Our Financial Situation As Of 4/1/2018

It’s time once again for everybody’s favorite daytime fun-show, “Early Retirement Dude Prattles About His Money!” (Cue audience applause.)

But I never watch daytime TV, or nighttime for that matter, so let’s get past the numbers and move on to more important subjects…like, say, why the foolishness of a vendetta against the biggest e-commerce/cloud company in the entire world is hurting every investor in the United States and driving me straight to The Bottle.

OK, quickly:

When I first started discussing my family’s finances in June of last year, we were operating in a much less volatile economic environment. (See my article entitled “When Markets Are Scary, Look to the VIX.”) Even still, in those nine months the paper value of our investments has gone from $1,924,995 to $2,208,430, for a percentage increase of roughly 5.4%.

This looks a far damn cry from the ~10.6% dividend-reinvested S&P return since then, but you have to bear in mind two things:

  1. As retirees we shoot for a 4% withdrawal goal, which sandbags our results.
  2. We don’t reinvest dividends because we need positive cash flow. (See “I Have a Big-Ass Tax Problem”  and “A Simple Modeling Mistake That Can Delay Your Retirement By Years”.)

So there you have it. Despite the current market turmoil, nothing in our financial situation has really changed.

Except for one thing: Amazon.


Fair warning…here be politics.

In 2012 and again in 2014 I bought a total of 70 shares of Amazon at a split-adjusted cost of $227.57. At yesterday’s Trump-adjusted price1 of $1,392.05, you can see that we’re up $81.5K.

That number’s not nearly as high as it was five days ago, though, when Trump started tweeting about how AMZN is the bastard of all evil. Since we’re off twelve grand on those seventy shares which…well, here’s the kicker.

In theory the Tax Cuts and Jobs Act of 2017 will slice $1,600 off the average household’s tax bill.2 Which is good, to be sure, but my God…I wish people would remember there’s a bigger ball on the field.

We’re in a retirement crisis, yes? Everybody’s expected to self-finance, yet nobody’s saving enough money to do so. So that $33 a week ($1.6K/52) is a boon, however small, to anybody with the ability/intention/discipline to sock it away…especially in a down market when you’re dollar-cost averaging…but how much use is $33 a week when a presidential administration’s shoot-from-the-hip economic policies are systemically driving down long-term employment and stock prospects? Especially when you’re a sixty-seven year-old Baby Boomer with, like, a total of $200K in savings? On a straight mathematical basis, a $1.6K tax cut per year won’t offset a $12K market loss for another 7.5 years.

But that’s why investing for the long haul is so important.

Maybe I’m just talking my book, here, but I gotta admit that I buy into the theory that Trump is, ah, disseminating misinformation about Amazon in order to hit back at Bezos over the Washington Post’s coverage of his presidency…and if there’s a reason that’s closer to the truth, I’m frigged if I can figure it out. Amazon doesn’t even OWN the Post. Bezos does! So why punish Amazon investors?

Assertion: Amazon pays no taxes

Man…remember during the campaign when Trump said paying zero in taxes makes him smart? Bezos’s must be a second-rate brain, then, because Amazon did in fact pay $957 million in combined federal, state, local, and foreign taxes last year.3

Assertion: Amazon is a monopoly

Nope, not even close. Amazon clearly has a large effect on the retail business in this country, but Walmart? And I’ve seen analyst estimates that:

…total U.S. retail and food services sales last year [2016] were over $5.5 trillion. Amazon’s $135 billion accounted for a measly 2% of that.4

Assertion: Amazon costs the USPS billions in lost profits every year.

The Postal Regulatory Service—an independent oversight organization—has consistently found USPS contracts with AMZN and other parcel-based companies to be profitable. The biggest drain on the USPS is retiree healthcare and pensions thanks to a 2006 law (Bush administration) that requires it to pre-fund seventy-five years of these costs. 5

Amazon may in fact benefit from an inefficient government price structure—i.e., the USPS is clearly leaving money on the table when it comes to package delivery—but why is that Amazon’s problem to fix? Would you approach Walmart management and say, hey, I buy a lot of deli cheese from you because it’s way too cheap for the for the quality you’re selling…how about raising its price right here and now?

And Trump’s tweet about the Post being a lobbyist that should register…oh my God, from a guy who reportedly formulates policy from watching Fox News all day, it’s just too much.

So, yeah, this disinformation is hurting every small-time investor in the US, including you. As of February 21st:

“The online retail giant has accounted for 27% of the S&P 500’s gains this year…” 6

Well…war between governments and corporations is nothing new, I suppose, but this one seems straight out of a dystopian sci-fi novel. Neal Stephenson, I think, because it reads like satire.

Thanks as usual for reading. Article coming soon about FIRE and a mother’s unconditional love. Deeply personal and hopefully resonant. Peace out.

Footnotes

  1. And come to think of it, why isn’t that a formal broad stock market indicator? There oughtta be a trade around it. Some sort of random volatility derivative…calls and puts on Trump’s golf score plus the Mar a Lago gate receipts divided by the width of Melania’s frown expressed in statute miles. I’ll have to think about it.
  2. Source.
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Author: ER Dude

Sick of your job? After a thirteen-year career, Early Retirement Dude fled corporate America for good. You can do it too! Visit http://EarlyRetirementDude.com or email EarlyRetirementDude@gmail.com.

5 thoughts

  1. I believe Amazon will be fine in the long. I thought most of the downturn in the S&P 500 was from Trump fighting with China I had no idea 27% gain this year were related to Amazon.

  2. Hmm, so what’s your actual rate of return in the last nine months? Including the money that you took out to live on?

    Because you’re not comparing apples to apples if you compare dividend-reinvested S&P return with your return if you don’t look at how much extra money you put in (the Beardstown Ladies) or how much money you took out (you).

  3. Dear ER Dude,

    Thank you for your transparency and showing actual numbers. I believe this will help all current and future FIREs.

    Just a couple of questions, what year did you retire and how many children do you have?

    Keep up the great blog and I look forward to your next post.

    Semper FI,
    Luis

    1. Hi there. Thanks! Always great to hear from a Marine.

      >what year did you retire and how many children do you have?

      Retired in 2005 and have one kid, a wonderful daughter who’s about to turn thirteen. Have any yourself?

      1. ER Dude, I have four adorable little monsters under the age of seven and one in heaven. Currently, my wife is stressed that there could be another blessing on the way. We’ll know in a couple of weeks.

        I’m now in the Reserves and good to see you picked up on the “semper fidelis.” When I corresponded with JL Collins, I used Semper FI (Marines use “Semper Fi”) since I’m both a Marine and attained Financial Independence, FI.

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