Hey everyone!

The world just completed another lap around the sun and yours truly turned 36 on Sunday last. More importantly, Mj satisfied a major, nagging, childhood dream of mine and bought me an electric scooter for my birthday.

In a word, it’s EPIC. It’s fast (70km/hr), built like a brick $hit house and looks like it should be in a space movie.

Yes, yes, I know you want to call me a Gazelle. But below, in section one, I show you how a little mental modeling rationalizes this as a Lion move.

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Personal Finance

For long-time readers of the Journal, you’re well versed in the Lion vs Gazelle theme. First discussed in Issue #8 and many times since, we have even coined the verb “to gazelle”.

For new readers, let me explain.

The Lion vs Gazelle, a Primer:

A Gazelle is a person who gleefully spends, often unconsciously. They buy what they want—or think they need—thanks to clever marketing that has ‘incepted’ them into believing said item is essential. Usually on a credit card or the ‘buy now, pay later’ financing scheme, sadly leaving the Gazelle absolutely no room to save or invest. Instead, a horrendously full and unorganized storage room of useless crap and an empty bank account. That’s the Gazelle.

Lions, on the other hand, are entrepreneurs and businesses alike. Always on the hunt, Lions target the unwitting Gazelle with great precision.

Once you get on the Lion’s radar—google search a product, click a link or even talk about a product near your phone (seriously, Siri is always listening)—magically a whole bunch of highly convincing marketing material starts popping up in your Instagram ads and email inbox.

You are being actively hunted, and the Lions are fierce. They prey on the weak, take the Gazelle’s money, saving and investing those profits and re-investing to make even more money. That’s the Lion.

So where does that leave me?

Well, I like to think of myself as Lion, for the most part—focused on earning more, spending less (but still spending and having fun), and investing the difference. It’s about tweaking the right levers: work hard, get a raise, start a business, do a budget, pay off high-interest debt, brew your own coffee, buy diversified ETFs, etc.

But sometimes, I go full Gazelle.

Just like how this new E-scooter showed up for my 36th birthday (thank you amor):

• 12 years old → rides rich friend’s scooter → dreams of having one → asks parents → parents say no

• Forgets about it for two decades → E-scooters start popping up → childhood dream re-appears and burns hole in front of head

• Starts talking out loud about it → sees scooter ad → clicks link → scooter ads increase by 10x

• Tells wonderful wife about childhood dream → also tells wife how gazelle it would be to buy one → wonderful wife buys scooter for birthday.

That, ladies and gentlemen, is how a Lion hunts a Gazelle.

So, how do I rationalize this purchase as a Lion move?

First of all, I didn’t buy it—Mj did!

…

With the house money 😉.

Second, I’ve been putting off getting a second, money-sucking car for 4 years. This was and still continues to be a brilliant decision that has afforded us the ability to invest way more in our investment portfolio. As a result, I often take the loser cruiser to work while the portfolio grows. That, or Uber, and based on my math, I get about 20 ‘free’ uber rides per month by not having a second car.

Still, our little Mazda CX5 is getting tight with a one-year-old. At some point, we’ll need a second car. Or do we?!

Here’s the alternative plan that will give us more money to invest and grow our wealth.

1. Delay second car—the one I want is about $40,000, used.

2. Upgrade strategically—sell Mazda for $30,000, and buy a bigger car for $40,000. Only ‘out’ $10,000.

3. This satisfies our need for more room and lets us keep more money invested.

4. Eddie keeps riding E-scooter and/or the loser cruiser.

Because the Time Value of Money is the most important money concept you can learn, NOT spending $40,000 today and keeping it invested means we are winning. Big time.

So, what do you think? Did my self-therapy-rationalization earn me Lion status?

Or am I still a Gazelle?

Stock Markets

For all the excitement over stock market returns this year (congratulations to all you stock market investors), and the fact I often shout from the rooftops about being invested in stocks for long term growth, the following caution must be said:

Just because stocks go up 8-10%/yr on average, doesn’t mean they go straight up. Day to day, week to week, month to month… average is not reality. Far from it.

Below is what a 28x your money over 34 years at a 10% average return looks like:

Pretty wild chart eh? 28x times your money sure ain’t a smooth ride. Every year there are pullbacks:

• down 5% hurts - virtually every year

• down 10% hurts more - still fairly common

• down 20% hurts a lot, a glorified bear market, less common

• down 40% is like going through Hell, these are rare, but they do happen

So if you’ve never invested before, have always been “risk off”, or have a major upcoming expense to pay for, you would be ill-advised to pile all your money into the stock market after it’s gone up 25% two years in a row and expect the same result next year.

No, I’m not calling a market top - but markets gyrate, and sometimes, a lot.

Volatility doesn’t hurt if you aren’t forced to sell to fund your lifestyle. In other words, with a long time horizon, you can withstand those gyrations. But if you throw all your chips at the stock market today and expect it to go up by next year, you could be in for some emotional hurt.

Only invest what you can afford to, meaning, money that has a long time horizon attached to it.

And remember what Winston Churchill said:

Real Estate

Busy working through due diligence on an industrial property we have under contract, so I don’t have time to write anything else useful this week.

Since last week’s Guide to Real Estate Investing - an LP Perspective got a lot of downloads, thought I’d re-circulate again here in case anyone missed it.

1 Quote

A Question

Are you a Lion or a Gazelle?

_____________

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Thank you

Eddie Gudewill, CFA

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