There have never been more ways to defer paying taxes on investment gains. Wall Street has made sure of that. I stole the chart below from Bloomberg, but it does a good job of explaining some of today’s tax-optimized strategies.

The menu of tax-deferral strategies has exploded in recent years, fueled by lower trading costs and better technology.

Some of these strategies work as described (direct indexing and custom indexing being strategies we regularly implement for clients), but every time Wall Street hands investors a shiny new tool to avoid taxes, they usually take it too far.

We’ve Seen This Movie Before

In the 1980s, the tax shelter industry was booming. Intangible drilling cost (IDC) deductions were a popular vehicle allowing investors to sink money into oil and gas partnerships and write off the bulk of their investment as drilling costs in the first year. The pitch was simple: save money on taxes now and maybe make money on the oil later.

For many investors, the oil never came. The deals were loaded with fees, conflicts of interest, and speculative assumptions about energy prices. When oil crashed in the mid-1980s, and Congress tightened the rules with the Tax Reform Act of 1986, investors were left holding the bag.

Real estate limited partnerships, equipment leasing deals, and movie production shelters followed the same script. The IRS eventually labeled many of them abusive and pursued investors for back taxes.

The lesson wasn’t that tax planning is wrong. It was that tax planning is never the most important thing.

The New Playbook Has Some Old Risks

Today’s tools are more sophisticated and more transparent. Long/short strategies are one popular example.

Managers of these strategies simultaneously hold long and short positions and use leverage to create portfolios with 100% market exposure and an outsized capacity to realize capital losses for tax purposes.

But, of course, there are a couple of catches.

First, this article from Elm Wealth reviews the costs and benefits and finds that:

“The only party that is with near-certainty better off is Wall Street, while wealthy investors and the government, both individually and together, are likely worse off.”

Second, leverage has a way of converting innocuous strategies into ticking time bombs.

Custodians seem to have recognized this second point, and despite generating huge fees from the margin balances these strategies create, Schwab, Fidelity, and others are now limiting the extent to which firms can implement these leveraged long/short strategies for clients.

What Actually Works

None of this means tax planning is a waste of time. Managing the timing of gains, harvesting losses thoughtfully, maximizing tax-advantaged accounts, and being deliberate about asset location are all genuine, low-cost ways to improve after-tax returns.

However, it is important to never forget that if the underlying investment isn’t attractive on its own merits, the potential tax savings probably won’t fix it.

Personal Note:

Earlier this week, we hosted a Ladies Potting Social at The Flora Culture. My daughter attended and tells me she had a great time and loves her new plant.

The event wouldn’t have been possible without Crystal McKeon doing everything to put it together, and a huge thank you to everyone who came out and joined us.

Wall Street has a gift for complicating investments in ways that allow them to make more money. Structured notes are a good example of that. Most investors have never heard of them, but if you have money, someone has probably tried to sell you one. Here is how that conversation with a broker tends to go.

What the investor in the hypothetical conversation above probably doesn’t realize is that:

1. The bond is being offered by the issuer at $1,000, but the estimated value of the underlying securities used to create this investment is roughly $915. So, he is starting 8.5% in the hole1.

2. This is a bond, so even if the underlying metals perform well, the return is now subject to the issuer's credit risk.

3. The investor really only wanted to buy gold. But by tying the return to gold and silver, the entire return dynamic has changed. Gold may be fine, but a 50% drop in silver is very possible, and in that case, the price of gold doesn’t matter.

4. If you want to get out early, you can sell it in the secondary market, but you will probably get your head taken off.

This is Wall Street’s version of a parlay bet (See my note from January 2025: Sports Betting & Investing). The more moving parts they add, the harder it becomes to understand, the lower your odds of winning, and the more money they make.

Wall Street is financially incentivized to keep expanding this market, so even if it doesn’t benefit consumers, I suspect it will keep expanding.

A few related items worth mentioning

These things are everywhere.

Collectively, the US market for structured products was around $150 billion last year.

Structured products come in all shapes and sizes, and despite this 2011 study titled “The Dark Side of Financial Innovation,” which showed that structured products were overpriced to the point that their expected return was slightly below zero, these investments are still pitched as a way for investors to limit downside risk and improve returns.

Banks love structured products because they can package absurd spreads into an exciting sales pitch. Lawyers love them because the salespeople usually overpromise and underdeliver.

That is how you get the below headlines, which simultaneously appeared in my inbox last month (which inspired me to write this note).

My favorite quote from the article regarding the litigation:

The plaintiffs had argued that Stifel failed to exercise “any adequate supervision” as the broker, Chuck Roberts, assured them that the structured notes would preserve their principal while offering long-term average returns of 12.25%.

I don’t care how sophisticated you are. Anytime someone promises a safe 12% return, something bad is probably about to happen.

Personal Note:

Last week I presented at my 5th grader’s career day. I gave each kid a $5 billion Zimbabwean note to explain the concept of inflation. Some kids didn’t pay attention to the discussion and left the classroom with a genuine belief they were now rich.

1

Each of these structured notes comes with an offering document explaining the investment. If you open it up, you will see a chart somewhere in there that looks something like this.

We’ve been hearing a lot about how AI is going to destroy the job market. But I’m pretty sure that isn’t true.

Back in 2016, Geoffrey Hinton (who would go on to win the Nobel Prize for his work on neural networks) proclaimed that we should stop training radiologists because, in five years, AI would be better at the job than humans.

10 years later, the number of radiologists has continued to climb, and the average income for radiologists now exceeds $500k. Turns out AI has made reading scans faster, cheaper, and better, creating more demand for the service.

This is one example of Jevons Paradox. When steam engines made coal more efficient to use, we burned more coal. When vehicles got more fuel-efficient, we bought more cars and drove farther. When professional tools used by lawyers, accountants, and consultants improved, the cost of completing tasks fell, and demand for those services rose.

That pattern shows up reliably across two centuries of technological disruption. And it’s showing up again now.

Apollo published a few charts, which I’ve copied below, to make this point.

First, as the cost of professional work has fallen, the addressable market has expanded, and the total number of firms and workers in professional work has grown.

Second, AI is making it easier for recent college graduates to compete with established firms on certain tasks. That is likely the reason the unemployment rate is falling faster among young workers:

And the number of new businesses created each week is at the highest level in US history:

The story of technology and labor is not a story of disappearing jobs. It is a story of shifting jobs, expanding markets, and rising demand for things we couldn’t afford before. That’s been true of every major technological leap in the last two centuries. There’s no particular reason to believe AI will be the exception.

The radiologists are fine. The lawyers will be fine. And the patient investors who didn’t panic will be fine too.

Personal Note:

This was a big week for me to be proud of some of my favorite sportspeople.

First, as I’ve mentioned before, this is my first year as the President of Fort Bend lacrosse, and our varsity squad won the city championship for the first time in program history.

We had five All-State players, two All-District players, two honorable mentions, and a Coach of the Year.

Second, my local Riverbend teaching pro, Jesse Droemer, won the PGA Professional Championship at Bandon this week. This gets him six exemptions into PGA tour events, along with a spot in the PGA Championship in two weeks.

If you are looking for someone to cheer for, he is your guy.

Weekly Notes

April 3 — “What You’re Trying to Teach and What You’re Actually Teaching” Opening stock trading accounts for kids is more likely to teach bad habits than patience, and competitions judged on strategy quality — rather than portfolio returns — are a better model for financial education.

April 10 — “Vibes & Valuations” Using the anticipated SpaceX IPO as a case study, the post cautions that when retail enthusiasm peaks, even great companies can make for terrible investments.

April 17 — “The Good News Is There. It Just Doesn’t Make Headlines” Strong earnings, normalizing valuations, and the benefits of diversification tell a more optimistic story than the headlines suggest.

April 24 — “Investing While Sad” Despite historic lows in consumer sentiment, widespread pessimism is framed as a bullish signal — markets only need news to be slightly less bad than feared to move higher.

Quote We Love

"In the short run, the market is a voting machine, but in the long run, it is a weighing machine." — Benjamin Graham

Media Features

USA Today quotes Jon Swanburg in an article on free and low-cost financial advice.

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One year ago, I wrote a note titled “The Time to Invest Is When Things Feel the Worst.” The article used charts to show that, 12 months after the most bearish periods (when Americans were collectively most concerned), the stock market averaged 25% returns.

Looking back, this was a good call. We’re now 12 months later, and the S&P 500 has climbed another 36%.

But the good returns haven’t done anything to make people less depressed.

• This week, the Federal Reserve’s measure of US worker satisfaction fell to its lowest level since the survey began in 2014.

• Last week, consumer sentiment had fallen to the lowest level ever recorded in the 70-year history of the University of Michigan economic survey.

Why people continue to be sad is beyond the scope of this article. (For that discussion, see Derek Thompson’s article If America’s So Rich, How’d It Get So Sad?)

But counterintuitively, the fact that people remain sad supports the idea that the stock market is still a good place to invest.

When the market feels safe, investors tend to take more risks. Rising prices beget more confidence, and more confidence begets higher prices. Optimism creates bubbles, and bubbles lead to crashes.

But when investors have as little confidence as they do today, even bad news can make the market go higher. All it takes is for that bad news to be just a little less bad than expected.

Personal Note:

A few weeks ago, my wife brought home a foster dog she named Junebug, along with her two puppies.

Junebug is an amazing dog who was rescued from a very bad situation. When we brought her to the vet for a checkup, the doctor found that she was highly heartworm positive with BB pellets in her skin. But she somehow still loves people and will be going to her new family in Washington state in a couple of weeks.

Below are just a few examples.

Earnings Are the Story

The primary reason the stock market has been going up is that earnings have been going up. Companies are making more money. As the chart below shows, earnings and dividends have collectively contributed nearly 7% to the S&P 500’s total return this year. The only reason the stock market isn’t up further is that people are willing to pay less for those earnings now than they were at the start of the year.

And that is healthy.

A Return to Normal Valuations

Remember last year when everyone wanted to talk about how tech companies had gotten too expensive, and we were in something that looked like another dot-com bubble (See my note from October, Not Every Boom is a Bubble)?

Well, since then, tech valuations have compressed from 40x to 20x, and we are back at valuation levels last seen before the AI boom began.

Similar trends have occurred in other sectors as well. As the chart above shows, today’s valuations are very much in line with their ten-year averages.

Diversification Did Its Job

A few years ago, the S&P 500 was the best-performing asset class in the world, and it was tempting to wonder why you owned anything else. (See my January 2025 note, Predicting Stock Returns). But that has since changed, and diversification has continued making a difference.

Investors who stuck with their plans have continued to benefit. Those who went chasing returns have not.

The Impact of Higher Oil Prices

This chart isn’t necessarily good news, but it provides some important context for the bad news. Specifically, higher oil prices do not necessarily lead to lower stock prices.

Historically, when oil prices have risen by 20% over two days, as they have recently, the stock market has averaged 24% returns over the next 12 months.

That is not intended as a prediction, but rather a reminder that scary inputs do not always produce the outcomes we fear.

The Optimist’s Advantage

Finally, good news tends to be boring. It arrives gradually in the form of declining mortality rates, rising corporate profits, or technological progress that compounds quietly over decades. Bad news is a much better storyteller. It creates vivid narratives that make the worst feel permanent.

But nothing is ever quite as bad as it seems. The world rarely ends, and when it comes to your retirement plan, the pessimists may sound smart, but it is the patient optimists who make money.

*If doomscrolling has you thoroughly depressed, I highly recommend reading some of the articles on the Human Progress website.

Personal Note:

Tomorrow is the day! If you are in the Sugar Land area and looking for something fun to do, come on out, eat crawfish, play with puppies, and bid on auction items.

Last year, my wife made me walk around greeting people in a dog costume. We’ll see what happens this time around.

It is not very often that an initial stock offering comes along that is so obvious, so exciting, and so inevitable that even people who never buy stocks start paying attention.

But that seems to be what has happened with SpaceX.

Last week, the company confidentially filed with the SEC for a U.S. Initial Public Offering (IPO), targeting a potential June 2026 debut. The company reportedly aims for a valuation of over $1.75 trillion and may raise between $50 billion and $75 billion, making it potentially the largest IPO ever.

Do the financials justify a valuation that would make the company worth roughly 300% of Exxon or nearly 175% of Walmart?

I haven’t seen the numbers, but probably not.

SpaceX may be a great company, with great growth potential, but as I mentioned in my note two weeks ago (The Price is the Risk), great companies can be terrible investments if you pay too much for them. And when a company is at the peak of its popularity, as SpaceX seems to be right now, that popularity makes it one of the most dangerous things to buy.

In many ways, it reminds me of Facebook.

Back in 2012, I remember one of the bond traders I worked with excitedly buying shares of Facebook on the first day of its IPO. It was the only stock trade I ever saw her make. The shares started at $38, fell 33% in 11 days, and eventually fell more than 50% over the next few months.

Somewhere around the lows, she sold her shares and declared Facebook a scam.

SpaceX may trade very differently from Facebook, and it may very well end up being the greatest company ever created. But when an IPO is all anyone can talk about, and investors seem more concerned with vibes than valuation, it is generally best for retail investors to stay away.

Interesting sidenote:

The Fundrise Growth Tech Fund is a closed-end fund that began trading a few weeks ago with very thin liquidity. Most investors who held shares when the fund was private are currently locked in and unable to sell. But the fund owns SpaceX along with other private AI names like Anthropic, Databricks, and OpenAI, and retail investors want to get in before the underlying holdings become public.

So, despite the fund valuing its holdings at around $19/share, the fund started trading at around $31, peaked at $575, and currently trades at around $122.

When the hype dies down and the lockup period for existing shareholders ends, it should eventually trade closer to $19 (or whatever the net asset value ends up being), and whoever is left holding the bag will probably wonder how they lost nearly everything being an early investor in a portfolio of great companies.

Personal note:

My wife has spent the last few months helping to organize a fundraiser for Jenni’s Rescue Ranch. If you are in the Sugar Land area and looking for something to do on April 18th, I highly recommend it.

Weekly Notes:

March 6 | Iran, Uncertainty, and Why We’re Staying the Course - If you are asking whether to move to cash until the Iran conflict settles. The answer is no. Historically, the S&P 500 is positive 83% of the time in the year following a major geopolitical event — and panic-selling is rarely the right move.

March 13 | The Eternal Promise of Easy Money - Private credit was the hot trade for years — until the blowups started. A reminder that chasing high-return, hard-to-understand investments usually ends the same way, no matter how convincing the story sounds at the time.

March 20 | Everyone Thinks They’ll Get Out in Time - An AI meme coin, a derivatives bet on the Second Coming, and shady micro-cap IPOs walk into a bar. Three stories that illustrate how blurry the line between investing and gambling has become — and why smart people keep ending up on the wrong side of it.

March 27 | The Price Is the Risk - Gold doubled in two years and got labeled a “safe haven.” Then it dropped 20% in three weeks. When an asset surges because people are nervous, the risk isn’t the geopolitics — it’s the price you’re paying to get in.

Quote We Love:

“Investing in an unknowable future as an agnostic is a daunting prospect, but if foreknowledge is elusive, investing as if you know what’s coming is close to nuts.” - Howard Marks

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I see a lot of articles about why opening a stock trading account for your child is a good way to teach financial literacy, investing, and the value of long-term planning.

As a father of a 13-year-old, I mostly disagree.

First, investing should be very boring, and kids hate boring. If you put money in an account and let them have access to it, they will eventually find a way to make it exciting.

Second, most stock trading education is terrible. Just about every school district has a stock trading competition, and the team with the highest returns at the end of the semester wins.

What they don’t mention is that short-term gains and short-term losses are potential impostors, as neither is necessarily indicative of real investment ability (or the lack thereof). The kids who win by using leverage and betting on memes probably will come away having learned a lot of bad habits.

Third, judgments that prove correct don’t necessarily do so promptly, so even the best investors look wrong a lot of the time.

If you want the kids to learn the right things (and they feel the need to make it a competition), have them enter an event like the Wharton Global High School Investment Competition, where they do the trading, but winners are selected on the strength and articulation of their team strategies, not on the growth of their portfolios.

Finally, it is worth noting that I am probably biased. When I was in middle school, a relative gave me an envelope filled with old stock and bond certificates. Nobody could tell me whether they were worth anything, so I started researching them, only to discover that all the issuers had gone bankrupt during the Great Depression.

But as part of my research, I found out that people called scripophilists collected these things, and even though the shares and coupons may not be worth anything, the certificates themselves might be.

So, rather than giving up on my hopes and dreams of instant riches, I changed my AOL screen name from SwimKid622 to Scripo22, pretended I was a wizened expert in old stocks and bonds, and started selling them to people in chat rooms.

Fortunately, this was around 1997, and there were limits to how much trouble I could get into and how many schemes I could concoct. Today, I imagine I would have sold the certificates on eBay, used the cash to start trading crypto, and probably developed a habit that looked a lot like a gambling addiction.

But you never know.

What I do know is that one of the hardest skills for professional investors to master is showing up to work each day and doing nothing.

If you think you can teach your kids this restraint by opening a trading account for them on a gamified platform like Robinhood and letting them track it in an app on their phone, go for it. But be careful. What you are trying to teach and what you end up teaching could be very different things.

Personal note:

In addition to being the President of TSA Wealth Management, I moonlight as the President of my kids’ lacrosse program. I recently did an interview with USA Lacrosse about our focus on creating opportunities outside expensive, overly intense travel programs, and Paul Ohanian wrote a very nice article.

Feel free to check it out.

The greatest risk doesn’t come from low quality or high volatility. It comes from paying prices that are too high. This isn’t a theoretical risk; it’s very real. – Howard Marks

Over the last several weeks, I’ve noticed a trend in which financial prognosticators describe their strategy as moving into “risk-off trades” or “safe haven assets.”

It sounds like an appealing strategy during a time of war until you look at what they’ve actually been buying.

Gold As a Safe Haven

At the beginning of 2024, an ounce of gold cost a little over $2,000. By 2025, it was up to $2,700. On February 28, 2026, when military strikes started in Iran, the price had risen to around $5,300.

In a little over two years, gold rose 150%. Nothing about the metal changed. Its weight, shine, and industrial use were identical. The only difference was how much people were willing to pay for it. And that is precisely where the risk lived. Not in geopolitics and not in central bank policy, but in the price itself.

Howard Marks has written that investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity. At that point, all favorable facts and opinions have already been factored into its price, and no new buyers remain.

I don’t know if gold reached its near-term peak popularity at the start of the war, but today, as I write this note, the price of gold has fallen to a recent low around $4,100. A decline of roughly 20% in three weeks.

None of this is to pick on gold or suggest that owning some of it is foolish. Diversification is important. But when you hear the word “safe haven,” it should be in reference to something like a short-term treasury that doesn’t move much in price or have much upside.

When you hear “safe haven” applied to an asset that has recently doubled in price because people are nervous, it just means you are a late mover into a popular trade with a lot of risk.

Personal Note:

As I mentioned at the end of last week’s note, we took a cruise with my parents for our kids’ spring break. My dad doesn’t usually smile for pictures, so I consider this one a notable success.

Also, we had a client social event on the patio of Sylvia’s Enchilada Kitchen last night. I forgot to take pictures, but I had a great time and would like to give a huge thank-you to everyone who came out.

Nothing so undermines your financial judgement as the sight of your neighbor getting rich.” – JP Morgan

Today’s note is just a compilation of three stories I find entertaining. Each reminds me that, for many people, the line between investing and gambling is very blurry.

• My lobster lost $450,000 this weekend.

A developer gave an AI agent named Lobstar Wilde money and social media access. A meme coin was created that fed additional money to the AI. The AI got rich off the token and accidentally sent $450,000 to a random stranger on Twitter.

That stranger sold the $LOBSTAR tokens, crashing the price, which made the AI lobster go even more viral, and the price rose again. According to CoinMarketCap, there are currently over 12,000 holders of the coin, and the current value of $LOBSTAR is around $4,000,000 (down from a high of roughly $14,000,000).

• Derivative contracts on Jesus.

Polymarket is a cryptocurrency-based prediction market where users can place real-money wagers on almost any event imaginable. One of those wagers is that Jesus Christ will return before 2027.

According to the platform, there is a 4% chance of his return.

These odds (and this bet in general) don’t make sense until you realize there is also a derivative market where people place wagers on how high they can get the odds of Jesus’ return to climb.

Most of the money on the yes side of the trade doesn’t truly believe Jesus is returning. They simply think other people will bid up the price so they can get out at a profit before the deadline.

• Just because a company gets listed on an exchange doesn’t mean it is legitimate.

Any IPO on Nasdaq that is raising less than $15 million is pretty much a pump and dump scheme. And there are a lot of them. Last December, Barron’s published this article with the details. Over 230 offerings below $15 million apiece have occurred on Nasdaq since 2023. Last year, eight were halted by the SEC, and over 20 of the new issues fell more than 60% in a single day.

I suspect there are plenty of smart people who hold $LOBSTAR, bet on Jesus, and buy micro-cap IPOs. But, as I’m often reminded, being a smart person and a smart investor are often two very different things.

Personal note:

My kids’ spring break was this week. We used the time off to take a cruise with my parents.

I’ll be back in the office on Monday.

Back in November of 2023, I did an interview with Greg Greenberg from InvestmentNews on the topic of private credit.

The resulting article (found here - “Rising rates have advisors sprinting toward private credit”) ended with my note of caution:

No matter how far private credit outpaces other alternative investments in terms of popularity or asset accumulation, Jon Swanburg, president of TSA Wealth Management, is avoiding them altogether. That’s not because of their credit quality today, but because of the direction it may move in the future.

“I worry that issuers are going to continue lowering their lending standards to get the new inflows of cash put to work,” Swanburg said. “Given the limited regulation, the opacity of the underlying loans, and today’s high interest rates, I wouldn’t be surprised to see some sizable blowups in the years ahead.”

For two years, this statement looked pretty dumb. Private credit continued to outperform with low volatility and seemingly minimal risk.

And then, at the end of 2025, the blowups started. We are now a few months later, and the headlines for private credit haven’t gotten any better.

I have no idea what happens next for private credit. It may recover, and today’s fears will have been for nothing. Or it may continue to fall, and funds will collapse under mountains of defaults.

Either way, I’m certain there will eventually be a new hot trade that promises higher returns and less risk. And when your friends and neighbors are getting rich piling into that new trade, my best advice is to ignore the temptation.

Don’t bet on it and don’t bet against it. Just ignore it.

A well-constructed portfolio, built around your actual financial goals and grounded in assets you understand, doesn’t require chasing the trade of the moment. Investors who sidestep the excitement, absorb a little short-term embarrassment for being “too cautious,” and stay focused on the long game tend to arrive at their destination in much better shape than those who couldn’t resist the eternal promise of easy money.

A note on liquidity:

The other issue with the private credit trade is that illiquid investments are being packaged in semi-liquid products for retail investors. Nobody sees this as a problem when times are good. But when times are bad, it causes trouble.

A good rule of thumb is to avoid any investment that promises to be more liquid than its underlying holdings.

Dog updates:

Another day, another opportunity for my wife to bring home a new foster dog. This one is named Puggy, and she is available for adoption through Jenni’s Rescue Ranch.

This week, I received a few calls and emails from clients asking whether we should increase our allocation to cash until things with Iran become less scary.

The short answer is no.

First, as we wrote about over the last few weeks, we never know what will cause the volatility, but we always expect it.

Second, while there are no facts about the future, historical evidence suggests that now is not the time to sell.

Back in 2022, after Russia invaded Ukraine (and before I published these notes to Substack), I sent out a version of this chart that went back to WWII, making the case that 83% of the time, the S&P 500 is positive one year after major geopolitical events.

Below is a consolidated version that is a little easier to read:

This is not to cheer for bad things or to minimize the potential human impact of conflict. This is simply a reminder that the world has been ending, one headline at a time, for as long as markets have existed. Successful investing requires consistency in the face of uncertainty and never reacting out of fear.

But what if this time is different?

Negative years can and will happen following a conflict. The largest negative return above was in the year following 9/11.

But context matters. The September 2001 attacks didn’t happen in a vacuum. The dot-com bubble had already begun deflating in early 2000. Corporate accounting scandals were multiplying. The economy was already fragile. 9/11 was the event that broke investor confidence in an already-stressed system.

What you’re walking into matters as much as the shock itself. A healthy economy can absorb tremendous disruption. A stretched one is more vulnerable.

Personal Note:

The tiny long-haired chihuahua we’ve been fostering has been adopted by someone in Tennessee. This dog has admittedly been one of my favorites. It has no paw on the front right, and the front left looks like a crab claw, but it still leaps with the best of them.

February 6 | 43% of Stocks Lost Money in a Great Market The S&P 500 nearly doubled over five years — but nearly half of individual U.S. stocks lost money over the same stretch. Disney, Target, and Nike were all in the red. Here’s why that matters for how you’re invested.

February 13 | The Retirement Spending Myth Most Calculators Get Wrong Most retirement calculators assume your spending climbs every year with inflation. Real data says otherwise — and the difference could change how much you think you need to retire.

February 20 | Great Years Still Include Scary Declines The average intra-year drop for the S&P 500 is 14% — even in years that end positive. A look at why the scary moments are part of the plan, not a sign it’s broken.

February 27 | Midterm Volatility Is Right on Schedule Tech is down, tariffs are back, and the headlines feel heavy. But midterm election years have historically been the bumpiest — and most still ended in the green.

Quote We Love:

“Far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves." — Peter Lynch

Seminar:

February 18 | What 2025 Taught Us — And What It Means for the Year Ahead (Seminar Slides) A data-packed look at what drove markets in 2025 — from the dominance of gold and international stocks, to why staying invested on April 9th made all the difference. Jon covered volatility, Big Tech, earnings, the economy vs. how people feel about it, and what history says about investing in a midterm election year.

It would be easy to look at this week’s headlines and think things are getting worse.

• “Magnificent Seven” tech stocks are down sharply for the year.

• Tariff uncertainty is back.

• Private credit funds are showing cracks.

• Bitcoin has plunged almost 50% from its record high.

• AI disruption fears are rattling entire industries.

But for investors who remain broadly diversified, things haven’t been bad. International stocks are up. Bonds are holding steady. Value stocks are outperforming growth, and small-cap stocks are outperforming large. Diversification is working exactly as designed.

But things could get worse, and as I mentioned in last week’s note, that would be completely normal. Scary headlines and market volatility happen every year. What I’ll add this week (and what I discussed during the seminar) is that 2026 is a midterm election year, which has historically turned up the volume on both scariness and volatility.

The good news, as noted in the chart above, despite averaging an intra-year drawdown of 17.5% in midterm years since 1950, the S&P 500 still delivered positive full-year average returns.

A Pattern Worth Remembering

Last year, those who sold out of fear (or sold because they had limit orders in place) on April 8^th could have missed just one trading day and underperformed a buy-and-hold investor by nearly 11%

That is how markets work.

I suspect we will see more scariness in the days, weeks, and months ahead, and I can’t promise this time will be the same as anything we’ve seen in the past. But I can tell you that successful investing has never been about predicting which crisis will pass and which one won’t. It’s about building a portfolio tailored to your goals and positioning yourself to weather whatever storm arrives.

Personal Note:

My wife is fostering two new puppies.

The little one is missing a front-right paw, and the front-left looks more like a crab claw. But she gets around just fine. If anyone is in the market for a new puppy, they are both available for adoption through Jenni’s Rescue Ranch.

This week, we hosted a seminar at our office titled “What 2025 Taught Us – And What it Means for the Year Ahead.” A copy of the slides can be downloaded here.

One theme of the presentation was that scary double-digit stock market declines occur nearly every year, and 2026 will likely be no different.

For example, last year the S&P 500 finished up more than 16% after gaining 23% in 2024. And yet, by Apr. 8 of last year, the S&P 500 experienced a peak-to-trough decline of roughly 19%, largely driven by tariff announcements.

The declines in 2025 inspired me to write the note, “Stock Market Declines Are Normal,” which was largely just a refresh of an article with the same title I wrote in 2024 after the S&P 500 had fallen 4.5% over the previous five days and Japan had its worst market decline since 1987.

Both were very scary times in otherwise great years. But these things will happen.

In any given year, the average peak-to-trough decline for the S&P 500 is 14%. Yet, despite these regular pullbacks, the market has been positive 34 of the last 45 years, with an average annualized return (from 1980 - 2025) of 9.405%, or 12.117% with dividends reinvested.

While I have no idea what will cause the stock market to decline in 2026, I have no doubt it will happen again. And when it does happen, I fully expect it will feel scary, and I fully expect I’ll get a few calls from people who want to sell.

I always do.

Humans aren’t designed to be good investors. Our only hope is to tune out the noise, execute our plans, and remember that this too shall pass.

Seminar Recap:

Here is a link to the seminar slides, and below is a picture from Wednesday’s event. Thanks to everyone who came out.

Personal note:

We used the long weekend to visit family in California, and no one was injured during the five-person bicycle ride.

In the hypothetical scenario above, if your expenses start at $100k and increase annually at the inflation rate, 25 years from now, you’ll spend between $164k and $266k per year, depending on whether inflation averages 2% or 4%.

But that isn’t how things work.

In the real world, spending tends to decline, and what we spend money on changes as we move through different stages of life.

The following charts are from JP Morgan’s 2025 Guide to Retirement. For those with investable wealth between $250 and $750k, spending peaks early in retirement at around $75k and declines to $51k per year as they get older.

For those with investable wealth of $1m-$3m, the trend is very similar, with spending starting at $132k/year, declining to $90k over time.

Of course, you still must account for inflation, but the numbers aren’t nearly as severe.

For example, if your expenses start at $132k at age 60 and you experience annual inflation of 3%, a straight-line assumption would have them reach $371k by age 95. However, in the real world, we would expect actual expenses at age 95 to be closer to $253k / year. A discount, in future dollars, of $118k / year.

Every situation is different, and averages tell us nothing about the individual. However, by correctly framing what your expenses may look like in retirement, you can hopefully create a better plan that gives you confidence to spend more money earlier on and maybe realize you don’t need as much retirement savings as the basic calculator may have suggested.

People love knowing how they stack up compared to others. Below are the 2024 spending averages from the Bureau of Labor Statistics’ 2024 data.

Personal Note:

The middle school track season started last week. My 7th grader signed up for distance running and pole vaulting.

Take this chart, for example.

The black line is the S&P 500. Over the past 5 years, the index has returned roughly 94%.

The bottom three lines show the performance over the same period for:

• Disney: -40%

• Target -43%

• Nike -55%

These are all large, well-run US companies included in the S&P 500, and they have all been terrible investments.

This is why diversification is so important. Over the last five years, while the stock market has been on a terrific run, 43% of individual US stocks have lost money.

Owning a combination of funds with hundreds or thousands of positions is admittedly less exciting than picking individual names, but the diversified strategy is much more effective at managing risk, and in retirement planning, nothing is more important.

A quick note on crypto:

Harry Truman famously said, “The only thing new is the history you don’t know.”

In light of this week’s historic declines in crypto, it’s worth revisiting my note from last June -  Texas Wants Bitcoin. History Wants a Word: What gold, diamonds, and past manias can teach us about today’s crypto moves.

Personal note:

One of my favorite side gigs is being the President of Fort Bend Panthers Rec Lacrosse. We have youth teams for grades pre-K through 8th, along with JV and varsity teams representing Ridge Point High School.

Last weekend, our 3rd- and 4th-graders won the pre-season tournament, as did our 5th- and 6th-graders.

If you have any kids or grandkids looking to try a new sport, I highly recommend they check out lacrosse.

In the first 28 days of 2026, silver is up roughly 50%. Over the previous 12 months, it has been up about 282%.

There are plenty of narratives explaining the move, and no shortage of investors convinced that higher prices are inevitable. But we’ve seen this before, and while there is no telling how high prices eventually go, history gives us a pretty good idea of how it ends.

Remember the Hunt Brothers?

In 1973, they began buying silver at $1.50/ounce and, over six years, accumulated more than 200 million ounces, valued at more than $4.5 billion.

Silver nearly reached $50 per ounce in mid-January 1980, prompting the CFTC and CME to change the margin rules. The price of silver quickly fell to $10 per ounce, the Hunts lost over $1.1 billion on the trade, and eventually declared bankruptcy.

Remember 2011?

Coming out of the financial crisis, silver rose 500% from $8.50 to $50 over two years. But in 2011, the CME raised margin requirements five times in nine days, and silver prices fell by 30% over a few weeks. The prices continued to go lower from there.

But This Time is Different!

The details and environment are always unique, but some things never change. Yesterday, the CME increased margin requirements for silver on non-high-risk accounts from 9% to 11%, while high-risk accounts will see an increase from 9.9% to 12.1%.

Investors shrugged it off, and silver prices continued higher.

But if history teaches us anything, it’s that silver prices do not rise in a straight line forever. I have no idea how high prices may ultimately go, but the pattern is familiar. Margin requirements will continue to rise, leveraged trades will be forced to unwind, and prices will fall back to earth. And once enough time has passed for a new generation of traders to forget how the last cycle ended, the amnesia will set in, and we’ll do it all over again.

Personal Note:

Our house made it through the Texas freeze without any major issues, but my wife brought in a new malnourished foster dog with eight puppies to keep things interesting.

Since smartphones became mainstream in the 2010s, we’ve been running an unprecedented experiment: a casino in every pocket.

My oldest son just turned 13 and recently got a smartphone. This is terrifying. Anyone who has ever seen someone on a smartphone knows what it means to be in the machine zone, where time and space are suspended, and nothing else matters but continuing to scroll.

Technology is only going to get more addictive, so I feel like this article, “The Gambler’s Goal is Not to Win but Simply to Continue,” is an important read for him and everyone else.

The article cites a lot of interesting data points, but below are some of my favorites that relate to investing:

• The median option purchased by a retail trader in 2020 had 4 days to expiry; by 2022, that collapsed to less than one day. Today we’re down to 30 minutes.

• 93% of traders lose money trading options

• 95% of bettors lose money on sports betting.

• 98.6% of Pump.fun tokens are worthless and 97% of Pump.fun traders have made less than $1,000 trading memecoins.

Investing should be slow and boring. Any time you are trying to make money in a way that is fast and exciting, you are probably going to lose.

Personal Note:

Last weekend, we took our families to Kalahari for a business retreat. It may have been more family and less business, but a wonderful time was had by all.