I moved from annual reviews to quarterly reviews this year, but with how quickly April flew by, I just had to write another!
April was supposed to be a terrible month based on the downward trajectory we were experiencing in March. It was easy to imagine the S&P 500 heading below 2,000. However, financially, April ended up as one of the best months ever.
The S&P 500 rebounded by an astounding ~30% from its bottom. Over 80 million Americans got a stimulus check. Over 25 million are getting an extra $600/week in unemployment benefits. And over 2 million small businesses are getting 2.5 months of payroll covered if they keep their employees with the same pay for at least eight weeks.
On the coronavirus front, although there have been tragically over 50,000 deaths attributed to the virus, the government had at one point guided us to expect over a million deaths. With much dire warning, it feels like a blessing the government got their predictions so consistently wrong.
Then on April 29, it was announced some of the Bay Area's shelter-in-place restrictions would finally be lifted. Starting on May 4, we will finally be allowed to once again play golf, sunbathe in parks, fish, go to the car wash, buy plants at nurseries, and start doing home construction again. I'm excited to dust off my old golf sticks that haven't been touched in two years.
Once I heard the news, I was reminded what I've always known since 2012, that freedom is way more valuable than money.
Why Freedom Is More Valuable Than Money
If you have money, but no friends, having money won't make you very happy. So much about having money and happiness is being able to treat and help the people you care about. Spending money only on yourself gets incredibly boring after a while.
If you have money, but have no family, having money feels less meaningful. Before I had kids, I was much more cavalier about the way I managed and invested my money. Making money was more like racking up points in a game. Once my son was born in 2017, money became much more valuable because it had more purpose.
If you have money, but have no freedom, you might as well burn your piles of cash or try and bribe your way out of prison! As someone who has spent most of his time at home since 2012, you would think that I'd be much more accepting of a lockdown. Instead, I started getting pissed off after the fourth week.
Quarantine life really isn't like early retirement at all. All the things I used to love doing at will, like playing tennis, playing softball, traveling, seeing family, eating out, and so forth were gone. Worse, I couldn't do anything casual outside without fear of persecution by all the COVID Police out there.
One day, I was playing at a park with my son when I started getting yelled at by two old guys saying I wasn't social distancing enough. They barked at me even though they were walking side by side. I promptly walked up to them and asked who made them park police? They probably thought I didn't know how to speak English and were clearly taken aback. They shut up and started walking away.
Another time, I was playing tennis with a friend at a public park after four weeks in quarantine. We were rallying 80 feet apart when an older woman started scolding us for playing while she was hanging out with some friends. I stopped what I was doing and walked up to her group of friends and asked if I could sit down and chat with them. They were aghast!
It was so annoying to get judged by others. A part of me felt like I was back living in Virginia where I faced random racist incidents on a monthly basis.
I don't understand people who are hell-bent on imposing their will on others. It was fascinating to observe people complaining about a situation despite being part of the problem.
Below is a perfect example.
If you manage to get through the quarantine without judging others for respectfully living their lives, congrats! This means you probably are level-headed. You are unlikely to be upset easily and you will likely end up richer and happier. Instead of freaking out you probably even had the confidence to buy the market dip in March.
Not being easily upset by others is a super power.
Money Buys Happiness Because It Buys Freedom
One of the reasons why I was so happy to escape the rat race in 2012 was because my passive income was large enough to get me away from office politics and a whole bunch of other unpleasant things about work. It wasn't my capital or my passive income that made me happy, it was the freedom to no longer have to be around annoying people. Remember, I willingly walked away from a $250,000 base salary at 34 years old.
Today, it is still not the money that is making me happy. Instead, it's money's ability to enable me to raise my children as a stay at home dad. Teaching my son new things and getting to snuggle my daughter every day are priceless.
Yes, I was absolutely bummed when the S&P 500 was going down 10% a day, losing me hundreds of thousands of dollars in the process. I began to fear that with each sell-off I was one step closer to having to go back to work.
As the S&P 500 began to rebound, my mood began to improve because my fear of having to miss out too much on my children's lives started to abate. I started to feel enough relief that I decided I would stay unemployed for a lot longer.
When the government took away my ability to take my son to the playground or play tennis or softball with my friends, I accepted the decision as an important way for all of us to do our part to flatten the curve. But I would be lying if I told you I didn't also feel resentment at the government for taking away my liberties. The least they could have also done was to eliminate property tax during the restriction.
The lockdown has also made me empathize with people who are willing to retire early on a modest amount of capital. They hate their jobs so much they just have to get out, even if it means living on near poverty wages to do so.
To them, freedom is absolutely more important than accumulating a few more bucks. In fact, these folks get the most bang for their freedom buck because they're willing to live on just enough to survive.
Once you have a minimum amount of wealth to cover all your basic necessities, it is the freedom of choice that truly boosts happiness. The freedom of choice is why mega-millionaires who live in mega-mansions can still be so miserable. When you have thousands of employees relying on you, but you've got to furlough or lay off a quarter of them during a time of crisis, you're not going to be feeling too good.
After a tremendous rebound in April, according to Personal Capital, my net worth rebounded by about 6.5% from its lows thanks to about 25% exposure to equities. Anything more than a 5% swing in my net worth in a month is considered wild given how relatively defensively it is structured.
My net worth goal by year end is to try and increase it by a modest 7% – 10%. But I doubt the markets will cooperate.
Based on what I'm seeing in San Francisco real estate land, prices are holding up well so far. I'm just surprised so many sales are getting done given the shelter-in-place rules, the need to sign documents in front of someone, and the eventual desire to move into the property or rent it out after closing. I took a private tour for this one house the other day and three other parties toured the house before me.
It's too early to tell what's going on with my real estate crowdfunding holdings as I did not receive any distributions in April. My hope is that I'll see some surprise positive exits, like I saw in February when a couple deals paid out. However, I'm not expecting anything for the rest of the year.
Treasury bonds continue to hold up like a rock and municipal bonds have thankfully recovered almost all of its losses thanks to the Fed explicitly saying it will be buying city and state debt.
As for my beloved Financial Samurai, what I realized since the pandemic began was that I haven't stopped writing, recording, or commenting at my usual pace. In other words, no matter how well or how poorly this site performs, it doesn't affect my joy for writing.
If you find yourself continuing to work on something no matter the income or attention it gets, you have likely found your calling. There's no better time to start your own site than during a lockdown. Ah, to be 32 and full of energy again!
How The Lockdown Has Changed My Views
With how quickly April went, I have a feeling May will go by just as quickly. I've got my new normal routine down and I'm assuming so have many of you.
Here's how my views have changed during the lockdown:
- De-risk. I've sold practically all the stock I bought in March for a quick 15% – 30% gain (still down overall given the S&P 500 is still down). I'm also selling down some existing stock that has made nice comebacks, like Tesla at over $850. What a crazy ride! I'd be a fool not to take some money off the table. Losing 30% of the value in my stock portfolio felt horrendous. I've had enough volatility to last for the next several years. No more please.
- Increase spending. Losing so much and then gaining so much back was a good reminder of how easily money can disappear. Instead of losing so much money again to risk making more money, I'm going to be more aggressive in using money to pay for a better life. Over the past four months, I've already spent a small fortune on a night doula to help with feeding, sleep training, and allowing us to sleep a little longer. Now I'm compiling a list of things to buy once the lockdown is over.
- Permanently give up on going back to work. Losing my freedom reminded me how much I would hate to be trapped in an office and being told what to do by someone I do not fully respect. The annoyance I feel towards our governor and mayor is exactly the same as the annoyance I had felt towards bad bosses. I've become too used to my freedom and could only do part-time consulting at most.
- Embrace homeschooling. The reason why most parents don't homeschool is that they have jobs and it takes a lot of time and patience. Well, we don't have jobs and we have lots of time. Therefore, it's worth at least making an effort while also trying to develop our children's social skills. The constant sickness truly was the worst thing about preschool. We just need to make sure our children's immune systems keep getting stronger by going to public places.
- Get thin and ripped again. When it comes to COVID-19, there seems to be a high correlation between obesity and death. Given I really would like to live until I'm at least 70, I've got to do more than just always tell myself to lose 5 lbs. I've got to lose 15 lbs to get down to 153-155 lbs and stay there. Besides, with my term life insurance policy running out in 2023, I'm more motivated than ever to get in shape.
- Get out of town before another lockdown happens. Before attempting to relocate to Honolulu in the Fall of 2022, we are going to rent a house in Honolulu this winter for at least one month to try before we buy. There's a good chance there will be a second wave of COVID-19 and undoubtedly another wave of the flu by winter. Instead of subjecting all of us to months of quarantine and sickness again, we'll pull my son out of preschool, save some money, and just go through our own shelter-in-place near the beach this winter.
April turned out so good, I'm afraid May is going to be a big disappointment. Remember, everything is relative when it comes to finance.
It's hard to imagine the government doling out as much free stimulus money in May as it did in April. Instead of the S&P 500 climbing by another 30% to a new record high, it's more likely the index will give up 10%+ of its gains. We're likely going to see ~40 million unemployed by the end of May. More companies we know will likely decide to shutdown. Finally, the coronavirus death count will undoubtedly go higher.
If there was ever a time to “sell in May and go away,” this May ranks right up there. Instead of focusing on stocks, I'm going to be busy hunting for real estate bargains for the rest of the summer.
I believe the easy (recovery) money has been made. It's possible we could reach all-time highs this summer the more we hollow out our economy. But I doubt it. I'm going defensive by holding more cash than normal. If I miss out on making more money, so be it. I don’t want to lose what I already have. Stay safe everyone!
Update: My 2020 Year In Review
How was your April? Has the lockdown changed the way you view things and your plans going forward. What do you expect will happen in May? If you're bullish at S&P 500 2,900+, I'd love to hear your reasons why.
If you've dropped by from a CNBC guest post I wrote, I wrote that post in March (~40 days ago) when the world was falling apart. The post was also cut down by about 40% (700-800 words) without my usual action steps to help people get their finances right. Further, I did not come up with the title. Authors have no editorial control when guest posting.