Fiscal Update October 2019 – Tale of 2 Economies

I hope everyone had a good weekend. Many people turned back their clocks 1 hour marking the end of this year’s daylight saving time. But time wasn’t the only thing that fell back. Economic growth in the U.S. pulled back to just 1.9% for the 3rd quarter of 2019, lower than the previous 2 quarters. Last month I wrote about anticipating this GDP number, and warned that if it continues to fall (which it did) then we may be close to a U.S recession. The Canadian economy is also in trouble, managing to eke out a 0.1% gain in the latest month.

Yet somehow the U.S. stock market reached an all time high at the end of October. Senior citizens must be thrilled to see their retirement funds performing so well. 😀

So economic output is slowing down, but investors have never been more optimistic – pushing stocks to record highs. How does this happen? It’s basically the result of the U.S. Central Bank’s monetary policy. In late October the Fed lowered interest rates again, trying to stimulate the overall economy. However, all it did was push investors to buy stocks over bonds because bonds now pay lower interest/returns. But a higher company stock price doesn’t improve business hiring, productivity, or employee salaries. The average American worker doesn’t see any direct benefit from the Fed’s monetary stimulus. Only Wall St. does.

The result is a diverging economic reality between two worlds; the working class that’s just one paycheck away from financial ruin, and the investing class who continues to see growing asset prices. Over the last 10 years, the S&P 500 gave investors about 13% annualized return. So the fact is if someone put $1,000 into a low cost index fund in October 2009, then today he would have $3,400 – assuming he reinvested the dividends. Wow. And all this required zero effort on the investor’s part. Amazing. 🙂

So the lesson here is simple. Focus on investing your savings, and be patient. Investing is like cooking a juicy steak; the less you touch it the better. Working hard at a job can only get you so far. But the real secret to financial success is to leverage the Central Bank’s policies, and invest in a diversified portfolio to build wealth the easy way. 🙂

Although October was a good month for stocks, I had a major expense (property tax payment for my farms) that stifled my savings. In the end, I was able to grow my wealth by $8,300 for the month. Not bad, but I didn’t reach the $1 million net worth milestone I was aiming for. Oh well. Better luck in November. 🙂

Liquid’s Financial Update

*Side Incomes: = $5,400

• Part time job =$600
• Freelance = $400
• Dividends =$1200
• Interest = $500
• Farm rent = $2,700

*Discretionary Spending: = $3,700

• Food = $300
• Miscellaneous = $2,100
• Interest expense = $1300

*Net Worth: (ΔMoM)

• Total Assets: = $1,384,500 (+7,000)
• Cash = $9,100 (+300)
• Canadian stocks = $195,100 (+2400)
• U.S. stocks = $134,900 (+1400)
• U.K. stocks = $21,900 (+500)
• Retirement = $137,700 (+1900)
• Mortgage Funds = $37,100 (+200)
• P2P Lending = $36,700 (+300)
• Home = $367,000 (assessed land value)
• Farms = $445,000

• Total Debts: = $385,100 (-1,300)
• Mortgage = $186,100 (-400)
• Farm Loans = $162,400 (-500)
• Margin Loans = $34,800 (-200)
• Line of Credit = $1,800 (-200)

*Total Net Worth = $999,400 (+$8,300 / +0.8%)
All numbers are in $CDN at 0.76/USD

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Random Useless Fact: