2024 Year-End Review, Net Worth, Career, Large-Cap Bubble

2024 was complicated for everyone, I think. Although we got richer overall, it's hard not to look at last year's developments and worry about the future. I'm worried about what comes next. First, the good news.

Net Worth

Our net worth grew in 2024 by 14.59% in USD and 21.53% in EUR to $194,321 and €186,667, respectively.

Volatility and Expenses

This annual result masks some volatility. Like most investors, we saw the market jump after the Trump victory, only to watch as most of those gains were lost. In some positions, we lost much more than just the election jump. For example, Greenbrick Partners suffered heavily in the latter half of the year.

We also had some large expenses that ate into our returns. Most substantially, we have lingering tax issues from 2022, which inflated our 2024 estimated tax payments. I hope we'll be refunded much of that money in 2025, but as it stands, it's a loan we've been forced to fork over to the Finanzamt.

Careers

Both my wife and I continued to push our careers forward. I'm deliberately vague here about what I do for a living, but in 2024, I took some steps that have already had meaningful results for my life. Whether or not they translate to extra money is uncertain, but I do feel like I've been overly cautious career-wise for too long, and 2024 was the proof.

My wife's small business continues to grow. She has sharpened her preferred customers, raised prices, and increased her income. Although she doesn't think so, she's very brave and keeps impressing me.

Now let's look at the negatives.

US Stock Bubble

May we call a spade a spade? US large caps are in a bubble. Investors in US large caps are ignoring major risks to valuations. Even ignoring those risks, the overvaluation becomes undeniable when I look objectively at the outrageous outperformance of the S&P 500, the Nasdaq 100, and the hyper-focused growth and technology funds.

Adding to this discomfort is the knowledge that it's impossible to time the bubble's bursting. Any actions taken now will likely languish in relative underperformance while the market valuation churns upwards.

There are some acute risks that the market appears to be wholly discounting:

1. The risk of the US debt ceiling not being raised by the Republican-controlled Congress. The idea that US bonds are the safest asset in the world is at serious risk of being disrupted because the Republican party regularly threatens to not raise the debt ceiling.
2. Donald Trump's proposed tariffs on all imports may trigger inflation while provoking reciprocal trade wars.
3. Cuts to federal spending may reduce growth.
4. Bird flu transmission between humans. The first death from this latest strain was announced on January 6, 2025.
5. Geopolitical risk, especially the invasion of Taiwan by China. So much of the value of US growth is based on products manufactured in a country at major risk of invasion. For an example of geopolitical risk biting a country in the rear look no further than Germany. Allies warned Germany about tying its energy needs so tightly to Russia. As Germany built gas pipelines and shuttered its nuclear power plants, it was clearly ignoring a major source of risk, especially since its economy is so dependent on cheap energy. As we know now, that risk was very real, and Germany is now paying dearly for having hidden its head in the sand.
6. The risks associated with the US no longer being a "rule of law" country. The country elected a felon for president, for God's sake. This felon has promised to pardon the people who tried to overthrow the last presidential election. He is suing newspapers for coverage he finds offensive.

Beyond those acute risks, many stocks with the heaviest weighting in the S&P 500 are dangerously overvalued. Here are some charts from FAST Graphs showing the reasonable valuation line in orange based on earnings growth, their normal valuation line in blue, vs. a chart of weekly closing prices in black:

The SPY ETF:

Apple Inc:

Microsoft:

Nvidia:

Oracle:

Walmart:

Eli Lilly:

Broadcom:

Tesla:

My Portfolio

Several names in my portfolio are overvalued. Lowe's, Apple, Dutch Bros, and Berkshire Hathaway appear overvalued relative to their P/E ratios and growth prospects. I'm exempting Berkshire from this because evaluating book value is a better metric. But what do I do with the others? I intend on holding Dutch Bros because I always intended it to be a never-sell position. It's a tiny position, and I bought it on its first trading day like an idiot. So I'm holding.

Lowe's and Apple are harder. Both are excellent companies. Both are stupidly overvalued. I've decided to sell Apple and am debating Lowe's.

I've struggled with this next decision, but within the Wiseguy Portfolio, I've reduced exposure to large-cap growth and raised small-cap value. I may increase exposure to bonds and gold, but I haven't decided yet. Recessions hit small-cap earnings, too; regardless of their valuation, they will feel pain.

Vanguard Brokerage

After over a decade of using Vanguard as a mutual fund platform, I've finally switched over to their brokerage platform. They emailed me saying that they were forcing the change, which made the decision an easy one.

My foreign address was a hindrance before, but I've changed to an American address to switch. I hope this doesn't bite me in the butt, but I don't know what else to do. Vanguard has tolerated my foreign address for years, and I hope they remain tolerant of me for the foreseeable future.

As for the brokerage itself, it's not nearly as full-featured as Interactive Brokers or Robinhood. It's obviously designed for people who don't want to trade every day, which is fine for me, but I'm still struck by some information being difficult to find. Their app doesn't display the average price paid per share of a given security. That's weird. In the app, trade confirmations don't say how many shares I've purchased if I buy using a dollar amount. It's also annoying that purchasing in dollar amounts is limited to Vanguard securities only. It's a strange bit of self-serving, but it's not the end of the world.

2025 Forecast

I am currently pessimistic about the direction of the world. This shift right-ward both in the US and in Europe threatens stability. Much of what we value about the world exists due to international order and the rule of law. The safety of shipping, the low barriers to trade, and the patchwork of friendly nations working together to solve problems has been imperfect but prosperity making. This new order threatens all of that while offering very little in return.

I don't know what 2025 will bring. In less than a month, Germany will have its own elections, which also threaten to make the lives of immigrants worse. When it impacts us directly is impossible to say.

Until next time, take care of yourselves and your loved ones. Stay healthy. Keep saving.

2024 Third Quarter Update: Net Worth, Accounting, Your Money or Your Life, Anxiety

Numbers

At the end of the third quarter of 2024, my wife and I crossed the $200,000 net worth threshold for the first time. We ended September with $200,732/€180,352, corresponding to a quarter-over-quarter rise of 10.3%/6.63%.

I figured that we'd reach this point sometime this year, but the speed at which it happened has nevertheless surprised me. This has not been an awe-inspiring year of savings, and I feel like our money has just been going on a ride of its own making.

Accounting

One accounting change: I've included our rental deposit in our assets under the heading "Other Long Term Assets". Technically, it should function on our balance sheet as a long-term asset and for my landlord as a liability, even though the money is currently in his possession. This is similar to how customer deposits are liabilities on a bank balance sheet. It also remains an asset despite the risk that the deposit will be lowered upon moving out.

Taxes

I struggle with estimating and including tax liabilities in our accounting. Therefore, I simply haven't done it, although it's a major factor. For example, we had to pay a large estimated tax payment in September, most of which will almost certainly be returned to us. How do I include that? Most of it will be returned, but not all of it. And how best to include any accrued tax liability?

So should I throw up my hands and give up, as I've done, or make a lazy estimate?

Your Money or Your Life

Last month, I purchased Vicki Robin's Your Money or Your Life on Audible and listened while walking around the park. I won't write a big review at the moment, but there's a lot that's very good in the book.

What she does especially well is connect money with time. She frames the trade-offs in our choices very starkly, and I've been forced to reassess some of my lifestyle. That's especially true because I had some health scares during the last few months. Although those scares didn't add up to anything significant, I had to confront my fears about life and death.

Anxiety

I walk around with a lot of anxiety related to my economic success. This is true despite the ongoing success of my investment choices. Anxiety is, by its very nature, not happiness. What choices am I making, or better yet, what do I believe that provokes so much latent stress?

There are two avenues to disentangle:

• The fears about my "hopes and dreams" career field, which feels fundamentally precarious.
• My need to be perceived as successful, whether that translates to actual financial betterment or not.

I don't have answers at this point, only hunches. Under the first category, there's some reality underlying this anxiety. I work in a field full of economic uncertainty. My wife and I visited a friend over the weekend who's currently unemployed and on unemployment despite being respected in the field. A local employer is currently undergoing a change in management that will likely lead to a lot of employee turnover. Those employees may not be able to find new employment in this field.

Under the second, I do want to be seen as successful. It's the truth, but I don't know what the balance between being "seen as" and just "being" is, if that makes sense. In many senses, within my field, just going by the numbers, I am extremely successful. However, because I exist within this "hopes and dreams" world, my position does not confer great status on me.

And therein lies the tension. By the numbers, I should chill out and enjoy my life. By my nebulous sense of social status within my field, and my fear that my entire field might vanish, I can't.

Forecast

I suspect the next few months will be very good earning months for us both. Neither of us is going on any vacations, and there shouldn't be great expenses befalling us. We will have to pay some taxes, but we may also have some taxes returned to us.

Whether I can resolve these tensions in the next few months is uncertain. But I'll let you know my progress in the annual update. Until then, stay sane and healthy.

2024 First Half Update

Our net worth was $180,483/€167.735, representing a quarter-over-quarter change of -.71% and -.34% respectively. Quarter-over-quarter this was flat performance, but our first-half wealth growth in 2024 remains decent.

The Past Three Months

We've incurred a lot of spending in the past few months, which has slowed our savings rate. For one, our summer travel plans got expensive all of a sudden. We delayed buying our tickets to the US, which caused the price to creep up.

However, there's some spending that's just the result of carelessness. Some money leaks are happening, and I need to figure out where those are. For example, we're regularly exceeding our grocery budget. Some expenses are deliberate choices that nevertheless feel careless. I bought a new iPhone, which is expensive. My wife has doubled some of her lessons. I've been making some purchases in one of my side businesses. Each choice feels small in the moment, but they add together into reduced savings over time.

The stock market was also turbulent the past three months. I contemplated our wealth reaching the $200,000 in my last post, but as I hit "publish", the market gods reminded me not to get too complacent. That said, I wasn't worried about it as it was happening. Since I've adopted the ETF strategy, my mental health around investing remains healthy.

Third Quarter Forecast

I'm glad I waited before writing this post. In the latter half of June and in early July, we were expecting to have to pay enormous sums to the Finanzamt (the German tax authority) in estimated taxes. Because the pandemic depressed our incomes, our estimated taxes also correspondingly fell. When our incomes recovered, the Finanzamt wanted to adjust our estimated tax payments to new unheard-of levels. Thanks to the quick work of our tax preparer, we got the necessary paperwork organized and dispatched, which saved us from having to raid our savings just to cover estimated taxes.

It was a stressful moment, and it reminded me that I need to be more actively saving self-employment money as estimated tax funds. We shouldn't have allowed ourselves to get into that position.

That said, we're still digesting our elevated travel costs from the past few months. This will hamper saving. We also paid an outstanding tax bill from 2022, and that alone may wipe out any savings we accrue. It's hard to say without knowing the future.

Until next time, stay healthy.

First Quarter Update 2024

We had an excellent first quarter of 2024. Our net worth rose 8.42%/%10.82 quarter over quarter to $182,025/€168,542.

After I'd tallied everything, it hit me that we might cross the $200,000 mark sometime this year. It wouldn't even take outstanding performance. Even if our wealth compounds at 7% over the next two years, we'd pass that threshold sometime in 2025. Naturally, it's best to not become attached to any rate of return, but I'm trying to steel myself for the fact that growth might come more quickly than I'd anticipated.

Naturally, the primary mechanism of this is stock market growth. I've been saving every month, but the market has been easily outpacing my contributions. It's also been outpacing my spending (I went to the United States and bought a new iPhone this quarter). However, the reverse could just as easily be the case. So far in April, our portfolios have plunged more than our current year contributions. That kind of volatility is to be expected, but it's still bracing to see. Our contributions are gentle rows in a canoe that's already flowing through the water, but the current can still take us in unexpected directions.

Pension Valuation

We crossed the $100,000 mark sometime in late 2020, and I didn't recognize it at the time. I hadn't begun adding my German pension to the calculation, so life continued as normal. Frankly, I could probably goose the current numbers to equal greater than $200k now; all I'd have to do is value my pension as the equivalent of my contributions. But without a good reason to do so, I won't do that. When considering a pension rationally, the value of it can only equal or be greater than the value of contributions when viewed in hindsight.

One new emergent factor in my pension calculation is the reduction in life expectancy in the United States. Being American, I use the Social Security actuarial tables, and I have discovered that life expectancy has dropped by several years. I suspect this has to do with COVID-19, but regardless of the reason, with a potentially shortened lifespan, the valuation decreases.

Second Quarter Forecast

This has already been and will continue to be an expensive quarter.

The stock market thus far has been harsh to all factors. The one bright spot has been my small gold ETF position, but this is a mild retardant to the drawdown. Ex-US has also been relatively stable. However, this drawdown has already been nearly as severe as the cost of any of the spending I'm about to mention. If the drawdown continues, it will easily be greater than whatever spending we embark on.

My wife and I have decided it's time to do some remodeling and lifestyle upgrading, and we're spending on new bits of furniture and other household accouterments. It's nothing extravagant, but it's a cost. We will likely re-enter the world of TV ownership sometime in the next few months, for example. Ikea has also been padding its cash flow statements with our money.

We also plan to visit the US briefly this summer. My wife has an ill sibling, and we're taking some time to visit them. We also recently helped financially support this sibling's adult child, who had a cash crunch. Although they offered to reimburse us, I agree with Dave Ramsey that loaning money to family members is a way to hurt that relationship, so we gifted the money instead.

We also owe taxes from 2022. We don't know when the Finanzamt will hit us with the bill we know is due, but it's coming any day now.

Despite all that, we're doing well. Until next time. Stay happy and healthy.

2023 Update: New Worth, Reflections, Businesses

Staying the course worked.

When I wrote my end-of-year update for 2022, I was feeling pressure due to the severe drawdowns in our assets. 2022 was a rough year in nearly every asset class, and we were not spared. However, the choice to begin using ETFs for much of our portfolio meant that I didn't make any catastrophic choices despite the drawdowns, and that change paid off in 2023.

In 2023, I made additional changes, which have further solidified my temperament. Namely, my eliminating debt and restarting IRA contributions, I've taken steps that will pay off for decades while taking off some of the pressure to nail stock picks.

Net Worth Update

At the end of December 2022, I wrote:

However, December was also the first time that our net worth was down in every metric that I track. There are four comparisons at the top of my spreadsheet: USD month over month, EUR month over month, USD year over year, and EUR year over year. For the first time, all of these metrics were negative.

The story was very different in 2023.

Our net worth rose in December to $167,897/€152,080, which is a month-over-month rise of 6.6%/5.15%, a quarter-over-quarter rise of 13.90%/9.16%, and a year-over-year rise of 34.11%/30.10%. This represents an all-time high for our accumulated wealth.

2023 Changes

Debt and IRA

The biggest change was the decision to close out the loan I'd taken and restart my IRA contributions. This was not taken lightly, though some triggers made 2023 the year. I've mentioned those triggers before, but I'll summarize:

• A family conversation made me feel like I was being pushed into choices that I didn't agree with.
• Looking for emotional support to say "no" to family members, I found Dave Ramsey episodes.
• He's anti-debt, and I was in debt, and - after analyzing my feelings - I realized how stressed I was about it.
• His book Baby Steps Millionaires reminded me that tax-advantaged accounts are powerful tools for wealth building.

Looking back, had I not sold anything to pay for the debt reduction, I'd have more money today. But how would 2023 have felt? I didn't like that monthly payment to the loan company. I felt like our budget was overly tight because of it. It was a negative in my mental life, and although I'd have more money now had I simply persisted, I don't think I'd be as happy.

I filled up our IRA contributions for 2022 and 2023 early in the year, which meant I'd have to do the more complicated tax filing using the Foreign Tax Credit. I managed that, and it's not so bad, but U.S. tax filing remains a major net negative in our lives. Every year it's a stressful frightening experience.

Small Business People

We've been active small business people here in Germany. My wife made great strides in 2023, acquiring new customers and increasing her income. She diversified away from a single high-volume, low-paying customer and negotiated higher rates from several new clients. It was impressive.

I have several small businesses, and while they aren't able to compete with my wife's for income, they have increased our bottom lines. One of them is still in its infancy and therefore unprofitable, but I believe that will change in 2024. The other is almost pure profit. The attention is give towards them is what I might have in the past directed towards stock picking. This new focus is much more productive and fun.

This year, we've modified our budget spreadsheet to account for these varied sources of business income.

2024 Expectations

I don't know what will happen. At the end of 2022, I didn't expect that a single conversation with my sibling would so disrupt me. I didn't think I'd seriously enter this new line of business. I thought I might leave my job, which I didn't.

I know there will be disruptions, and there will be surprises. At least I hope so. If I could completely plan year 2024, that would be outrageously boring.

Until next time. Happy new year, happy saving in 2024, and stay healthy.

Third Quarter 2023 Update: Boredom Hack, Net Worth, Side Hustles, Taxes

I've had a breakthrough.

Here's a question: how much poor stock market performance is due to boredom? As in, if we're bored with our lives, are we turning to the markets purely for entertainment? For example, the speculative extremes during the pandemic may have been caused by people having nothing better to do.

In my own case, it's a likely factor in much of my own bad behavior. I have periods, especially since moving abroad, where I feel directionless. Due to the lack of upward mobility of my day job, it's hard to get excited about it when I'm at home. My wife can't absorb all of my neediness (nor should she be expected to, of course), but it has to go somewhere. My stock market life became an obsession and a fantasy, where maybe, just maybe, I could find the formula to let me bail on my day job and its constrictions.

This singular focus on it did some good things for me. Learning about companies is learning about the world. However, the anxiety of watching the market plagued my mental health. As a result, I've made a number of decisions that were poor and have led to head-scratching consequences. "What was I thinking?" has been a recurrent thought.

Two things have lightened my mental load. The first is having bitten the bullet and moved to mutual funds. Taking some of the pressure off of my individual stock positions came with an unfortunate tax bill (more on that later), but the concomitant reduction in anxiety has been worth it. The second is the reinvigorization of my side hustles. Over the summer, one of them got new life breathed into it. Having somewhere else to project my ambitions has been great for me.

Being too busy to worry about markets is an incredible hack. I go days now without looking at my portfolio's performance. It exists and does its thing. Honestly, as clever as I think the Wiseguy Portfolio is, I'm considering simplifying it even further because I want to spend even less time worrying about it and fiddling with it. Because there are more dividends from different funds coming in at any given time, and because I need to occasionally rebalance all these different funds, it gives me more chances to look at it and worry. It also eats up time that I could be using productively elsewhere.

I haven't made a final decision about that.

Net Worth

Our net worth increased quarter over quarter to $150,992 and €142,714, which is a quarter-over-quarter gain of 1.27% and 4.81% respectively.

The third quarter generally sees a lot of income come in (haha), which offset some of the market shenanigans. I got my summer bonus, and my wife also got some good-sized payments from her customers. Since our vacations were modest this year, we didn't have large summer outflows, and she could work more often uninteruptted.

The past two months have seen high market volatility, and my portfolio was hit. Bonds have been especially strongly hit, but some of my individual stocks have been beaten up too. Green Brick Partners, for example, has had a rough go of it due to some bad news in the mortgage market as well as Greenlight Capital selling a sizable chunk of their position to rebalance.

Side Hustle

One of my side hustles generated some sales, but I also had expenses that more than offset those. I'm trying to sell some things to keep the hit in line, but so far, I've been unsuccessful. I've also gotten a refund on one expensive item that will show up the next time I write one of these.

I want this side hustle to become a profit generator for me, and that's where most of my ambitious energy has been directed. The upside is that making wild swings in the side hustle might lead to imperfect results and some wasted money, but it won't lead to disaster like a bunch of stock trades can. And if I can make even a few multiples of profit on my invested money, I can have a return generator greater than most of my stock positions.

Taxes

In 2022, when I moved a lot of money to mutual funds, I did this by selling a bunch of individual stocks. This has led to a large tax bill in Germany, whis has taken me by surprise because I had a loss in the US.

The culprit was, besides myself, the weakened euro. Some of my trades were purchased when the euro was at a high point and sold when the euro was at a low point. This made gains more valuable and losses less potent. Because nearly all of my positions are dollar-denominated, I couldn't see my mistake, and as such, I had enough gains to have to accrue my first capital gains tax in Germany. Oops.

That hit hasn't landed in our net worth statement yet, but it's coming.

It's made me realize that it's very hard for me to determine the euro cost basis of my positions. I knew that I'd sold during a weak time for the euro, but I didn't realize that the difference would be that extreme. However, to determine my liability, I'd have to track every single lot purchase in a spreadsheet. Interactive Brokers does not provide good cross-currency tax planning tools, and if I don't do it myself, I'll just walk into this trap over and over again.

Final Thoughts

Even with the missteps, this was a good quarter. I feel relaxed about money for the first time in years, and I feel like I have somewhere to direct my creative energies outside of my day job.

We'll have some big costs coming up. My wife wants to see her family over Thanksgiving. The aforementioned tax bill will hit. I still have some investments I need to make in this side hustle. Hopefully, these costs are offset somewhat by some additional side hustle sales, some sales of personal items, and increased income from our day jobs. As for the stock market, it's anyone's guess.

Until next time, stay healthy.

2023 First Half Update

2023 Second Quarter Update:

The first quarter was full of re-evaluations of financial goals and strategies and was full of fear over impending disaster in my family. Back then, we had to make difficult decisions and have difficult conversations.

The second quarter of 2023 was much milder.

New All-Time High

After a year and a half of being in a net worth drawdown, we emerged at the end of June at a new all-time high. We're just shy of $150,000 at $149,097/€136,162. That's a quarter-over-quarter rise of 10.05%/9.05%.

The 2022 bear market, although not extreme by historical standards, was the worst extended drawdown we've had to live with during our married lives. Despite some losses, there were no disasters in our portfolios, and the stress lead to some necessary reappraisals of how best to allocate savings. I'm grateful for the lesson and happy to allocate most money to an ETF/mutual fund asset mix. While my stock picking has done well this year, I feel safer knowing that all of our eggs aren't in that basket.

The drawdown was exasperated by the drawdown of our incomes. My wife has a lull in her business as she changed strategies, and my extra income opportunities at work dried up. As the market corrected, we were unable to add money in any kind of aggressive way. However, both of those states have started to change: I've found new sources for additional work, and my wife's new business strategy is starting to pay off. It's exciting.

Family Disaster Averted

After much Sturm und Drang back in January and February, it appears that PoorParent will stay put. Staying put means staying in an uncomfortable but stable situation with a family member who has health problems.

It's clear that PoorParent isn't thrilled with this, but they also don't appear to be angry at me and Sib.

Honestly, Sib did most of the heavy lifting. I helped Sib define their own boundaries and see how they weren't respecting their own limits and desires. This lack of self-respect led to Sib not respecting my limits. But once Sib understood this, they had the uncomfortable conversation with PoorParent. Thus far, admittedly, I haven't spoken to PoorParent about my worries. They haven't brought it up, and I won't either.

Portfolio Performance

My individual stock portfolio returned 19.91% in the first half. This was mostly led by Greenbrick Partners and Apple Inc. Greenbrick is now a 1 bagger. It's had astounding performance. But so has Apple! Frankly, if there's any greatest mistake I've made while investing, it's selling even one share of Apple, and unfortunately, I've sold many more than one.

The laggard was Abbvie, which is facing increasing competition from Humira biosimilars. I may add more to the position if its price nears my purchase price.

The Wiseguy Portfolio as I've implemented it is hard to measure. Because it's across three different accounts and uses Vanguard "Admiral" funds in addition to ETFs, it means that getting close to the target weights is currently very tricky. Additionally, the iteration of the portfolio I call Wiseguy 2.0, which includes REITs, didn't take place until a few months ago.

An idealized version of the portfolio returned 12.07% in the first half of 2023. That underperformed the S&P 500, which returned 16.81%.

Second Half Financial Goals

As of yesterday, I have maxed out our 2023 IRA contributions. I put the final $2,000 into the US REITs portion because I refuse to hold a REITs ETF in my taxable accounts. Currently, I'm overweight REITs and US large-cap growth and through the rest of the year, I'll be adding to gold and the small cap value buckets in my taxable account.

We're also rebuilding our emergency fund. If we aim for 6 months of spending, then we need around €16,000, which we're not close to. I'm not planning on pulling a Ramsey and devoting every euro to that goal, however, and I will simply be adding monthly sums to it in addition to other saving. That kind of single-minded focus doesn't make sense when I have plenty of assets, and the risk to my livelihood is so low in comparison to the American "at will" employment reality.

That said, having extra cash would be reassuring.

We've also begun a small down payment fund. We're not devoting large sums to it yet, but it's frustrating not having anything saved for a better living situation.

My wife suggested a dog fund. We both want a dog someday, but we're concerned about the cost, so we've begun saving for it.

Wrap Up

I don't see any disasters on the horizon. The stock markets could always take a dive, which would be both a bummer and an opportunity. No matter what, we'll keep saving as best we can without running afoul of our dual tax situation. Until next time, stay healthy and keep saving. It adds up over time!