Dear Financial Samurai,
This week’s market volatility didn’t come out of nowhere. It started in an unexpected place: Japan’s bond market.
On Tuesday, Japan’s 40-year bond yield broke above 4% for the first time, the 30-year climbed toward 3.7%, and even the 10-year touched its highest level since the late 1990s. These weren’t slow, orderly moves either. Some long-dated bonds sold off more than 25 basis points in a single day.
Japan has the third-largest bond market in the world, and when yields spike there, global capital has to adjust. Within hours, U.S. long-term Treasury yields moved higher, followed by bond markets across Europe and Canada. Equity markets, especially long-duration growth stocks, reacted almost immediately.
While the near-term catalyst was political – talk of a snap election and proposed tax cuts – the deeper issue is structural. Japan has been running extreme debt levels for decades, with debt-to-GDP around 235%. For years, the Bank of Japan held yields artificially low through aggressive bond purchases under its yield curve control policy.
That era is ending. So is the carry trade where investors borrow in yen to invest elsewhere, like U.S. stocks. Please be careful. Thankfully, JGB yields did dip back down about 25 basis points from their highs.
The average 30 year fixed mortgage rate is back up to 6.2%, essentially round tripping after roughly $200 billion of mortgage backed securities were bought just a couple of weeks ago.
As a result, real estate demand may fade at the margin, since rates below 6% appear to be a true psychological threshold for buyers. Based on my conversations with mortgage brokers, they were slammed with inquiries as soon as mortgage rates dipped under 6%.
Decumulating Wealth Can Be Harder Than Accumulating
For the past three and a half years, I’ve been telling myself I need to spend more money. I’ve tried to be more intentional with my spending, to enjoy what I’ve accumulated, and to remind myself that wealth is meant to be used.
But after reviewing my budget closely this year, I had a realization that surprised me. I’ve been spending generously since 2017. I just hadn’t framed it that way.
If you are a parent, you have to calculate how much more you are spending compared to a version of yourself without children. By my math, my wife and I are spending between 130% and 150% more since becoming parents.
The challenge, I’ve learned, isn’t forcing higher spending or manufacturing consumption. It’s recognizing that meaningful decumulation is already happening as a parent and letting go of the guilt that comes with it.
Sometimes the change you need isn’t behavioral. It’s mental.
Check out: Having Kids Is The Best Way To Decumulate Wealth When FIRE
Didn’t Buy a New Car
After 60 agonizing days, with a trip in between, of dealing with car problems, I’ve decided not to buy a new car. Maybe it’s sunk cost fallacy after spending about $1,750 in the latest round of repairs and countless hours troubleshooting. Maybe it’s my defiant streak of never giving up, which in this case would mean trading in the car and ponying up at least $50,000 after tax for a new vehicle.
But something bigger is going on here, something that goes beyond just me, which I share in my new post, The Main Reasons Why I Won’t Buy a New Car Anytime Soon.
While dealing with an electrical problem that refused to go away, I turned to AI to act as both my car mechanic coach and therapist. At the time, it felt like a mission impossible scenario, similar to discovering a leak in your ceiling but never being able to identify the source, no matter how many roofers you bring in or how many times you inspect it yourself.
That experience changed how I think about problem solving. AI isn’t just a productivity tool. It’s a thinking partner. One that doesn’t get emotional, doesn’t get tired, and doesn’t charge by the hour. I’d like to think AI saved me at least $50,000 by helping me avoid buying a new vehicle, which feels fantastic.
If you’re dealing with marital challenges, work stress, health concerns, or a complex decision you can’t seem to resolve, AI can help surface options and perspectives you might be too close to see. The quality of the output depends entirely on the quality of the input, but when used thoughtfully, AI can save enormous amounts of time, money, and mental energy.
Check out: AI Can Be A Great Therapist For Many Of Your Problems
We May Be Anomalies
Finally, I wanted to share something I found interesting. I played poker with 10 other dads the other night and posed a simple survey question: Where do you think the S&P 500 will go this year? I expected at least some thoughtful analysis or projections. After all, I think most of us depend on our investments to work hard for us so we don’t have to.
Instead, I got complete indifference. Only one person spoke up and said he was negative, without offering any reasons. Everyone else shrugged and stayed quiet. I was genuinely surprised, especially given that the entire evening revolved around figuring out how to take each other’s money.
I had a similar reaction recently while talking to a friend who graduated from Harvard Business School and previously worked as an analyst and fund manager at a hedge fund. When I asked him about his thoughts on 529 plans, he had no idea what they were, despite having two young kids.
These experiences make me think that those of us who write about and read personal finance may be anomalies compared to the broader population. It might not even be productive to bring up personal finance topics in public unless you want blank stares or to bore people to death.
But what I do know is this: as long as we stay engaged with personal finance on a regular basis, we will almost certainly build far more wealth than the average person who does not.
To your financial freedom,
Sam
If you’re interested in investing in AI, check out Fundrise Venture. Fundrise invests in leading private AI companies like OpenAI, Anthropic, Anduril, Databricks, and more. The minimum investment is just $10, and I’m personally an investor. Fundrise has also been a long-time sponsor of Financial Samurai, as our investment philosophies are closely aligned.
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