Financial Samurai Newsletter March 24, 2024: A Strong Economy

Below is the March 24, 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 March 24, 2024: Better Than Expected In A Good Way

The most significant development of the week occurred when the Federal Reserve revised its GDP growth forecast for 2024, upgrading it to 2.1% from the previous 1.4%. Additionally, the Fed maintained its expectation of three rate cuts in 2024.

According to the March projections of the Federal Open Market Committee, known as the dot plot, the median federal funds rate for 2024 is anticipated to be 4.6%. Given the current fed funds rate range of 5.25% to 5.50%, this implies three rate cuts of 0.25 percentage points each.

This news is particularly favorable for stock investors, as it indicates that despite robust employment, consumption, and stock market performance, the Fed remains committed to rate cuts.

Financial Samurai newsletter and the Fed's Dot Plot for interest rate forecasts in 2024, 2025, and 2026

Anecdotes Of A Strong Middle Class

One of the reasons why I wrote “To Gain More Value, Buy A More Expensive House” because I've observed bidding wars for median-priced homes and below here in San Francisco. It's not isolated incidents, but rather dozens of examples, indicating a healthy middle class. After all, people don't typically make significant purchases like cars and homes unless they're confident about their household's future.

I'm curious to know if you're experiencing similar trends in your city. When the middle class demonstrates confidence in the housing market, it's a positive sign for the economy. Unlike the top 1%, the middle class comprises a larger portion of the population with more spending power, thus influencing GDP more significantly.

Another reason for writing this post was to shift the focus from the negatives of upgrading homes to a positive aspect. I wanted to counterbalance the negativity with a valuable insight. The benefit is that when you feel like you've secured a good deal, life can feel more affordable.

Surprisingly, a good number of readers have disagreed with my thesis of being able to find better value the higher up the price curve you go. So if you also disagree with the post above, please share why. I may have a blindspot in my experience buying multiple homes at various price points since 2003. 

Also read: How To Prepare For A Bidding War So You Don't Lose Your Shirt

How To Compensate A Buyer's Agent

This week, I delved into the implications of the NAR settlement in a new post, particularly regarding real estate commissions and home prices. In my view, real estate commissions are likely to see a decline this year, as consumers now have more leverage and reason to negotiate.

I've noticed that many homesellers and homebuyers hesitate to negotiate commissions, often due to a lack of knowledge and fear of confrontation. It's akin to the reluctance people feel when negotiating a severance package. Starting the conversation with your boss and discussing being laid off with a severance package can feel daunting.

However, I assure you that the more you educate yourself about real estate commissions, contracts, and severance packages, the more empowered you'll feel to advocate for your financial well-being and that of your family.

Negotiating a lower fee with the listing agent is relatively straightforward. For instance, proposing a fee of 1.5% instead of 2.5% is a simple adjustment. However, determining how to compensate a buyer's agent can be more complex. It's not uncommon for a buyer's agent to invest considerable time with a client without receiving payment, despite operating in a free market.

Proposed Buyer's Agent Fee Structure

I recently came across a Buyer's Agent Fee schedule that struck me as reasonable. It accounts for factors like the agent's experience and the price range of the home the buyer is interested in. Additionally, requiring homebuyers to sign a buyer's agent contract before an agent begins working seems fair and ensures clarity for both parties.

I suspect something like this fee structure will be more commonplace over time.

Proposed Buyer's Agent Fee Structure after the NAR settlement - Financial Samurai newsletter

A Provider's Clock

Finally, in this Financial Samurai newsletter, I've come to a realization about some things that have been bothering may, that may also be bothering you:

  • Fathers who leave their babies soon after birth for no good reason.
  • Fathers who claim to be financially independent but won't allow their working wives to join them.
  • The presence of able-bodied men still living with their parents 10-15+ years after high school or college.
  • Parents who willingly work 80 hours a week and travel extensively after having kids.
  • Ultra-rich individuals who, despite not needing to work, still dedicate countless hours to their jobs, even with young children.

Genetics Control Our Actions – Newsletter Debate

While there are multiple factors contributing to these situations, I strongly believe that our individual Provider's Clock plays a significant role in shaping our behavior as parents. I argue that the intensity of our nurturing instinct is largely determined by genetics, accounting for at least 50.1% of the influence, much like our height, skin color, and personality traits.

In essence, our innate predisposition is beyond our conscious control; it's a product of our genetic makeup. Recognizing this fact allows us to alleviate the inner turmoil caused by behaviors that contradict our own values. How's that for a therapeutic breakthrough towards more peace and harmony?

However, if you subscribe to the belief that nurture or environmental factors contribute 49.9% to outcomes, you might find yourself more perturbed by observed behaviors. Consequently, you may exert greater effort to effect change, believing you have more control over the situation.

For me, even if nurture's influence is just 10% of the equation, I'm committed to maximizing that 10% within my control. How about you? Feel free to share in the comments section of the post.

See: A Provider's Clock For Men Is Like A Biological Clock For Women


If you'd like to diversify into real estate, check out Fundrise. I think we're past the bottom of the real estate downturn and heading higher. Fundrise is a long-time sponsor of FS and FS is an investor in Fundrise. 


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