Matt McGuinness

Comments

• Thanks for the thought exercise Jonathon. IMO, Ignoring valuations would be to your portfolio like what ignoring your health would be to your duration & quality of life. In that context, the question really answers itself... I've been "mostly" retired for 3 years now and plan to fully retire in a few more months. I'm a mostly defensive, buy & hold value & dividend yield investor with a heavy concentration in hard assets (infrastructure, commodities - ie energy & PM's, and REITs/ R.E. News flash: most REITS are not historically expensive, valuation-wise, right now. In fact many high quality names (like ARE, AHH) are at historically exceptional discounts to their NAV's. I also like hi yielding preferred shares purchased below call value in certain very stable/ strong Mtg & Equity REITs, and investing in moderation in BDCs, CEFs, MLPs and even some CLO via ETFs.).. I only own one "Mag-7" stock (APPL), which I've held for over a decade, and I've never owned bitcoin, so I mostly missed the Covid explosion valuations of all the big tech/ high growth names. "Oh well !" OTOH when the S&P plummeted for a few weeks > 4/2/25 my max portfolio drawdown before the subsequent (rapid) recovery was < 8%, when my relatives & friends who love AI and the big tech names were all pretty crestfallen. My portfolio value is now higher than it was on 4/1, despite net withdrawls since then for mortgage payments, home improvements, etc. And, the high dividend yield aspect of my investing style reduces volatility quite a bit, and makes me fairly sanguine/ resilient whenever my portfolio does experience volatility. I suspect there'll be much more volatility ahead for us all over the next few years...and disappointing 10-year returns from here especially for S&P 500 investors, for the reasons you described re: current valuations which are very high based on the Buffet yardstick and many other historical valuation measures. I have a tax background so I'm careful to hold investments where those high dividends & MLP distributions yield are almost all tax deferred or tax free (w/ no UBTI). Quite a few K-1's on our tax return, but like anything else - knowledge is acquirable and even complex topics are manageable...the fear of the task is typically much worse than the reality. Holding MLP's in taxable brokerage accts is a very powerful retirement savings accumulation tool, IMO. Sorry this went so long, but I wanted to explain why I'm not too worried about valuations at the moment, even though I completely agree that wide areas of the market (ie the S&P500, Nasdaq, & growth stocks generally) are probably overdue for a major drawdown when the next "risk off" wave arrives... perhaps triggered by a US recession, or maybe due to various other negative geopolitical/ macro factors that always seem to be on the horizon lately. Tariff's, inflation, higher 10-30 Yr interest rates? (Etc!.) So, I'm personally not overly "worried" about valuations today, per se, based on how I've positioned our portfolio ever since Covid. But I will never ignore valuations. in fact when the big drawdown finally does arrive, I plan to focus on valuations intently - to rebalance much of our current holdings allocations away from short term treasuries, money market funds & high yielding preferred shares, and into newly beaten-down equities that I view as too expensive to buy today, but which may then become too attractive valuation and/or yield-wise to ignore.

  Post: Ignore Valuations? By Jonathan Clements

  Link to comment from May 24, 2025

• Here's another consideration when it comes to saving money on dentists, and certain other commonly practitioner-owned small business professional services like dermatologists and veterinarians. This advice is based on my wife's & my personal experience in each of these 3 cases over the last 5 years or so. Q: As the baby boomer retirement wave accelerates, what do you suppose your family dentist/ veterinarian/ dermatologist, who has had his/her own practice for the last 10/20 years or more, and who is finally ready to retire, does when they finally exit the business? A: They sell their practice to someone much younger, typically someone who just graduated from dental/ vet/ medical school in the last 5 years. With a large book of existing loyal clients who visit on a regular/ predictable schedule, have a good convenient location already fixturized out for the practice at hand, and a good, trained staff already in place, these businesses can be quite valuable. Especially if your trusted Vet had the good sense to brand his practice with a non-person specific name. For example, before he retired my dentist in Dana Point, CA named/ branded his dental practice "Dana Point Smiles", rather than " Dr. Wilson, DDS". This allowed the intangible assets of the business (client base, location, lease, local awareness of the business and staff, etc) to more easily be assignable for a higher value to whomever purchases the practice. The Buyer not only takes on significant debt to fund the buyout of the practice (perhaps partially funded by the Seller in financing carried back as a note), but also very likely is still paying off significant medical school student debt and may be doing so for many more years. So, over the course of a few years you go from a founder-owned practice who had little or no debt, and knew most of his/her patients personally, to a new owner who is saddled with significant debt taken on to buy the practice, plus perhaps student loans (and younger family expenses at home). There's only 2 ways to make the math work: more procedures to be billed (via more from existing clients is fastest to accomplish, adding new patients is much harder/ slower) - and/or higher fees. When my dentist sold his practice a few years ago the young buyer was introduced as just a new member of the staff, no more, and very much downplayed. But fairly quickly my existing dentist was seen less & less, and eventually not at all. Only ~ 6-9 month later (after the last time he was seem there) came the announcement he was retiring, and introducing the new dentist. In addition, the buyer took a great interest in new x-rays and suddenly I needed four new crowns to replace ones I had had for 8-12 years but none of which were causing me any pain or other issues. He reassured me we could space these out over 24 months or so - but we needed to get started ASAP. And prices began to rise as well. The very same thing happened with our local vet in Laguna Beach, an older woman who we had known for many years. A younger vet was first introduced as a member of her staff, who co-worked with the proprietor for 6-9 months to minimize customer defections (and maximize the value of the business practice as an asset). And soon after our vet retired fees climbed dramatically and things that used to be no charge were now itemized and never overlooked. If this sounds familiar, you might consider changing to a sole practioner who did not just buy their practice from another doctor in the last 5 years, and who hopefully doesn't plan to retire for another 5-10 years or so. It could save you a lot of money!

  Post: What Medicare Misses

  Link to comment from August 20, 2023

• Agree on all of your points above, especially re: saving more than less. But the "not calling it quits too early" advice may differ greatly, depending on the person. My take: if A.) you really love your work & co-workers, and/or B.) failed to save sufficiently to-date relative to your go-forward needs & obligations to others, and/or C.) have only limited family & friends to spend your time with, and/or D.) your health is excellent and can be expected to serve you well for many, many more years to come (ie a great family medical history and lifestyle choices), then this too is probably excellent advice. If the above factors describe you, then you very well may want to err on the side of "working another year or two" (or more), until enough of these factors realign to change the calculus. But especially if you already have adequate financial resources secured and/or only modest financial needs (saving aggressively over a long period of time will help in both regards, especially the propensity to spend more!), then also guard against calling it quits much later than is necessary. Time, close personal relationships & your health are your 3 greatest resources IMO, and for too many years we tend to underappreciate this fact & may continue to trade all 3 away for more money, or the out of a fear of change. Flexibility is indeed a critical adaptive trait, especially now!

  Post: Ask Before Quitting

  Link to comment from June 17, 2023

• I semi-retired 10 months ago, including selling the home of 22 years, moving to another state thereby swapping a 90-minute round trip commute 5 days each week for 1-2 hours of zoom calls weekly from high in the mountains. My biggest regret now is probably not doing this a few years sooner... I'll turn 63 in 2 weeks, and I have 7 older brothers, several in their mid-70's who are in very poor health. My advice: enjoy whatever time you are blessed with now to the fullest, rather than worrying so much about how the last few years of your life will go, when your health will fade the fastest. You'll have more than enough time to worry about that then...and fewer regrets as a result.

  Post: Ask Before Quitting

  Link to comment from June 17, 2023

• James: I read your article with great interest, especially the first 30 years because of the parallel with my own life. You were born in 1959 (I assume) while I was born in 1960. We both went to large state universities with powerhouse football teams they were known for (I went to school in Ann Arbor, Mich.), and studied accounting. Yours probably had more post season success in the bowl games than mine. (Q: Why did Mrs Schembeckler put Bo's oatmeal on a plate? A: If she put it in a bowl, he'd lose it!) I took the opposite path after graduation in 1982 and, went to work for the Big 8 (Peat Marwick Mitchell) in Los Angeles, where I worked for 5 years. When you earned your CFA in 1983, I earned my CPA at about the same time. I also still remember my first stock investment, in around 1987 - Apple Computer. Needless to say I sold those shares 4 or 5 years later...a pity, or else I'd be writing this post today from my yacht in Monaco (watching with some amusement as the authorities seize the adjacent mega yacht owned by a Russian oligarch!) Upon deciding I definitely did not want to sell accounting, tax & consulting services for the rest of my career, I then went into the restaurant industry for a large operator with over 1,000 restaurants across the county, who had just started franchising - Denny's. (I ultimately became CFO at Denny's, 11 years later). Like you, I married at age 29 (in my case in 1989). We only had one child, 6 years later. Fast forward 27 years and I'm now planning to retire later this year, our son is getting married next month, and our first grandchild is already en route later this year. Becoming grandparents and long deferred travel plans will finally be our focus, just in time for the departure of peak pandemic restrictions. I can foresee pickle ball (which I haven't tried yet) becoming a major hobby, largely replacing my youthful obsession with golf! I'm very interested in QLACs, and love your ladder strategy. Even after converting 6 figures annually into my Roth IRA for each of the last 3 years, and directing 100% of my employee contributions into a Roth 401K for years, I still have significant balances accumulated in multiple pre-tax Rollover IRA's, 401K's and 409A's. However I am waiting for higher interest rates to begin purchasing QLAC. I believe higher interest rates (& inflation) are inevitable, based on the trillions of money printing over recent 2 decades, and especially the unprecedented crescendo of cumulative deficit spending over just the last 3 years. We very possible won't see 1970's level interest rates again in our lifetimes, but I believe a 200 - 400 basis point increase in T-bills over the next 2-5 years would make locking in future QLAC annuity payments beginning 15 years or more hence would be much more attractive than any current QLAC offerings available today. Again, thanks for your post, and I look forward to reading some of your others. Go Blue !! Hook 'em Horns !!

  Post: My Experiments

  Link to comment from March 6, 2022

• Really enjoyed your article! It brought a few things to mind: 1. Many people view cars as mere "appliances", needed only to perform a specified function (transportation from point A to B within at least minimal comfort parameters defined by the commuter & their budget). For these folks, cost minimization (including depreciation, maintenance & fuel economy considerations) are paramount. As a finance professional, I admire and on some level truly envy these people...but I am not one of them. 2. Others of us have a more complicated, "emotional" relationship with cars. Some - like myself, a "car guy" who grew up in the '60's in Detroit in the muscle car era and restored my first ride (a 1966 Barracuda) with my dad when I was only 14 - treat cars as a hobby. Guys like me spend lots of our free time immersed in car culture even when we are not behind a windshield. For this latter group, especially those that have a longer daily commute (mine is 42 miles each way), a commuting vehicle becomes another expression of who we are based on what we choose to drive! 3. It will be very interesting to see how EV's, and soon enough self driving/ semi-autonomous EV's have on the relative unattractiveness of longer commutes like mine. Much greater multi-tasking will be possible...or is even considered "multi-tasking" anymore if we get to the point when we don't have to devote ANY attention to the task of driving from point A to point B anymore?! 4. l can't remember how many times I looked up while driving to work and suddenly realized I missed my exit 2 or 3 exits back, because I was so engrossed in an Audible book that had captivated me (often a Harry Bosch or Jack Reacher novel!) And then I thought, HOW DID I EVEN GET HERE (and how many times did I reflexively change lanes getting to here??!) 5. As I'm planning to retire at the end of this year and will no longer have that long commute 5 days a week, I guess I will use some of that freed up time to tinker on my cars and buy/ sell/ trade and just drive them to different destinations instead.

  Post: Road to Nowhere

  Link to comment from February 19, 2022

• Great article Dennis! I followed a somewhat similar track, just ~ 9 years behind you (I'm 61, and getting ready to retire at the end of this year). Like you I moved to So Cal from the midwest (from Michigan, in 1982), and got a steady corporate job (Big 8 CPA firm). After renting for 4 years near the sand in Manhattan Beach w/ 2 college buddies, I bought a 1,000 sf starter home in Long Beach for $104K (major "Fixer" 9 miles from the beach), and got engaged. Did all the work myself, thanks Home Depot, and sold it a year later in 1987 for $175K. If you lived in So Cal during the past 40 years, serial buying RE, fixing & flipping was another way to accumulate significant home equity. We have owned 5 successor fixers since that first house, but have lived in our current home in Laguna Beach for the last 21 years now. I have 7 older brothers and 1 sister (who is coming to visit us next week from Ann Arbor to celebrate her 60th B-Day), and I have been preaching "wait until 70 to collect SS" to all of them for years. I believe my wife will probably outlive me by at least 5 years, and this strategy has an excellent probability of easily exceeding the breakeven payback point related to deferring benefits. You did me a big favor this morning by sharing your overall retirement portfolio strategy (ie you're primary savings are all invested in only 3 Vanguard funds: VITSX, VGTSX and VTBIX). My remaining 401K balance is currently invested in exactly those same 3 funds, in that order, not because I was wise but because I was lazy! Our plan automatically moved everyone's balances to age-appropriate Target Date Vanguard Funds (VTHRX, the 2030 target date fund for me), and I was too lazy to override that default. That is, I was too lazy up until COVID hit. Until then I was disappointed in most years year that S&P and NASDAQ beat my 401K returns by wide margins, 5-10% points in many years. But I stayed the course and stayed in VTHRX. (Yawn!) Then I started taking a series of very large tax-free in-service Rollover Distributions from my 401K into a self-directed Rollover IRA right after COVID hit and the market tanked, ultimately moving ~ 98% of my 401K funds over - and reinvested those funds into small cap value funds, individual REITs and energy stocks that had been crushed along with everything else, instead of back into VTHRX. That has turned out very well for me, and since March 2020 my IRA has significantly outperformed the broader market indices (which of course themselves have done very well over the same period). But I could never have pulled this off if I hadn't gone INTO Covid at the end of 2019 with all of my 401K funds so conservatively invested, including a significant bond allocation! So if I recently moved 98% of my funds OUT of VTHRX over the past 21 months, why am I so glad I saw your timely article this morning, which endorses that very allocation ? Because you just reminded me WHY this is such a powerful asset allocation strategy when times are still uncertain. In fact. most of my market success over the past few years was only possible precisely BECAUSE I was so invested in the VTHRX allocation strategy going in - which set me up to be in a position to take advantage of that turmoil almost 2 years ago now. I was just getting ready to rebalance OUT of VTHRX the last ~ 2% of my formerly large 401K balance, to other more narrowly targeted sector allocations. I was literally working on this when I took a break to read your new post this morning! But you have caused me to reconsider. Since I intend to retire in < 12 mos, and I a focus-on-the-law friend named Murphy & I believe the much anticipated/ long overdue/ gully-washer of a market correction everyone has been waiting years will finally arrive by early 2023, soon after my retirement party. So Sequence-of-Returns risk is now on my mind. That being the case, the sensible/ conservative/ SIMPLE portfolio allocation represented by VTHRX seems an excellent place to park a signifcant portion of our retirement savings as my wife & I embark on the next phase of our lives. Hmmm...instead of cleaning out the last 2% of my 401K from VTHRX, maybe I will leave it alone after all - and in fact reallocate a big chunk of my new Rollover IRA holdings with 80%, 120% returns and more BACK into VTHRX...to await that big correction, when it finally arrives. Thanks again, Dennis!

  Post: Road to Retirement

  Link to comment from January 8, 2022

• Costco comes with other "freebees" the rental car companies love to charge for as you noted, like free extra driver (must be registered/ designated in advance). I honestly don't know how the rental car companies make any money off of Costco members, the rates are so low compared to other booking options!! My favorite rental car hack years ago was priceline.com (where you didn't know the name of the rental car company until after you booked), but for the last 7 years it has been Costco!!

  Post: 13 Rental Car Rules

  Link to comment from August 21, 2021

• It is refreshing to hear a different perspective and "voice" than what we usually hear from traditional financial advisors. Me, a CPA, CFO and finance expert who hasn't had a physically demanding job since I was a golf caddy 47 years ago in grade school, I am definitely planning to wait until age 70 to begin collecting benefits (subject to further review based on any future changes to tax laws and means testing changes to make SS more solvent). And I preach this view vigorously to other "white collar" workers like myself who do not have any family hereditary history of shorter life spans, or who are happily married to spouses who are blessed with "good genes" for longevity (or both). Articles like this do not change this calculus for me at all, of course - and of course it wasn't intended for those in my circumstances. (BTW I suspect > 50% of Humble Dollar readers skew towards similar "white collar" careers and not working on a factory floor, in railway switching yards or doing physically demanding acrobatic maneuvers in a wrestling ring). But for those whose income sources do require being on your feet (or periodically on your back, in a ring!) to generate income, I totally get it, and were I in similar circumstances I might have written this article myself. One of my 7 older brothers was a golf course maintenance superintendent whose career involved physically demanding work outdoors in midwestern golf season from spring-to-fall, and on his feet repairing equipment in the shop during the winter. (He has a bachelors degree, used to work for the IRS and also does tax returns as a preparer every winter/spring. A very smart and financially astute guy.) He just began collecting benefits at age 62 last year. I encourage adding more writers such as Juan F., who bring a greater diversity of perspectives and backgrounds, which may thereby attract a broader diversity of Humble Dollar readers. In my experience we all learn much more by being exposed to both sides of an argument, especially those like the optimal age to begin collecting SS benefits - where there is clearly no "right" answer which applies to us all. This reminds me of a favorite saying: "If you and I agree on everything, one of us is probably unnecessary...!"

  Post: Why I Won’t Wait

  Link to comment from August 21, 2021

• There used to be another syndicated financial columnist I enjoyed reading regularly, way back when Jonathan Clements was still writing a regular column in the Wall Street Journal and Humberto Cruz was a syndicated columnist. I can't remember his full name and I don't think he wrote for the WSJ, but his thumbnail photo is still quite clear to me! And I'm pretty sure his first name was "Samuel". (Anyone: please complete the name for me so I don't go crazy, if my description triggers recognition of the columnist in question !). Anyways, a common theme in "Samuel's" columns was, just as you say, younger people have a much less secure retirement awaiting them, financially, than the generation of older folks who are already there or closing in fast. And for similar reasons; wealth transfers to the elderly codified into IRS law and policies favoring the elderly based on longstanding societal stereotypes, perhaps developed during WW II or the 50's and 60's I'm guessing. Although at the time he was writing, he was probably referring to the greatest generation, while you are now making the same point mostly about their successors the baby boomers like myself (born in 1960), as time marches on. But the wealth gap in society today has only widened as a result of the Covid pandemic, by increasing the net worth of home and stock owners, but not so much younger working age folks early in their careers with few appreciating assets. So Samuel's and your point is even more true today than it was 10 years ago, IMO. An acceleration of means testing for older folks for SS and Medicare benefits and tax preferences could separate the more fortunate (wealthy) seniors from the ones on fixed income with little savings, and I have to assume this will happen (in a big way) before I begin drawing SS in another 9 years at age 70. The coming massive expected estate wealth transfer from boomers to the next generation may help, but not anytime "soon" in the case of late boomers like myself - I plan to live another 25 years or more, God willing...!

  Post: Unnecessary Breaks

  Link to comment from July 25, 2021