Net Worth: 2020.04.01

Where do I begin? Everyday lives across the world turned upside down over the past month. In the investing world, March began the month with the Dow Jones Industrial Average (^DJI) at 25,590.51. Today, the market opened at 21,227.38 after reaching a low of 18,213.65 on March 23rd. The previous all-time high was February 12th, when it reached 29,568.57. From top to bottom the Dow dropped a staggering 38.4%. Although the market rebounded, the short-term future still looks grim.

I now work from home 100%. My wife cut her workdays back to 3 days per week. Because we both work in healthcare, our daughter’s school is allowing her to attend a small class on Tuesdays and Thursdays. Other than these changes, our lives have not changed much despite all the chaos. The biggest news is that we managed to increase our net worth and hit our first milestone of surpassing $1M in assets. Here are the details.

Monthly Net Worth Update

Assets

Our assets increased this month due to a bit of trading I managed, which gave me anxiety for days until I was out of my trade. Here are the details for each category.

Cash Savings

We continue to use and love using YNAB. We finished the month with our Age of Money up to 48 days. Our total cash savings was less this past month because we took a cut in pay. Even so, we were only down by $557.40, which $507.78 of that was a loan to our oldest son to fix his car.

Cash Back/Gift Cards

Our cash back increased slightly by $42.24. I am building a Plex server and used some of our Amazon cash back to purchase some computer cables. I plan to cash out more of our cash back next month to apply to savings.

Cryptocurrency

Along with the markets, cryptocurrency took a nice hit last month. Our account is down $1,431.25. C’est la vie.

Retirement

Last month, I received my annual merit increase at work. I took the opportunity to increase my 403b (a 401k for non-profit companies) percentage from 4% to 8%. My goal is to continue to increase it each year until I max out my annual contribution.

I plan to share my crazy investing experience with you, but first, I would like to share a related excerpt from a book I am reading, Principles: Life & Work by Ray Dalio. This excerpt is from Chapter Three beginning at the end of 1979 where Ray talks about oil tycoon, friend, and one of the wealthiest men in the world, at the time, Bunker Hunt.

There were long lines to buy gas and extreme market volatility. There was clearly a sense of crisis. The nation was confused, frustrated, and angry. Bunker Hunt saw the debt crisis and inflation risks pretty much how I saw them. He’d been wanting to get his wealth out of paper money for the past few years, so he’d been buying commodities, especially silver, which he had started purchasing at about $1.29 an ounce as a hedge against inflation.

He kept buying, and buying as inflation and the price of silver went up until he had essentially cornered the silver market. At that point, silver was trading at around $10. I told him I thought it would be a good time to get out because the Fed was becoming tight enough to raise short term interest rates above long-term rates, which was called inverting the yield curve.

Every time that happened, inflation hedged assets and the economy went down, but Bunker was in the oil business and the Middle East oil producers he talked to still worried about the depreciation of the dollar. They had told him that they were going to buy silver as a hedge against inflation, so he held on to it in the expectation that price would continue to rise.

I got out…

By early 1980, silver had gone to nearly $50, and as rich as he was, Bunker became a lot richer. While I had made a lot of money on silver’s rise to $10, I was kicking myself for missing the ride to $50, but at least by being out I didn’t lose money.

There are anxious times in every investor’s career, when your expectations of what should be happening aren’t in line with what is happening, and you don’t know if you’re looking at great opportunities or at catastrophic mistakes.

Because I had a strong tendency to be right, but early, I was inclined to think that was the case. It was, but to have missed the $40 move up was inexcusable to me.

When the plunge finally did happen in March 1980, silver crashed back to below $11. It ruined Bunker Hunt and it nearly brought down the whole US economy as he fell. The Fed had to intervene to control the ripple effects. All of this pounded an indelible lesson into my head. Timing is everything. I was relieved that I was out of the market, but watching the richest man in the world, who also was someone I empathized with, go broke, was jarring. Yet, it was nothing compared to what was to come next…

Speculating

Not only does the previous passage sound similar to what is currently going on, although for different reasons, it also relates to my trading experience this past month. Although I hardly cornered any market, here is what happened. On March 20th, I placed options trades for two different stocks that I would like to own. The trades were far OTM (Out of The Money) meaning that the chances of them filling was remote. However, at the end of the day, the market dropped precipitously and I ended up buying all the shares for my trades.

I made $2,940 on the trades, but ended up with more shares than I dared own with the market in such turmoil. I was anxious all weekend about if I would be able to get out of my shares. Monday, one of the stocks started going up and I sold for a $5,000 profit. Just after I sold my shares, it turned back down and I was elated. Tuesday, the other stock shot up and I made $12,000 from the trade. I wanted out because the market could potentially drop further and I did not want to violate Rule #1.

Why is this related to Ray Dalio’s tale regarding silver? Both of these stocks rallied over the following week and had I still owned them the first stock would have generated $50,000 instead of $5,000 and the second $32,000 instead of $12,000. The truth is. No one can time the market, but at least I have $19,940 more than when I started, and for that I am glad.

529

I only continue reporting on this category because we have a little money in it. We are not certain when or if we will begin contributing again, but if we do, we will share our reasons behind our choice.

House

The market is down a little this month valuing our house at $342,984. This is still entirely too much for our house, so we keep it at the more reasonable $310,000 for now. I will evaluate the value again in July.

Cars and Boat

Because I did not drive for over half of last month, my car had very few miles added to it. This enabled the value to increase by $918. We drove Dr. SoS’s car for typical errands, though, and it dropped by $163. Our boat stayed the same, but we plan on taking it out today!

Liabilities

We paid off an additional $2,489.08 in the last month across our three debts.

Credit Cards

We paid our credit cards more frequently last month. With so much uncertainty, we wanted to make sure we kept our balances at $0.00.

Car Loan

Only 9 more $600 payments at 0% interest until no more car payments. When we get to that point, we will probably invest the cash each month and ride this crazy market straight back to the top.

Mortgage

We have 8 years 8 months (104 payments) to pay off the remaining $164,518.36 balance paying off $1,330.65 against the principle last month.

Student Loans

We have 22 years 11 months (275 payments) to pay off the remaining $202,760.31 balance paying off $558.43 against the principal last month.

Savings Rate

We continue to calculate our savings rate, which I started calculating in February 2020. Here are the resulting calculations for the month. This was measurably higher this month because we earned less money during the month.

• 33.29% – Percent of Debt Payments / Income earned
• 14.55% – Percent of Personal Retirement Savings / Income earned
• 3.93% – Percent of Employer Retirement Savings / Income earned
• 18.48% – Percent of all Retirement Savings / Income Earned
• 51.77% – Percent of Savings + Debt Payments / Income Earned

The debt payments are for our home mortgage, my car, and Dr. SoS’s student loan. The savings is only what I and my company contribute to my company 403b, excluding any cash savings.

Summary

As of the first day of April 2020, we are up 3.57% to a new high of $646,596.25 from our net worth of $624,283.05, from March 2020, and up 12.35% from our net worth of $563,279.16, from April 2019.

Now that we reached our first Financial Independence (FI) milestone of $1M in assets. Our next milestone is $1M in our retirement accounts. Our goal is to reach that within the next couple years. This market may give us that opportunity. We shall see.

We compile this information each month to keep us accountable and to hopefully inspire others to spend less than they make, save more, and make wise investment choices. If you have any comments or questions, please leave a comment.

Thank you for reading!

Mr. SoS