Apr 062017
 

A New Way to Measure Your Success

There are varying degrees of success and many different ways to define it. For example, in order to be a successful frequent flyer, you will probably need a lot of connections. 😀 And if you’re trying to lose weight, success is all about mind over platter, and winning that Nobelly Prize. 😄

how much do you value your free time?

Financial success is often evaluated in terms of income or wealth. But I often argue that time is our most precious resource. Unlike money, all our days are numbered. So given this reality, perhaps the best way to evaluate our success is to find out how much we value our free time. 🙂 This can be done with the following steps.

  1. Think of an activity that is neither pleasant nor unpleasant to do for you. It also can’t help you gain skills or make you smarter.
  2. Determine the minimum amount of money you would charge to perform that service for 1 hour for a stranger.

This mental exercise will reveal how much you value your time at an hourly rate. 🙂 For example, services I can provide that I neither like nor dislike include slowly folding laundry and walking around town for no reason.

I would have gladly accepted $20/hour to fold laundry 10 years ago. But things have change now. I would not give up my free time for any amount less than $40/hour today, because I can offer valuable skilled labour. Furthermore, I’m 10 years closer to death so there has to be an added premium on the remaining time I have compared to the past me. Due to simple economics, the fewer days I have to live, the more valuable those days are to me.

In a way, $40/hour is an indicator of my level of success in society. Perhaps a doctor or lawyer would value their free time at $120/hour. This wouldn’t be surprising given their place on the social economic ladder. It is not only a measure of their immense human capital compared to mine, but also their financial status.

How the Value of Time is Tied To Success

As self sustaining adults, the value of our free time should be the lowest at the start of our careers. But over time this value should increase to keep up with our growing human capital. Over time our demand for time is increased, and demand for money is reduced because we can earn money easier and more quickly.

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Feb 162017
 

A survey done a few years ago found that 34% of people rely on winning the lottery as a legitimate retirement plan. 😐 #smh. I’m no financial expert, but when it comes to aggressively planning for one’s retirement, playing the lottery more frequently probably isn’t the best strategy.

But of course some people can get very lucky, like Jane Park, who lives in the U.K. When she was 17 years old she bought her first lottery ticket and won the jackpot of £1 million. That’s roughly CAD $1.6 million, or USD $1.2 million. What did she do with her new found wealth? First, she spent £4,500 on a boob job. 😄 Then she purchased some properties, a Louis Vuitton handbag, and a chihuahua, because why not? 🙄

But it appears her lucky situation had unintentional consequences. At 21 years old today, Jane explains that winning the lottery has actually made her sick. That is to say, “sick of shopping for designer goodies.” She is also “struggling to find a genuine boyfriend who isn’t after her money.” Jane says that despite her wealth people don’t seem to understand her stress of being a millionaire. She says despite her material possessions her life feels “empty and without purpose.” Damn. Poor girl.

“I thought it would make it ten times better but it’s made it ten times worse. I wish I had no money most days. I say to myself, ‘My life would be so much easier if I hadn’t won.’” ~ Jane Park

But don’t feel too sorry for her just yet. Jane is currently thinking about suing the lottery company for giving her the money and ruining her life. She claims that the company should not be selling lottery tickets to 17 year olds because someone at that age can’t handle so much money. Again, I’m no expert. But if money caused her to feel empty and without purpose in the first place, then I’m not sure suing for more money is going to help her situation. 😄

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Random Useless Fact:

There was record snowfall this year in parts of Canada

This is what Vancouver looked like a week ago.

Oct 242016
 

 What $300,000,000,000,000 Look Like

All $ amount in today’s post is in US dollars.

What would you buy if you had all the money in the world? According to British news site The Independent, the total amount of financial assets in the world is around $300 trillion. This is the total value for all the equities and fixed income, including company shares and both private and government bonds, plus all the other securities we can invest in. This $300 trillion does not include real estate or any derivatives.

If we had $300 trillion all in $5 bills and laid them out on the ground in a single layer, they would take up about as much space as all of Alberta.

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If we had a way to stack all these $5 bills one on top of another, the stack would measure 1.6 million km or 1 million miles high! Wow. That’s literally out of this world. 😀 That’s enough distance to cover a round trip to the moon and back, twice! By the way, have you guys heard about the new restaurant on the moon? The food isn’t bad. But there’s no atmosphere. 😄

Anyway, let’s take a look at how the allocation of financial assets in the world has changed over time. According to the MarketWatch chart below, it appears every type of asset class has become more valuable since 10 years ago.

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As we can see, the stock market is the most volatile. Stocks lost nearly half of their global value during the financial crisis of 2008. However the graph also shows that equities do recover over time. This is why we should not sell our stocks in a bear market. In fact, lower asset prices may present an opportunity to average down and buy more stocks. 🙂

We can also see that the allocations haven’t changed much over time, with the exception of public debt securities. A lot of demand for public debt comes from Central Banks as they attempt to stimulate the economy. The act of quantitative easing creates trillions of dollars of wealth, but disproportionately benefits investors. That’s why the value of financial assets since 2008 has increased tremendously, but average income in the U.S. has not. Instead of working hard to get ahead, many investors like myself have increased our wealth by simply riding on the backs of central bank policies.

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Central planners around the world will likely continue to print money for the foreseeable future. As the global population ages we can expect even more demand for fixed income securities. Dividend paying stocks will also be popular as investors look for higher yielding alternatives to bonds. The total value of financial assets in the world should continue to increase going forward.

$300 trillion divided by 7.5 billion people who are alive today means each person’s fair share is $40,000. This means accumulating $400,000 of financial assets would give us 10 times what the average person has. This is a respectable level of financial stability that can cover years of living expenses in case of long term unemployment or disability. Having $800,000 in financial assets represents 20 times the average. This would be enough for one person to claim financial independence, assuming the person knows how to manage his or her finances properly. 😉

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Random Useless Fact:

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Jul 142016
 

An Economy Based on Resources

Our current economic system can use some improvement. The government’s manipulation of currency, deficit spending, and bank bailouts are among many of the controversies that we have to deal with in modern times.

But I recently found out about an organization called the Venus Project that aims to replace the society we currently have with one that’s based on computer driven central planning. In this new hypothetical economy money doesn’t exist. The system will revolve around resources instead. The idea is that all the resources in the world belongs to everyone. And the way resources are used up and distributed is by a computer program. Right now we have enough food in the world to technically feed everyone, but poverty and hunger still exist. This new system would solve those kinds of social economic problems. A central artificial intelligence would keep track of all the oil, timber, fish, and other goods available, and it would manage the production and distribution of stuff in the most efficient and environmentally sustainable way so that everyone would have enough. In such an economy that is based on resources, there would be no use for money. 😕 The Venus Project also claims it will shorten the work day and raise the standard of living higher than what most people realize is possible.

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Although I agree that the status quo needs to be challenged I don’t think the Venus Project is the right solution. In fact, I don’t think its proposition is even possible at this time. There are a lot of concerns about the project that have yet to be addressed. Personally I don’t understand how an economy can even function without a price mechanism.

Money doesn’t just simplify life. It also bolsters stability in a market so we can budget in a predictable fashion. 🙂 Money can be anything as long as most people accepts it as a medium of exchange. It can also be used as a store of value.

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May 192016
 

Triple Digit Returns on Currency Investment

There are lots of ways to make money in the world. It’s up to us investors to find them. 😉 A couple of years ago I blogged about my investment in Zimbabwean dollars. I purchased some uncirculated $100 trillion Zimbabwean banknotes on the internet and paid CAD $5 for each one. 🙂

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Back then I even made a prediction that these notes would be worth $25 each in 2016. Boy was I wrong, lol. It’s now been about 3 years since I purchased my investment. Here are some recent ones that actually sold on eBay within the last day!

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Holy mackerel! 😀 Each of my Zimbabwean banknotes is worth over CAD $60 today. That’s at least 1,200% return on investment in just 3 short years. Financial independence – here I come! 😀 If the people who read my previous blog post purchased 15 or 20 of these notes, then they could sell their investments today and be thousandaires! 🙂

Due to runaway hyperinflation what you can buy for a Zimbabwean dollar these days is absolute non-cents. Around the year 2000 the government enacted a policy to redistribute land and resources. Foreign capital stopped flowing into the country. As a result the Reserve Bank of Zimbabwe printed huge amounts of money to pay for labor and services. The value of the Zimbabwean dollar dropped due to an oversupply of currency and prices began to rise. By 2008 prices of food and other goods were literally doubling every 24 hours! At its highest point the annual inflation rate was 230,000,000%. Savers were wiped out. And businesses didn’t know how much to pay their employees or charge customers because there was no price stability, including for labor. All this turmoil caused the country’s GDP to fall 18% in 2008. By 2011, about 72% of the country’s population lived below the poverty line. If the first president of Zimbabwe, President Banana, was still alive today, he would probably be very upset by all damage his successors have done to the nation’s economy. (yes, that’s his real name)

The Zimbabwe currency was abandoned by most people in 2009. Since then the country has stopped printing the currency, and consumers have been using the U.S. dollar and the South African Rand to conduct financial transactions. Last year the government decommissioned the Zimbabwean dollar completely and anyone who still had some could exchange it for American dollars at the official exchange rate set by the government: $1 USD = $35,000,000,000,000,000 ZWD, lol.

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