The WCI March Newsletter - What Should Your Portfolio Do About the Russian Invasion?

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WCI News

First things first, I want to apologize to all of you. I dramatically undersold the experience at WCICON22. It was phenomenal. The expectations of attendees, speakers, and even the staff were seriously exceeded. We didn't even break any chandeliers with the T-shirt cannon. Kudos to Chrislyn, Katie, and Morgan for putting on an awesome experience and to Dr. Disha Spath who was the emcee as our new WCI Ambassador. It was my favorite conference that I've ever been to, even if I only managed to be a runner-up in the pickleball competition. Since it's a combination in-person/virtual conference, people were watching sessions from the lazy river. It's hard to beat steak and salmon lunches outside in the sunshine. While you'll have to wait until next year (March 1-4, again in Phoenix) for the full in-person experience, you can get all the content from this year's event now via our Continuing Financial Education 2022 online course. You can buy it today and all the content will be up by tomorrow. It's on sale too, 10% off (normally $779, $699 through March 14th). It qualifies for CME, so you can use your CME funds or write it off as a business expense. No risk guarantee as usual.

February was quite a whirlwind. In addition to the three talks I gave at WCICON, I had three other speaking gigs in February, including one in-person down in LA at Valley Presbyterian. I also spoke to hundreds of people virtually both at Novant Health early in the month and at our Planning for Success webinar for medical and dental students (over 1,000 people signed up for that) the night before heading to LA. That was so great we may do another one for residents later this year. March will be a little slower for me thankfully, with just one in-person talk out in San Francisco at the CSRO conference on March 19th for rheumatology fellows. A highly recommended and free conference for rheum fellows by the way.

There are two online events coming up in the next couple of weeks you should know about, both totally free to you. I have an interview in each of them. The first is The Physician Finance Summit on March 4th and 5th, put on by Dr. Baladandapani, one of our first-time in-person WCICON speakers this year (she knocked it out of the park). The second is Dr. Peter Kim's (Passive Income MD) Leverage and Growth Summit on March 9th-13th. I'll be doing my live Q&A session for that while on a heli-skiing trip in Canada on the 11th, so forgive me if I'm not too dressed up for it! Peter does two events during the year, one focused on real estate in the Fall (it'll be live again this year) and this online one more focused on entrepreneurship and starting businesses.

The deadline (March 15th) is rapidly approaching for our WCI Champions program. If you know a first year medical or dental class that hasn't yet received a free copy of The White Coat Investor's Guide for Students for each student, please encourage a student to sign up to pass them out as the "class champion."

Market Report

Link to Spreadsheet Data sources: Vanguard and Morningstar

February was another bad month for stock and bond investors, led by large growth and international stocks. A small value tilt certainly moderated the loss however. Given inflation and the war in Eastern Europe, there has been a bit of a flight to hard assets such as precious metals and commodities. At first it was interesting to see that cryptocurrencies were not included in that (and seemed to be highly correlated with stocks), but in the last two days BTC has done very well. Crypto is going to do what crypto is going to do it seems, although its one year return is actually highly negative and its five year return is actually now lower than the stock market. Interest rates are up, no surprise given inflation and the Fed's recent announcements about raising rates. Naturally, that has hurt bond returns, particularly the ones with the longest durations. We added another column to the chart this month and hope that helps you take a longer term view on investing.

Best of the Blog(s)

Lots of great posts from across the WCI Network this month. Check them out!

1. 4 Lessons From the Vanguard Target Retirement Long Term Capital Gains Distribution Disaster This was a surprisingly popular column and appears to be helping drive a class action lawsuit.
2. How Much Should I Tithe to My Church? I expected more negative feedback on this one, but people seemed to have enjoyed it.
3. Purchasing a Foreclosed Home and 10 Other Ways to Provoke a Migraine. Caveat emptor.
4. From Fourth Year to the Real World, Part 1. This is a new series that I think you'll enjoy as you follow four real life MS4s into their career.
5. Suckered into Whole Life Insurance...My Brain Made Me Do It! Columnist Dr. Racela has a way of kicking the beehive over. Given the number of whole life salespeople now reading the blog, it appears it has been too long since we touched this subject.
6. See, Do, Teach: Reflections on WCICON22 Did you miss it? Here's some perspective on what it was like from another WCI columnist.
7. A Dot-Com Retrospective: I Lost a Month's Pay Betting on a Medical Technology Company Best to learn from the mistakes of others.
8. A 2022 Update on the Returns of My Many Real Estate Investments. What is POF really seeing when it comes to his real estate investments?
9. 6 Weeks of International Travel During Peak Covid. You might think we travel a lot internationally, but we can't keep up with the Dahleen family when it comes to slow travel.
10. FIRE Crossroads 019: When $10M is Not Enough. $10M is not enough for this interviewee. Whereas this doctor retired with $20M: Post FI Notes 014: $20 Million with a Unique Asset Allocation
11. Passive Income MD Survey. POF already published his and ours will be out in a few days; check out Peter's. The most interesting stat to me? More women than men are in his audience.

Best of the Web

Every month I recommend (about) 10 articles from across the web. Thank you to those who send us suggested articles.

1. Does Your Doctor Work for a Private Equity Company and Should You Care? The patients have noticed too. Dr. Hsieh extensively quotes Ben White's thinking on the subject.
2. I'm Making My Kids Millionaires by Hiring Them. Not a new concept to WCIers, but it's a great step-by-step guide.
3. Planners Rate Themselves More Highly Than Their Clients Do. A sobering analysis for financial advisors to look at, it will also help you to temper your expectations when you hire an advisor.
4. Why It Could Be Years Before We See a Normal Housing Market. Waiting for the crash to buy? Ben Carlson doesn't think that's a great idea.
5. Employer Sponsored Insurance, Friend or Foe? This is perhaps the worst of the unforeseen consequences of World War II era wage controls.
6. Medicare IRMAA Premium Brackets. Medicare is not all free, but how much you pay depends on your income...from two years ago.
7. The Secret to Happiness at Work. The % of people who say they are completely satisfied at work is up to 55%. No way is that number that high among docs given that 60% report having burnout! Interestingly enough, 30% of job satisfaction is reportedly genetic! But a sense of a calling matters a lot.
8. The Last Taboo. Whether you want to share your financial numbers publicly or not, there is no doubt that others willing to do so are making it easier for all of us to talk about money.
9. Which Spouse's IRA Should We Spend From (or Convert)? Mike Piper thinks about stuff I haven't even thought about. Always something new to learn out there for us finance nerds.
10. Do You Choose Money Over Family? The answer is almost surely yes. Be aware of how often you are doing so.

Great Stuff from the Forums

The WCI Forum, subreddit, and Facebook Group continue to be great places to get some help with your questions. See these great topics that people are discussing now:

1. 401(k) and IRA Millionaires. Slow and steady wins the race.
2. Is it Wrong to Not Chase After PSLF? No, but it might not be financially optimal?
3. Which Physician Mortgage Terms Would You Choose? When do you want to be done?
4. Burnout and Travel. What are your dream travel locations?
5. Investment Advice After Tax Advantaged Accounts You can always invest more in taxable, but how?

New Podcasts

Be sure to check out the podcast if you haven't yet. 30,000-40,000 are listening to every episode. If you'd like to leave a question to be answered on the WCI Podcast, record it here.

• #251 How to Fix the Retirement Account System (Sponsored by DrDisabilityQuotes.com)
• #250 Marriage, Kids, and Finances (Sponsored by PearsonRavitz)
• #249 What to do With Old Retirement Accounts (Sponsored by PearsonRavitz)
• #248 Veterinarians and Their Finances with Dr. Erik Hofmeister (Sponsored by Laurel Road for Doctors)

The Milestones to Millionaire Podcasts (all accessible at this link) are short podcasts celebrating your accomplishments! Lots of professional variety this month.

• #55 Pediatrician Reaches Financial Independence (Sponsored by CrowdStreet)
• #54 WCI Ambassador Reaches Millionaire Status (Sponsored by CrowdStreet)
• #53 Dentist Reaches Financial Independence (Sponsored by DLP)
• #52 Multimillionaires 5 Years Post Residency (Sponsored by CrowdStreet)

Not enough podcasts to get you through the month? Try these from Passive Income MD!

• PIMD Podcast #96 Obstacles That Prevent You From Succeeding
• PIMD Podcast #92 How to Get an Infinite Return Investing in Real Estate

New Videos

Welcome to the new WCI Youtube Channel. 462 more of you subscribed this month, now more than 14,300! Please subscribe, like, and share!

Tons of new videos this month. Here are just a few of them:

1. Best Investing Accounts
2. Funding Order for Investing Accounts
3. Tax Loss Harvesting - A Step-By-Step Walkthrough

Tip of the Month

Like most of the rest of the free world, I was appalled to see Russian invade Ukraine this week. It brought me right back to growing up in the 1980s hiding under my desk in elementary school. Growing up next door to the closest in-country US military base to the Soviet Union, we spent a lot of time under our desks, although to be fair half of them were earthquake drills. I spent a few minutes at WCICON22 (two weeks before the invasion) talking with a Ukrainian doc about the situation, so I am well aware of the significant real-life human and political effects of the largest European war since World War II. It is a tragedy of the highest order.

From an intellectual standpoint, I find it incredibly interesting to watch one country wage traditional warfare while nearly the entire developed world fights back primarily with economic warfare. Sanctions are nothing new (they're not even new to Russia), but these seem to be the most severe that have been placed on a major country for a long time. The ruble has crashed to a record low (down 20-40% in a day) against the dollar. Russian interest rates have doubled to 20%. The Moscow stock exchange was shuttered. US stock exchanges are preventing the trading of Russian companies. The iShares Russian ETF (ERUS) is down 53%. Russia's biggest bank is on the brink of collapse and savers are rushing to withdraw money before it does. Projections are now that the Russian economy will shrink by 5% this year and that inflation will soar. Sanctions have been placed against individuals, companies, and the country itself. Nearly overnight, a major country has essentially been turned into a pariah nation; nobody wants to touch it. The US has told its citizens to get out of Russia, not because they're worried citizens will be physically harmed, but simply because there may soon be no way out of Russia given that Western airlines are refusing to fly there and vice versa. While Russia saved up a "war chest", expecting some form of sanctions in response to its actions, 40% of that war chest has been put off-limits, the assets having been frozen by foreign countries. Western companies and even non-governmental organizations like FIFA are falling over each other to see who can hurt Russia most. I even thought about turning access to WCI off for anyone in Russia.

All of these economic actions have investors wondering if they should do something. The answer, as usual, is no. Stay the course. In your 60 year investing career (30 during your career and 30 during retirement), this is likely to be a tiny blip if anything. Your written investing plan should address what to do in situations like this, and for most of us, the plan says "do nothing."

While world stock markets are down about 10% year to date, that happened long before the rhetoric about Russia-Ukraine ramped up. Russia is a major supplier of oil, particularly to Europe, so it is no surprise that the price of oil is up about 25% year to date between rising inflation and this crisis. Does that mean you should buy oil or oil stocks? Or that you should sell them? I have no idea. The future is always so hard to predict. Stock index funds own all the oil stocks already, so I will accept that the market collectively likely knows more than I do and is pricing them better than I can. The cure for high oil prices is high oil prices anyway. If the price of oil remains high, more production will come online. Will the high cost of gas ruin the rest of the economy? Probably not. One rule of thumb is that for every $10 increase in the price of a barrel of oil, inflation goes up by 0.2% and GDP falls by 0.1%. Not exactly a dramatic effect.

Some think the crisis will make it less likely for the Fed to raise interest rates by 0.5% this month (but still expect a 0.25% increase). Savers already aren't thrilled to see inflation outpacing interest rates by 6%, but those looking to buy houses and refinance their student loans aren't complaining. Precious metals like gold and treasuries are doing their usual "flight to safety" thing, but Bitcoin is hardly acting like "digital gold." It's down on the year and just as volatile as ever (although sharply up in the last 2 days). Some have speculated that Bitcoin and other cryptoassets would help Russia get around the sanctions. Over the last 24 hours, there is a large percentage increase in people buying crypto in Russia and Ukraine. However, aside from severe volume limitation, the transparency of blockchain based assets makes it easy to see when sanctions are being violated, and enforcement agencies can move in, and in the last year they have shown themselves more than willing to do so.

For many of us, broadly diversified stock index funds make up the largest portion of our portfolios. While stock markets can be affected by geopolitical events, those effects are usually pretty short-lived. This chart from Kiplinger's demonstrates:

While the market is typically down a month after the event, it usually turns around by the 3 month mark. Even Pearl Harbor was not enough to keep the market down for a whole year and 9/11 paled in comparison to the surrounding tech stock bust. There is no reason for a long term diversified stock investor to do a thing with their portfolio. If you're tempted to, I suggest you stop doom-scrolling Twitter and CNN for a few days.

There is a terrible tragedy going on in Ukraine right now, but as far as the economic effects on YOUR financial life, remember that this too shall pass. If you want to do anything about it, consider giving some money to a reputable organization assisting Ukrainian refugees. Be sure to research non-profits carefully as every big geopolitical event spawns scammers masquerading as legitimate charities.

Jim

James M. Dahle, MD, FACEP
Founder
The White Coat Investor
https://www.whitecoatinvestor.com

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