What’s on the Menu 🍴

The stock market has been getting hammered, and the US government is on the brink of shutting down… again.

So how can we protect (and grow) our dough in a world that’s filled with political divides and panic?

Today we dive into some arbitrage strategies, and take a look at what’s happening so you stay in the know!

• Live Better for Less with Geoarbitrage 💸

• Looming Government Shutdown: Major Risk or Nothing Burger? 🍔

• What Could Cause A Resilient Stock Market? 📈

• Is the Stock Market Finally Unraveling? 📺

Today’s newsletter is a 5 minute read.

Live Better for Less with Geoarbitrage 💸

Costs of living soaring faster than SpaceX rockets…

And some parts of the world feeling as divided as a high school cafeteria.

So many folks are playing a global game of Monopoly to get the upper hand.

Geoarbitrage could be your express lane on the road to financial prosperity.

Imagine sipping inexpensive cocktails in Bali while your bank account fattens up in US dollars.

It's about earning in a strong currency and stretching those dollars in a local currency…

Where life is cheaper, but the Mai Tais still taste as sweet.

Think of it like this: you're not just saving on housing and healthcare; you're also upgrading your quality of life.

Less crime, more culture, better company, and oh—the food!

Say goodbye to your low-quality, expensive grocery store sushi; hello, authentic ramen bowls in Tokyo.

Now, for my fellow Americans, geoarbitrage comes with varying intensity levels:

• Level 1: Move to a lower tax state - Trade in your Silicon Valley studio for a Texas ranch.

• Level 2: Leverage Puerto Rica’s tax breaks - give your income a sultry salsa twist with a super-low income tax.

• Level 3: Live overseas and get the foreign earned income exclusion - your earnings up to $108,700 are tax-free if you reside outside the U.S. for 330 days a year.

• Level 4: Move your wealth overseas - Buy land and stocks in emerging markets.

• Level 5: The drastic renouncement of citizenship - It's the nuclear option for tax elimination.

Geoarbitrage offers varying levels of freedom, but it isn't a one-size-fits-all sombrero.

Weigh the pros and cons, and pick your level.

Over the past 15 years, I’ve saved hundreds of thousands of dollars (and increased my quality of life) by spending time in Asia, South America, and Europe.

Before you pack your bags, ask yourself: "Am I willing to trade my current reality for a new zip code or even a new passport?"

Your move, globetrotter.

The Looming Government Shutdown: Major Risk or Nothing Burger? 🍔

The US federal government is once again on the verge of temporarily shutting down most of its departments due to disagreements over the federal budget.

The government’s current fiscal year ends September 30th, and without an approved budget for the next fiscal year in place, many agencies will be forced to suspend their normal activity.

This could mean delayed regulatory approvals, furloughed national guard members, air travel delays, reduced food stamp assistance, and a backlog at the IRS.

Ugh. 🙄

This saga is similar to the debt ceiling issue we just witnessed in late May / early June, but with a different root cause.

In this case the cause is Congress not agreeing on spending allocations for the coming year, rather than the need to raise the borrowing limit to accommodate existing spending plans.

Just like the debt ceiling crises though, we’ve experienced government shutdowns in the past, so we have some idea of the risks they pose and how they will likely play out.

The good news? Most shutdowns in the past have lasted less than three weeks.

The longest government shutdown (2019 during the Trump presidency) lasted 34 days and cut GDP by roughly 0.2% according to the Congressional Budget Office.

So if history is any guide, this impending shutdown should be brief and have a relatively muted impact on the economy as a whole.

Federal workers will of course feel the pain more acutely.

The main issue in our opinion is that the timing of this shutdown is terrible.

We’re in the midst of a stock market correction, high interest rates, and rising concern about the overall economy.

The last thing consumers & businesses need right now is more uncertainty!

The economy and financial markets are more vulnerable to any incremental bad news, so the hope is that this shutdown gets resolved quickly.

Ultimately we think this shutdown will be yet another silly political spectacle that gets quickly put in the market’s rear view mirror.

But if the shutdown drags out longer than expected through October, watch out below!

What Could Cause A Resilient Stock Market? 📈

As the S&P 500 continues its selloff, it has a lot of investors wondering what to do.

Between higher bond yields, perky oil prices and wage increases threatening inflation, stock investors have a lot to be worried about.

Even the fear/greed index is reflecting the sentiment:

The funny part is among all of the fear, the S&P 500 is still UP 12% year to date.

So why is everyone feeling so down when things based on price returns aren’t … bad?

Obviously, the market is forward looking, and is taking recession fears into account, but, we always like to think about the contrarian side here at the Daily Dough.

So, what could actually cause the stock market to show resilience and stay elevated (keeping some gains)?

People often forget in the chaos that the stock market is backed by corporate earnings.

And, right now, earnings are STILL expected to grow.

This alone could bring demand for stocks.

Just take a look at earnings historically, and what is expected in 2023, 2024 and 2025.

We’re talking consistent, smooth growth after an earnings recession in 2022.

(May we also note how beautiful this earnings trend is historically? It’s a great visual case to own stocks.)

If we put a price to earnings multiple on estimated 2024 earnings (call it a flat $250 earnings per share), we’re sitting at a 17.2x PE right now for the S&P 500.

For reference, the 25 year average is a 16.7x PE.

So, it’s plausible that if earnings stay on track, it could put a bid on this market that is stronger than expected.

Aka: we don’t see the deep crash that everyone is expecting.

This can change if we do in fact see a large shift in consumer behavior. This is the big “what-if”.

But the flip side is the consumer could stay afloat better than expected when looking at things like home equity, mutual fund assets, and checkable deposits.

The contrarian view may not play out, but, it’d be silly to ignore it as a possibility.

We Talk Money
Is the Stock Market Finally Unraveling? 📺

Inflation is ticking back up... Rates are blasting off... And stocks are pulling back hard.

In this week’s We Talk Money episode, we’re diving into the data to see what we're expecting throughout the end of the year!

Food For Thought 🧠

"No man is free who is not master of himself.”
- Epictetus

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.