Investing: The Greatest Show On Earth

Investing: The Greatest Show On Earth

Mar 9, 2021 by Morgan Housel

Let me share two quick stories that have nothing to do with investing. I want to convince you of something important and overlooked: Investing is a broader field than it looks, and there is so much to learn about it outside of the narrow lens of finance.

The first comes from forests.

Most young tree saplings spend their early decades under the shade of their mother’s canopy. Limited sunlight means they grow slowly. Slow growth leads to dense, hard wood. But something interesting happens if you plant a tree in an open field: free from the shade of bigger trees, the sapling gorges on sunlight and grows fast. Fast growth leads to soft, airy wood that didn’t have time to densify. And soft, airy wood is a breeding ground for fungus, disease, and ultimately a short life. “A tree that grows quickly rots quickly and therefore never has a chance to grow old,” forester Peter Wohlleben writes.

Which is exactly how it works in business and investing, isn’t it?

There’s a graveyard of companies and investors who tried to grow too fast, attempting to reap a decade’s worth of rewards in a year or less, learning the hard way that capitalism doesn’t like it when you try to use a cheat code. Chamath once put it: “The faster you build it, that is the half life. It will get destroyed in the same amount of time.”

Another story, this one from medicine.

In 2013 Harold Varmus, then director of the National Cancer Institute, gave a speech describing how difficult the war on cancer had become. Eradicating cancer – the National Cancer Act’s goal when it was signed in 1971 – seems perpetually distant. Varmus said:

There’s a paradox that we must now honestly confront. Despite the extraordinary progress we’ve made in understanding the underlying defects in cancer cells, we have not succeeded in controlling cancer as a human disease to the extent that I believe is possible.

One of the missing pieces, he said, is that we focus too much on cancer treatment and not enough on cancer prevention. If you wanted to make the next big leg up in the war on cancer, you had to make prevention the top priority.

But prevention is boring, especially compared to the science and prestige of cancer treatments. So even if we know how important it is, it’s hard for smart people to take it seriously.

MIT cancer researcher Robert Weinberg once described it:

To continue reading, please go to the original article here:

https://www.collaborativefund.com/blog/investing-the-greatest-show-on-earth/

16 Money Rules That Millionaires Swear By

16 Money Rules That Millionaires Swear By

Gabrielle Olya  Mon, March 8, 2021

Being a millionaire or billionaire — especially a self-made one — usually requires being disciplined about saving and spending, as well as investing wisely. Although the super rich can splurge on lavish vacations and fancy cars, some eschew a luxurious lifestyle for one that allows them to maintain their wealth over the long-term. So, if you want to live like a millionaire yourself, you’ll have to follow the money rules of the wealthy.

Kristen Bell: Take Advantage of Coupons When Shopping  Net worth: $20 million

“Frozen” star Kristen Bell still clips coupons despite her multi-million-dollar wealth.

“I almost exclusively shop with coupons,” she said on “Conan,” sharing that her personal favorite place to shop with coupons is Bed Bath & Beyond. “It’s the best one because they’ve got 20% off, and if you go and buy a duvet or an air conditioner or whatever, you could be saving upwards of $80.”

Sara Blakely: Create and Maintain a Nest Egg   Net worth: $1 billion

Spanx founder Sara Blakely kept her day job while starting her shapewear company to make sure she’d be able to maintain a healthy nest egg.

“It’s really important to save money and create a nest egg, become comfortable for yourself with what the nest egg is, and don’t touch it,” she told Business Insider. “Leave it there. I always had a portion of my paycheck put into savings, and that was an easy automatic way … I didn’t quit my job until I’d already landed Neiman Marcus and Saks Fifth Avenue. I was so careful, I [worked on Spanx] at night and on the weekends because I didn’t not want to have income coming in.”

Warren Buffett: Think of Investing as a Long-Term Strategy  Net worth: $82 billion

Billionaire investor Warren Buffett isn’t a proponent of active stock trading.

“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever,” he wrote in his 1988 Berkshire Hathaway shareholders letter. “We are just the opposite of those who hurry to sell and book profits when companies perform well.”

Grant Cardone: Save $100K and Invest the Rest  Net worth: $300 million

Grant Cardone is a self-made millionaire, author and sales training expert. He recommends hitting a lofty savings goal — $100,000 — and then investing any money earned after you hit that amount.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/16-money-rules-millionaires-swear-130000577.html

5 Major Money Mistakes To Avoid Once You Turn 60

5 Major Money Mistakes To Avoid Once You Turn 60

Laura Woods  Sun, March 7, 2021

You’ve been working hard your entire adult life and you’re finally nearing retirement. The prospect of having more time to relax and enjoy yourself is exciting, but you’ll need money to do that.

As you wrap up your peak earning years and prepare to step away from the workforce, it’s important to make smart money moves that will protect your nest egg. All it takes is one poor financial choice to throw a wrench in your plans — and financial stability — so take the time to make informed decisions.

When faced with a large amount of cash, it can be tempting to share it with loved ones — i.e., your children — or indulge yourself with luxury items. However, this money needs to last your entire retirement, which could span decades. Here’s a look at common financial blunders you don’t want to make as you get older if you want to avoid a major financial setback.

Collecting Social Security Benefits Too Soon

Many people make the mistake of taking Social Security income as soon as they can because it’s available. Others start early because they’re afraid the system will run out of money. Neither approach is the best way to maximize benefits.

“You receive more each month if you wait until your full retirement age, and you can even get increases after that — amounting to roughly 8% per year until you’re 70,” said Justin Pritchard, CFP, founder of Approach Financial, Inc. in Montrose, Colorado.

Having patience can literally pay off.

“Instead of claiming as soon as possible, run some numbers to determine how much you’ll earn if you wait,” he said. “Remember that a surviving spouse who takes over your benefit will be affected by your decision, so choose carefully.”

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/5-major-money-mistakes-avoid-190054441.html

Why Rich Parents Are More Likely To Be Unethical

Why Rich Parents Are More Likely To Be Unethical

David M. Mayer, Professor of Management & Organizations, University of Michigan

Sat, March 6, 2021, 9:11 AM

Federal attorneys in 2019 arrested 50 people in a college admission scam that allowed wealthy parents to buy their kids’ admission to elite universities. Prosecutors found that parents together paid up to US.5 million to get their kids into college. The list included celebrity parents such as actresses Felicity Huffman and Lori Loughlin.

Some might ask why did these parents fail to consider the moral implications of their actions?

My 20 years of research in moral psychology suggests many reasons why people behave in an unethical manner. When it comes to the wealthy, research shows that they will go to great lengths to maintain their higher status. A sense of entitlement plays a role.

How people rationalize

Federal attorneys in 2019 arrested 50 people in a college admission scam that allowed wealthy parents to buy their kids’ admission to elite universities. Prosecutors found that parents together paid up to US.5 million to get their kids into college. The list included celebrity parents such as actresses Felicity Huffman and Lori Loughlin.

Some might ask why did these parents fail to consider the moral implications of their actions?

My 20 years of research in moral psychology suggests many reasons why people behave in an unethical manner. When it comes to the wealthy, research shows that they will go to great lengths to maintain their higher status. A sense of entitlement plays a role.

How people rationalize

Let’s first consider what allows people to act unethically and yet not feel guilt or remorse.

Research shows that people are good at rationalizing unethical actions that serve their self-interest. The success, or failure, of one’s children often has implications for how parents view themselves and are viewed by others. They are more likely to bask in the reflected glory of their children. They seem to gain esteem based on their connection to successful children. This means parents can be motivated by self-interest to ensure their children’s achievement.

In the case of cheating for their children, parents can justify the behavior through comparisons that help them morally disengage with an action. For example, they could say that other parents’ do a lot worse things, or minimize the consequences of their actions through words such as, “My behavior did not cause much harm.”

To continue reading, please go to the original article here:
https://www.yahoo.com/news/why-rich-parents-more-likely-141127240.html

How Stimulus Checks Can Give You A $14,000 Windfall This Year

How Stimulus Checks Can Give You A $14,000 Windfall This Year

Sigrid Forberg  Thu, March 4, 2021

Congress is nearing the finish line as lawmakers race to pass President Joe Biden’s $1.9 trillion relief package by mid-March.  Included in the package is the third round of stimulus checks — for up to $1,400 this time — plus an extension of emergency federal unemployment benefits, an expanded child tax credit and more.  So if you need more help to pay down debt or cover household expenses, you may start to receive it in a few weeks. 

Taken together, government relief this year could provide a family of four with a pile of money totaling at least $14,000, according to a new analysis. Here’s how your household could get a windfall like that in 2021.

How does the math work on $14,000?

Consider the Smiths, a hypothetical family of four with two adults and two children, 7 and 10. Provided they met the income criteria for stimulus checks, the Smiths would have received $2,400 in January from the second round of payments: $600 for each adult and each of the kids.

If Congress passes the current aid bill and Biden signs it, the family would get another $1,400 per person, for a total of $5,600. Add that to the $2,400 from earlier in the year, and you get a total of $8,000 in stimulus checks for the household.

Another part of the president's COVID rescue package boosts the child tax credit to give low- and moderate-income families $3,000 for each child between the ages of 6 and 17 for 2021. Half that money would be paid out in monthly installments (a different kind of "stimulus check") during the second half of the year.

So, the Smiths would receive an additional $6,000 for the kids — for a grand total of $14,000 in government relief this year.

Some households stand to get even more than that, notes a report from the financial services firm Raymond James.

How do you collect more than $14K?

To continue reading, please go to the original article here:

https://www.yahoo.com/finance/news/stimulus-checks-14-000-windfall-010000221.html

How Much Money is Enough?

How Much Money is Enough?

By Retire Before Dad

How much money is enough to retire or change careers? As my wealth has increased, I've found that net worth is an imperfect measure of enough.  A few years ago, somebody asked how much money is enough for me to retire.  I used a back of the napkin estimation based on the financial independence number and answered.  This was 2015-ish.   At the time, I thought the number would be more than enough to live comfortably for the rest of our lives, fund our three children’s college educations, and still travel in retirement.

But sometime in Q4 2019, our family’s net worth (minus home equity) surpassed the number, and since then, we’ve left it in the dust thanks to the Covid-19 dip and recovery rally.  According to the 2015 RBD, I could stop working my full-time job today. Yet here I am, with no immediate plans to leave my career.   As my wealth has grown, I’ve found that net worth alone is an imperfect indicator of enough.

Enough for What?

It’s hard to determine how much money is enough if you haven’t defined your objective.  Enough varies based on many factors, including your life stage, financial needs, and desired outcomes.  How much money is enough to:

Retire at age 55 and never work again?

Retire at 50 and work part-time in retirement until age 65?

Quit your day job to become an entrepreneur?

Leave your high-paying career for a lower-paying, more meaningful opportunity?

Retire with enough to leave an inheritance for your family?

Figuring out precisely what you want is essential, so you’re pursuing the right outcome. The ideal outcome is not always clear.   My goal since 2003 is to retire and never work again at age 55, so I can travel six months out of the year.  I was 27, single, and living with my parents when I set that goal.

Eighteen years later, my reality has changed. Kids, future college costs, new interests, and a greater sense of purpose have changed how I think about a traditional retirement.  Working at the same corporate job for the next ten years and retiring at age 55 to travel may not be the optimal route.  I’m now looking at hybrid models, where I potentially “retire” from my lifelong career to pursue more exciting work.  

To continue reading, please go to the original article here:

https://www.retirebeforedad.com/how-much-money-is-enough/

Warren Buffett Says This Is How You Stay Financially Healthy In The Pandemic

Warren Buffett Says This Is How You Stay Financially Healthy In The Pandemic

Doug Whiteman  Tue, March 2, 2021

Warren Buffett isn't letting the pandemic get in his way.

The 90-year-old investing legend has gotten both his COVID shots, and so has his longtime business partner, Charlie Munger, according to a report by Bloomberg.  Though Buffett wasn't able to immunize his company from the coronavirus economy, Berkshire Hathaway Inc. has been making a strong recovery. Profits were down 48% last year at the massive conglomerate, but earnings during the final quarter of 2020 jumped 23% from a year earlier. 

So, all in all, the billionaire businessman would seem to be weathering the crisis just fine. You can, too — if you follow his lead.  Here are six lessons from Buffett on how to protect your money as the pandemic hangs on.

1. Pounce on low interest rates

With interest rates falling, Buffett says it's a great time to borrow.   Buffett became one of the richest people on Earth by taking advantage of opportunities. In the last year he has been pointing out fantastic opportunities for borrowers, thanks to the Federal Reserve's response to the COVID crisis.

The Fed "did the right thing" by cutting a key interest rate almost to zero in response to the virus, Buffett says. The central bank continues to hold rates down, and that's helped keep other borrowing rates low.

"This is a very good time to borrow money, which means it may not be such a great time to lend money, but it’s good for the country that it’s a good time to borrow money," he said during Berkshire Hathaway's online shareholders meeting last May.

How you can be like Buffett: If you're a homebuyer or homeowner and have a solid credit score, grab one of today's historically low mortgage rates while you can.

Though rates have been rising in recent weeks, you can find new and refinance mortgages at 3% or lower — if you shop around and compare mortgage offers from multiple lenders.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/warren-buffetts-6-rules-stay-231800460.html

A Healthy Obsession with Money

A Healthy Obsession with Money

By Retire Before Dad

I’m obsessed with money.

I think about earning, saving, and growing money most of the day. I’ve written about money for more than seven years. Saying someone is obsessed with money might conjure to mind words like greed, fame, power, influence, and opulence.  Picture a celebrity flashing fancy clothes and jewelry on Instagram and their millions of envious followers.  Or a hedge fund manager posing in front of a Hamptons mansion for a Fortune Magazine feature. How much is enough?

Money and politics? Barf.  But money is a powerful tool for good.   Sites like GoFundMe help us support families in our communities when they suffer a trauma.  International charities such as Doctors Without Borders and World Central Kitchen can’t operate without generous financial donations.

The pursuit of money for abuse of power or to oppress others is a stain on humanity.  But a healthy obsession with money, for individuals, leads to smarter money decisions.  Years of making smart money decisions will eventually lead to personal wealth.   Wealth provides financial security, the ability to purchase useful things and meaningful experiences, and the opportunity to give to others — all of which make our lives better. But the reason I’m obsessed with money is that it gives me options.

Options When Unemployed

In late summer 2017, I learned that the project paying for my employment would endure deep funding cuts. Management had to reduce staff.   I was particularly vulnerable as a subcontractor.   Though my experience and tenure might have been enough to carry me through the cuts, I asked the project managers to let me go.  They dropped me, forcing my employer to lay me off (I wasn’t happy with my employer, but that’s a different story).

It all happened within a few days. I didn’t have a new job to fall back on.  I wanted to leverage my expertise to build on my career, finding a better employer with excellent benefits and growth opportunities.  That kind of job wasn’t immediately available. I had to wait for it.   We had about $19,000 in emergency savings and $1,000+ of monthly income from investments and a rental property.

Instead of heading to the unemployment office, I focused on my side business to earn supplemental income. Sufficient emergency savings, investment income, and side income gave me the option to be patient during a potentially precarious situation.

To continue reading, please go to the original article here:

https://www.retirebeforedad.com/healthy-obsession-with-money/

Buyer’s vs. Seller’s Market: What Do They Mean?

Buyer’s vs. Seller’s Market: What Do They Mean?

Lauren Ward  Contributing Writer  Last Updated: March 2, 2021

When you’re buying a house, it’s important to know what type of market you’re in: a buyers market or a sellers market. Each type of housing market offers its own set of unique opportunities and drawbacks depending on what side of the equation you’re on.

In a buyers market, the market is more favorable toward buyers due to an abundance of inventory, a low demand for housing or other factors that cause home sales to be slower than normal. This type of market works in the buyer’s favor because they can ask for extra concessions, lowball the offer or generally push the purchase to be more favorable to them. A sellers market, on the other hand, means that you’ll be competing with other buyers for the homes on the market. In this case, the seller calls the shots due to high demand for homes.

Though much of the country would be considered a sellers market right now due to extremely low interest rates on mortgage loans, that could always change in the near future. The pendulum swings constantly, and it’s not always clear where it will stop. So, if you’re considering a new home purchase in the near future, here’s what you need to know about a buyers or sellers market to make the most of the market you happen to be in.

Compare Mortgage Rates

Compare top mortgage lenders in your area and find the right fit for you.

Check Rates

What is a buyer’s market?

A buyers market is when there are more houses for sale than there are buyers. People aren’t buying at a fast enough rate to keep the market from flooding with inventory — which drives the market to be more friendly to the buyers that do exist.

In a buyers market, sellers must often lower the asking price on their homes to be competitive. If they don’t, they run the risk of their house sitting on the market for too long, which can cause financial issues or issues with getting a loan for the house they’re moving to. Therefore, not only do homebuyers get to enjoy deflated prices in a buyer’s market, but they also stand a good chance of having their lowball offers being considered.

What is a seller’s market?

To continue reading, please go to the original article here:

https://www.thesimpledollar.com/mortgage/buyers-vs-sellers-market-what-do-they-mean/

Warren Buffett: “Retirees Face A Bleak Future”

Warren Buffett: “Retirees Face A Bleak Future”

Notes From The Field By Simon Black

March 2, 2021 Cancun, Mexico

Warren Buffett minced no words in his most recent annual shareholder letter (which came out over the weekend) when he told investors that “retirees face a bleak future.” Buffett was referring to the pitifully low interest rates that dominate fixed income investments (like bonds and annuities).

In September 1981, he writes, investors could buy a 10-year US government bond yielding nearly 16%. Now, inflation was a lot higher in the 1980s than it is today. But even after adjusting for inflation, the average annual yield for any investor who held that 1981 bond to maturity over the next decade would have been 5.7% per year.  Today, that same 10 year bond yields just 1.4%. But the official inflation rate in the United States is also 1.4%. This means that, after adjusting for inflation, your net yield today is ZERO.

What’s even more incredible is that there are obvious signs inflation may be on the rise; for example, the most recent Producer Price Index of wholesale price inflation reached its highest level since 2009.

Yet simultaneously the Federal Reserve keeps saying that they want to keep interest rates low. And they’re doing their best to push the 10-year yield even lower than 1.4%.

In other words, inflation could go higher, and interest rates lower. So anyone who buys bonds will actually suffer a negative yield after adjusting for inflation.

And this is precisely what Buffett was talking about.

Retirees-- along with pension funds and charitable endowments-- often buy fixed income investments (like bonds) because of their perceived safety and predictability.

The stock market can be all over the map. Some days it’s up, some days it’s down. But bonds (in theory) are stable investments that pay a fixed sum of cash, every single month or quarter.

But it’s gotten to the point now that those ‘safe’ investments can actually cost you money, especially after adjusting for inflation.

Anyone who actually wants to earn a halfway decent return on investment must now seek out riskier and more volatile assets.

Stocks are the next best choice for most people. But the stock market has become absurdly overpriced. There are still undervalued gems, but they’re more and more difficult to find.

Coca Cola is a great example of how overpriced the market is; Coke’s earnings actually peaked in 2010, more than a decade ago. At that time, the company earned $2.53 per share and had $14 billion in long-term debt.

Its earnings have been in decline ever since. Last year Coca Cola earned $1.79 per share, a decline of 30% from its peak in 2010. And over the same period its long-term debt has nearly tripled to $40 billion.

Revenue is down, earnings are down, free cash flow is down, debt is up. Any rational person would look at this data and conclude that Coca Cola’s stock price should have been in the dumps since 2010.

But that’s not the case. Coke stock has more than doubled, and it’s not far off from its all-time high.

This makes absolutely no sense, yet it exemplifies the sorts of risks that stock market investors have to take today, simply because-- as the saying goes-- “There is no alternative.”

If interest rates were at normal levels, no sane investor would pay record high prices for a declining business. But this is what people feel compelled to do with their money now because it doesn’t seem like they have any other option.

Buffett knows this, and he has routinely lamented the overpriced stock market for the past few years in his annual letters, along with outrageous fees charged by big funds and Wall Street investment banks.

To Buffett, stocks aren’t securities to be traded. Instead, they represent shares in a business, and shareholders should view themselves as partners in that business. And the best investments are “wonderful,” well-managed businesses that can be acquired at a discount.

This year Buffett summarized his ethos by saying:

“Productive assets such as farms, real estate, and yes, business ownership, produce wealth-- lots of it. Most owners of such properties will be rewarded.”

One issue Buffett didn’t mention in this annual report is the sad state of finances for nearly every pension fund in the world… and that makes retirement prospects even more bleak.

Social Security, for example, is underfunded by tens of trillions of dollars according to the program’s Trustees (which include the Treasury Secretary of the United States).

Social Security’s finances have been so mismanaged that the trust funds are set to run out of money as early as 2029. And it’s not like the federal government (which already runs a multi-trillion dollar deficit) is in any position to bail out the program.

So retirees really do face bleak prospects.

This isn’t intended to be a downer, but hopefully a call to action. Because there’s plenty you can do about it.

Only a handful of people in the world have the ability to set interest rates and inflation policy, or to manage Social Security back to health. Chances are you’re not one of them. Neither am I.

But we do have the power to use every tool at our disposal to fix these challenges for ourselves.

And that’s the bottom line: unless you want to be like Buffett and still be working in your 90s, you absolutely have to set aside more money for retirement.

There are plenty of ways to do that. For example, anyone with the ability to generate side income can set up a solo 401(k) and set aside north of $50,000 per year for retirement in an incredibly tax advantaged way.

That side income can be just about anything; you could sell products on Amazon, start your own website, consult, drive for Uber, flip real estate, etc.

Whatever your talents and skills are (and I’m sure they’re numerous), you can set up a robust retirement structure and dramatically boost your retirement savings.

You just need the right information… and the willingness to take action.

To your freedom and prosperity,  Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/investing/warren-buffett-retirees-face-a-bleak-future-31198/

P.S. Join the Official Sovereign Man Telegram Channel: https://www.sovereignman.com/tg

When Everyone’s a Genius (A Few Thoughts on Speculation)

When Everyone’s a Genius (A Few Thoughts on Speculation)

Feb 24, 2021 by Morgan Housel

The end of a speculative boom can be inevitable but not predictable. Unsustainable things can last a long time. Identifying something that can’t go on forever doesn’t mean that thing can’t keep going for years. Years and years and years.  Part of it is emotion. During the Vietnam War Ho Chi Minh said, “You will kill ten of us, and we will kill one of you, but it is you who will tire first.” Emotional trends aren’t beholden to logic, which can keep them going far past any point of reason.

Part is storytelling. Unsustainable trends have life support if enough people think they’re true, and once people believe something’s true it gets hard to convince them it’s not. Or put differently: If enough people believe it’s true it’s just as powerful as actually being true.

Every investor is making bets on the future. It’s only called speculation when you disagree with someone else’s bet.

In hindsight there was as much speculation in the 1990s that Kodak and Sears would keep their market share as there was that eToys and Pets.com would gain market share. Both were bets on the future. Both were wrong. It happens.  Of course there’s a speculation spectrum. But let’s not pretend that others speculate while you only deal with certainties.

The willingness to believe crazy things increases when it feels like the world is dangerous and falling apart. Chronicling the Great Plague of London, Daniel Defoe wrote in 1722:

The people were more addicted to prophecies and astrological conjurations, dreams, and old wives’ tales than ever they were before or since … almanacs frightened them terribly … the posts of houses and corners of streets were plastered over with doctors’ bills and papers of ignorant fellows, quacking and inviting the people to come to them for remedies.

Optimism always overshoots. It has to. The correct price of any asset is what someone else is willing to pay for it, because all asset prices rely on subjective assumptions about the future. And like a blind man who doesn’t know where a wall is until he bumps into it, markets cannot know exactly how much people are willing to pay until they go a little too far and say, “Ah, in hindsight, that was the limit.”

To continue reading, please go to the original article here:

https://www.collaborativefund.com/blog/speculation/