2024_New_Year_Goals_and_Predictions_-_1424_10.14_AM
00:00:00.000 | [MUSIC PLAYING]
00:00:03.440 | Hello, everybody.
00:00:09.480 | It's Sam and Sydney from the Financial Samurai Podcast.
00:00:12.360 | And happy New Year 2024.
00:00:15.560 | Happy New Year.
00:00:16.800 | How are you feeling?
00:00:18.120 | Good.
00:00:18.600 | I'm feeling good.
00:00:19.320 | I'm actually feeling really rejuvenated,
00:00:21.880 | despite having 10 days with no child care
00:00:24.880 | help during the winter break.
00:00:26.960 | It was pretty relaxing.
00:00:28.680 | I'm surprised. How about you?
00:00:30.080 | I'm feeling pretty good.
00:00:31.400 | Well, I admit I'm still tired.
00:00:33.760 | But overall, I'm excited that we started a new year.
00:00:36.960 | And hopefully, things will be good this year.
00:00:41.160 | I mean, the key is how long this endurance, this good feeling,
00:00:44.560 | and excitement will last.
00:00:46.240 | Because as we know, as we grind through the year,
00:00:48.640 | things get a little bit slower, a little bit more tired.
00:00:52.680 | So let's talk about some 2024 goals between you and me.
00:00:56.400 | And then I'll discuss some of my predictions,
00:00:58.600 | finance-related and otherwise, for the episode.
00:01:01.680 | So what are your main 2024 goals?
00:01:05.200 | Well, I kind of went a little overboard this year
00:01:07.680 | and had a lot of very small goals.
00:01:11.080 | I'll just throw a few of them out there
00:01:13.000 | that come to the top of my mind.
00:01:15.360 | In terms of work, I definitely want
00:01:19.040 | to keep a more consistent and regular schedule.
00:01:23.800 | I'm the type of person that gets very easily distracted.
00:01:26.920 | And I think it helps to have very clear priorities
00:01:30.880 | for every day and to also chunk my time so that I can plan
00:01:38.040 | to spend 30 minutes, one hour, two hours
00:01:41.160 | on a very specific thing and block out everything else.
00:01:44.720 | So don't check email during that time or messages.
00:01:47.480 | I think that will hopefully help me focus better,
00:01:50.360 | because I tend to get distracted very easily.
00:01:54.240 | And I also have a really big goal,
00:01:56.960 | which is a shared goal for us, is to do more
00:02:01.040 | work on your second book.
00:02:03.720 | We've got the manuscript deadline coming up and then
00:02:08.280 | all throughout the rest of the year.
00:02:10.240 | So I'm really looking forward to working on that.
00:02:13.120 | And I also hope to read at least five nonfiction books this
00:02:17.880 | year.
00:02:18.380 | I had a goal last year of three to five, and I hit five.
00:02:21.200 | So hopefully to get at least five under my belt this year.
00:02:25.280 | And then two personal goals.
00:02:28.000 | I really want to help our daughter
00:02:30.880 | get a jump start on reading.
00:02:32.840 | So my goal is to teach her around 50
00:02:36.760 | of the most commonly used and simple sight words this year.
00:02:42.200 | And then I finally want to get our son and I
00:02:44.680 | to sit down and get some piano lessons in.
00:02:48.880 | I would love to be able to teach him a few songs by the year end.
00:02:52.900 | How about you?
00:02:54.540 | Oh, some great goals.
00:02:56.580 | Well, I have a theme.
00:02:58.060 | Every single year I have a theme for all my years.
00:03:00.700 | And this year's theme is one last year of intense focus.
00:03:04.540 | I was going to call it the one last year for survival,
00:03:08.500 | but that sounded a little too dire.
00:03:10.740 | This marks my 15th year running Financial Samurai,
00:03:13.320 | coinciding with both our children starting
00:03:15.360 | school full time in September.
00:03:18.220 | And I've got to admit, fatigue has set in,
00:03:20.540 | reminiscent of 2011 when I was pondering leaving investment
00:03:23.880 | banking for good, because I was just burned out
00:03:27.180 | and I ended up making a huge life change.
00:03:29.840 | I don't think I'm going to make that huge life
00:03:31.720 | change by stopping Financial Samurai and this podcast
00:03:34.760 | altogether.
00:03:36.100 | However, I think adjustment needs
00:03:38.020 | to be made because I'm trying to keep Financial Samurai going
00:03:42.340 | for 20 more years, or at least until our kids are
00:03:46.000 | young adults and they know what they
00:03:48.520 | want to do with their lives.
00:03:50.280 | So for some of my goals, health goals, stay the same weight.
00:03:53.620 | I've given up on losing weight.
00:03:56.740 | I think 168 to 171 pounds at 5'10" is perfect.
00:04:00.820 | I'm going to play tennis and pickleball combined
00:04:03.400 | three times a week, hopefully without getting injured.
00:04:06.240 | And if I do that and maintain my eating habits,
00:04:08.560 | I think I'll be able to stay the same weight.
00:04:10.780 | And then one thing was really good
00:04:12.360 | was taking one mental health break a month.
00:04:15.000 | I think I only did one day of unproductive nothing
00:04:19.200 | for all of 2023, and it was amazing.
00:04:23.480 | I kind of locked myself away in a room
00:04:26.640 | and I went to the hot tub.
00:04:28.200 | I had peace and quiet, and I just felt like a green shoot.
00:04:31.560 | Green shoots were sprouting out of my body.
00:04:33.400 | I was like, wow, I'm healing like Wolverine.
00:04:35.720 | In terms of wealth goals, I think this year
00:04:39.640 | is going to be back to frugality mindset for me
00:04:44.080 | versus being a relatively free spender.
00:04:46.960 | And the main reason why is we need to re-boost
00:04:50.440 | our liquidity after buying this house.
00:04:52.960 | So I'm hopeful that our net worth will increase by 10%
00:04:57.040 | and we're going to boost back our liquidity
00:04:59.780 | to get to six, 12 months of living expenses
00:05:03.800 | because those capital calls at the end of 2023
00:05:06.160 | really sucked away a lot of liquidity.
00:05:09.080 | There are all these surprise capital calls.
00:05:11.400 | I was thinking to myself, what is going on?
00:05:12.680 | There are higher percentage than normal
00:05:14.680 | and more frequent than normal from more funds.
00:05:17.760 | And then finally, in terms of the wealth side,
00:05:20.840 | replenish our stock exposure to about 20% of net worth.
00:05:24.920 | Ideally, the percentage range is between 25 to 35%
00:05:28.600 | of entire net worth.
00:05:30.160 | But again, with the selling of stock to buy the house,
00:05:33.360 | it's declined to about 15%.
00:05:36.520 | Oh, and there's another financial goal.
00:05:37.800 | I want to invest about $50,000 in private funds
00:05:40.960 | that invest in artificial intelligence.
00:05:44.000 | I know it's all the rage, valuations are high,
00:05:46.720 | but I'm going to invest in funds
00:05:48.360 | that are looking at the best in class companies in AI.
00:05:51.320 | And I want to diversify across all segments of AI.
00:05:55.920 | I think it's just a smart hedge because in 20 years,
00:05:59.520 | AI could crush a lot of jobs, millions of jobs,
00:06:02.560 | and our kids might be underemployed or unemployed as a result.
00:06:07.100 | And as we learn from the OpenAI CEO debacle,
00:06:10.800 | as well as the New York Times copyright lawsuit
00:06:13.120 | against OpenAI, OpenAI is full on trying to make max money
00:06:18.120 | for its shareholders and for its employees.
00:06:20.600 | This is not nonprofit for the good of all humanity.
00:06:23.480 | It's about max profits.
00:06:25.200 | So if you can't beat them, you've got to invest with them
00:06:28.680 | at least to try to make money as a hedge.
00:06:31.860 | If AI turns out to be a dud,
00:06:34.920 | then hopefully our kids will have jobs.
00:06:38.400 | And if AI turns out to be some revolutionary technology,
00:06:41.900 | then well, hopefully our funds
00:06:43.980 | will grow tremendously in value.
00:06:47.580 | And in terms of X-Factor goals, I've got two.
00:06:50.340 | One is to publish our second book with Portfolio Penguin.
00:06:54.700 | Hopefully it'll come out in the second half of 2024.
00:06:57.460 | It is a lot of work.
00:06:59.160 | Thank you so much for editing every single chapter,
00:07:02.020 | the intro, the conclusion, so much work,
00:07:04.020 | but it's so rewarding once it comes out.
00:07:06.280 | And the second X-Factor goal
00:07:08.620 | is to potentially help you get a consulting job
00:07:12.620 | in the second half of 2024,
00:07:14.260 | once our daughter goes to school full-time in September.
00:07:18.460 | And I'm pretty excited about it.
00:07:20.180 | I don't know how excited you are about it
00:07:22.220 | after being free since 2015,
00:07:26.420 | but my thought is I care too deeply about you
00:07:31.100 | to let you be a stay-at-home mom
00:07:32.940 | after our daughter begins school full-time,
00:07:34.980 | because I've talked to many stay-at-home mothers
00:07:38.020 | over the past six and a half years, many, many,
00:07:41.140 | some who have faced divorce,
00:07:43.020 | some who have lost their spouses tragically,
00:07:46.980 | and they suddenly have to bear the sole responsibility
00:07:50.500 | of earning all the income.
00:07:53.120 | And that is a very daunting task,
00:07:56.420 | especially now that our passive income is lower,
00:07:59.180 | given the house.
00:08:00.340 | So to be able to get back on the horse,
00:08:02.740 | earn some consulting income,
00:08:03.900 | maybe full-time income one day to provide for our children
00:08:07.540 | just in case something happens to me,
00:08:09.700 | I would rest easier knowing that could happen.
00:08:14.700 | And I'll also rest easier knowing
00:08:16.700 | that you'll be able to do that
00:08:19.000 | while filling that time as our kids are in school.
00:08:22.460 | What are your thoughts?
00:08:23.620 | - I know you are way more excited about that than I am,
00:08:26.620 | but I'm definitely open to the idea.
00:08:28.660 | And I wouldn't say that I've been free
00:08:32.660 | since our kids were born,
00:08:34.420 | since I have been contributing in many different ways
00:08:39.120 | for the site.
00:08:40.980 | People who have never run a website
00:08:43.540 | don't realize how much actually has to go on
00:08:45.860 | to get everything running smoothly
00:08:48.420 | and just to have a small business.
00:08:49.900 | There's a lot to do.
00:08:51.220 | - Absolutely.
00:08:52.340 | - And yeah, motherhood has definitely kept me very busy.
00:08:56.600 | And yeah, I think, yeah, it will be an adjustment
00:09:00.180 | to have both kids in school full-time.
00:09:02.820 | I'll definitely miss having our daughter home twice a week.
00:09:06.780 | And yeah, we'll see how things go.
00:09:09.580 | It's definitely nice to feel productive.
00:09:12.300 | I just hope I won't be too tired.
00:09:15.140 | I'm already tired, but I am partly to blame
00:09:18.380 | because I don't sleep enough
00:09:20.300 | and I have to work on my productivity.
00:09:22.740 | So I've got a lot of goals to work on between now and then.
00:09:26.500 | And yeah, we'll see how things go or by the end of the year.
00:09:29.020 | - Yeah, I would say change is inevitable.
00:09:32.260 | You've done so much work for Financial Samurai,
00:09:34.780 | the editing, the finances, the backend stuff,
00:09:38.660 | troubleshooting, so you have been invaluable.
00:09:41.900 | But at the end of the day, Financial Samurai,
00:09:44.780 | this podcast, for example,
00:09:46.140 | this podcast doesn't make any money.
00:09:48.220 | Financial Samurai makes some money, but it's okay.
00:09:51.580 | But I think it's like, okay,
00:09:53.260 | are we gonna really spend more time writing and recording?
00:09:57.620 | I think we've got a happy cadence.
00:09:59.740 | And it's actually fun, I think,
00:10:01.380 | to find, let's say, part-time work
00:10:03.700 | and inject ourselves back into society,
00:10:06.940 | hang out with new people, meet new people, go to events.
00:10:10.340 | I think it's fun.
00:10:11.340 | It's kind of like how we got injected back into society
00:10:14.780 | after sending our kids to school.
00:10:16.900 | We got to meet new parents, new friends,
00:10:19.540 | and I thought that was a lot of fun.
00:10:21.060 | - Okay, so let's jump into predictions for 2024.
00:10:25.900 | What are your thoughts on interest rate,
00:10:28.540 | real estate, et cetera?
00:10:30.180 | What are you predicting could happen this year?
00:10:33.420 | - Well, I think the Fed is gonna cut the Fed funds rate
00:10:37.660 | four times in 2024 by 25 basis points each time
00:10:42.180 | for a total of 1%.
00:10:44.580 | In other words, by the end of 2024,
00:10:46.460 | the Fed funds rate range will drop from 5.25 to 5.5%,
00:10:52.460 | down to 4.25 to 4.5%.
00:10:56.740 | And partly as a result,
00:10:59.300 | average mortgage rates will likely decline
00:11:01.820 | below 6% on the 30-year fix.
00:11:04.060 | These are national averages,
00:11:05.980 | but if you go and apply for a mortgage,
00:11:08.340 | you're gonna be able to get 50 to 75 basis points
00:11:10.820 | lower than the stated average.
00:11:12.660 | So we're talking you could potentially
00:11:14.180 | get a 30-year fix mortgage at 5 to 5.5%,
00:11:18.700 | which sounds pretty reasonable
00:11:20.440 | in light of current inflation,
00:11:22.460 | in light of where we were.
00:11:24.460 | And so due to these events,
00:11:27.260 | so the consensus is calling for three Fed funds cuts.
00:11:30.180 | I'm saying four.
00:11:31.300 | And part of the reason why is,
00:11:33.060 | look, look at CPI at 3%,
00:11:35.340 | look at the Fed funds rate at 5.25.
00:11:37.840 | That's 2.25% real.
00:11:40.580 | So that's restrictive.
00:11:42.500 | And if inflation goes down to 2.5%,
00:11:45.340 | well, that's more restrictive, right?
00:11:46.660 | So the Fed can't be too far behind the curve on cutting
00:11:49.780 | or else it could cause a recession and lots of job losses.
00:11:54.240 | So with these forecasts in mind
00:11:57.040 | for the Fed funds rate and mortgage rates,
00:12:00.840 | we should expect demand for real estate to increase.
00:12:04.160 | I think there's gonna be a lot of pent up demand.
00:12:05.980 | There has been a lot of pent up demand
00:12:07.320 | since starting in the first half of 2022,
00:12:09.800 | when the Fed started raising rates.
00:12:11.880 | So every single month,
00:12:13.660 | more people just waiting, wondering what's going on,
00:12:17.560 | why buy a home, not so much inventory,
00:12:20.880 | mortgage rates are high,
00:12:21.960 | maybe mortgage rates will finally come down.
00:12:24.340 | And they are gonna finally come down.
00:12:25.760 | They have been finally coming down since the end of 2023.
00:12:30.160 | And so the more it comes down,
00:12:32.020 | the more demand is gonna appear in the market.
00:12:34.900 | So I think there's gonna be back to bidding wars.
00:12:36.620 | And I think real estate market,
00:12:38.840 | the median or the average price increase,
00:12:42.580 | home forecast is about 1.8%.
00:12:45.640 | I think it's gonna be higher than that.
00:12:47.040 | I think we could see four to 5% increase
00:12:49.640 | in the median home price.
00:12:51.080 | Depends on which index you use,
00:12:52.840 | whether it's the St. Louis Fed
00:12:54.600 | or the Freddie Mac home price index,
00:12:57.020 | which is much higher than the St. Louis Fed.
00:13:00.560 | But I think it's gonna be really a good time
00:13:03.520 | for the real estate market,
00:13:04.720 | especially since there's been a huge lag in performance
00:13:08.120 | compared to the stock market,
00:13:09.800 | which was up 24% in 2023, the S&P 500.
00:13:13.000 | So capital searches for laggard companies,
00:13:17.320 | assets, sectors to invest in.
00:13:19.120 | And I think that capital is gonna rotate
00:13:21.360 | into the real asset of real estate.
00:13:23.960 | So we're talking four and a half to 5% increase in 2024.
00:13:28.700 | Now in terms of the stock market,
00:13:29.880 | it's interesting because the median S&P 500 forecast
00:13:33.660 | by Wall Street forecasters is something around 4,830.
00:13:40.720 | Now, based on the huge rally end of year in 2023,
00:13:45.720 | that means there's only about two, 2.5% upside
00:13:48.680 | based on the end of 2023 numbers.
00:13:52.240 | And so the market has sold off quite persistently
00:13:56.520 | on the first several days of 2024.
00:13:59.080 | So we have maybe three to 4% upside now,
00:14:02.240 | but that's not a lot.
00:14:03.440 | If you think about it, the risk-free rate of return,
00:14:06.040 | which is the 10-year bond yield, you can get 3.8%, right?
00:14:11.040 | If you get a one-year treasury bond
00:14:13.640 | or a six-month treasury bond,
00:14:14.480 | you can get about four and a half to almost 5%.
00:14:17.700 | So if you tack on four and a half percent to 5%
00:14:19.960 | to the existing S&P 500 level of 4,700,
00:14:24.320 | we're talking like 4,900 something,
00:14:26.900 | which is above the average Wall Street sell side
00:14:30.640 | year end 2024 S&P 500 target.
00:14:34.280 | So we've got to think about how are we going to allocate
00:14:38.600 | our money in terms of risk-free and risk.
00:14:42.640 | And it seems to me that risk-free
00:14:46.080 | is a better trade right now
00:14:47.920 | based on these average target prices.
00:14:50.560 | So I see upside in the S&P 500.
00:14:53.680 | I think we could get to 4,900,
00:14:57.580 | basically based on 20 times the S&P 500 earnings
00:15:01.360 | of maybe 247, 248.
00:15:04.840 | Nobody really knows.
00:15:06.520 | It sounds kind of expensive 20 times,
00:15:08.420 | but then by the time we get there in the second half of 2024
00:15:12.120 | we're going to start looking at 2025 estimates,
00:15:15.360 | which could grow to 260, $270 earnings per share
00:15:19.200 | for the S&P 500, which would bring that multiple down.
00:15:22.480 | So not too exciting on the S&P 500,
00:15:26.920 | more excitement in real estate.
00:15:29.520 | And in terms of the economy,
00:15:31.380 | it doesn't seem like we're going to go
00:15:33.440 | into a recession anymore.
00:15:34.360 | Amazing, because every single inversion
00:15:37.720 | in the past of the yield curve has portended
00:15:40.040 | to a recession 12 to 18 months later.
00:15:43.740 | So the Fed can start cutting rates,
00:15:45.840 | let's say in March, April.
00:15:48.280 | I mean, it's pretty soon March or April.
00:15:50.920 | Then maybe the economy will be saved, who knows.
00:15:54.360 | But so far things seem pretty decent.
00:15:57.000 | And if rates do go down this low,
00:15:59.140 | you're going to see a lot of the riskiest assets,
00:16:02.620 | the assets with the highest beta, like small cap names,
00:16:06.360 | like cryptocurrency, it's already run so much,
00:16:09.920 | like private growth companies whose valuations got smashed
00:16:13.720 | by 30 to 70% since late 2021, early 2022,
00:16:18.720 | come back with a vengeance.
00:16:20.800 | Because it's going to be risk on if the rates go way low
00:16:24.240 | or down by another one or 2%.
00:16:26.320 | So that's it for our predictions for 2024.
00:16:29.340 | If you're an investor, it should be a pretty decent year.
00:16:32.380 | I don't expect huge increases or huge collapses.
00:16:36.220 | The volatility hopefully should subside a little bit.
00:16:39.220 | As we learned from 2022 and 2023,
00:16:42.300 | it's important to stay invested.
00:16:45.340 | Stay invested for the long-term.
00:16:46.820 | Look at your asset allocation, review it quarterly,
00:16:49.980 | semi-annually, at least annually.
00:16:52.660 | Talk to a friend or significant other about your goals
00:16:56.300 | and have a conversation at the beginning of the year.
00:16:58.160 | What do you want this year to be like for you?
00:17:01.120 | And how are you going to achieve your goals?
00:17:04.240 | I hope everyone has a wonderful 2024
00:17:07.920 | and you meet most of your goals.
00:17:09.840 | And we will speak to you in the next episode.
00:17:12.440 | - Happy New Year, everybody.
00:17:13.680 | Talk to you later.
00:17:14.880 | - Bye.
00:17:15.720 | (upbeat music)
00:17:18.300 | (dramatic music)
00:17:21.060 | [Music fades out]