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Dear Financial Samurais,
Here we go again—more tariff drama. President Trump is threatening to impose 50% tariffs on the European Union next month as negotiations stall. Meanwhile, Apple faces a potential 25% tariff if it doesn’t bring manufacturing back to the U.S.
Maybe 50% tariffs will finally get people to think twice before dropping six figures on BMWs, Audis, Porsches, and Mercedes. Perhaps we’ll see less spending on Louis Vuitton handbags with 98% profit margins or Rolex watches. At least we can still enjoy Napa wines and crack open a cold Miller Lite instead.
All this to say, I don’t expect the S&P 500 to retest its recent low of 4,850—maybe a 20% chance. More likely, we could see a dip to 5,500, which is where I’d start buying the dip again. Goods from the EU just don’t hit the average American consumer as hard as low-cost goods from China.
Check out this Equity Risk Premium (ERP) chart, which shows the difference between the S&P 500 earnings yield and the 10-year Treasury bond yield. With an ERP of just 2.23% compared to the historical median of 5.18%, the premium doesn’t seem high enough to justify being overweight stocks at the moment.
Bought Some Security
This week, I picked up various Treasury bond durations after the 10-year yield spiked to around 4.6%. If you believe in the 4% rule like I do, then earning over 4% risk-free, with no state income tax, makes Treasuries a compelling buy. If the 10-year bond yield goes up to 5%, I'll buy even more.
Of course, if you’re still early on your path to financial independence, you might ignore bonds in favor of higher risk and potential reward investments like growth stocks. That's what I aggressively did in my 20s, 30s, and early 40s. But now, I’m leaning into stability and reducing volatility.
Judgment Time!
Let’s be honest. Some people get a real kick out of judging others. So I figured, why not give you something to chew on?
I just published a personal story about how I couldn’t bring myself to spend big bucks on a vacation rental in Honolulu this summer. While writing it, I realized something deeper: maybe we overspend not because we want more, but because we’re afraid of looking cheap. Maybe it’s our insecurities that push us to care too much about what others think.
We all value different things, and ideally, we should spend according to our values—not someone else’s expectations. Yet it’s so easy to judge how others spend, especially when it’s not our money.
So go ahead, be the judge! Check out my latest post, Why We Spend Money Even When We Know We Shouldn't and let me know: Does the thesis ring true? Would you have spent the money I’m debating over? And what do your spending habits say about you?
The Home Sale Journey
I’ve been able to buy the dip and add to Treasury bonds thanks to proceeds from selling my previous home. After the market rebound, I mentioned in last week’s newsletter that I took profits on about half of my stock positions. With this second chance at asset allocation, I’m shifting toward a more traditional 60/40 stock/bond and cash portfolio.
One takeaway from this home sale is how an ARM (adjustable-rate mortgage) can be the best mortgage product for certain homebuyers. When I bought the house in 2020, I knew deep down it was a stepping-stone to something nicer. So instead of locking in a 30-year fixed mortgage at 2.5%–2.625%, I went with a 7/1 ARM at just 2.125%. I didn’t want to pay more interest than necessary for a home I planned to live in for fewer than 10 years.
Because ~95% of buyers opt for 30-year fixed mortgages, ARMs tend to get a bad rap. But as with many things, we often distrust what we don’t fully understand. I’ve learned to live with being in the minority ever since moving to America for high school in 1991.
ARMs aren’t bad—they’re just misunderstood. In my latest post, How an ARM Can Save and Make You More Money on a Home, I break down why.
Second-Guessing a Preemptive Offer
Selling a home comes with tough decisions, especially when you get a strong offer before officially listing. If you or your agent don’t fully understand the market, you could leave a lot of money on the table. I know because I recently faced this very scenario.
Here’s the truth: accepting or rejecting a preemptive offer is always a gamble. If you accept it, you’ll always wonder what might’ve happened if you had gone to market. And if you go to market, you’ll only then know whether the preemptive offer was actually the better deal.
As I wrote in my WSJ bestseller, Buy This, Not That, the key is to think in probabilities, not absolutes. If you're not at least 70% confident your decision is the right one, it's probably best to hold off.
I share my experience and decision-making process in my latest post: Accepting a Preemptive Offer vs. Listing on the Open Market. Let me know what you would’ve done!
To Your Financial Freedom,
Sam
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