Dear Financial Samurai,
Stocks are in free fall as oil prices rise and the Iran war drags on. At the same time, Meta and Google just had their “big tobacco” moment after California jurors found Meta and YouTube negligent in the design of their platforms, awarding a 20-year-old plaintiff $3 million in damages tied to social media addiction and mental health struggles.
We all know social media can be addictive, just as we’ve long known tobacco is addictive. But this verdict raises a bigger issue. If one case can win, many more may follow. The potential liability for social media companies could run into the billions.
For employees at these companies, this creates a real dilemma. Do you stay and continue earning a high income while knowing your product may be causing harm to adults and children? Or do you walk away to find something less heavy on your soul?
It’s much easier to ignore these questions when stock prices are rising. But when stock prices stall or decline, the moral tradeoff becomes harder to justify. These questions went through my head during the 2008-2009 global financial crisis, ultimately leading me to walk away from finance in 2012.
Median Decline During Midterm Election Years
I shared this data at the beginning of the year, but it’s worth revisiting now that markets are selling off hard. I thought the S&P 500 would hold its 200-day moving average around 6,600, but it sliced through 6,400 and closed Friday at 6,369. Selling has become indiscriminate as recession fears rise.
Historically, the median decline during midterm election years is about 15.6%. That implies a potential level of roughly 5,850 for the S&P 500, or another 8% downside from here. At least valuations are becoming more reasonable at around 20 times forward earnings.
It’s never fun to give back a year’s worth of gains and possibly more. But this is where diversification matters. We continue to fund our kids’ custodial accounts, 529 plans, and Roth IRAs.
Remember, the annual gift tax exclusion is now $19,000 per person. Realistically, it doesn’t matter how much you gift if your estate is well below the estate tax threshold, which is about $15 million per person this year. Take advantage of the volatility to invest in your children’s future.
Personally, I’m annoyed I didn’t do more to protect my portfolios from downside risk in 2026 after three consecutive years of gains. However, I’m now on a mission to build each custodial investment account to $200,000 this year thanks to the sell-off. I’ll view every 1% decline in the S&P 500 as another gift for my children.
Real Estate vs. Stocks Debate
I enjoy the real estate versus stocks debate because both asset classes have clear advantages. Yet the criticism toward real estate is often far more intense than toward stocks.
We have real estate tycoons and stock market tycoons. Both paths can build significant wealth. Personally, I now own both in roughly equal proportions after selling a property last year and seeing VCX list this month.
So why the hostility toward real estate?
My theory is simple. Real estate is harder to own. It requires more capital, more effort, and more responsibility. And human nature often pushes us to criticize what we cannot own or do not fully understand.
Given it’s the spring selling season, I put together a fresh comparison: It’s Easier To Make Millions On A Home Than In Stocks
If you also dislike real estate, I'd love for you to blast holes in my argument.
Don’t Worry About Not Finding Purpose
One of the biggest fears of early retirement is losing purpose.
After spending decades working 40 to 60 hours a week, it can feel disorienting not sitting in meetings all day, commuting in rush-hour traffic, telling people what to do, navigating office politics, flying on a Sunday to see clients on a Monday, and going through performance reviews.
But I’m here to tell you that you will be OK.
Purpose doesn’t disappear. It simply shifts. You begin to gravitate toward things that genuinely interest you, whether that’s spending more time with family, improving your health, creating, or giving back.
Ironically, when your income growth slows or your company's stock declines, the meaning behind your work becomes more important. And if that meaning is fading, it may be time to negotiate a severance and move on.
Check out: Finding Purpose After Retirement Is Easier Than You Think
Continuing To Put Cash To Work
A lot has changed this year, so I updated my post: How I’d Invest $250,000 Today. How I'm investing is consistently a top three question I get.
Two assets get upgraded:
First, Treasury bonds yielding around 4.45% for the 10-year are attractive. It is a blessing to still be able to get a relatively high risk-free rate after tremendous gains in stocks since 2000.
Second, stocks are becoming more reasonably valued after the recent pullback. I'd be surprised to see another 20% drop as we saw in 2022, although anything is possible.
As always, the key is to stay calm, stay diversified, and stay consistent.
To your financial freedom,
Sam
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