Morgan Stanley Buying E-Trade is Ominous for Expats Abroad

I don't like dealing in FUD, but that's exactly what I felt when I read the news that Morgan Stanley would be buying the broker E-Trade.

Recently, I've been doing some research on what brokerage was best for normal American expats who want to buy securities with USD but also give their foreign residential address rather than a US address maintained by a relative. I started putting together a spreadsheet, thinking that I'd find a handful with different upsides and downsides.

But honestly, it was worse than I imagined. Nearly every broker's website I visited required a US address, and if a foreign address was allowed, many brokerages would explicitly refuse to allow US citizens living abroad onto their platform. Yes, you read that right. So as of right now, I can find two brokerages that will let an American abroad be honest about their foreign address when creating an account:

All hail Interactive Brokers and Charles Schwab. I use IB, but I'm grateful to both for sticking by us.

Because of this dearth of options, I am worried about the consolidation of online brokerages, and I hope that IB can resist being bought out by a rival who then eliminates US expats from its customer list. Some American friends of mine living in Germany starting an OptionsHouse account back in 2015. OptionsHouse was that rare unicorn who allowed US investors abroad to open an account with a foreign address while being a US citizen. In 2016, E-Trade bought OptionsHouse, and if you try to sign up for E-Trade now, they require a US address but allow a foreign mailing address.

So far, my friends have been allowed to maintain their accounts with their foreign address, but with Morgan Stanley now buying E-Trade, I wonder how long that will last. In 2015/2016, there was a wave of account closings for expats who held their assets at some online brokerages, and with our reliance on the goodwill of a few companies, I'm waiting for the day when another wave starts.

Hopefully that never happens, but our dependence on a dwindling number of companies willing to have us as customers is, bottom line, a risk.

Driving is Absurd

The longer I live without a car, the more absurd driving seems to me.

Maybe it's not even really "driving" but car ownership that's so strange. Buying a car is an absolutely enormous expense. Despite approaching middle age, I've never considered going to a dealership to inquire about vehicles. I guess I could, but why would I? I'm hesitant to buy much less expensive stuff, and a new car just seems like an enormous obligation.

I owned a used vehicle for years while living and working in the US. I know the arguments about how necessary a car is there, and for some of my activities, a car was an absolute necessity. But I'm not certain that those activities themselves were absolute necessities. I ended up doing a lot of things that I never would have done had I not had a car, so, in a sense, it cost me twice by owning the car.

I spent so much money on gas and maintenance. So much of my mental space was clogged with mystery noises coming from the wheel wells or from the engine. It took many trips to many mechanics to find a mechanic that I trusted, and all that meant was that I could spend money with less worry. But I still had to spend the money!

Moreover, cars are dangerous. It's both amusing and annoying how easily freaked out many people are about all sorts of low risk subjects while being completely inured to the dangers of their cars. Last summer, I turned down an invitation because I would have had to have driven there with a rented car, and -- in addition to the financial costs -- driving would have placed both me and my wife at risk. "Is this trip worth the potential costs?" Increasingly, that answer is, "No."

Even without a car, I am affected by them. The air where I live is dirtier, and there is background distress about the pollutants we're breathing. The floor in our apartment builds up a dirty film when we open our windows in the summer thanks to the busy street out front. Walking to work requires serious concentration because the drivers out front are always in a hurry and are super aggressive. I've nearly been hit by cars running red lights here, and I've watched other people nearly get hit by cars. And this is despite the rigorous training German drivers go through.

Oh yea, they're really loud.

And how about the vast amount of space given over to cars? Pedestrians have to push past one another for a narrow bit of uneven sidewalk, while the cars have multiple lanes and huge parking structures given over entirely to their use. It starts to feel unfair once you no longer take part, and it's easy to get resentful that so much stuff is sacrificed to this idol. Thankfully, in Germany, there's always a Fußgängerzone, but that's one of those instances where the exception proves the rule: it shows how the default is automobile driving.

All that said, I can't guarantee that I'll never own a car again. It could happen. If we moved to the countryside or had kids or did a job where driving or hauling stuff became absolutely necessary, then maybe we'd buy a used car again. And I'll certainly drive again: whenever I visit the US, there's nearly unavoidable car use involved.

But I'd rather not if at all possible, and it is an idle wish of mine that cities and countries would back off from further sacrifices to this idol.

Net Worth Update: January, 2020

Our net worth increased from Dec. 26 to Jan. 26 in USD by 4.72% and in EUR by 5.48% to $62,387 and €56,561 respectively.

Some Changes to the Chart

This is the first time I've broken out the holdings in my taxable brokerage. I didn't do this by individual securities but instead by currency and cash amount. Since I have some securities based in euros in addition to dollars, I have split those up. You can see that reflected in the slightly higher euro assets.

Additionally, I'm using a ~10% margin position in euros. Namely, I sold euros to buy dollars some months ago, and I would like to have that debt acknowledged in my spreadsheet and chart. After long consideration paired with the low interest rates my broker charges for euros, I thought it a good idea to lever up a little bit. 10% is a very mild levered position, but it's still mildly unsettling: I am in debt, and I pay interest on that debt. It's worked out so far, but I want it to show, and you can see it in the sudden amount of euro liabilities.

I plan on going back and adjusting the previous months to show this change, but there's no set schedule for when I'll do that.

Major Factors in the MoM Change

I tried to be aggressive with our saving overall, and we saved around 37.5% of our blended income (post-tax for me pre-tax for her) this month. Some of income came after I finalized the spreadsheet: I got one of the refunds I've been expecting for my dental work, so it will be reflected in next month's net worth change.

In addition to that refund, I got some random income boosts. We both got some gift money: since we live abroad, those who wish to give us gifts often just send money. In addition, a colleague hired me for some extra work and sent that money straight into my bank account. That story deserves its own post.

The stock market performed reasonably well, though it wasn't a crazy positive month.

Possible Big Purchase in 2020

After thinking we wouldn't be buying anything large, my wife and I discussed 2020 money goals, and she mentioned a large purchase she's interested in: a piano. In my mind, this might eventually happen as an ongoing rental or a fixed upfront cost of 1000-4000€. I have some math to do!

We also haven't made fixed plans for the summer. The summer trip to see family is often our biggest outlay for the year, so that's a big wild card.

February Outlook

There's one final dental cost refund that I expect to happen in February, but otherwise, I don't expect any big cash infusions beyond our normal income. Our February budget right now is aiming for a 22.6% savings rate, so if the market holds still for a month, we're looking at a net worth change of ~€1000-€2000.

If You Buy It to Keep It Forever, Then You Need to Actually Keep It Forever

Last month, my wife's computer died.

The trackpad started glitching out, the battery couldn't hold a charge despite not being very old, and it had trouble accessing the boot disk. After some basic triaging, I determined that any potential fix was worth more than the computer was.

It was totaled.

I bought that computer in 2011 for my personal use before giving it to my wife. Back then Macbook Pros were upgradeable without too much fuss: if you wanted to add more RAM or a larger or faster disk, it wasn't difficult at all. And that's exactly what I did. I doubled the RAM in the first year, then I bought a 1 TB hard disk, and then, once prices were more reasonable, I bought a SSD and added it.

The computer, amazingly, got faster over time. OS X "Lion" was truly awful when it came to speed, but in the years that followed, OS X and subsequently macOS got faster. That combined with my hardware upgrades meant that the machine even in its final years felt speedy. In many ways it was faster than the "upgrade" I bought used via eBay that was manufactured a couple of years later.

In addition to the upgrades, I also made repairs. The most significant was changing out the keyboard after it started glitching out. That was a major operation that lasted many hours, but it fixed the problem for much less than a new computer. I also changed the battery and replaced faulty RAM sticks. When colleagues had problems with their Macs of this vintage, they'd bring them to me for the repair. This actually got us a free used computer after I revived a Macbook Air with liquid damage that the owner had given up for dead.

When I bought it, I paid up for several upgrades, but I was determined to wring every ounce of life out of that computer. And I did until it finally became untenable to do so anymore.

This is not meant as an endorsement of Macs, but instead, it's meant to be a reminder: if you pay up for something because you believe it will last a long time, then you actually need to use it a long time to get that value from it.

I've saved myself a lot of money on unnecessary replacements by asking myself, "Did I buy the thing I want to replace while thinking that I would be able to use it a more or less forever? Have I reached forever?"

If not, then I don't buy a replacement.

Obviously, "forever" isn't literal but means instead until the product becomes untenable to use. It's up to you to define what that means, but "totaled" is a good concept here: once a product costs more to repair than to discard, it's probably time to move on.

For example, I'm saved a lot on clothing with this Q/A. Boots and coats are expensive, but they're also fashion items subject to our whims. I'd love to buy the next fashionable "keep it forever" item, but I'm already in possession of several. So the better course of action it to look at what I already have and then take care of it, either through repair or basic maintenance.

I'll add that cars also fall into this category. With proper maintenance, modern cars can last very long times. When I owned my last and only vehicle (since we're car-less now), I was a regular at the quick oil-change place and the various mechanics I trusted. I drove a 1999 vehicle until 2013, and I sold it for a still respectable price once I had to. Had we not moved abroad, I assume that I'd still be driving that vehicle.

In all cases, beware the story you sell yourself to convince you that a new thing will be the real "keep it forever" item. Look at what you have and ask whether it's really and truly done for, or if you're just in the mood to spend some money.

Net Worth Update: December 2019 and Year End Review

Our net worth increased in December to $59,577 and €53,624, which is a one month change of 4.36% and 3.61% respectively. That's due to my bonus, the infusion of money from a relative to subsidize my wife's music lessons, and the stock market's performance.

For the year over year view, compared to December 2018, our net worth has increased by 60.95% in USD and 65% in EUR. That's an increase of $22,562.

That's not bad, but a lot of it was dumb luck. Compared to the 2019 budget I wrote at the beginning of the year, our spending was higher in nearly every single category than planned, and our saving was lower in both categories than was planned. I wish there were an obvious reason other than just unrealistic expectations, but that's the heart of it.

Percentages

With our total savings of €7,959, we had a savings rate of 13.79%. If we were total newbs at saving starting with nothing, that would imply we'd have 51 years before retirement (according to the famous "The Shockingly Simply Math Behind Early Retirement").

So where did our money go? The top category is "Rent" at 17.78%. Since bundled into the "Rent" are several utilities, it on its own does not seem too egregious. It's not ERE-level, but I'm actually pleased at how low it is. With my regular pay-raises and Germany's strong renter protections, it should trend downward as a percent over time.

The second largest line-item is "Dentist" at 13.01%. As I mentioned often, I had some major dental work done this year, and although I expect some assistance from several sources, only one of them came through before year-end (seen in the graph as "Refunds").

After that are the "BLOW" categories. Combined, they're 12.79%. This is spontaneous money and is something of an allowance for me and my wife. I estimated that we'd need €2,400 each for the year, but in reality, we each spent around €3700.

What lies within those "BLOW" numbers? It contains our hobbies, our restaurant visits with friends, our clothing, some travel, some entertainment, some toys, and so on. It's a big category. I wish I could say that I knew how to restrain spending within it, but it's tricky. Ultimately, we know inside ourselves that we can afford certain things, so we buy them.

Under those large categories are other medium sized expense groups. "Groceries" at 6.9%, "Health Insurance" at 5.68%, "Household" at 5.19%, "Travel" at 2.41% and "Telephone" at 2.36% are the largest. Groceries have proven difficult to cut. There's not much to be done about the "Health Insurance" cost. "Household" was inflated because we bought a sofa and an iPad for my wife when her computer died. It's something of a wildcard in 2020 because I'm not sure when my computer might kick it, but until it does, I'm going to assume that this category will be lower in 2020. "Telephone" was inflated due to my iPhone purchase at the beginning of the year, which I won't repeat in 2020 absent one of us losing or killing a phone.

And "Travel" basically means plane and train tickets for vacations. It's a separate category from our commuting categories (which are so small as to be essentially meaningless). Like everything else, I planned an amount, and we spent more than I planned for. I will just plan for more this year.

Stock Performance

Since our savings rate was so low, the gains came mostly from the performance of the stock market. In December, 2018, there was something of a bear market, so my numbers were depressed. As I wrote then:

Since the majority of whatever wealth we have is in the form of stocks, we were hit hard by the sell-off in equities. Anyone paying attention to the markets this past month would have seen the kind of fast paced elevator down that market pundits have been scaring us about for years. Our savings rate didn't spare us from the damage.

But in 2019, stocks did amazingly well. My collection as a group did very well, in fact, and the turnarounds by some have been shocking. I have some very good winners, and I'm pleased with the names in the portfolio right now.

That said, I did make some mistakes. In general, my mistakes have tended to be selling too early, rather than too late. Some names I took losses on for no good reason, and with others I took profits too early and missed out even higher highs.

Simply abiding a portfolio is hard, and although I'm getting better at it, there's no guarantee that I won't futz around again with negative results.

2020 Expectations

Obviously, I have no control over the stock market, so there's no guarantee that our net worth number will be higher next year than now. But I can control our savings rate.

The biggest change will be the absence of dental costs. I'll go in for a cleaning and all that, but the big procedures are behind me for the time being. If I save that, it will result in a near doubling of our 2019 savings rate. If we cut down our "BLOW" costs, then maybe we can get even more saved.

A wildcard is the parent I mentioned in "My Baby Boomer Parent is Poor". My family has reached an inflection point there, and I wonder if 2020 is the first year I'll have to help. I hope not, but it's not outside the realm of possibility.

My wife and I have no large expenses planned for 2020. Maybe a computer, but I'm not going to rush it until it becomes absolutely necessary. We'll do some travel. We have no large-scale furniture purchases planned. My hobbies don't require any new large purchases.

So this year, I'm hoping to save over €10,000 and hopefully closer to €12-€13,000, which would be a 23% savings rate. That feels doable and maybe even beatable.

Here's wishing you and your loved ones a happy and prosperous 2020.

Net Worth Update: November 2019

Our net worth increased 3.56% in USD and 4.03% in EUR to $57,087 and €51.756 respectively.

This was a surprisingly good result considering some large expenses. Once again, the stock market performed well. Our taxable brokerage account -- excluding deposited money -- climbed about 5% during the month. The IRAs climbed 3%.

On the expenses front, I finally got the bill for the dental work, and it was as quoted and expensive. Thankfully my health insurance chipped in their part quickly after I'd paid the bill in full, which cut down the cost by a third. I still have some other expected reimbursement sources that will hopefully chip in during the next month.

Our groceries budget was again really high. We had a Thanksgiving feast with some American friends, and we chipped in on some of the costs. But I doubt that was the whole story, and I hope this isn't a new normal.

December Outlook

On the income side, I'll receive my Christmas bonus from work, which adds up to 1/3 of a full month's pay. We also expect to receive the money from my wife's relative who helps subsidize my wife's music lessons. I realize how lucky we are for that.

As mentioned, I expect to receive additional reimbursement for the dental work. It won't cover the whole cost, but it will be enough that the total cost will have been significantly brought down.

We'll have to pay our estimated taxes in December, and that will be a large hit. My wife, due to a US trip, will have worked less in November, which will lower her December income.

We also need to buy my wife a new computer since hers finally died. I'll need to write a separate post about that since that previous computer gave us excellent value over its life.

Net Worth Update: October, 2019

Our numbers increased to $55,126 and €49,753, which is a month over month rise by 5.97% and 4.44% respectively.

This was almost entirely due to the performance of the stock market. If you follow the market at all, you know that the S&P 500 hit new all-time highs in October, and that momentum brought my collection of individual names along for the ride. I'm finally back in the black, and I'm curious if it will actually stick this time or not.

We saved just under €1500 of our income, which amounts to a 34% savings rate (of the money that comes into our tax account). We overspent in October though, so that's going to cut into the amount I can save in November.

We also bought a plane ticket for my wife to visit her family in the USA. Ticket prices were reasonable, and she wants to support a family member who's going through a tough time.

Improved Groceries Spending?

Although I'd hoped we could keep our grocery bill down, we ultimately spent much more than budgeted this month. I'm still a bit confused about the result.

Part of the challenge is that I've joined a gym and am working out a lot. I need to eat more because of this, and at first, I was trying to do it with cheap bulk options like lentils, onions, oatmeal, frozen peas, etc., but my digestive system just couldn't handle it. I've eaten plenty of high fibre foods in my life, and the amount of discomfort I experienced eating these less expensive options was confusing.

I'm still trying to eat mostly cheap foods, but there's no escaping that I'm eating more of everything, and that has a cost. On the other side of the ledger, my alcohol consumption has dropped significantly, which is a major savings.

First Credit Card Product Change

I followed through with a product change from the Citi ThankYou Premier after the annual fee hit my statement. I tried asking for a retention bonus, but the bank had nothing for me, so I product changed to the Rewards+ card and got the fee refunded. We'll get to keep the accumulated points, so I'll be on the lookout for a chance to use them at some point.

Before I switched the card, I did the math, and it didn't make any sense to have two cards with annual fees. I couldn't spend enough to accumulate enough points to justify the fees on two different cards. Part of the challenge is that so much stuff in Germany still can't be paid for with a credit card. Because bank transfers are so easy here, credit cards haven't found a toe hold in all sorts of markets that would otherwise be an option for us to spend on.

November Outlook

My wife should be getting some novel payments this month from some additional work she did. I got some extra money from some extra work that I did, so money inflow isn't a problem.

That said, trips to the USA always cost something, and the family member in distress might also need some help financially. That's an unexpected turn, but we'll try to help if we can.

Aaaaaand the shoe will eventually drop on some dental costs. I'm not sure why it's taking so long though.

Until next time.