Financial Samurai Paid up and What We Think Trump Does

Well we recently had the chance to cash in on our Trump bet with Sam from Financial Samurai. He’s a much nicer guy than any of us and we provide some highlights although there wasn’t much to talk about when things are going good across the board. Maybe we’ll find another item to bet on since we still disagree that people are “rational creatures” when we largely view humans as driven 99% by emotion (only 1% figure out how to be rational, hence the disparity in wealth).

Dinner with Sam

Wall Street is in Secular Decline: There is no doubt that Wall Street for now is in secular decline (unless something changes). Billions of dollars (around half of fund flows) are going into passive ETFs with extremely low fees (around 0.09%) and trading is becoming more automated by the second. Since Sam exited the industry total compensation is down around 15-20% give or take since we’ve now witnessed two years in a row of declines. Layoffs occurred across Wall Street last year (unless you’ve been living under a rock you’ve seen the press releases!)

We don’t think this will change since we’re going to roll with what we think the future looks like. Unless you’re in a client facing role where your value is based on relationships (very difficult to automate in the future) then you’re going to see a squeeze. Robotics and computer systems are going to be able to make trades and do basic find replace or data entry type items in the near future. In addition, these systems will be able to process much more information rapidly when new data is presented making maintenance type Wall Street work largely worthless. The value will be in the relationships, strategic thought and naturally a balance sheet for raising funds.

The Game of Lying Down Continues: As we’ve said in the past always lie *down*. This means if you’re making $X or have $X in recurring income always give a number materially below that. There is no point in telling anyone what you make.

Generally speaking, everyone believes they are worth more than you are, some sort of competitive pre-programming, best to just talk about median industry pay since this is easier to confirm as there are many third parties that disclose income ranges (hint hint practically every head hunting firm will give you a range).

We Still Hate San Francisco: The place is a dump and every straight male should avoid the place unless they need to be there for money (temporarily). Sam loves the area but he’s also married and ready to have his first kid. We won’t convince him on this second topic either (first being people are generally irrational). The place looks like a complete dump with needles on the street next to homeless people, actual human feces and absurd rental prices to hang out with guys who have sex with ugly, fat, old, sea donkeys.

The negatives aside it could be a good place to invest given potential for major technology IPOs in the future (Uber and AirBnB for example). Luckily or unluckily, we hate the place so much we’ll never own a piece of that nasty place. Finally, we think there are many places to own property that have similar rental markets to San Francisco, this includes New York and Los Angeles and many other places outside of the USA. We’ll never have to pay for a piece of that trash city.

The Market Rally Post Trump: Predicting the economy is largely a waste of time. But. Two things are clear: 1) people believe trump will help the economy and 2) if the corporate tax rate is lowered business owners will benefit. With that backdrop the answer is clear, we’re still better off investing time and energy building an actual company instead of trying to time the market. If you believe the market is overdone just keep dollar cost averaging but put in *less* on a monthly basis as you spend more on your actual company. A corporate tax rate reduction from the 30s to even 20% will impact you much more over the long-term.

So we are clear, we’re still dollar cost averaging we’re just going to do less since we believe he will likely make some positive US tax reforms.

Interest Rates are Going Up: Rates are going to go up based on commentary from the Fed. This means bond prices are going to come down and it may be smart to review bonds after the next couple of interest rate increases. If you have a large amount of money in the bank that you’ve spent 10+ years to accumulate it may be smarter to decrease the volatility in your portfolio. In addition, if the tax rate were to come down, the value of municipal bonds will decrease materially as well (tax free benefits no longer as meaningful). We think that would also be an interesting opportunity. If we see a decline in the tax rate that isn’t sustainable or believe a new establishment will raise taxes once the Trump term is over… may be time to buy those as well.

Blend Into the Crowd: For day to day living, standing out as being rich doesn’t make any sense. Unless you’re trying to make a good first impression you can simply dress modestly to avoid being harassed by regular people. We have a more lax stance on luxury goods and believe there is a time and place for them (specific occasions). Dressing sharp on days when you’re not meeting anyone new doesn’t make much sense because your buddies shouldn’t care if you’re wearing that bling bling on a day to day basis.

Who Do You Owe? While the topic didn’t come up much, we thought about it after Sam recently disclosed he will be starting a family. We think this is a good time to ask “who should you pay back?” and the first answer is *typically* your family. Remember, we encourage you to cut contact with family members who are holding you down/getting in your way. But, if there is someone who helped you then you should throw some money their way as a thank you. We’ve started a personal list of people who helped us get to where we are and will start helping them in order. Most of these people will be influential when you were young, some won’t even want the money (or ness it) but we’re going to start a tally for the excess money.

No we’re not going to start some charity to try and save the world, we’ll go first to people who were influential or helpful before the success started rolling in. Finally, if you’re not financially independent these types of bigger moves can wait. If you’re growing your income rapidly then you will add the most value to those around you by investing in yourself.

*In short, Sam is a great guy and is much nicer than any of us ever will be. We still disagree on two things 1) that people are rational (we don’t think so) and 2) that San Francisco is a great city (we hate the place more than we hate fat people… that’s a lot of hate).*

What Trump Will and Won’t Do:

Hard to put this into discussion topics so we’ll put it in bullets (Wall Street Playboys opinion not Sam):

– America First: He will prioritize American companies in a big way particularly with a potential import or border tax. This is clear based on the announcements from major car manufacturers who have talked to the future president. We go with actions and signs are pointing to bringing manufacturing back to the United States.
Taxes: Personal income taxes and business taxes will be adjusted. We really doubt we see a 15% corporate tax rate and also doubt the current tax plan which raises taxes on the middle class will go through. Instead we think there will be a smaller adjustment to personal income taxes where the brackets are moved to give breaks to middle class earners and we think a tax rate in the 20s makes more logical sense for corporations.
Media Decline: He will continue to damage the media. We think this is becoming clearer and clearer as well given that he seems to prefer social media and tweets over interviews. This is unlikely to change. Expect material negative changes to media add buying patterns and the future of marketing in general. Long-story short, media will continue to be in pain for the foreseeable future.
Immigration: Illegal immigration reform will happen. We again do not know exactly how this will be done, either a tax on Mexico to cripple their economy until something is done with the illegal immigration problem. He will likely build the wall, we put a high probability on that given it would psychologically lock in a second term for him. While we already made a killing off of Mexico and the decline is likely already priced in now, we don’t see Mexico as a good investment at this time (best to avoid instead of shorting now that it has come down some 20% since the day before the election)
Energy: It is hard to see how he’ll adjust the system to take away from clean energy type companies so we’d suggesting looking into oil and gas companies exposed to the USA. Meaning, we wouldn’t try to play this idea (move away from clean energy) by investing in offshore companies given the potential taxes foreign companies will pay. We have a basic overview of the Oil and Gas sector and would look at American Based companies that fit into where you believe oil prices will go.
Health Care: This is another convoluted topic and we think this is much more complex than “repeal Obamacare” while it sounds nice to say it from a marketing perspective (gathering republican support who hate liberals) the actual action will be different. We think it will take some time to come up with a better solution or to find a way to outright repeal Obama Care. We’ll see what happens but think this one is the hardest to profit off of since we won’t know who really benefits in an outsized way.

Focusing on You: As always we suggest all readers focus on what they can control. This means we would first focus on building a business since this would benefit you the most long-term even if taxes don’t come down (taxes decreasing is just another reason to do so. After that we would review a financial portfolio and decide if you want to adjust your exposure based on his clear America First prioritization, recent auto manufacturing announcements and of course hatred of the Media.

Comments

  1. The Ripper says

    Wonderful analysis of the potential consequences of Trump’s presidency. No questions, but in case you wanna make it clear around what time can we expect the book?

  2. pops says

    I get lying down.but what if you won a public jackpot that people in your peer group all saw? What do you do then? I recently won a public thing that put my name in websites, the local paper and in the associated press? What are my options then?

    • Wall Street Playboys says

      This is hilarious so we’re letting it stand.

      If it’s a big amount of money you should just make up some nonsense: “I am so glad I got that because my health was bad and blah blah or my family member was struggling blah blah” then just dress down for awhile and let it blow over as people forget and aren’t jealous.

      • Michael says

        Id also suggest moving. If you’re in an area where people regularly play the lotto, they’ll never stop beating your door down for money. Move someplace where you are not top of the heap.

  3. Unsure says

    Hey, I’ve just discovered your site, and am impressed by your no nonsense advice.

    I’m 24 years old. I have a History degree from the University of Manchester. I’ve worked for 3 years as a History teacher abroad. I was planning on going to Law school, but I’m doubtful about that now. I was looking at working in something to do with marketing and sales as I think these will be more transferable to a future business and entrepreneurship.

    I’m unsure about what my next step should be. A lot of your advice focuses on working in banking, and learning some finance courses whilst at university. Should I:

    -Get a post-graduate degree in Marketing or an MBA.
    -Get a job at a bank in marketing, or an alternative field.
    -What position should I go for at Bank with a History degree.
    -Get a job at digital marketing job at a company.

    I’m currently learning digital marketing on the side (Udemy), and am reading some books on copy writing and sales.

    Your advice would be greatly appreciated.

    • 8==D says

      They literally say in the article that they don’t want questions (because they’ve answered every conceivable question already).

      I’m sure that ~awesome~ reading comprehension will net you a solid job :^)

    • Wall Street Playboys says

      No questions… we do Q&As from time to time on twitter with our subscribers

      We’re leaving this long comment so nice readers can decide if they want to link to older articles which answer all of this stuff already.

    • Axl says

      Read from this site:

      1. “$1m, 10 years, no excuses
      2. Money Making Machine
      3. Friends
      4. Follow your skills, not your dreams
      5. Efficiency

      Also:

      5. Ludvig Sunstroms blog
      6. The Unchained Man by Caleb Jones and his blogs
      7. Scott Adams’s book “How to fail at life and Still Win Big”
      8. The Slight Edge by Jeff Olson

      Then get to work

      • LKY West says

        I recommend TUCS from ludvig, it’s a great book that’s replicable to everything in life – Uber organization

    • Cernocheck says

      WSP do not comment on things outside the United States.

      It may be tough for you to land a grad job in banking in the City. I would perhaps target off-cycle internships. See how that goes. If you really want to do banking, maybe do a Master’s at a Target school (LSE, Warwick, UCL, Oxbridge, Imperial) and keep on applying. You have to consider the monetary and time costs of this.

    • Krael says

      I also have a History degree and spent/wasted time as a teacher and in stupid further education.

      Some Important points:

      1. Nobody gives a shit about a history degree. In fact you will be perceived as overqualified for basic jobs you desperately want and you will be tossed immediately from jobs that need any actual degree.

      2. Do NOT waste your time getting another degree. It is fucking pointless and huge waste of time & money.

      3. Get a job in Sales. Personally I spent two years in debt collecting threathening people to pay their electricity bill and then levered my “telephone skills” into an Inside Sales job.

      Afterwards you have plently options to do whatever you want wherever you want it as long as you become a stellar salesperson.

    • says

      Remember always focus on scale, not penny pinching. Get a day job and a side hustle at night. Save half your money, and invest in a scalable business. Exactly what I did and my net worth is 900K I will hit a million this year. I’m 35.

  4. Playing Catch Up says

    Love the site but it would be good if you guys got back to the focusing on you self-improvement version that used to exist for the site. I miss the days you guys put up an age range and talked about where to be at each phase of life to see whether or not you were successful or doing well.

    Just looking around I see so much bad advice out there throughout the web such as “you’ll change careers many times in your life” or “employers don’t really care that much about grades”.

    The post you guys did on the 20s was great and your material about life in a person’s 20s in general has been your best stuff, outside of Wall Street information IMO.

    Not sure what direction this blog is heading in now but it would be good to hear more contemporary advice from you guys and what you would say to a lot of younger men out there in the modern economy.

    BTW, with sales being so big, it seems like grades might not be AS important since most sales roles I see don’t care all that much about GPA.

  5. Anon says

    An Appeal to Logos (Specifically: Wealth) for WSP

    or

    Why FinancialSamurai Bothers with Children and You Should Too:

    I understand the urge to not have children with the modern woman. Third Wave Feminism has destroyed the natural, complementary, and dualistic relationship between man and woman, the masculine and the feminine, that has existed for thousands and thousands of years. Divorce courts can and do strangle the average husband (with or without children). Yet civilization is built upon those who care for the future and the future of their friends and family. Civilization is inherently a group effort. Rampant individualism will destroy it, as it has done throughout history. Instead of simply checking out of the system, I’m begging you to use your influence and connections in an attempt to improve the system. You’re clearly more capable than the average citizen (based on your articles, which I try and apply daily to my life. Thank you!). Use your genetic advantages not just to enrich yourself, but to build a stable society. Without a stable society, you have no guarantee that your hard-won wealth can be protected. Instability will lower the worth of your dollar and expose you to the risk of some asshole stealing your capital or causing you personal injury (which is arguably worse: Health>Wealth). And outside Singapore, Hong Kong, Tokyo, Abu Dhabi, Buenos Aires, Ciudad de Panamá, and a few other adult playgrounds, there aren’t many places to run to if Western Civilization collapses. Please, please use your greater work-ethic and intelligence to make a difference.

    “The price good men pay for indifference to public affairs is to be ruled by evil men.” – Plato

    Thank you and best of luck in all of your future endeavors.

    – Anon

  6. says

    I’m glad I settled my debt!

    Let’s hope the bull market continues this year and things don’t fall apart.

    I am much more defense of this year and buying municipal bonds given the gross yield is much higher than my mortgage. It feels like I’m living for free.

    The best thing we can do to build our wealth as to control what we can control.

    Sam

  7. Natural Gas Analyst - Houston says

    Been extremely busy lately, but have been catching up on your articles during down time over the past few weeks.

    Great article here, interesting insight on helping out those who have helped you in the past. I began doing a little bit of this myself this year.

    Always good to return value to those who have created value in your life!

    Cheers.

  8. Michael says

    Not so sure about the thoughts on Mexico. My thinking is that if the Mexican economy was doing worse, the USA would see more illegal immigrants coming over to seek a better life. Improving the Mexican economy would give Mexicans less of a reason to come illegally.

    Building a wall would probably increase the number in the US since it would be harder for the illegals already in the country to get back in if they ever left (circular flow)

  9. JK Simmons says

    The running joke it that SF is full of 49ers, 4’s that act like 9’s.

    As someone who interned in SF, I can say you’re right on the money that it’s a shit hole. Avoid it all costs, especially if you’re a straight single man. Awful rent, shitty city environment (needles everywhere, tons of homeless), and nothing but male techies for miles around. If you’re a woman, you’ll hate the pickings. If you’re a man, there won’t be any pickings.

  10. BSD says

    Have to caveat your media comment – I think traditional media (print, TV) will definitely suffer and ad buying there will go down. But I think social media will benefit from this trend – more ad buying there as more people turn towards those platforms for news.

  11. says

    Worked at Google for 3.5 years, agree with SF 49er comment above.

    As for sea monkeys, well I think sea monkeys are actually kind of cute, unlike most girls in the bay. And the 8s in the bay think they’re 10s lol.

    If you’re in the bay area, I did find a hack which was au pairs – hot european girls baby sitting for rich (usually white) families – there is a lot of wealth in the bay and they come for 1-2 years

    Source: I dated a French au pair

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