Blinded By Greed

Blinded By Greed?

Lately, I’ve been doing some research on the astounding returns of various investment classes over the decades.

• The S&P 500: How does a 9.92% annual return since 1928 sound?

• REITs: 9.77% per year since 1972.

• Large-cap value: Even better, at 11.13% annually since 1928!

• Small-cap value: An astonishing 13.15% annual return since 1928!!!

An extra 3% per year results in twice as much money at the end of 25 years! So keep that in mind when you compare the long-term returns of the various asset classes.

But these are long-term averages across some very different market and regulatory conditions. The fly in the ointment is that these conditions may very well be changed in the future, and returns might be lower than they have been in the past.

Links for June 2021

Links for June 2021

Morgan Housel writes at Collaborative Fund. He's always insightful, and I enjoy reading his work! The short stories herein all have valuable lessons for all of us: https://www.collaborativefund.com/blog/a-few-short-stories/

• My favorite line? At the end of the story about the blind woman: "Every goal you dream about has a downside that’s easy to overlook." Wise words!

What's wrong with America? Philip K. Howard has a compelling and logical answer: https://www.city-journal.org/america-needs-new-approach-to-regulation

3D printing in 1989?! Yep: https://www.youtube.com/watch?v=NpRDuJ5YgoQ

Just recently discovered Lyn Alden, and she could have had a high-paying career doing investing research for a big corporate bank! I'm glad she didn't:
https://www.lynalden.com/international-stocks/ and https://www.lynalden.com/contrarian-investing/

Glad I'm not alone in thinking Lyn Alden's research is top-notch: https://www.undervalued-shares.com/weekly-dispatches/blogs-to-watch-part-1-lyn-alden/

Interesting information on the average American household budget: https://www.valuepenguin.com/average-household-budget

Another good illustration of why your personal home is NOT an investment: https://freddysmidlap.com/2020/01/10/paid-off-your-house-congratulations-you-still-have-to-pay-to-live-there/
    Along similar lines: http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/ and https://froogalstoodent.blogspot.com/2018/04/want-to-be-rich-dont-buy-house.html

Great insight into why you should always take advice with a grain of salt, even if it's from someone who is successful: https://alawyerandhermoney.com/financial-advice-is-wrong/

An interesting look at investing during an abrupt market downturn: https://www.brewingfire.com/how-im-investing-the-crisis-part-i/ and https://www.brewingfire.com/how-im-investing-the-crisis-part-ii/

Excellent advice on how to get a raise, from someone who's been in a position to know: https://steveark.com/2020/10/02/so-you-want-a-raise/

Your Guide to Getting a Mortgage as an At-Home Entrepreneur

Your Guide to Getting a Mortgage as an At-Home Entrepreneur

Picture credit: Unsplash

Guest post

Buying a home is a big step, and it can be even more intimidating when you’re self-employed.

But don’t let the prospect of homebuying dampen your entrepreneurial spirit! There are many paths toward homeownership, even if it involves a bit more effort for those who are self-employed.

Links for May 2021

Links for May 2021

Holy cow, this is in the running for the best macroeconomic analysis I've ever seen! https://www.lynalden.com/fraying-petrodollar-system/

An engineering argument for Universal Basic Income: https://www.scottsantens.com/engineering-argument-for-unconditional-universal-basic-income-ubi-fault-tolerance-graceful-failure-redundancy

A tragic personal story to illustrate the three sides of risk: https://www.collaborativefund.com/blog/the-three-sides-of-risk/

The Battle of the Bubbles, from the always-on-point Ben Carlson. Whoo, some of the speculation mentioned herein puts recent bubbles to shame! https://awealthofcommonsense.com/2020/07/the-battle-of-the-bubbles/

A thought-provoking piece about education: https://americancompass.org/the-commons/our-educational-colonialism/

A timeless point about humility and success. Since the original post gives me a "404 not found" error message, here's a version from the Web Archive: http://web.archive.org/web/20200109002010/https://www.collaborativefund.com/blog/getting-rich-vs-staying-rich/

History isn't exact, as any decent historian would tell you: https://awealthofcommonsense.com/2019/07/why-history-get-stuff-wrong-all-the-time/

This great piece draws attention to how Wall Street's incentives fail investors: https://netinterest.substack.com/p/zuckermans-curse-and-the-economics

Similar in nature, and similarly insightful: https://netinterest.substack.com/p/financing-the-american-home

Here's why you don't need alpha (that is, outperformance compared to the market) unless you're a professional money manager who's responsible for billions of dollars: https://ofdollarsanddata.com/you-dont-need-alpha/

Ben Carlson is always observant and always insightful: https://awealthofcommonsense.com/2020/08/what-happened-to-the-middle-class/
     *However, I'd argue with Stephen Rose's income-based classification of rich/poor/middle-class, as described in the footnote. As noted in the bestseller The Millionaire Next Door, there are plenty of wealthy people who have a moderate income, because they're frugal and they wisely invest the money they save.
     But that's the way Americans tend to look at wealth, including the IRS: you're rich (or not) based on your income, rather than on your net worth.

Now this is interesting! Meet the man who twice tried to sell the Eiffel Tower: https://awealthofcommonsense.com/2020/01/the-man-who-tried-to-sell-the-eiffel-tower-twice/

Great lessons about personal finance: https://www.collaborativefund.com/blog/PF/

An interesting insider's look at the ultra-wealthy, basically the top 1% of the top 1%: https://whorulesamerica.ucsc.edu/power/investment_manager.html

Could you live without money? This fascinating fellow did just that, for about 15 years: https://www.becomingminimalist.com/the-man-who-quit-money-an-interview-with-daniel-suelo/

Hat-tip to Of Dollars and Data for pointing me to some of this top-notch work: https://ofdollarsanddata.com/my-favorite-investment-writing-of-2020/

Can I retire on $2 million?

Can I retire on $2 million?

Is it possible to retire on $2 million?

In short: yes. But, of course, it depends on you.

From 10K to 125M: Why compound interest is the 8th wonder of the world

From $10,000 to $125 million:
Why compound interest is the 8^th wonder of the world

I can show you how to turn 10 grand into a private-jet-level fortune!

The only problem? It takes 92 years. So your fortunate grandchildren are the ones who will actually end up with nine-digit wealth.

But you can harness the same incredible power to work for you, within your lifetime! No B.S., no tricks.

Stick with me, and I’ll show you how it’s done.

Supercharged, again: a (briefer) interview with Paul Merriman

 Supercharged, Again: Briefly Talking Millions With Paul Merriman

If you like this and want more detail,
be sure to read the full interview here!

Today, we have a special treat: an interview with Paul A. Merriman, founder of the Merriman Financial Education Foundation and also a wealth management firm that still bears his name!

In November of 2020, he and his co-author Richard Buck released their latest book, We’re Talking Millions! 12 Simple Ways to Supercharge Your Retirement.

Supercharged! Talking Millions with Paul Merriman

Supercharged! Talking Millions with Paul Merriman

Today, we have a special treat: an interview with Paul A. Merriman, founder of Merriman Wealth Management and the Merriman Financial Education Foundation! In November of 2020, he and his co-author, Richard Buck, released their latest book, We’re Talking Millions: 12 Simple Ways to Supercharge Your Retirement.

Froogal Stoodent vs. jlcollinsnh

Boy, I've been pretty feisty recently! First picking a fight with Vanguard, then tackling the sticky healthcare debate, and now picking a fight with Jim Collins, the personal finance world's favorite uncle!

The reason for the fight with Vanguard—and now for the fight with jlcollinsnh—is that I've been spending quite a bit of time recently on asset allocation, and I'm starting to wonder whether the simplest approach truly is the best.

Froogal Stoodent vs. Healthcare

The Froogal Stoodent Takes On Healthcare

Is Medicare for all the best answer to healthcare in the United States? Believe it or not, that might actually be a more efficient approach, in terms of minimizing administrative costs! https://www.nytimes.com/2018/10/15/upshot/is-medicare-for-all-the-answer-to-sky-high-administrative-costs.html
    But administrative costs aren't the only concern, of course.

Maybe this is a part of the reason why healthcare is so inefficient: https://www.axios.com/health-care-ceo-pay-compensation-stock-2018-0ed2a8aa-250e-48f1-a47a-849b8ca83e24.html

Mr. Money Mustache uses an alternative to the traditional medical model. Very interesting! But does it make sense for the rest of us? It's worth remembering that he's wealthy. I don't know about you, dear reader, but I'm not (yet): https://www.mrmoneymustache.com/2020/11/09/direct-primary-care/

Added 12/11/2020: Recently saw this horror story and thought it was highly relevant: https://www.nakedcapitalism.com/2020/12/medicare-blues.html

***

It seems to me that there are a lot of insurance companies that would suffer greatly if we moved to a "Medicare for all" model.

It's tempting to say, "Yeah! Screw the big insurance companies! They just take all our money and make life miserable for doctors and hospitals!"

But that's partly because I don't work in the healthcare industry.

Imagine if we just snapped our fingers and did away with private health insurance companies like the various companies that comprise the Blue Cross Blue Shield Association. As of 2019, the U.S. Department of Labor counts 2.8 million people employed in the healthcare industry.

An untold number of additional people could be cut by hospitals and doctor's offices, because the billing would be streamlined from multiple different insurers to one (Medicare).

How would the economy absorb roughly 3 million suddenly-unemployed people? What kind of short-term waves would that create throughout the economy?

And what kind of impact would that have on the portfolios of people who are near retirement? Or are currently retired?

In the long run, over maybe 5-10 years, the situation would sort itself out. And, at least for younger folks such as myself, the efficiency gains over the long term may make it worth some short-term pain.

But tell that to the 3 million people who could lose their jobs.

Either way, there will be pain. There will be pain if we don't do anything, and there will be pain if we do overhaul the entire system.

Essentially, the cost-benefit analysis is far from clear, at least to me.

But what I do think is that our current situation is a lousy hybrid that marries some of the worst aspects of a free market with some of the worst aspects of government-run healthcare. In our current situation, nobody wins.

Except maybe the CEOs of healthcare companies.

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