Mar 302018
 

Peter Munk 1927 – 2018

The founder of the world’s largest gold mining company passed away a couple of days ago at the age of 90. Peter Munk came from humble beginnings. He fled his home country of Hungry during WWII when it was invaded by Nazi Germany. Soon after he boarded a boat from England and came to Canada when he was 20 years old.

With no skills, money, or influence Peter and his family had to start from nothing in a foreign country. But that didn’t stop him from wanting to achieve great success. After graduating from the University of Toronto in 1952 Peter thrived in the business world. He helped to build multiple companies, including resorts, an electronic manufacturer, and mining companies. His biggest career move began in 1981 when he formed Barrick Investments, which would eventually become Barrick Gold (stock symbol ABX) the largest gold miner in the world. The company currently produces about 5 million ounces of gold per year across its many operations around the world.

Among other things, the billionaire entrepreneur is also known for being one of canada’s most significant philanthropists giving hundreds of millions of dollars to charity such as hospitals. He also established the Munk School of Global Affairs, the Munk Debates, amd was named a Companion of the Order of Canada, the country’s highest civilian honor.

Last year he was included in the New York Stock Exchange Wall of Innovators, alongside Warren Buffett, Jamie Dimon and Jack Ma. In a remark that captured the two leading pursuits of his life—business and philanthropy—Peter Munk said. “You can create wealth. You are entitled to the joy of this creation. But ultimately society makes it possible, and this wealth should flow back to society.”

Being independently wealthy is nice and all. But doing something meaningful with that money is more important. Having money doesn’t make our problems go away. It merely replaces one problem with another. For example Elvis Presley’s daughter inherited $100 million from her father’s estate in 1993. But that’s when the problems began. Through years of spending and mismanagement the funds have nearly dried out. This year only $14,000 remains of the initial $100 million fortune. Ouch. 🙁  Having a lot of money also created many problems for Jeane Napoles and her family. Peter Munk has 5 children and 13 grandchildren. I hope they can make their inheritance last longer. Financial management education is important for everyone, but especially so for children who come from wealthy families.

The idea that rich people don’t have money problems is a myth. Everyone has money problems from the single parent living on social assistance to the CEO of a large company. The difference is the CEO just has better money problems. Or maybe worse, depending on your perspective. 🙂

 

——————————————————————–
Random Useless Fact

 

Jan 192017
 

Meet the World’s Wealthiest

Charity group Oxfam recently reported that the world’s 8 richest people have as much combined wealth as the poorest 50% of the world’s population.

Here is the list of the 8 richest individuals, in order of net worth:

  1. Bill Gates: America founder of Microsoft (net worth: $75 billion)
  2. Amancio Ortega: Spanish founder of Inditex which owns the Zara fashion chain (net worth: $67 billion)
  3. Warren Buffett: American CEO and largest shareholder in Berkshire Hathaway (net worth: $60.8 billion)
  4. Carlos Slim: Mexican owner of Grupo Carso (net worth: $50 billion)
  5. Jeff Bezos: American founder, chairman and chief executive of Amazon (net worth: $45.2 billion)
  6. Mark Zuckerberg: American chairman, chief executive officer, and co-founder of Facebook (net worth: $44.6 billion)
  7. Larry Ellison: American co-founder and CEO of Oracle  (net worth: $43.6 billion)
  8. Michael Bloomberg: American founder, owner and CEO of Bloomberg LP (net worth: $40 billion)

The level of extreme wealth has become more concentrated over time. In the previous year, it took the net worth of 62 individuals to match the poorest 50% in the world. Here’s a look at the trend over time.

The middle class is feeling squeezed in many parts of the world. From 2000 to 2014 the number of households in the U.S. considered to be middle class fell significantly. A study from Pew Research shows that a majority of Americans no longer lives in the middle class. Median income of U.S. households in 2014 was 8% less than in 1999, according to Pew. For context, a 3 people household making $42,000 would be considered middle class.

One similarity shared by most multi-billionaires today is a focus on philanthropy. 🙂 Bill Gates would already be worth 12 figures today if he hadn’t given so much to charity already. He has been estimated to save over 6 million lives with his efforts to eradicate Malaria, end Polio, and help third-world countries grow rice. Warren Buffett wants to donate 99% of his wealth to charitable causes. Hundreds of other billionaires have signed up for the Giving Pledge, a campaign to encourage the rich to give away most of their money.

We all want to make money. But once we reach a certain level of financial success and become independently wealth, we have to think about how to use our excess wealth in the most meaningful manner possible. Helping other people in need is probably one of the best ways to achieve this. 🙂

I would be inclined to donate more money too if I were rich. I have already decided that if I ever win $1 million from the lottery, I will donate a quarter of it to charity because I am so generous. 😉
I still have to decide how I want to spend the remaining $999,999.75 though. 😄 j/k.

Continue reading »

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.

16-10-300-trillion-visualize-spread-out

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.

16-10-financial-assets-world

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.

16-10-draghi-print-money-ecb

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. 😉

__________________________________
Random Useless Fact:

16-10-rip-off-medical-supplies-us-iv-bag

Sep 012016
 

Millionaire Status

After checking my balance sheet for the month of August I realized that the value of all my assets is worth $1,006,200. Great Scott! For the first time in my life I own a million dollars worth of stuff! 🙂

According to the official Oxford Dictionaries website, a millionaire is “a person whose assets are worth one million dollars or more.” The word “assets” is commonly defined as any owned items or properties that have financial value. So according to this official definition I am now technically a millionaire! ? Gosh almighty! Below is my reaction right now.

16-08-owl-smile-aww-yeah-millionaire

I started investing about 8 years ago. I mostly just buy a wide range of investments and use diversification to lower my risk. I also intend to hold my investments until I retire. It sounds like a simple strategy, but it works for me. 🙂 Some readers may think I’m a good stock picker. But that’s not true.

In the last 7 years falling interest rates have pushed up asset prices across the board for stocks, bonds, and real estate. The S&P 500 index in the U.S. returned over 150% to investors since 2009. 😀 Good heavens!

My point is anyone could have randomly invested in a basket of different securities starting in 2009 and would likely see similar appreciation in their assets as I have. 😉 So I didn’t get lucky choosing stocks. But I am lucky to have started investing near the bottom of the great recession in 2008.

Continue reading »

Aug 152016
 

Asset Allocation for the Wealthy

I don’t always recognize good investment opportunities when I see them. But I do know that we should never invest in funerals… because it’s a dying industry. But when I run out of investment ideas I usually turn to the wealthy.

I think it’s extremely important to follow what rich people do. It gives us insight about financial opportunities that we should be aware of. People with extremely high net worths tend to have either a natural knack for managing money, or are at least smart enough to hire the best advisors to invest on their behalf. Of course wealthy people don’t make the best investment decisions all the time, but their historical performance is consistently higher than the average Joe, which is how the rich continues to stay rich. 🙂

One way to track the “smart money” is to follow the quarterly member surveys from Tiger 21, an exclusive network of high net worth investors. To get into this private club all you need is to have a minimum net worth of $10 million. Easy right? 😛 This confidential and anonymous survey asks members about where they have their net worths allocated.

16-08-tiger21-highnetworth-investors

Almost all participants are either self made investors or entrepreneurs with a good eye for business trends. With hundreds of members spread across North America, the results of the survey should represent a fairly accurate cross section of investment opinions from some of the most sophisticated millionaires and billionaires in the world. So what have the wealthy been doing during the last year? For the most part they have decreased their exposure to real estate and increased investments in private businesses. 🙂

Below we can compare the Tiger 21 survey results from the first quarter of last year with the same quarter this year.

Continue reading »