Why Financial Wellbeing Matters
.Why Financial Wellbeing Matters
By Robin Powell April 27, 2021
The concept of financial wellbeing is suddenly receiving plenty of attention. What is it? Why is it important? And most importantly, what can we do about it? The global pandemic has brought into sharper focus the concept of “financial wellbeing”, a holistic measure of personal security not typically captured by investment returns, consumer spending and saving data or macro-economic aggregates.
On some measures, financial wellbeing has been deteriorating in developed economies for years, thanks to privatisation of social services, rising divorce rates, the growth of short-term employment contracts, increasing consumer debt and the shift to defined-contribution retirement plans. But the sense of isolation and loss of control that many people feel in increasingly market-driven economies with minimal safety nets became more intense in 2020 as COVID-19 cut incomes through job losses, furloughs or reduced hours.
The Golden Age of Fraud is Upon Us
.The Golden Age of Fraud is Upon Us
Posted April 27, 2021 by Ben Carlson
A 30-something low-level actor created a business plan that would buy the rights to cheap movies and turn around and sell those rights to HBO for audiences in Latin America. The investors backing the project were promised returns of 15% in just 6 months. No bad in an era of 0.25% savings account yields. Investors forked over more than $690 million to bankroll the rights to these films.
So what’s the catch?
The movie contracts with HBO were fakes, the business plan was a hoax and the entire ordeal was a Ponzi scheme where new money paid off previous investors. The money was used to provide a lavish lifestyle for the architect of the fraud, Zachary Horowitz.1 One investor claimed to have “99% of his and his family’s money” invested in Horowitz’s scheme.
When The “Lord Protector” Turned Out To Be The Worst Tyrant Of All
.When The “Lord Protector” Turned Out To Be The Worst Tyrant Of All
Notes From The Field By Simon Black April 26, 2021 Cancun, Mexico
In early 1657, a young farmer from southeastern England named John Washington boarded a small merchant vessel bound for the English colonies in North America. Officially he was supposed to be part of a minor trade voyage to transport tobacco to the colonies. But secretly John had no intention of ever returning home. He wanted to sail as far away from England as he could.
Britain in the 1657 was a pretty miserable place. A series of civil wars throughout the 1640s had left the country impoverished and chaotic, leading to the dictatorship of Oliver Cromwell. Cromwell, in theory, was supposed to be on the side of the commoners who wanted to limit the power of the monarchy. But after installing himself as “Lord Protector” in 1653, Cromwell turned out to be more dangerous and autocratic than even the most tyrannical of kings.
What Are NFTs And How Do I Get In On The Action?
.What Are NFTs And How Do I Get In On The Action?
Published: 04/26/2021 by Samurai Sydney
Chances are you’ve been seeing the term NFT popping up in headlines all over the place. But what are NFTs? NFT is the abbreviation for non-fungible token. NFTs are a type of cryptographic asset that are verified using blockchain technology. Huh? WTH does that mean? If you a creator and an investor, NFTs could be the right up your alley with the alternatives portion of your portfolio. Let’s dive in.
What are NFTs?
When I first heard about NFTs, I didn’t know what the hell people were talking about. Now, I understand what they are, but I still find this new asset class incredibly bizarre. This is mostly due to the insane amounts of money people are throwing into them. More on that below.
First, let me help you better understand what a non-fungible token is.
It’s Time To Start Thinking About Inflation
.It’s Time To Start Thinking About Inflation
Notes From The Field BY Simon Black April 20, 2021 Cancun, Mexico
In the year 215 AD, the young Roman Emperor Caracalla, then just 27 years of age, decided to ‘fix’ Rome’s perennial inflation problem by minting a brand new coin. Caracalla’s predecessors over the previous several decades had ordered an astonishing debasement of Roman currency; the silver content in Rome’s ‘denarius’ coin, for example, was reduced from roughly 85% in the early 150s AD, to less than 50% by the early 200s.
And with the silver content in their currency greatly reduced, government mints cranked out unprecedented quantities of coins. They spent the money as quickly as they minted it, using the flood of debased coins, for example, to finance endless wars and buy up food supplies for their soldiers.
Needless to say this caused rampant inflation across the empire.
All Market Models Are Wrong But Some Are Useful
.All Market Models Are Wrong But Some Are Useful
Posted April 23, 2021 by Ben Carlson
I was doing a little research into the relationship between wages and inflation this week and found a report from 1952 detailing the incomes of families in the United States in 1950. There were nearly 40 million households in the U.S. in 1950. Just 3.3% of those households made $10k or more per year while 77% made less than $5k. So you could talk all you want about candy bars selling for a nickel or houses selling for $7k back then but the main reason things were so much cheaper is because people made less money.1
People are very scared of inflation today but the trade-off with inflation is you typically see wage growth as well. Since 1950, prices are up around 1000% as measured by the CPI. But median household income is up more like 2500% in this time. Wages aren’t growing as fast as many people would like in recent decades but they have still grown over the rate of inflation over the long-term. So I think some inflation could actually be good in the coming years if it is accompanied by higher wages.
These types of trade-offs are everywhere in the markets when you start looking.
Could Reading Literature Make You Better With Money?
.Could Reading Literature Make You Better With Money?
Posted by Robin Powell on April 19, 2021
Could Reading Literature Make You Better With Money? By Jacon Schroeder
To make better choices and build wealth, have you tried investing time with the works of Shakespeare? Our relationship with money is forged by experience. Why wouldn’t we then want the broadest experience possible to help us make important financial decisions? Experience by proxy is one of the values literary fiction offers.
Reading can be more than just a way to accumulate knowledge. Some of the most useful money skills you won’t acquire from traditional personal finance and investing books. Qualities such as self-discipline, self-awareness, creative problem-solving, empathy, adaptiveness, among others. All of which science suggests can be honed by losing yourself in a novel.
How Much is Your Time Worth?
.How Much is Your Time Worth?
April 20, 2021 by Ben Carlson
In his final letter to shareholders as CEO, Jeff Bezos took a victory lap by calculating all of the time Amazon Prime has saved for its customers:
Customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes. Compare that to the typical shopping trip to a physical store – driving, parking, searching store aisles, waiting in the checkout line, finding your car, and driving home. Research suggests the typical physical store trip takes about an hour. If you assume that a typical Amazon purchase takes 15 minutes and that it saves you a couple of trips to a physical store a week, that’s more than 75 hours a year saved. That’s important. We’re all busy in the early 21st century.
So that we can get a dollar figure, let’s value the time savings at $10 per hour, which is conservative. Seventy-five hours multiplied by $10 an hour and subtracting the cost of Prime gives you value creation for each Prime member of about $630. We have 200 million Prime members, for a total in 2020 of $126 billion of value creation.
Classic “Money Rules” Applied to TIME
.Classic “Money Rules” Applied to TIME
FIRE is not a single point in time. It’s a lifestyle. If you follow a basic set of money rules it will lead to a financially successful life. The same thing can be said about TIME. To me, 5am is not a single point in time, or a number on a clock face. It’s a lifestyle. Similar to FIRE, following a simple set of time rules will lead to a satisfying and life well spent.
I’ve written before about how the Pay Yourself First rule is similar to getting up early each day. (I pay the first few hours of every day to ME, not others – more here). It doesn’t matter if it’s 5am, 6am or 7… Paying yourself first each morning ensures you never lose out on personal time.
So this got me thinking…. What other classic money rules can we apply to TIME?
A Thought Experiment from Warren Buffett
. A Thought Experiment from Warren Buffett
By Kyle Kowalski
Being born at the right time and the right place
The “Ovarian Lottery” is a short thought experiment popularized by Warren Buffett.
The idea is borrowed from John Rawls, a Harvard philosopher and author of A Theory of Justice. There are also earlier references like “Ovarian Roulette” from Dr. Reginald Lourie in the 1960s.
In The Snowball by Alice Schroeder (Amazon), Warren Buffett is quoted as saying:
“When I was a kid, I got all kinds of good things. I had the advantage of a home where people talked about interesting things, and I had intelligent parents and I went to decent schools. I don’t think I could have been raised with a better pair of parents. That was enormously important. I didn’t get money from my parents, and I really didn’t want it. But I was born at the right time and place. I won the ‘Ovarian Lottery.’“
Go Figure
.Go Figure
John Goodell | April 12, 2021
A LOT OF INVESTMENT math focuses on how money grows over time. But as an attorney who’s worked with many clients hoping to retire in comfort, I find myself thinking more about risk—and how the math can work against us. Consider five sets of numbers:
Inflation’s toll: 0.98
Got cash? If you multiply that sum by 0.98, you’ll see your money’s purchasing power a year from now. This assumes 2% inflation, which is the Federal Reserve’s stated target. To be sure, inflation has averaged less than 2% over the past decade. But cumulatively, it has still totaled roughly 17%. An item that cost $10,000 in 2011 would cost $11,692.68 today. Think your wealth is safer sitting in cash? It isn’t.