A Tale of Two Futures

In his famous novel “A Tale of Two Cities,” Charles Dickens wrote: “It was the best of times.”  Dickens novel is set in the years leading up to the French Revolution.  The struggle of people against the entrenched power structure feels familiar to many.  It seems to describe our current social and political climate.  Despair and opportunity are swirling beside one another.  This is creating a tale of two futures for the US economy. Continue reading “A Tale of Two Futures”

The Smart Money

There is a popular phrase in investing terminology called the “smart money.”  Typically this phrase is used to describe the investors that are ahead of market sentiment.  These are the people with the foresight to sell before the market crashes and buy before the market booms.  The critical question to ask is how we can become part of the smart money?

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The Infinite Compounding Fallacy

The financial planning profession has a long history of demonstrating the power of compounded growth to clients.  Typically, a chart will be shown that shows the difference between investing $100 per month at 1%, 5%, 8%, and 10% rates of return for 20, 30, and 40 years.  As expected, the results are typically astounding.  The extended impact of compounding for a longer period of time at a higher rate of return creates a tremendous difference in the amount of compounded returns after a long period of time.  Thus, the fundamental assumption behind all contemporary financial planning models is to invest money into financial products that have historically compounded at a high rate.  This is supposed to enable you to enjoy a happy and comfortable retirement from your compounded returns.

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Buying Low and Selling High

The cliche “buy low and sell high” has been around seemingly since the beginning of time.  However, there is quite a bit of depth behind this simple piece of wisdom.  In order to discover this depth, we need to ask ourselves what kind of person will buy low and what kind of person sells high.  We also need to ask what situations result in low prices for you to buy, and what situations result in high prices for you to sell.

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Re-Thinking Wealth Building

Wealth building has become a key topic of conversation in the financial media.  Traditional financial advisors frequently talk about equity and debt.  (aka ‘stocks and bonds’)  This is certainly a part of wealth building, but the current world has become highly complex.  In order for people to achieve their financial goals, they need to think about wealth building differently.  Many people go through booms and busts but never manage to get ahead.  This is especially important for people who over-invest in buying a home and under-invest in other financial assets.

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What is Wealth?

Every time that an asset class rises or falls, the media begins to challenge the notion of wealth, productivity, and output that many people hold in their minds.  The typical situation for most people is that they think of wealth as being measured in money.  For people like Ben Bernanke, money means currency.  For people like Bill Bonner, money means gold.  However, in both cases, I see wealth as something much deeper.

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