The Federal Reserve’s investor-friendly stance on interest rates has infused this market with a another dose of optimism. While trading action Monday didn’t really reflect that, we’re still tracking toward one of the best Junes on record for the Dow Jones Industrial Average
In the spirit of the market axiom, “Don’t fight the tape,” Sam Dogen of the Financial Samurai blog laid out a bull-market checklist to “living your best life,” as indexes continue to flirt with record highs.
“I haven’t felt this good about the current state of the markets since 2007,” he wrote in a Monday post. “Sure, everything went to hell the next couple of years and mass carnage ensued. But that’s neither here nor there.”
Here’s how he says to play it this time around:
1. Take advantage of lower rates: 10-year bond yields
are at two-year lows, and other costs of borrowing money are also at enticing levels. “You should take advantage by refinancing your mortgage and your student loans if you have any,” Dogen said.
2. Stay exposed to risk assets: This one’s rather obvious. Buy when the buying’s good. And that’s now. “Stocks, bonds, and real estate are your friends in a declining interest rate environment,” he wrote. “Lower interest rates make owning other assets with higher interest rates or potentially higher returns more attractive.”
3. Ask for a raise or change jobs: With unemployment at 3.6%, has there ever been a better time to look for a new job? “The general rule of thumb is that you can get at least 20% more if you put yourself on the open market tomorrow,” Dogen said. “Depending on performance and industry, after about three years on the job in a hot labor market, you could conceivably get 50% or more.”
4. Take a sabbatical: Time for a break. You earned it. Maybe. “Yes, it’s tough to get off the grid when so much money is to be made,” he said. “But it may be now or never as it might be career suicide to take a sabbatical during a downturn.”
5. Start strategically living it up: This is really just an extension of number 4. “If you can’t live it up when times are good,”he wrote, “you certainly won’t be able to live it up when times are bad.”
6. Hunt for unicorns: Get your bubble on! There are some home runs to be hit. “I would set aside 10% of your cash flow (not existing investments) in search of the next great speculative investment,” he said, adding that you should expect to lose 100% of your 10% with the chance of making a 1,000%+ return. Dogen explained how a $3,000 in Vertical Computer Systems
in 2000 allowed him to make a $120,000 down payment on his first San Francisco property. “All you need is one lucky break to supercharge your wealth,” he said. “But in order to get your lucky break you need to take extra risk with some of your funds.”
7. Shop your business around: Assuming you have a business to shop around, of course. Valuations tend to be at their highest during a bull market because expectations are so high for future earnings growth,” Dogen wrote. “To create next level wealth is all about growing the equity component.”
8. Become a charlatan: The sad-but-true section of his checklist. With so much money floating around out there, the snake oil flies off the shelf. “It doesn’t matter if you’re a failed political consultant trying to position yourself as a financial expert or a company founder with no pertinent experience,” he said. “If you fake it, chances are higher you will make it during a bull market.”
9. Calculate your financial independence number: FIRE (financial independence, retire early) becomes — or appears to become — a realistic option in a climate like this. But just make sure you set an achievable goal. “It’s fun to calculate how much you’ll have if the bull market lasts for X years,” Dogen wrote. “It’s also very dangerous to extrapolate massive gains for a long period of time.”
There you have it. All your bull-market dreams can come true. In theory.
“Nobody knows how long this bull market will last,” Dogen said. “All I know is that for the foreseeable future, the Fed is on our side, interest rates are low, and there’s a presidential election coming up promising us lots of freebies.”