanes? Your insights, whether shared anonymously or not, would greatly enrich my upcoming post.

I'm striving to comprehend the mindset of buyers willing to engage in bidding wars for their “dream” homes, despite the continuous influx of new listings. Personally, I'm hesitant to enter bidding wars because I'm wary of how my emotions might challenge my financial discipline.

For those of you considering purchasing a home and awaiting a decline in mortgage rates, I recently penned an educational piece titled “Components That Affect Mortgage Rates The Most.” There's a prevalent misconception that the Fed directly controls mortgage rates, which isn't the case. The Fed influences mortgage rates by regulating the Fed Funds rate, an overnight lending rate.

After reading the post, you'll gain a more nuanced understanding of the potential fluctuations in mortgage rates. This insight might also help alleviate any real estate-related FOMO you may be experiencing.

New Print Of Buy This Not That Coming Out

I received a heads-up from my publisher at Portfolio Penguin that a new print of Buy This Not That is hitting warehouses this week. Initially, I assumed it was the second print of the first edition. As a book collector with a focus on investment returns, this prompted me to immediately draft a post titled “Investing In First Print, First Editions Is The Way.”

My plan was to purchase as many first prints as possible online and in bookstores and hold onto them for 20+ years. This strategy mirrors what I've done with my ancient Chinese coin collection, which I started during my study abroad in China in 1997, and my father's 1950s baseball card collection, which I discovered in his garage in Hawaii in 1994.

The appreciation of these collectibles has been substantial, and I've even spotted some of the Chinese coins I own in the British Museum in London!

However, upon reviewing my current collection of Buy This Not That books, I realized that they are already second prints. It turns out, I was mistaken, and the latest print edition of Buy This Not That is actually the fourth print! Now, my quest to acquire more first prints will be even more challenging.

If you happen to own a first print (check the copyright page), I'd recommend wrapping it up and storing it in a secure place.

Buy This Not That Book Reviews

Don't Fret Too Much About That College Rejection

April is the month when nearly all high schoolers applying to college find out their acceptance or rejection status. With today's hyper-competitive college admissions landscape, rejections come swiftly and abundantly for many.

If you're a disappointed student or parent, it's important to allow yourself to feel that disappointment. However, it's equally crucial to recognize that there are numerous alternatives that can still lead you to your desired destination. Try your best to find the silver lining in rejection in any situation.

I've personally experienced countless rejections or being ignored. Each rejection stings, but I use them as fuel to propel me forward and fight for what I want.

For those seeking guidance on handling rejection better, consider adopting the mindset of a “happy loser.” Clotaire Rapaille, a psychoanalyst and ethnographer, describes a “happy loser” as someone who sees rejection as a challenge. The initial “no” ignites their determination to strive harder and persevere.

Clotaire illustrates this with an example where a company measures success not by the number of sales made, but by the number of rejections encountered. In essence, until the happy loser faces a “no” from a potential client, they haven't truly achieved success.

Here's a story of how I turned a rejection and an ignore into a big financial win, Embrace Rejection! How Being Denied Saves Us At Least $50,000.

To Your Financial Freedom,


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