📓 Your Doomsday Money Planning Guide

What’s on the Menu 🍴

Are you prepared if things go… south?

Every smart investor looks at what can go right…

And what can go wrong.

Today we’re helping you look at both sides of the coin!

• Are These The Most Hated Stocks In The World? 😒

• Doomsday Money Planning: An Odd Pathway To Peace Of Mind 📓

• Millennial Homeownership Dreams vs Boomer Reality 🏡

Today’s newsletter is a 5 minute read.

Are These The Most Hated
Stocks In The World😒

While many global stock markets rallied in 2023, one country stood out as a big exception: China.

Both the Chinese and Hong Kong stock markets fell last year despite positive returns nearly everywhere else:

While there was optimism about China’a long awaited post-Covid reopening at the beginning of last year, reality did not meet expectations.

Unfortunately for investors in Chinese stocks, the pain has continued through the first three weeks of 2024.

Nowhere is this more evident than in the large Chinese tech stocks such as Alibaba (ticker: BABA), Baidu (ticker: BIDU), and JD (ticker: JD) which trade on US exchanges.

The Chinese tech giants have VASTLY underperformed their US counterparts in the past year:

Today the median forward price-to-earnings (P/E) ratio of the “magnificent 7” US tech stocks sits at 29.3X, while BABA, BIDU, and JD all trade for under 10X forward earnings!

Why is there such a valuation disparity? And could this lead to an investing opportunity?

A number of reasons have been given for Chinese stock underperformance, including:

• Geopolitical tensions between the US & China

• Regulatory fines & crackdowns by the Chinese government on their own companies

• Economic slowdown in China

• Fallout from bad investments in the property sector

• Increased scrutiny on IPOs by regulators

• Uncertainty created by Chinese “VIE” company structures

• Poor investor sentiment

These probably all played some role, and US investors are particularly sensitive to the risks of holding foreign stocks after Russian ADRs were delisted in the wake of the Ukraine war.

But here at the Daily Dough we also like to think about the contrarian viewpoint…

What if sentiment around these Chinese stocks begins to improve?

There’s certainly A LOT of potential relative value in these stocks, and after bottoming they could potentially rocket higher very quickly.

It’s also worth noting that several of the Chinese tech companies are now buying back stock AND paying dividends.

The Chinese economy has shown some signs of improvement recently, and the government has been signaling that it will support their stock market.

Despite some “green shoots”, headlines about the Chinese economy continue to be uniformly negative in Western financial media.

The continued woes in the Chinese property sector certainly aren’t helping.

But we think the conditions are forming for a very profitable contrarian trade.

As always we must be mindful of 1) timing given the many false bottoms and 2) position sizing given the unique risks of Chinese stocks.

Will this turn out to be one of those “the herd was wrong and it’s obvious in hindsight” wins?

Let us know what you think!

Doomsday Money Planning:
An Odd Pathway To Peace Of Mind 📓

Most of the time, we’re money planning for our future with the most positive of thoughts.

We’re thinking through how to invest more money so that we can live the life of our dreams.

But, there’s an interesting angle that can work for many people for max peace of mind: “DOOMSDAY money planning”.

Many people who actually have a lot of wealth or are doing well with their money, have a lot of anxiety around it. No matter how well they’re doing, they feel like they don’t have enough.

But, doomsday planning works across wealth spectrums and money attitudes.

The main idea is to think through the worse case financial scenario you could end up in, and problem solve how you can get through it.

You don’t want to be scratching your head on what to do in real time if a worst case scenario comes.

Here are thoughts on how to approach doomsday money planning based on where you are in your wealth building journey:

1. For high-net worth individuals: Many here have paid off homes (leading to more peace of mind if they needed it). They traditionally also have assets that they can pull from while working towards a new project or business.

   Most of the time in this cohort, pulling back on lifestyle expenses and living off of assets can work. It depends on what the withdrawal rate is from a portfolio, but typically, they have hit enough investable assets to truly be okay with some tweaks in spending.

   The problem is, many wealthy individuals don’t THINK they’re going to be okay. They’re constantly worried even though they can technically hunker down and live off of their assets if they really needed to. So, seeing it modeled that a simpler lifestyle could be funded, is helpful to put worries at rest.

2. Individuals in the accumulation stage: Many people live in this category. They’re not high-net worth individuals yet, but, they’ve got assets that they’ve accumulated (and will be here a while longer).

   The doomsday scenario solver here could be to plan paying off a home with existing assets to have more peace of mind. Paying off a home may or may not be the best use of cash and it really needs a thorough analysis, but it’s an option. Individuals in this category typically have an emergency fund in place to live off of if needed (or at least they should).

   Thinking through a doomsday scenario will help you make sure you have ENOUGH in your emergency fund. This is key and what will sustain someone in the accumulation stage. You also want this money to be liquid so that you don’t have to sell investable assets at the wrong time.

   Some people may even have enough equity in their homes to be able to sell, and then go live with family temporarily. The good news is, plan for the worst while things are good so that you don’t have to end up in a situation that isn’t ideal (maybe living with family isn’t an option).

3. Individuals starting their wealth building journey: Not having a lot of assets can feel daunting. However, you can still doomsday plan. People in this category are likely still paying off debts and saving their emergency fund.

   Planning for worst case scenarios here could be getting a roommate to help cover housing costs, or even going to live with a friend or family. Think through your professional skills. If you have skills to be very employable or have the ability to start a side hustle, this can help keep your mind at ease. Human capital is an asset, don’t forget that.

As odd as it may feel to think about worst case scenarios while your doing just fine in life, it’s an essential step for many people.

Knowing that you’ve planned for all angles will help you know what to do with your next dollar as well.

Reading this may have led you to realize you don’t have enough in your emergency savings account, or that you actually DO have a lot of equity in your home in a worse case scenario if you had to sell.

Maybe you have a wonderful family home you can always go back to temporarily.

Little things like this can simply help you sleep better at night, and feel better about continuing your wealth building journey!

Want to build more wealth? Check out our Wealth Building Community. You’ll get access to the Wealth Master Plan Training Program, which will help guide you through how to optimize your investing portfolio, save on taxes, plan for your family, and more!

Millennial Homeownership
Dreams vs Boomer Reality 🏡

In the ever-twisting saga of the housing market, a new report sheds light on a crucial issue:

Boomers aren’t letting go of their family-sized nests, leaving younger generations flapping in the wind when it comes to buying a home.

This trend is not just about personal preference; it's a snapshot of a broader economic turbulence.

Here's the deal: Boomers own a whopping 28% of large homes, leaving Millennials and Gen Z in the dust with a measly 14% and 0.3%, respectively.

"Boomers love their homes”, says Redfin's Sheharyar Bokhari, pinpointing the heart of the issue.

But there's more to this story than just attachment.

• Some argue it’s not about Boomers hogging real estate. Instead, it's the byproduct of cheap money and ballooning government deficits since 2000, pushing asset prices sky-high.

• Others offer a more familial angle: Boomer parents are holding onto their spacious homes as a safety net for their offspring, who are getting squeezed out of the rental and buying markets.

• Then there's the healthcare angle. With us living longer yet needing more care, long-term care institutions are eyeing these properties.

• But it's not all about economics and health. Some Boomers, especially the wealthier ones, have turned their homes into time capsules. In South Florida, for instance, it's not uncommon to find vast, lonely mansions, where rooms remain untouched since the '90s, and entire floors are abandoned.

So, what’s the bottom line?

It's a mix.

Older folks might be holding onto large homes partly because they've heard the economic doomsday clock ticking for their kids.

The narrative of “move back in with your folks” is more than just talk; it's becoming a real estate reality.

Delicious Bites 😋

• Bitcoin ETFs top 3X daily volume of all 500 ETFs launched in 2023 combined

• The EU is about to outlaw and restrict some of the most prized features in crypto

  

Food For Thought 🧠

"When everything seems to be going against you,
remember that the airplane takes off against the wind, not with it.”
- Henry Ford

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.