gmt's Net Worth for January 2019

Assets Value Change ($) Change (%)
Cash $9,613,237 $761,050 8.60%
Stocks $0 - -
Bonds $0 - -
Annuities $0 - -
Retirement $887,062 $11,946 1.37%
Home $2,137,500 - -
Other Real Estate $332,500 - -
Cars $570,000 ($12,000) (2.06%)
Personal Property $0 - -
Other $5,274,428 $464,133 9.65%
$18,814,727 $1,225,129 6.97%
Debts Value Change ($) Change (%)
Home Mortgage(s) $0 - -
Other Mortgage(s) $0 - -
Student Loans $0 - -
Credit Cards $0 - -
Car Loans $0 - -
Other $0 - -
Total Debts $0 - -
Net Worth $18,814,727 $1,225,129 6.97%
*All values shown in USD ($)
Despite all the stock market turmoil, several developments this month combined to make for a meaningful positive move in net worth, and almost none of it had to do with the stock market.

First, with respect to “Other Assets,” a lot is happening. For the last five years, this category represented two separate business interests, the larger one being equity in my law firm and the other being another lesser business interest that I’d sold in late-2016, subject to a payment schedule. I’ve now received full payment for the balance due on that second business interest, which normally would make the total amount of “Other Assets” go down (as that cash is moved into another category). But, my firm had a blow-out year in 2018 and, despite it being worth more, I’ve held back the firm's value at the 2017 level for the last 18 months.

The new amount for “Other Assets," therefore, reflects the adjusted value of the firm for 2018 as determined by our “buy-out” formula (which is basically 3 times average earnings from the last 5 years). This is still conservative since the estimated value for 2019 should be north of $6MM—and our practice is non-recessionary. So maybe I’ll continue to let that value lag 12 months and, like I’m doing here, update it to the prior year’s value on the 1st of every year to keep a conservative value. We’ll see, but it was time to update it in any event.

Second, I've received a large end-of-year disbursement and, after paying remaining estimated taxes for 2018, the remaining balance is still almost $600K. That, plus the payment referenced above in “Other Assets” as well as recovering bond prices boosted “Cash” to a new personal record, with the bulk of those funds currently invested in conservative, medium-term, investment-grade municipal bonds.

Third, and far less exciting, with respect to “Automobiles.” I am adjusting this down. It accounts for reducing the value of my boat to $500K, and also includes reduced values for 3 modest vehicles for myself and my daughters, all depreciating assets, of course. That said, I’ve upgraded a lot of stuff on the boat this year and think my values on it and the 3 vehicles are probably low, but this fits my view of being cautious on valuations.

On a similar note, I continue to undervalue my real estate holdings. I do this partially because their illiquid nature makes them difficult to assess, but also because I don’t trust inflated real estate values (which lag the market) and prefer to account for these assets as though values will adjust somewhat lower in an anticipated recessionary environment. I also continue to account for their net value, i.e., their value after deducting any applicable transaction costs and taxes in the event of a sale. So like my other assets, my stated real estate values are probably lower than actual values.

Anyway, taken together this makes for a good month, hitting several new personal milestones, and thankfully avoiding much of the carnage currently spreading through the equity and corporate junk-bond markets.

Speaking of which, once the VIX spiked over 30 and the S&P hit 2,400, I began to scale back into the stock market. Though this will probably prove to be premature, I’ve missed this stomach-churning, roller coaster year and I’m glad to have preserved and grown my wealth by 15% this year (which gets harder to accomplish each passing year). That said, assuming the market continues its slide, I’ll continue scaling in—particularly when the VIX spikes over 40 and the S&P drops below 2,350—making long-term, high-quality, large-cap equity investments over time with a preliminary "target asset allocation” for investible assets of about 20% to equities. As of now, with investable assets, I’m approximately 8% in equities, 76% in municipal bonds, 4% in alternative investments, and 12% cash waiting to be deployed.

Happy new year to all.


1/9/2019 4:31:43 PM auzzieyank
Thanks! Can you tell use the municipal bonds fund symbol?
1/10/2019 3:37:00 PM gmt
Sure - my allocation is about 75% with VWIUX (intermediate-term ~ 5 years) and 25% with VWALX (slightly longer-term ~ 7 years). VWIUX is mostly AAA and AA bonds and has absolutely no AMT exposure whereas VWALX goes slightly deeper into the credit quality, but still with all investment grade bonds, and has about 20% AMT exposure. I've often questioned whether it makes sense for the extra yield to hold VWALX, but I'm ultimately comfortable with the mix long term.