Find the Time

Tyler Linsten Personal Finance

Considering we have the 4th of July holiday coming up, you might find yourself with some free time. Maybe it’s an hour or an entire day. Either way, there are certain “financial hygiene” tasks only you can tackle and you should do them at least yearly. I wanted to find a way to write a similar post for a while now, but The New York Times beat me to it. It’s so good — simple, actionable, and quick to digest.

(I’ll add that checking your Social Security estimates and verifying your earnings history at is another very quick task that should be completed yearly)

This will motivate me to write my own version, but Ron Lieber at NYT has presented a great take on a topic of which most people struggle to find a starting point.

Find the time!

Fine, Let’s Talk About Trump

Tyler Linsten Investing

The embargo ends.

I’ve avoided him on this blog for the most part, but Donald J. Trump is the 800-pound gorilla in the room universe right now. There’s no sense in being “apolitical” if politics are at the forefront of what’s making markets and to a certain extent, humanity, move right now (whether forward or backward). Thankfully, my point you’ll discover here is one of optimism so no matter who you support I believe the conclusion is something to think about.


Let me be crystal clear: I believe Trump as President is a negative development for mankind. I see no reason to believe anything Donald Trump has said or done is going to be materially helpful at moving America (or the world) forward, let alone your investment portfolio.

Fact: The reason any investment portfolio has steadily grown over past years/decades/centuries is that the world continued to move forward economically and socially. Long-term investors count on the slow churn of higher GDP, increased standards of living and extended longevity, which allow the noise of news and behavioral impulses to be ignored because asset prices continue to increase. Free trade and immigration, among other institutions — key drivers of economic growth — are currently under attack, bringing into question the sustainability of the economic tailwind we’ve enjoyed for centuries. That’s pretty bad.  


The good news: There’s a silver lining.

Put the “fate of humanity” topic aside – the big question in the financial world has been, “if Trump is so bad, why have markets gone up and not imploded?” The answer is two-pronged.

First, checks and balances have provided a baseline stability. It may be that the Constitution was handed down by an alien existence far more advanced than we are, because it’s so perfect. The power of the Presidency is held in check and no single branch of government can easily tank the country. No matter how sinister a single President’s gameplan, or how evil his alleged foreign captors may be, the Constitution provides for a way out. Has there ever been a more important document ever drafted? I don’t think so.

Second, the big reason markets haven’t imploded: Discounted cash flows. Yes, I heard you say “WTF?” from here. Seriously, though, we only need to go to Finance 101 to come to this conclusion. Hang with me on this one. The key takeaway: Markets steadily rising after Election Day make sense when using second-level thinking instead of the “Trump bad, market go down” first-level (shallow) reaction.

Markets are collectively smarter than you or I, and their wisdom is usually realized after the fact. Sometimes they slowly digest and gradually adjust to news and developments within the economy. The simple conclusion I have reached is that markets are pricing in the fact, realized on November 8th, 2016, that somebody other than a bought-and-paid-for, lifelong politician can ascend to the Presidency, which far outweighs the near-term negativity from Trump’s reign as President. The better-than-previously-expected future is more than offsetting the present downside, or, put differently: Markets think this “More Future Outsiders as President” factor is more valuable than whatever damage is expected to be caused in the next four years of Trump.

The bedrock formula in investing says that the price of a security (or stock market) is simply the sum of the present value of future cash flows. This means that the primary driver of today’s prices is the future. Cash flows coming in the near future are valuable to pricing the current value of a security, but the vast majority of what moves the needle is all of the things expected to happen in the medium- to long-term. This is why individual stocks are so concerned with updated earnings outlooks and future growth. For instance, Tesla Inc. has no profits today, but its shares have massive value because expectations for the future are very high.

Apply this concept to the economy as a whole and you’ll see my point. It’s not Donald Trump, per se, that moved the market higher, it was the adjustment required to price in the fact that the status quo had been changed: Our President doesn’t have to rise to power from the cesspool that is modern politics. The cash flows of the future economy (and thus stock market) are now expected to be higher because there is the heightened probability of a competent outsider being elected, one who presumably changes the status quo.

It’s important to state this is only my theory. I simply believe when it comes to future economic growth, money cannot control elections and public policy forever and any development suggesting an increased probability this might be reversed will see positive reactions. I believe we’re seeing this right now. The candidate pool for President just got a whole lot larger, which is a net positive to you, me and our portfolios.

There you have it. In conclusion: Trump — bad. Outsider Presidents in the future — very good.

Christmas in May

Tyler Linsten Investing, Personal Finance

Well, technically it was in April, but we can still celebrate the good news this month. 

Vanguard is at it again, quickly following up Christmas in February. They have announced another round of cuts to expense ratios and shareholders win again. Here’s a look at the new rates for this round, there’s a good chance you own a handful of these if you’re a client:


Mr. Money’s Misguided Mustache

Tyler Linsten Investing, Personal Finance

A few weeks ago, the unofficial king of the do-it-yourself, financial-independence/retire-early investing crowd, Pete Adeney, AKA Mr. Money Mustache, updated his post on his Lending Club “experiment.”

I’ve been a vocal critic of Pete’s because I feel the influence he commands with his blog has led him to be a bit slimy. Long story short, Pete sets up affiliate marketing relationships with the products he recommends and in turn he makes a shitload of money from his blog ($400,000 per year) when people sign up for these products or view ads. My beef with him got started after Lending Club was revealed to have acted to defraud its investors (they lied about the loans they sold to institutional investors and also had disclosure issues regarding loans purchased by the CEO’s family) but Pete kept on recommending Lending Club and he kept on raking in the dough from his referrals.

As a certain someone might say in a tweet: “Not very nice!” I think he has a responsibility – regulated advisor or not – to behave better than this.

Here’s a blurb on why Pete is only just now deciding to ditch Lending Club:

You can read the post, but in short Pete saw his account value go down slightly (about 1%!) so he’s sounding the alarm and ditching the account. OK…? Given his reluctance to tell his followers to sell after “alleged” fraudulent activity(!) at Lending Club, it was already safe to say that if you’re getting your financial advice from internet blog posts created by a hobbyist with massive conflicts of interest, you might want to change your mind and diversify your advice sources. This update further proves my point.

But it’s a little worse.

Here’s further proof Pete just doesn’t really get what it’s like to own a portfolio of loans (the “fixed” part is only fixed until somebody decides not to pay), even if there is broad-based diversification:

The balance dropped! Oh no. With regard to fluctuation, “interest bearing loans aren’t supposed to do this” is an unbelievably naive statement. Fixed income products have to be repriced when interest rates (and other factors) change, otherwise arbitrage opportunities are available. The idea that Lending Club provides a simple “set it and forget it” super stable money making machine is just not accurate. (There is a secondary market for these loans and I suspect many investors are in for a shock if they attempt to liquidate early, as we’ll see below)

It’s one thing to say “well, I don’t want to face any losses so I’m cutting and running,” but that isn’t what Pete is doing. He’s implying that something is wrong with the way these loans are working and that’s just not the case. Delinquencies are rising and his balances should naturally take a hit. That’s not hard to understand. Interest rates, in general, are up, which naturally puts pressure on fixed income products, too.

Allan Roth wrote a great article featured at CBS News, and this passage might help:

In summary, rising delinquencies – as Pete has experienced – bring a delayed hit to Lending Club account balances since they’re not “marked to market” until they’re officially dead. Pete’s portfolio is now seeing those defaults, he thinks the system is broken (or something?), and it’s also a bit of another knock on Lending Club for promoting a snazzy, continuously updated rate of return when in reality some of the underlying loans are effectively zombies and negative returns could be just around the corner.

So what’s the deal, Pete?

The “losses” shown are basically a 1% downtick in account value. Not to defend Lending Club, but I’d love to know how this is any different than an emotional investor selling at the first sign of a paper loss. Or is there something more to the updated opinion? Unfortunately, Pete is not just a regular investor dinking around with alternative assets. He’s an influencer with a massive, money-minting megaphone and he’s dangerous to his readers. He should have backed out months ago and now he’s blaming factors he seems to not understand are 100% inherent in fixed income investing.

Conclusion: I think it’s still safe to say that following the advice of online mustaches is a task best done skeptically.

Pete, you’re out of your element.

Took a Hike

Tyler Linsten Pretty Pictures

Today we interrupt your regularly programmed commentary on markets and investing. Instead, a bunch of pictures. OK, maybe one thing on investing toward the bottom.   

Hopped on a plane:

Stopped by Yosemite National Park for a few days:

Hiked up a hill:

Turned around and saw this:

Went to see Half Dome. It’s incredible:

A “photosphere” I created — drag your mouse or your finger on the image:


Checked out Sequoia National Park and its massive trees:

Tried to not get stuck between a rock and a hard place:

Decided this view was best described as “not as advertised,” but wasn’t discouraged:

Most importantly, I found myself in the clouds making a no-brainer investment:

A post shared by Derek Lapsley (@lapsleyphoto) on

Ended up in the desert:

All told, the best trip of my life. It’s going to be tough to top.