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The Coffeehouse Book

The New Coffeehouse Investor Book

The Coffeehouse Investor

How to Build Wealth, Ignore Wall Street & Get On With Your life by Bill Schultheis

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It is a Saturday morning, and I am playing in a Juvenile Diabetes fundraiser golf tournament later this afternoon.

The outing is being held at the Useless Bay Golf and Country Club, on the south end of Whidbey Island, a pastoral setting, as you can see from the picture above. Of course it is always fun to take my golf clubs on the ferry for a short jaunt across Puget Sound.   

I have a couple of hours to kill before the tournament starts, so I am sitting in the dining room, watching the PGA tournament on TV, and reflecting on the ups and downs of the stock market this past week.   

From a day to day point swing, it was a wild week on Wall Street. 

From a “getting on with your life” standpoint, as one week in the life of a Coffeehouse Investor, it was a big non-event. 

What the stock market does over the next two weeks or next two months (or for that matter, the next two years) should be irrelevant to whether or not you reach your financial goals. 

That is where your financial plan comes into play. 

I am slightly amazed when someone says “The stock market’s recent decline of 12% means I am going to have to go back to work, or delay my retirement by 3 years.” 

It’s as if they weren’t expecting a 12% drop in the market. 

It is time to deal with reality.  There will be times when the stock market experiences a correction of 10% or more.  There will also be times when it suffers a bear market decline of 20% or more. 

That is the stock market for you.

It is time to plan accordingly, and get on with your life.   

 


 

Monday, down 634

Tuesday, up 430.

Wednesday, down 519.

Thursday, up 423.

Friday, up 184 (through mid day trading).

For the week, down 115 (so far).

For someone who encourages you to ignore Wall Street, I do anything but. 

Let me explain. 

I created The Coffeehouse Investor back in the late 1990s in an effort to help investor build wealth, ignore Wall Street and get on with their lives.  I still work on Coffeehouse in my spare time.   

As a livelihood, I keep close tabs on the daily stock market swings, only because I work as an investment advisor (and co-owner) of Soundmark Wealth Management in Kirkland, WA. 

In my nearly 30 years in the financial services industry, this past week, with its crazy ups and downs, has been one of the most gratifying weeks of my life. 

If ever there was a week to ingore Wall Street, this was it. 

This morning I received an e mail from someone that fairly reflects the impact the Coffeehouse principles can have on your life as well. 

Bill, I must say…the advice you offered in your book has literally changed my life! I hardly look at the financial news anymore and do so merely out of interest. Through all this market chaos of the last few days, I was totally unemotional and quite excited about the buying opportunities. I invested some spare cash yesterday as part of my rebalancing strategy.

For Wall Street, it is easy to pontificate on theoretical approaches to reducing alpha and increasing beta based on Monte Carlo simulations that affect risk adjusted standard deviations. 

It is another thing to introduce three simple principles that you already know to be true, and see the profound impact these principles have on the lives of clients who are too busy to keep up with the latest one hundred point swing in the Dow.

The Coffeehouse principles are not mine. They are everyone’s to share with others.  Take a moment to introduce these principles to someone who could benefit the same.  As Larry Swedroe is fond of saying, we are changing the world, one investor at a time.   

Have a great weekend! 

Bill  

 

 


In the heat of the summer, maybe it’s time to have a cold beer.

Sometimes it’s hard to look past the market’s ups and downs and stick with a financial plan that is a little more sophisticated than trying to predict the market’s direction over the next two months.

And yet that is what we are challenged to do.

History reminds us that capital markets are volatile.

The crash in October, 1987, when the market dropped 22% in one day.

The nasty bear market of 2000-2002, following the technology bubble.

The bear market of 2008, led by the sub-prime crisis.

One thing we can be sure of – there will always be bear markets and market corrections (like now).

That means capital markets are working, thank goodness.

Yesterday I shared The Coffeehouse Investor view of the current market on local NPR station KUOW.

Later on in the day, a friend shared with me this interview on local station KPLU-NPR that highlights The Coffeehouse Investor, and the wisdom of staying the course in these challenging times.

Do you have questions or comments about the current investing climate?  Send them our way and I’ll do my best to answer them in tomorrow’s post.

 


The price movement of the current stock market reminds us that it is a volatile beast.

During these times it is more important than ever before to have a financial plan in place so you know how much risk you and your portfolio can absorb.

If you need to sell out of the stock market because a 10 percent drop in the market is likely to affect your lifestyle on the downside, you probably don’t have a well-crafted financial plan in place.

If you want to sell out of the stock market because you are tired of watching your common stocks periodically drop 10 percent in value, well, that is a different story. 

Burton Malkiel, author of “A Random Walk Down Wall Street” shares his thoughts on the current stock market climate in today’s Wall Street Journal. 

I thought you might find it interesting, as it does a good job reflecting the sentiments of The Coffeehouse Investor.


 


Sometimes when I read a column, I think to myself, “My sentiments, exactly!”

This morning I finished reading yesterday’s Wall Street Journal, and came across 2 such columns that caught my attention.

Scott Adams, creator of the wildly popular “Dilbert” character, often pokes fun at the financial industry and is a big fan of The Coffeehouse Investor philosophy of investing in low cost index funds. 

In yesterday’s column, he wrote about the topic of “boredom,” why boredom is important in this world for creativity, why we aren’t getting enough boredom in our lives, and the repercussions of this phenomenon.

Adams writes,

Lately I’ve started worrying that I’m not getting enough boredom in my life. If I’m watching TV, I can fast-forward through commercials. If I’m standing in line at the store, I can check email or play “Angry Birds.” When I run on the treadmill, I listen to my iPod while reading the closed captions on the TV. I’ve eliminated boredom from my life.

I can relate to that.  I am constantly struggling to find enough time to “do nothing.”  My most creative moments have come when I have been bored out of my mind.  So today on this gorgeous Sunday in August, I am going to begin by leaving my cell phone at home.

Are you getting enough boredom in your life?   

The other column, written by Jonah Lehrer, is titled “Social Networks Can’t Replace Socializing.” 

As humans, we strive for a sense of community and belonging.  Sometimes in our busy world it is difficult to carve out enough time to celebrate community and connections in person.  That is one reason on-line Social Networking has become so popular.  

In the column, Lehrer takes a close look at Google+, what it offers in relation to Facebook. Toward the end of the column he writes,

These limitations suggest that the winner of the social network wars won’t be the network that feels the most realistic. Instead of being a substitute for old-fashioned socializing, this network will focus on becoming a better supplement, amplifying the advantages of talking in person.