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The First Real Test of the FIRE and FI Communities

There is an adage on Wall Street many have repeated over the years and more so in the last month:


What so many forget is another Wall Street adage similar to the first:


I have warned this is not over yet so don’t get too excited about buying the first decline.

My opinion is unchanged. Unless something drastic changes, the events put in motion will play out until their logical end (the end all panics end in).

Most readers of my blog have never experienced a prolonged decline in many markets at once. It has been 12 long years since things were really ugly. This will be the first REAL test of the FI and FIRE communities. Unfortunately, most leaders in these communities have also never experienced a real market panic when they had meaningful money invested.

By now I hope I convinced all of you to never invest with borrowed money. If you followed this advice it will only be a time thing before normalcy returns. Before the clouds clear, however, the news feeds will be littered with end of the world predictions. Unemployment will rise, markets will fall, the economy will slow or even decline. This has all happened many times before.

My advice to you, kind readers, is turn off the news feeds. The coronavirus will be fine without you watching its every move. Oil prices are going to decline heavily. Enjoy even cheaper gasoline prices in the interim.

If you didn’t sell at the high (you didn’t) don’t try to out guess the market now. Stand pat. Let the world around you panic as it always does. You, my good friends, are smarter than that. You will not be moved by a decline in your investment account balance. That is only a temporary thing unless you lock in the loss.

I was beginning to believe the coronavirus was the black swan event that would finally trip up this long bull run. It seemed strange because the coronavirus is bad, but not that bad. The economic damage could be sharp, but short lived.

The oil price war between OPEC (mostly Saudi Arabia) and Russia is the real black swan event I was waiting for. This has a real risk of causing serious damage.

If oil prices stay where they have fallen to (I’m writing this Sunday night, March 8th, 2020 when oil prices dropped into the upper 20s and gasoline futures dropped over 20 cents a gallon), U.S. shale companies are in deep trouble with massive debt and no way to work out of the problem. 700,000 jobs are on the line and several million more in halo industries serving the U.S shale oil industry.

Not all these jobs will be lost. But if even a reasonable percentage are lost the decade long economic expansion will come to an end.

Remember, the end of one economic expansion only paves the way for the next leg up.

I don’t know where the next economic advance comes from, but there are some strong indications. In 2008-09 shale oil was the one bright spot in the economy as oil prices were high. Oil will be an economic drag this time around.

Where will the next massive spike in economic growth come from? I have several guesses. Elon Musk made EVs cool and reliable. I expect the next economic surge will include a massive transition from ICE vehicles to EVs.

Solar, wind and other alternative sources of energy have the promise of huge economic growth. Even larger economically is storage technology. Batteries and other storage technologies for solar and wind will be nice areas to watch in the decade ahead.

After all this time the final frontier might be the biggest source of economic growth going forward. Virgin Galactic, SpaceX and Blue Origin will compete for space travel dollars. Space holds the promise of opening an economic boom never witnessed before.

So when the news feeds tell you the world is coming to an end, don’t believe it. None of this is new. Old guys like me have seen this before. The history books go even further back with stories of boom and collapse. It is the nature of a capitalist system. You have to take risk to build a better tomorrow and sometimes that leads to some short-term pain.

Stay well, my friends. And vigilant. Fear will rule in the weeks and months ahead. Do not allow your emotions to rule your common sense.


Note: I originally wrote this for a Facebook post for my followers. I removed that post shortly thereafter and pasted it into this post. I felt it was too important to leave this as a social media post that will gallop into the distance rapidly. 

You can read more about past market panic in this book. 



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Monday 9th of March 2020

Great article, Keith. The FIRE community grew from a 12 year bull market. Now is the test to see if it will survive for the masses. It's a very interesting thing to see the panic already setting in in people who logically know this is normal, but can't tolerate it actually happening to them. This will be a real learning experience for many people who were far too overconfident.


Tuesday 10th of March 2020

I think part of it was that plenty of people hit major milestones with the latest surge. Finally crossing into 7 figures or double commas. That (probably inappropriate) exhilaration of course rebounded in a greater than average amount of angst. If they would have sold a few weeks ago they would still be millionaires after all, loosing that label isn't the easiest thing. Some people had readjusted (again inappropriately) their FI timeline based on current value, and were thus disappointed. Of course people with greater positive emotions on the way up are going to have greater negative emotions on the way down.

Keith Taxguy

Tuesday 10th of March 2020

That is the issue, Kim. Most in the FIRE community will be fine. Unfortunately a large enough percentage will be harmed. That is why I published yet again on the subject. I want to provide as much encouragement as possible for sound financial activities for those who struggle when the world around them panics. It is the stressful times where years of financial discipline can be destroyed. Some mock me for saying what I do, but that is okay. I do it for them.


Monday 9th of March 2020

"You can read more about past market panic in this book. " Which book? I don't see a link.

Keith Taxguy

Tuesday 10th of March 2020

Scott, Amazon changed their API recently and they are having problems with some of my older posts with Amazon books listed (66 need to be updated to be exact). For some reason Amazon did okay when I first published and then broke the link. I will try it as an in-text link because it is a good book. I'll drop the link here too:


Monday 9th of March 2020

Hey Keith, would you recommend doing a lumpsum buy during this sale on index funds or do a dollar cost average to buy at each drop of say 5% or more? i've been doing DCA as it makes me feel like i am in control which i am not really :) #sale

Keith Taxguy

Monday 9th of March 2020

The sooner money is invested the better. When you look at long range charts the massive 1987 drop is barely a blip 30 years out. Whether you bought at the high or the low made only a modest difference; the only thing that mattered was that you were in the market the whole time. Investing nearly 20% off the highs isn't the worst thing in the world as long as you have a 10+ year time horizon.


Monday 9th of March 2020

Honestly feel that 6 months worth of expenses in emergency fund is too low for the common advice given by FI blogs/podcasts. When times like these come, and will come for sure, everything falls apart. Investment accounts drop, people lose jobs, renters start falling behind payment, etc. I feel 2 years worth of cash is a more better cash balance.

Keith Taxguy

Monday 9th of March 2020

Once you have enough money accumulated, Benny, I usually recommend 2-3 years in a liquid fund (money market or liquid bank product). If the market climbs you can always sell something to raise cash. If the market tanks you can divert dividends to the money market account until the market reclaims new highs. This should provide at least a 4 year buffer. The 6 month rule is more for people in the accumulation phase and need to keep a greater percentage of their cash working.


Monday 9th of March 2020

Thank for writing this article Keith. Watching this unfold and watching our networth plummet is a humbling experience for sure. I'm taking your and Jack Bogle's advice of "staying the course.". I'm no good at market timing so time in the market is better than timing the market for me.

I wrote an investment policy plan at the advice of bogleheads and will stick with it. If for some reason I get scared I'll go back to that policy and re-read it. My wife maxes her 401k and the rest goes to Roth and taxable. The Roth's and taxable get filled once a month. I won't deviate from this. Attempting to time the dip and "catch the falling knife" is a losing game for me.

We have VFIAX(SP500) in taxable and 401k and VTIAX(International) in our IRA's. 60% US and 40% International recommended by Vanguard. We have 6 months of expenses in cash. I tax loss harvested into VFIAX from VTSAX. We'll see if I get another opportunity to TLH again.

I'll keep coming back here for reminders.

It will be interesting to see how the FIRE community reacts. Especially the young ones who just experienced the 11 year bull market and thought they were smart. Now could be the real test for them.

A nice reminder from Vanguard's CEO.

Keith Taxguy

Monday 9th of March 2020

Excellent attitude, Andy. And a solid plan, too!

This post preempted a much longer post I'm working on. Long posts take research and time. Then I wanted to talk with my followers on Facebook and decided it would be a good, if short, blog post. If I can get and the readers of this blog to not panic I have earned my keep. 2020 is going to be a stressful year for some. But this to will pass. Jack Bogle was right. Stay the course.