The Art and Science of Spending Money

The Art and Science of Spending Money

Jan 12, 2023  by Morgan Housel@morganhousel

Former General Electric CEO Jack Welch once nearly died of a heart attack. Years later he was asked what went through his mind while he was being rushed to the hospital in what could have been his last moments alive.

“Damn it, I didn’t spend enough money,” was Welch’s response.   The interviewer, Stuart Varney, was puzzled, and asked why in the world that would go through his mind.

“We all are products of our background,” Welch said. “I didn’t have two nickels to rub together [when I was young], so I’m relatively cheap. I always bought cheap wine.”

After the heart attack Welch said he “swore to God I’d never buy a bottle of wine for less than a hundred dollars. That was absolutely one of the takeaways from that experience.”

“Is that it?” Varney asks, stunned.

“That’s about it,” says Welch.

Money is so complicated. There’s a human element that can defy logic – it’s personal, it’s messy, it’s emotional.

Behavioral finance is now well documented. But most of the attention goes to how people invest. Welch’s story shows how much deeper the psychology of money can go. How you spend money can reveal an existential struggle of what you find valuable in life, who you want to spend time with, why you chose your career, and the kind of attention you want from other people.

There is a science to spending money – how to find a bargain, how to make a budget, things like that.

But there’s also an art to spending. A part that can’t be quantified and varies person to person.

In my book I called money “the greatest show on earth” because of its ability to reveal things about people’s character and values. How people invest their money tends to be hidden from view. But how they spend is far more visible, so what it shows about who you are can be even more insightful.

Everyone’s different, which is part of what makes this topic fascinating. There are no black-and-white rules.   But here are a few things I’ve noticed about the art of spending money.

1. Your family background and past experiences heavily influences your spending preferences.

I love this Washington Post headline from June, 1927 – the Roaring ‘20s, the last hurrah before the Great Depression:

This is timeless, and explains so much.

After Covid lockdowns there was the concept of “revenge spending” – a furious blast of conspicuous consumption, letting out everything that had been pent up and held back in 2020.

Revenge spending happens at a broad level, too. The most stunning examples I’ve seen of this are wealthy adults who grew up poor – and were heckled, bullied, and teased for being poor as kids. Their revenge spending mentality can become permanent.

If you dig into it, I think you’ll see that a disproportionate share of those with the biggest homes, the fastest cars, and the shiniest jewelry, grew up “snubbed” in some way. Part of their current spending isn’t about getting value out of flashy material goods; it’s about healing a social wound inflicted when they were younger.

To continue reading, please go to the original article here: Long but well worth the time

https://collabfund.com/blog/the-art-and-science-of-spending-money/

These Historical Parallels Are Really Spooky

These Historical Parallels Are Really Spooky

Simon Black, Founder  Sovereign Research & Advisory  January 13, 2023

By the third century AD, it was hard to imagine Rome being in worse condition. Historians literally refer to this period in Roman history as the Crisis of the Third Century. And it was brutal.

Roman citizens couldn’t believe what they were experiencing... it was incomprehensible to them that their fatherland had become so weakened.

Inflation was running rampant. The Empire was stuck in a quagmire of foreign wars and had suffered some humiliating defeats.

Rome experienced multiple bad pandemics, coupled with even worse government response.

Foreign invaders were flooding across their borders on a daily basis. Trade broke down, causing shortages in many vital goods.

And terrible social strife dominated people’s daily lives. Ordinary Roman citizens were at each other’s throats, and it was a time of disunity and outrage.

One contemporary writer of the era named Cyprian described the situation as follows:

“The World itself... testifies to its own declines by giving manifold concrete evidence of the process of decay... There is a decrease and deficiency in the field, of sailors on the sea, of soldiers in the barracks, of honesty in the marketplace, of justice in court, of concord in friendship, of skill in technique...”

Cyprian wasn’t just describing Rome’s obvious decline. Rather, his summary is an indictment of Rome’s inability to stop its decline.

Everyone in the imperial government knew what was happening in Rome. They simply lacked the ability to do anything about it.

Historian Arnold Toynbee called this the “Challenge and Response” effect... and it’s an interesting idea.

The concept is that every society has to deal with certain challenges; if the challenges are too great, the society will not survive... i.e. the desert is too harsh, the tundra is too frozen, etc.

But sometimes a society becomes so decadent, so prosperous, that it loses its ability to address challenges. It no longer has the social capital necessary— unity of purpose, the ability to compromise, the capacity to engage in rational debate.

That is the position where Rome found itself in the 3rd century AD. And I believe the West is quickly heading in this direction.

This is the subject of today’s podcast.

We start out talking about Rome’s mortal enemy... and how, after more than a century, Rome emerged victorious as the lone superpower in the Mediterrannean.

Everything was great, and peace and prosperity reigned for more than 200 years.

But over that time, the decadence set in. Wheras once Romans had valued hard work, freedom, and unity of purpose, their entire value system changed.

People expected, then demanded, to be taken care of by the state. Corruption became commonplace. The bureaucracy multiplied. Social conflict soared.

And eventually Rome lost the ability to meet its challenges.

I make a lot of historical parallels to our modern world, including some specific examples of absurdities which occurred just in the last couple of days.

But I also discuss why, in the end, these conditions actually create unique opportunity for creative, hard working, talented people.

You can listen to the podcast here.

To your freedom,   Simon Black, Founder  Sovereign Research & Advisory

https://www.sovereignman.com/podcast/challenge-and-response-145150/

7 Mistakes People Make When Choosing a Financial Advisor

7 Mistakes People Make When Choosing a Financial Advisor

Helping people make smart financial decisions

SmartAsset -- January 2023

Choosing a financial advisor is a major life decision that can determine your financial trajectory for years to come.

A 2020 Northwestern Mutual study found that 71% of U.S. adults admit their financial planning needs improvement. However, only 29% of Americans work with a financial advisor.1

The value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, but research suggests people who work with a financial advisor feel more at ease about their finances and could end up with about 15% more money to spend in retirement.2

Consider this example: A recent Vanguard study found that, on average, a hypothetical $500K investment would grow to over $3.4 million under the care of an advisor over 25 years, whereas the expected value from self-management would be $1.69 million, or 50% less. In other words, an advisor-managed portfolio would average 8% annualized growth over a 25-year period, compared to 5% from a self-managed portfolio.3

Being aware of these seven common blunders when choosing an advisor can help you find peace of mind, and potentially avoid years of stress.

1. Hiring an Advisor Who Is Not a Fiduciary

By definition, a fiduciary is an individual who is ethically bound to act in another person’s best interest. Fiduciary financial advisors must avoid conflicts of interest and disclose any potential conflicts of interest to clients.

All of the financial advisors on SmartAsset’s matching platform are registered fiduciaries. If your advisor is not a fiduciary and constantly pushes investment products on you, use this no-cost tool to find an advisor who has your best interest in mind.

2. Hiring the First Advisor You Meet

While it’s tempting to hire the advisor closest to home or the first advisor in the yellow pages, this decision requires more time. Take the time to interview at least a few advisors before picking the best match for you.

3. Choosing an Advisor with the Wrong Specialty

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

https://articles.smartasset.com/financial-advisor-mistakes/uxd1.php?utm_source=smartasset&utm_campaign=sma__falc_relatedposts_retire&utm_content=famistakes_rita

How Do I Know If I'm Rich?

How Do I Know If I'm Rich?

Ashley Kilroy   January 11, 2023

Openly discussing the topic can be uncomfortable. But you’ve probably wondered who can be considered truly rich and whether you fit that definition (or ever will). According to Schwab’s 2022 Modern Wealth Survey, the average American thinks being rich means having a net worth of $2.2 million. However, wealth has no universal definition. Just as beauty is in the eye of the beholder, being rich depends on your personal definition and circumstances. Here’s what you need to keep in mind when determining whether you are rich and what most people consider to be rich.

A financial advisor can help you create a financial plan to grow your savings and investments.

What’s the Amount of Money You Must Have to Be Considered Rich?

Schwab’s survey showed Americans’ conception of being rich means having a net worth of $2.2 million. This number represents a $300,000 increase from the survey’s results last year.

Additionally, statistics show that the top 2% of the United States population has a net worth of about $2.4 million. On the other hand, the top 5% wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current definition of being rich.

That said, Americans’ feelings about wealth go beyond dollar figures. For instance, the survey indicated that over half the country’s workforce would take lower pay for employment with a company aligning with their values. Additionally, almost 90% of employees want fulfillment from their work and orient their careers around their beliefs.

As a result, while Americans have a defined dollar number for being rich, they prioritize their principles as highly in the workplace, going so far as to take a pay cut to work for a company that resonates with their ideals.

And because being wealthy is subjective, some Americans might also believe that being financially comfortable is identical to being wealthy. Specifically, participants in Schwab’s survey reported that a net worth of $774,000 or more means being comfortable. Therefore, you might have a lower target for what it means to become wealthy – it depends on your lifestyle and financial priorities.

Factors That Determine If You’re Rich

Since the dollar amount regarding wealth is subjective, you can analyze your financial situation in multiple ways to determine if you’re rich. Different facets of beliefs about wealth include the following:

You’re Able to Save

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

https://smartasset.com/financial-advisor/how-do-you-know-if-you-are-rich

How I Set Up My Will — And What I Wish I’d Done Differently

How I Set Up My Will — And What I Wish I’d Done Differently

By Jessica Sillers — Jan 10, 2023

Misconceptions About Making a Will

How We Set Up Our Will

As a freelance finance writer, I’ve published hundreds of articles full of tips for families to make informed choices about managing money. I’ve covered realistic budget plans and ideas to make the most of credit cards. I’ve written extensively about planning financially for the future, including buying life insurance, saving for retirement and preparing a will. I say all this not to brag, but so you know why I feel self-conscious admitting this next part.

It took me a long time to make a will. Like, a really long time. My husband and I were expecting baby number 3 before we actually got a will in place.

It wasn’t that I didn’t know a will was important, but my own fears and misconceptions still got in the way. Here are the top reasons I felt nervous about making a will, and how it went when I actually did it.

Misconceptions About Making a Will

The main reason I put off making a will was because it seemed like such a daunting process. Some nights, tackling a will felt way too complicated. Other times, I tried to convince myself it would be simple to carry out my wishes anyway, even without a will. The truth is it’s much simpler to create your own will than leave loved ones to figure it out when they can’t ask for your input anymore. There were several common misconceptions I had to “unlearn” about wills.

1. Simple Estates Don’t Need A Will

Following the instructions in a will is only one part of handling a person’s estate, and it can sometimes seem like you might not need a will if your wishes are straightforward. Here’s how it works, and why a will matters.

Not all of your property may have to go through a will execution or probate process when you pass away. “Payable on death” accounts or “transfer on death” property can go directly to a beneficiary. If you add your chosen beneficiary to a bank account or life insurance policy (or have shared assets, like a joint account or home in both your and your partner’s name), that money or property doesn’t need to go through probate.

The rest of your estate needs to go through probate to be handled and distributed properly. If you die without a will in place, your state follows “intestate” laws for executing an estate without a will. Intestate laws involve deciding who will inherit your property. Generally, a spouse or children would be top of the list to inherit, then close family members like parents or siblings, then more distant relatives.

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

https://meetfabric.com/blog/how-i-set-up-my-will-and-what-i-wish-id-done-differently

The Million-Dollar Question

The Million-Dollar Question

By Amy Legate-Wolfe   Jan. 09, 2023

Dave Ramsey says 79% of US millionaires didn't receive inheritance from their family — so how did they make the big bucks?  Riches don’t so much lie in getting a big gift but rather applying one’s career gifts.

Want to know what it takes to be a millionaire? Well, Ramsey Solutions went straight to the source and surveyed 10,000 of them. And some of the findings were surprising. Like: eight out of 10 invested in their company’s 401(k) plan.

But wait. Aren’t millionaires supposed to live off Mumsy’s trust fund and coddle the family cash pile in their Martha’s Vineyard seaside homes? Not exactly — in fact, not even close. Dave Ramsey, personal finance expert and founder of Ramsey Solutions, says this myth of primarily inherited riches is “flat wrong.”

When Ramsey’s National Study of Millionaires asked where the riches came from, they found that a whopping 79% didn’t receive any inheritance from parents or other family members. Not one cent. Unpaid bills perhaps (though the study didn’t ask). But coffers of jewels and blue chip stocks? Nope.

So how did they achieve millionaire status, and what can you do to replicate their success?

Choose the Right Career

The Ramsey study found that five careers produced the most millionaires: engineers, accountants, management, attorneys and teachers.

While these careers strongly correlate millionaire status to a higher education, that didn’t require attending a swank school. In fact, only 8% of those in the study attended “prestigious private schools,” with 62% attending state schools.

And one crucial detail to note: Millionaire status doesn’t equal sky-high salary.

“Only 31% averaged $100,000 a year over the course of their career,” the study found, “and one-third never made six figures in any single working year of their career.”

On top of that, the millionaires in the Ramsey survey didn’t necessarily hold senior leadership roles: Only 15% belonged to that category. By contrast, more than nine in 10 (93%) said they got wealthy because they “worked hard.”

Where Hard Work Meets Smart Finance

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

Experts Say This Is A Key Sign You Have An Unhealthy Relationship With Money

Experts Say This Is A Key Sign You Have An Unhealthy Relationship With Money

By Natalia Lusinski Sep. 17, 2022

When it comes to money and budgeting, it’s often easier said than done. You may have the best of intentions — you’ll eat out less this month and put the money into your savings account instead. But then life happens. Just like working through any other life, fitness, or wellness issue, a little introspection is often the ticket. If you want to get your finances back in order, a financial psychologist or money mindset coach can help. It all starts with getting your head in the right place.

“Whenever things are in order, it brings us a sense of peace,” Severine Bryan, DBA, financial empowerment educator and coach, and founder of Sev Talks Money, tells TZR in an email.

“Having our finances in order doesn't necessarily mean we are debt-free, but it allows us to have a clear picture of where we are at. It is very important to know what is coming in and what is going out so we are not flying blind.”

She says she likes to think of organizing finances like taking a trip to New York City. “I can leave Georgia and end up in California if I don't know the details of the trip and if I don’t put specific plans in place,” she explains. “When I have a plan, I will go directly to NYC. And even if I take a detour, I will know how to get back on track to get there.” Ahead, Bryan and two other financial coaches explain how they help clients get back on track — and why it’s never too late to do so.

What A Financial Coach Does

Whether you consult a financial psychologist, money mindset coach, or similar type of financial expert, they all do variations of the same thing — help you figure out your relationship to money and how your past (upbringing) affects your present spending and saving habits.

“Part of what we're doing in financial therapy is to be able to really look with clarity at our circumstances — and how those circumstances change from moment to moment,” Financial Therapist Amanda Clayman tells TZR. She aims to help clients learn how to use certain strategies to get a money routine or practice in place.

Bryan adds that a financial coach can also help clients set financial goals, create a plan to achieve those goals, and provide accountability to help them follow the plan. “We also help the client dig deep to find what motivates them to achieve certain goals,” she explains.

“Because, many times, the goal is not money, but the things that money provides, such as freedom to make choices.” This can mean anything from wanting to eat out to buying a particular car or taking a certain vacation. “I think of a financial coach similarly to a football coach,” she adds. “The football coach gives the plays during training, but on game day, the quarterback is the one that has to make the calls.”

Finances can be a very difficult topic to discuss, Taryn Bushrod, money mindset coach and founder of Taryn’s World, tells TZR in an email. “Doing so exposes people’s vulnerabilities, and that can be extremely uncomfortable,” she says. “The first thing I do with a new client is build a relationship, so they are comfortable enough to start sharing pertinent information I need in order to help them start seeing results.” She then focuses on behavioral factors that impact spending.

“In doing so, you can identify the root cause of your actions and redirect your spending habits, which, in turn, could result in redirecting your funds.”

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

https://www.thezoereport.com/wellness/relationship-with-money?fbclid=IwAR3SsiSiZ3gONSAjnuc_z8XSUXZE38MbQa4LOpH8FAdojaC1Y4I4oj3neZY

You Have “Enough” Money When You Can Afford 2 Needs

You Have “Enough” Money When You Can Afford 2 Needs

By Darius Foroux

Do you have “enough” money? A study found that the ideal income for a typical American family to have “emotional well-being” is around $60,000 to $75,000 annually.1

In an interview, Warren Buffett said he would be “very happy” with $100,000 a year, despite his billionaire net worth.2 Meanwhile, John Bogle, the pioneer of modern index investing and founder of the Vanguard Index Fund, says “enough” is “one dollar more than you need.” Which I think is also a good definition.   The truth is that “enough” depends on our personal circumstances.

Money is an emotional subject, not a rational one. A multi-six-figure earner can feel they’re overwhelmed with material desires. While someone earning a fraction of that can feel perfectly satisfied with their life.

It’s all about what we think we need.

Here’s a thought experiment for you: Categorize all your needs.

That will help you to improve your relationship with money. There are several ways you can do this. Here’s an example:

Security — Having an emergency fund, a nest egg, and being financially free.

Loved ones — After establishing one’s own financial freedom, some people choose to take financial obligations for their family, sometimes including those in their extended family.

Exploration — traveling to other countries, having new experiences, living a non-traditional lifestyle, and so forth.

Hobbies — Cycling, training for endurance sports, collecting sports cars/luxury watches/ “big person” toys, beauty and fashion, etc. Depending on a person’s immersion in the hobby, these things can cost thousands or millions!

Creative outlet — painting, writing a book, making music, etc. Sometimes, your creative outlet is your full-time career. Other times, it’s a purely artistic endeavor that generates little to no income. Both are fine, depending on you.

You can define these categories any way you like. Then, ask yourself: What are my Top 2 needs?

The reason for choosing only two is that it forces you to think about whether you really want something over another. For most of us, security is always among the top 2.

 But that may not be the case for others. Some people come from backgrounds that are financially well-off, for example. Or even if they don’t, they’d rather spend their time exploring and being fully immersed in their creative outlets. So security may not be a priority.

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

https://dariusforoux.com/enough-money/

7 Things Rich People Never Do

7 Things Rich People Never Do

By Darius Foroux

I’ve adopted the mental model of Charlie Munger when it comes to living a good life. It’s useful to gain insights into the thought process of certain rich people.  Munger was trained as a lawyer, got briefly into real estate development, and built his fortune together with Warren Buffett in Berkshire Hathaway. Munger says:

“My system in life is to figure out what’s really stupid and then avoid it. It doesn’t make me popular, but it prevents a lot of trouble.”

It’s attractive to talk about all the things rich people do and how you can build wealth. A large part of my work focuses on the right actions we should undertake to get wealthy.

But what I don’t always share is how I figured out the right actions. Most of the time it’s a matter of looking at the wrong options and doing the opposite. In this article, I’m sharing 7 things that you want to avoid if you want to get rich.

These things might sound obvious, but avoiding these types of pitfalls will set you up for success. They should never be overlooked.

1. Using Credit Card Debt

Using credit cards as a payment method is fine. When the full amount is taken out of your checking out every month, you don’t pay interest.

I read somewhere that 77% of U.S. households have some amount of credit card debt.1 To be honest, I was shocked and find it hard to believe. That number just sounds too high to me. Either way, using credit card debt is dumb.

The average credit card interest rate is 18.79 percent right now.2 What?! Forget about how much more expensive it makes your purchases.

With interest rates that high, you’re only paying off interest, and your debt will just remain. This is how people get into debt and never get out of it. My parents still have credit card debt from 20 years ago. I’ve paid some of it off, but they don’t want to accept me paying off everything. I always tell them that’s stupid.

These crooks don’t deserve your interest payments. There are many other good things you can do with that money.

2. Thinking They Know Everything

I have a family member who’s a doctor, lawyer, neuroscientist, politician, engineer, musician, artist, creative, and every other profession in the world.

Every time you talk to him, he pretends he literally knows everything about everything in the world.

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

https://dariusforoux.com/rich-people/

Why It’s Time To Be Optimistic About The Future

Why It’s Time To Be Optimistic About The Future

January 9, 2023 Simon Black, Founder Sovereign Research & Advisory Group

Around 23,000 years ago on the southwestern shores of the Sea of Galilee, a small paleolithic tribe of hunter-gatherers made an incredible discovery that would forever alter the course of human history.

They realized that, instead of relying on fishing, hunting, and foraging for edible plants, they could actually grow their own food, right out of the ground. We know this happened because archaeologists have uncovered roughly 90,000 seeds from the site-- including different species of barley, various nuts (almonds, pistachios) and fruits (raspberries, figs).  More strikingly, the remains of several small dwellings have been excavated. And a number of stone tools were found on the site, including a grinding stone and several flint blades and sickles.

These findings are clear evidence that the tribe most likely lived on this ancient farm where they planted, harvested, processed, and consumed their own food, making it the world’s first known agricultural settlement.

That was a pivotal moment in human history.

Prior to the development of agriculture, human beings roamed from place to place constantly in search of food. But agriculture meant that, for the first time ever, our ancestors could put down roots and build a real civilization. Permanent construction. Institutions. Structure. Economic activity.

In the paleolithic era prior to agriculture, hunting and gathering food typically required the participation of nearly everyone in the tribe.

But after the development of agriculture and improvement of growing techniques, it only took a few people to grow enough food to feed the rest of the tribe. Everyone else was able to devote their time to other value-creating endeavors, like research, education, construction, defense, etc.

They learned how to store their surplus food production, to create savings and security for the future… as well as to trade with other tribes.

Agriculture also gave them the ability to grow industrial commodities, like cotton, papyrus, and medicinal flowers, which helped create new industries and technologies like writing, textiles, and healthcare.

Eventually their agricultural production grew to such an extent that small settlements like the one near the Sea of Galilee turned into villages, villages into towns, and towns into cities.

It’s difficult to overstate the importance of this development; nearly everything that we enjoy today begins with our ancestors coming out of their caves and planting the seeds of civilization.

For ancient civilizations, agriculture was wealth. Precious metals were well-known to them, but these people understood very well that you couldn’t eat gold and you couldn’t clothe yourself in silver. Gold and silver were simply a medium of exchange used to trade agricultural commodities… but the actual ‘wealth’ was the agriculture itself.

This is one of the common elements of the most advanced civilizations in early history-- the Sumerians, Egyptians, Yangshao, Indus peoples, etc. were all extremely prolific agriculture producers. They recognized that their success depended on their ability to efficiently grow and produce highly-valued products… AND to produce far more than they could consume.

This is what it meant to be ‘wealthy’ in the ancient world, and it remained that way for thousands of years.

(There were obviously many civilizations and kingdoms who attempted to grow wealthier by conquering others. But the basic motivation was the same: conquering more land meant having more production, and hence more wealth.)

But little-by-little the concept of ‘wealth’ started to change. Instead of real, tangible goods and the ability to produce, wealth became defined by the accumulation of money itself.

This change began in earnest in the 1500s, when European rulers began importing enormous quantities of gold and silver from their colonial mines in the Americas; the Spanish, for example, imported thousands of tons of silver just from a single mine in Bolivia.

In this way, they weren’t actually producing anything… other than more money. So they were essentially trying to become wealthier by creating more money, rather than producing valuable goods and services.

(Naturally it didn’t take long for inflation to set in, and Europeans suffered rising prices for more than a century, in part due to the incredible, sudden influx of gold and silver devoid of any increase in the actual production of goods and services.)

This is the view of ‘wealth’ that remains today; it’s no longer about the production of valuable goods and services. Instead, wealth is defined by money. And money has become synonymous with wealth, rather than as a medium of exchange.

In modern times it’s actually even more absurd. In our world, debt is actually wealth… in that the bonds of heavily indebted governments (like the US) are considered a form of money, and hence wealth.

Moreover, the notion that a government should produce more than it consumes and live within its means is viewed as preposterous. No one cares about deficits. Instead, politicians assume there will always be an endless line of willing suckers ready to buy more bonds.

This whole mentality has even given rise to a popular and growing economic theory known as MMT, or Modern Monetary Theory, which contends that government deficits are completely irrelevant. Its most well-known work, in fact, is literally called The Deficit Myth.

In short, MMT says you don’t have to actually do anything to create wealth. Governments can simply conjure infinite quantities of money out of thin air and everyone will live happily ever after.

(Naturally MMT proponents claim their position is grounded in ‘science’ and supported by several complex mathematical models. Therefore they’re right and you’re just an ignorant fool.)

We can even see signs of MMT’s influence in the stock market, where investors developed an ethos that, similar to deficits, profits don’t matter. And businesses with no hope of ever achieving profitability became worth tens of billions of dollars.

Seemingly everything became valuable over the past several years, regardless of productivity, profitability, or practicality.

Perhaps most egregious was back in 2019 when a concept artist sold TWO editions of his ‘work’-- a banana duct-taped to the wall-- for $120,000.

At that point the concept of ‘wealth’ had truly devolved to sheer lunacy.

But that time seems to have come to an end, and I believe we are seeing signs of a shift back to a more traditional view of wealth.

All it took was a devastating war, record-high inflation, unprecedented rate hikes, and an appalling level of government incompetence, to finally realize that a $120,000 banana is just stupid…

And that’s reason enough to be optimistic.

Over the past several years, bad businesses and dumb ideas soared in value because central banks printed gargantuan sums of money, corrupting the very concept of wealth itself.

But people now realize that central bankers are only human. They make mistakes too. They cannot walk across the water and maintain pristine economic conditions forever and ever until the end of time.

Moreover, people are starting to figure out that, while central banks can create trillions of dollars worth of money with the push of a button, they cannot produce a single microchip, a grain of wheat, a drop of oil, a line of code, nor any of the other valuable goods and services that an economy really needs.

And this is why I’m really optimistic.

There’s a whole lot of chatter about recession these days-- whether it’s coming, how bad will it be, how long will it last, etc.

But I think that’s an overly simplified way of looking at it. There’s already a recession-- primarily for $120,000 bananas and other idiotic ideas. Cheers to that.

But for those with a more traditional view-- that wealth is not defined by rapidly depreciating pieces of paper, but rather the ability to efficiently produce highly-valued goods and services-- a new era of opportunity is just beginning.

To your freedom,   Simon Black, Founder   Sovereign Research & Advisory

https://www.sovereignman.com/trends/why-its-time-to-be-optimistic-about-the-future-145095/

To Build Inevitable Wealth, Simply Avoid Financial Ruin

To Build Inevitable Wealth, Simply Avoid Financial Ruin

By Darius Foroux

In 1942, the world was at war. In December of the previous year, the United States entered WWII when Japan attacked Pearl Harbor.  By that time, the US got into a war that started in 1939. While Americans were quick to adjust back at home, by turning factories into manufacturers of weaponry, the war itself didn’t play out well at all.   America was struggling in the Pacific. It was a rough first year with many casualties. Some people started to lose faith.

That was the year an 11-year-old boy made his first stock purchase. He bought six shares of Cities Service, an energy company, for $38 per share. He bought three shares for himself and three shares for his sister, Doris Buffett.  The boy was of course Warren Buffett, the greatest investor of all time.

About 1942, he remembers, “We were losing the war in the Pacific.” Buffett learned an important lesson: “Never bet against America.”

That same year, in the midst of the crisis, the Manhattan Project started, which eventually developed into a nuclear weapon that ended the war in 1945.

There’s Always Bad News

When Warren Buffett bought his first stock, it looked like the allied forces were losing the war. But as long as you’re bullish on the future, you must become callous to what’s reported on the news. Buffett says:

“If it’s a good business at a good price, we buy it. There is always going to be bad news out there.”

Buffett and his partner Charlie Munger claim they never allowed macro factors to interfere with their investment process. They have a system for picking stocks and they have a mental model for staying in those stocks.

When you want to make an investment, whether that’s in the stock market, real estate, or in a private business, I bet that you can point to at least a handful of factors and say, “Let’s see how that plays out.”

Maybe you want to see how inflation plays out or whether a geopolitical conflict gets solved, but let’s face it, these are excuses. As Buffett says, there will always be bad news out there.

Instead of focusing on the news or listening to the opinions of people on CNBC, FinTwit, or YouTube, focus on your behavior.

There Are Many Ways To Get Rich; Only A Few Ways To Go Broke

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