Wednesday, March 30, 2016
Good Lord, deliver us.
Book of Common Prayer This morning, I was reminded by Tim Keller that we Christians are facing a three man tag team, the world, the flesh, and the devil. While fighting one of these opponents, don’t forget there are two more standing outside the ring ropes just waiting for the moment when the referee turns his back. The world contains all sorts of temptations. Advertisers make certain that we know that the world is filled with really cool, sexy looking people enjoying every good thing that life has to offer. “Here, try one of these, little girl. They will not harm you.” Then our flesh kicks in. We want to be one of those cool people. The lust of the flesh, the lust of the eyes, and the boastful pride of life are a part of all us, a part of being human. No matter how “spiritual,” we want that luxury vacation to Europe. We want a diamond tennis bracelet that costs more than a new car. We want the job that comes with the corner office on the top floor of the headquarters building. We want to have sex with somebody who looks like ……? Go ahead, be honest and fill in the blank. I’ll never tell.
For all that is in the world, the lust of the flesh and the lust of the eyes and the boastful pride of life, is not from the Father, but is from the world.
The world is passing away, and also its lusts; but the one who does the will of God lives forever.
Tuesday, March 29, 2016
Pretty soon I’ll be gone,
To work again.”
Dr. John the Night Tripper At least I think that’s what Dr. John is telling me, his Louisiana Voodoo funk delivery can be a little difficult to understand. Your relationship to money and time will largely determine the outcome of your life in this material world. It will also contribute a legacy, for better or for worse, to your children and their relationship with money. If you misuse debt, if you don’t plan and prepare for a career with a future, if you never learn how to defer gratification, your fiscal time frame is too short. You are setting yourself up for poverty. The most extreme example of this kind of behavior that can be found in our culture is exhibited by drug addicts. Their relationship with money and time is, how long will it take to get enough money for the next fix? A more common illustration can be found in families that live pay check to pay check. Whether they are a two income family living in a McMansion and driving leased BMWs or a single mom trying to make ends meet with two part time jobs, they are not making decisions that will lead to the creation of wealth over time. When I worked in factories, many of my coworkers would spend extravagantly in the first few days after they received their weekly paycheck, then try to live on just about nothing for the rest of the week. Some of the younger, single men would only work enough to cover their car payment and bar tabs, then if they were on piecework they would slack off or in some cases disappear completely for a few days. The middle class, as defined by net worth, does a little better. Instead of just looking for work, they had a plan. Perhaps they learned a trade. Perhaps they earned a degree with a realistic career track without taking on too much student debt. They are accumulating a few assets. Unfortunately, most of these assets, such as a house and cars consume rather than create a stream of income. Their time frame is month to month. Their measure of success is keeping ahead of the monthly payments. They have some money in the bank. Perhaps they are even putting something into a 401(k). If the economy is booming, they feel good enough to take out a second mortgage to buy a new SUV or take the family on a luxury vacation. After all, they work hard. They deserve it. If they are lucky they will work to age 65 (or later), pay off most of their debts, sell the big house, and live on Social Security, their 401(k), and the proceeds from the sale of their house in an area with a low cost of living. The rich are different. Even if they are broke, they are focused on accumulating wealth. As they watch their net worth grow, they are planning on where they want to be next year and how they intend to get there. When young, they understand that a college education is a financial investment in the future, not just an opportunity to enjoy maximum freedom with minimum responsibility. Not only do they understand those are four irreplaceable years of their life, but in additional they understand the concept of opportunity cost. Not only are they paying for tuition, room and board, student fees, and books, but they are not earning money that could be coming from their job or starting a company. These are the people who understand that compound interest can work for you—or against you. They avoid debt like the plague. These are the people who are turning run down houses into rental properties or are studying the stock market, looking for opportunities. They understand that their decisions in the present moment will become their future. Finally, consider the very rich. Steve Wynn dropped out of law school to take over the family bingo parlor in Maryland when his father died. The old man left him with $350,000 in gambling debts. Not an auspicious beginning for the King of Las Vegas. Even as a young, broke, businessman Wynn was on the lookout for investment opportunities. He was also trying to meet bankers who could help him reach his dreams. One of these men turned down the opportunity to become a part of Wynn’s first discovery. However, he was impressed enough with the young man to sell him a 3% or 4% stake in a bankrupt rundown gambling hall in Las Vegas at bargain price. The banker wanted Wynn watching over his property in that far away city. The rest, as they say, is history. Wynn proved a consistent winner who blessed his partners with unheard of returns on their investments in his properties. Today, with a net worth of $2.7 billion, Steve Wynn is still looking into the future. His latest project is a hotel casino in the Commonwealth of Massachusetts. His goals are to help make Boston a world class destination city and, through tourism, create jobs and build up tax revenue for his host state and local governments as he has done in Las Vegas and Macau. His mind is constantly looking into a future that will not take shape in the material world for years, perhaps decades, but when you hear Wynn describe the lobby of a hotel that isn’t even yet in the design phase, it is as real to him as if he was giving a guided tour to a celebrity customer.
Friday, March 25, 2016
Thursday, March 17, 2016
Tuesday, March 15, 2016
In the lunar calendar that started February 8, this is the Year of the Red Monkey. I found this description of the Red Monkey quite apt:
“According to Chinese Five Elements Horoscopes, Monkey contains Metal and Water. Metal is connected to gold. Water is connected to wisdom and danger. Therefore, we will deal with more financial events in the year of the Monkey. Monkey is a smart, naughty, wily and vigilant animal. If you want to have good return for your money investment, then you need to outsmart the Monkey. Metal is also connected to the Wind. That implies the status of events will be changing very quickly. Think twice before you leap when making changes for your finance, career, business relationship and people relationship.”I really enjoy the Of Two Minds blog written by Charles Hugh Smith. Even when I don’t agree with the author I find his work is almost always entertaining and sometimes quite insightful. In the post quoted above Smith is predicting that we are in for a wild ride in 2016. I agree with him on that prognostication. However, I know better than to try to outsmart the monkey. Who is the monkey? In this case the monkey is the market, the combined noise and commotion generated by hundreds of millions of irrational pants wearing simians all jumping up and down while screeching at the top of their lungs. Everything they see and hear on the Internet causes them to react in fear or greed. They drive the market up. They drive the market down.
They cause businesses to rise. Then they cause businesses to fail.Imagine, thousands of monkey all trying to get to the top of the same pyramid, trampling on each other on the way up and on the way down. Big strong monkeys that make it close to the top are pulled down by younger monkeys at the very moment they are beating their chests in triumph. There is a better way. Unless you are a King Kong willing to dedicate 16 hours a day for the rest of your life to fighting other monkeys, dinosaurs, and men in airplanes make the decision, “I don’t need the market to find financial freedom.” Isn’t that odd advice coming from someone who considers himself an investor? Avoid debt like the plague. Live on less than you take home each month. Save until you have a decent emergency fund. THEN begin to invest. The best plan for the average investor is an age appropriate mix of low cost index funds. This method is termed Modern Portfolio Theory (MPF). It isn’t bulletproof. Benoit Mandelbrot, Nassim Taleb, and other authors have conclusively demonstrated that the world is a more dangerous place than is predicted by MPF, but this is a good place to start. Maintain your balance between equities and bonds, cash, and precious metal. When the stock market goes up, sell some stock. Put that money in bonds or gold shares or even the bank (not much better than hiding it under a mattress these days). When the stock market goes down, cash out those bonds and buy some shares. In the first quarter of 2009, a blind monkey could throw a dart at a list of stocks and pick a winner. Products called life cycle funds or target date funds will maintain an age appropriate balance without any effort on your part. Just keep throwing small amounts of money into this machine every month during good times and bad. If you don’t put too much money in any one thing or too much money in at any one time, the chances are pretty good that you are going to do OK. If you like to make your own mistakes, you really can’t get yourself into too much trouble buying SMALL amounts of dividend paying stocks. Dividend Aristocrats are a good place to begin the search for these companies. If a company has a long history of paying a safe respectable dividend, you really don’t need to know a lot more information. These are perfect for a Dividend Reinvestment Program (DRIP), allowing you to reinvest your dividends in more shares. This is a free service offered by most brokers on most companies. Talk about the power of compound interest. When the stock market goes down, you are automatically buying a larger number of shares in a proven winner. When the market goes up, you are automatically buying a smaller number of shares. After ten years or so, even a fairly nasty correction isn’t going to keep you awake at night. If you have significantly increased the number of shares you hold, does it matter so much if the value of single share went up or down? Personally, I also like grab bags of utility stocks and consumer non-cyclical shares. The dividend for utility stocks is almost guaranteed by state regulators. Although even with this safety net, bad decisions can tank utilities. Still, people are going to flush toilets and turn on their air conditioners in good times and bad. As for those consumer non-cyclical companies, people are likely to smoke more cigarettes and drink more beer in bad times than in good times. Over the last 50 years the cigarette manufacturer, the Altria group has proven to be the best single stock you could own. Have you ever seen an empty CVS? Kraft, Coke, Hormel, the list goes on. People need to eat. Dave Ramsey is fond of telling the story of an opportunity he had to share lunch with a billionaire. In the course of the conversation, Ramsey asked the man to recommend a book on investment. The billionaire suggested the Tortoise and the Hare. He said that every time he read that book, the tortoise won the race. Go thou and do likewise. Proverbs 13:11
Wealth gained quickly will dwindle away, but the one who gathers it little by little will become rich.
Wednesday, March 9, 2016
Wednesday, March 2, 2016
Thy Kingdom Come,
Thy Will be Done,
On Earth as it is in Heaven.