Hello, everybody. It's Sam and Sydney from the Financial Samurai Podcast. And happy New Year 2024. Happy New Year. How are you feeling? Good. I'm feeling good. I'm actually feeling really rejuvenated, despite having 10 days with no child care help during the winter break. It was pretty relaxing. I'm surprised.

How about you? I'm feeling pretty good. Well, I admit I'm still tired. But overall, I'm excited that we started a new year. And hopefully, things will be good this year. I mean, the key is how long this endurance, this good feeling, and excitement will last. Because as we know, as we grind through the year, things get a little bit slower, a little bit more tired.

So let's talk about some 2024 goals between you and me. And then I'll discuss some of my predictions, finance-related and otherwise, for the episode. So what are your main 2024 goals? Well, I kind of went a little overboard this year and had a lot of very small goals. I'll just throw a few of them out there that come to the top of my mind.

In terms of work, I definitely want to keep a more consistent and regular schedule. I'm the type of person that gets very easily distracted. And I think it helps to have very clear priorities for every day and to also chunk my time so that I can plan to spend 30 minutes, one hour, two hours on a very specific thing and block out everything else.

So don't check email during that time or messages. I think that will hopefully help me focus better, because I tend to get distracted very easily. And I also have a really big goal, which is a shared goal for us, is to do more work on your second book. We've got the manuscript deadline coming up and then all throughout the rest of the year.

So I'm really looking forward to working on that. And I also hope to read at least five nonfiction books this year. I had a goal last year of three to five, and I hit five. So hopefully to get at least five under my belt this year. And then two personal goals.

I really want to help our daughter get a jump start on reading. So my goal is to teach her around 50 of the most commonly used and simple sight words this year. And then I finally want to get our son and I to sit down and get some piano lessons in.

I would love to be able to teach him a few songs by the year end. How about you? Oh, some great goals. Well, I have a theme. Every single year I have a theme for all my years. And this year's theme is one last year of intense focus. I was going to call it the one last year for survival, but that sounded a little too dire.

This marks my 15th year running Financial Samurai, coinciding with both our children starting school full time in September. And I've got to admit, fatigue has set in, reminiscent of 2011 when I was pondering leaving investment banking for good, because I was just burned out and I ended up making a huge life change.

I don't think I'm going to make that huge life change by stopping Financial Samurai and this podcast altogether. However, I think adjustment needs to be made because I'm trying to keep Financial Samurai going for 20 more years, or at least until our kids are young adults and they know what they want to do with their lives.

So for some of my goals, health goals, stay the same weight. I've given up on losing weight. I think 168 to 171 pounds at 5'10" is perfect. I'm going to play tennis and pickleball combined three times a week, hopefully without getting injured. And if I do that and maintain my eating habits, I think I'll be able to stay the same weight.

And then one thing was really good was taking one mental health break a month. I think I only did one day of unproductive nothing for all of 2023, and it was amazing. I kind of locked myself away in a room and I went to the hot tub. I had peace and quiet, and I just felt like a green shoot.

Green shoots were sprouting out of my body. I was like, wow, I'm healing like Wolverine. In terms of wealth goals, I think this year is going to be back to frugality mindset for me versus being a relatively free spender. And the main reason why is we need to re-boost our liquidity after buying this house.

So I'm hopeful that our net worth will increase by 10% and we're going to boost back our liquidity to get to six, 12 months of living expenses because those capital calls at the end of 2023 really sucked away a lot of liquidity. There are all these surprise capital calls.

I was thinking to myself, what is going on? There are higher percentage than normal and more frequent than normal from more funds. And then finally, in terms of the wealth side, replenish our stock exposure to about 20% of net worth. Ideally, the percentage range is between 25 to 35% of entire net worth.

But again, with the selling of stock to buy the house, it's declined to about 15%. Oh, and there's another financial goal. I want to invest about $50,000 in private funds that invest in artificial intelligence. I know it's all the rage, valuations are high, but I'm going to invest in funds that are looking at the best in class companies in AI.

And I want to diversify across all segments of AI. I think it's just a smart hedge because in 20 years, AI could crush a lot of jobs, millions of jobs, and our kids might be underemployed or unemployed as a result. And as we learn from the OpenAI CEO debacle, as well as the New York Times copyright lawsuit against OpenAI, OpenAI is full on trying to make max money for its shareholders and for its employees.

This is not nonprofit for the good of all humanity. It's about max profits. So if you can't beat them, you've got to invest with them at least to try to make money as a hedge. If AI turns out to be a dud, then hopefully our kids will have jobs.

And if AI turns out to be some revolutionary technology, then well, hopefully our funds will grow tremendously in value. And in terms of X-Factor goals, I've got two. One is to publish our second book with Portfolio Penguin. Hopefully it'll come out in the second half of 2024. It is a lot of work.

Thank you so much for editing every single chapter, the intro, the conclusion, so much work, but it's so rewarding once it comes out. And the second X-Factor goal is to potentially help you get a consulting job in the second half of 2024, once our daughter goes to school full-time in September.

And I'm pretty excited about it. I don't know how excited you are about it after being free since 2015, but my thought is I care too deeply about you to let you be a stay-at-home mom after our daughter begins school full-time, because I've talked to many stay-at-home mothers over the past six and a half years, many, many, some who have faced divorce, some who have lost their spouses tragically, and they suddenly have to bear the sole responsibility of earning all the income.

And that is a very daunting task, especially now that our passive income is lower, given the house. So to be able to get back on the horse, earn some consulting income, maybe full-time income one day to provide for our children just in case something happens to me, I would rest easier knowing that could happen.

And I'll also rest easier knowing that you'll be able to do that while filling that time as our kids are in school. What are your thoughts? - I know you are way more excited about that than I am, but I'm definitely open to the idea. And I wouldn't say that I've been free since our kids were born, since I have been contributing in many different ways for the site.

People who have never run a website don't realize how much actually has to go on to get everything running smoothly and just to have a small business. There's a lot to do. - Absolutely. - And yeah, motherhood has definitely kept me very busy. And yeah, I think, yeah, it will be an adjustment to have both kids in school full-time.

I'll definitely miss having our daughter home twice a week. And yeah, we'll see how things go. It's definitely nice to feel productive. I just hope I won't be too tired. I'm already tired, but I am partly to blame because I don't sleep enough and I have to work on my productivity.

So I've got a lot of goals to work on between now and then. And yeah, we'll see how things go or by the end of the year. - Yeah, I would say change is inevitable. You've done so much work for Financial Samurai, the editing, the finances, the backend stuff, troubleshooting, so you have been invaluable.

But at the end of the day, Financial Samurai, this podcast, for example, this podcast doesn't make any money. Financial Samurai makes some money, but it's okay. But I think it's like, okay, are we gonna really spend more time writing and recording? I think we've got a happy cadence. And it's actually fun, I think, to find, let's say, part-time work and inject ourselves back into society, hang out with new people, meet new people, go to events.

I think it's fun. It's kind of like how we got injected back into society after sending our kids to school. We got to meet new parents, new friends, and I thought that was a lot of fun. - Okay, so let's jump into predictions for 2024. What are your thoughts on interest rate, real estate, et cetera?

What are you predicting could happen this year? - Well, I think the Fed is gonna cut the Fed funds rate four times in 2024 by 25 basis points each time for a total of 1%. In other words, by the end of 2024, the Fed funds rate range will drop from 5.25 to 5.5%, down to 4.25 to 4.5%.

And partly as a result, average mortgage rates will likely decline below 6% on the 30-year fix. These are national averages, but if you go and apply for a mortgage, you're gonna be able to get 50 to 75 basis points lower than the stated average. So we're talking you could potentially get a 30-year fix mortgage at 5 to 5.5%, which sounds pretty reasonable in light of current inflation, in light of where we were.

And so due to these events, so the consensus is calling for three Fed funds cuts. I'm saying four. And part of the reason why is, look, look at CPI at 3%, look at the Fed funds rate at 5.25. That's 2.25% real. So that's restrictive. And if inflation goes down to 2.5%, well, that's more restrictive, right?

So the Fed can't be too far behind the curve on cutting or else it could cause a recession and lots of job losses. So with these forecasts in mind for the Fed funds rate and mortgage rates, we should expect demand for real estate to increase. I think there's gonna be a lot of pent up demand.

There has been a lot of pent up demand since starting in the first half of 2022, when the Fed started raising rates. So every single month, more people just waiting, wondering what's going on, why buy a home, not so much inventory, mortgage rates are high, maybe mortgage rates will finally come down.

And they are gonna finally come down. They have been finally coming down since the end of 2023. And so the more it comes down, the more demand is gonna appear in the market. So I think there's gonna be back to bidding wars. And I think real estate market, the median or the average price increase, home forecast is about 1.8%.

I think it's gonna be higher than that. I think we could see four to 5% increase in the median home price. Depends on which index you use, whether it's the St. Louis Fed or the Freddie Mac home price index, which is much higher than the St. Louis Fed. But I think it's gonna be really a good time for the real estate market, especially since there's been a huge lag in performance compared to the stock market, which was up 24% in 2023, the S&P 500.

So capital searches for laggard companies, assets, sectors to invest in. And I think that capital is gonna rotate into the real asset of real estate. So we're talking four and a half to 5% increase in 2024. Now in terms of the stock market, it's interesting because the median S&P 500 forecast by Wall Street forecasters is something around 4,830.

Now, based on the huge rally end of year in 2023, that means there's only about two, 2.5% upside based on the end of 2023 numbers. And so the market has sold off quite persistently on the first several days of 2024. So we have maybe three to 4% upside now, but that's not a lot.

If you think about it, the risk-free rate of return, which is the 10-year bond yield, you can get 3.8%, right? If you get a one-year treasury bond or a six-month treasury bond, you can get about four and a half to almost 5%. So if you tack on four and a half percent to 5% to the existing S&P 500 level of 4,700, we're talking like 4,900 something, which is above the average Wall Street sell side year end 2024 S&P 500 target.

So we've got to think about how are we going to allocate our money in terms of risk-free and risk. And it seems to me that risk-free is a better trade right now based on these average target prices. So I see upside in the S&P 500. I think we could get to 4,900, basically based on 20 times the S&P 500 earnings of maybe 247, 248.

Nobody really knows. It sounds kind of expensive 20 times, but then by the time we get there in the second half of 2024 we're going to start looking at 2025 estimates, which could grow to 260, $270 earnings per share for the S&P 500, which would bring that multiple down.

So not too exciting on the S&P 500, more excitement in real estate. And in terms of the economy, it doesn't seem like we're going to go into a recession anymore. Amazing, because every single inversion in the past of the yield curve has portended to a recession 12 to 18 months later.

So the Fed can start cutting rates, let's say in March, April. I mean, it's pretty soon March or April. Then maybe the economy will be saved, who knows. But so far things seem pretty decent. And if rates do go down this low, you're going to see a lot of the riskiest assets, the assets with the highest beta, like small cap names, like cryptocurrency, it's already run so much, like private growth companies whose valuations got smashed by 30 to 70% since late 2021, early 2022, come back with a vengeance.

Because it's going to be risk on if the rates go way low or down by another one or 2%. So that's it for our predictions for 2024. If you're an investor, it should be a pretty decent year. I don't expect huge increases or huge collapses. The volatility hopefully should subside a little bit.

As we learned from 2022 and 2023, it's important to stay invested. Stay invested for the long-term. Look at your asset allocation, review it quarterly, semi-annually, at least annually. Talk to a friend or significant other about your goals and have a conversation at the beginning of the year. What do you want this year to be like for you?

And how are you going to achieve your goals? I hope everyone has a wonderful 2024 and you meet most of your goals. And we will speak to you in the next episode. - Happy New Year, everybody. Talk to you later. - Bye. (upbeat music) (dramatic music)