Later this century the world will be increasingly run and governed by corporations.
Here's why.
The "nation state" no longer exists. It was replaced by the "welfare state" in the 20th century.
Instead of creating wealth, people have been voting for wealth.
People think a tick in a box on election day gives them power. It just gave them the power to create more government debt to buy their vote.
Everyone's pension relies upon the health of corporations.
Governments are desperate to lure corporations to their country for the jobs they create.
Corporations have many advantages over other legal entities.
Corporations are supported by both governments and consumer spending power.
Corporations operate far more efficiently than welfare states.
Corporations make a profit when people vote for them when they buy a product or service.
Corporations don't need countries but countries need corporations.
Corporations hire the smartest people.
Corporations gain real time information about the world.
Corporations only invest in productive resources.
Corporations supply equipment to the world's military and police forces.
Corporations can own things including ideas.
By the end of this century, or earlier, the welfare state will be bankrupt and the world's resources will be owned and operated by corporations.
Saturday 18 February 2017
The Best Time To Make Friends
The best time to make a new friend is between 9am and 10am in the morning.
Puzzled?
Okay, here are the reasons.
Between these hours people are generally...
...at their best after a night's sleep, a cup of coffee and breakfast
...they are more attentive, more optimistic, more confident and less anxious
...it is when their memory is at its best
...they have yet to face the challenges and stresses of the day ahead
...by 9am they are in "group social" mode
...after 10am people begin to focus on other issues in their life
It also helps if you meet new people in a new environment for you and them. Anyone who has made new friends on holiday will testify to this.
Don't try to make friends in the evening. That is the worst time. Most people will forget you by the morning.
That's it.
Puzzled?
Okay, here are the reasons.
Between these hours people are generally...
...at their best after a night's sleep, a cup of coffee and breakfast
...they are more attentive, more optimistic, more confident and less anxious
...it is when their memory is at its best
...they have yet to face the challenges and stresses of the day ahead
...by 9am they are in "group social" mode
...after 10am people begin to focus on other issues in their life
It also helps if you meet new people in a new environment for you and them. Anyone who has made new friends on holiday will testify to this.
Don't try to make friends in the evening. That is the worst time. Most people will forget you by the morning.
That's it.
Monday 6 February 2017
The 8 Ages Of Man
In William Shakespeare's play, As You Like It, he poetically describes the 7 Ages Of Man in his famous "All The World's A Stage" speech.
Read it here if you want to.
I have concocted a similar 8 Stages Of Man. In my version, each stage describes how we identify rewards and how we seek to achieve them at each stage of life. So here goes.
Act 1: Comfort
As babes and toddlers our primary source of reward is in achieving physical comfort. We seek warmth, food and soft textures. We dislike pooing, cold and hunger. Comfort is reward, discomfort is punishment. This is our basic nerve endings at work.
Act 2: Objects
As infants and young children we associate objects with reward and lack of objects as failure. We love objects. We explore their colours, their shapes, their textures, smells and sounds. We judge who is the best kid by the objects they have. Having toys, sweets and branded gear all ups our status with other kids . We also treat people and creatures as objects. In childhood, we define furry animals cute and ugly people as either silly or scary.
Act 3: Personal Identity
In our teens, our focus moves towards ourselves and how we are perceived by the other people. We identify reward as being a member of the right group in society. So we seek to find the most influential group or team we can join and become a member of. We discover our style of fashion, our choice of music and the type of activities we fit into. Are we nerds, sportsmen, artists, leaders, carers, maybe warriors.
Act 4: Target Orientated
Around the age of 20 we realise that being a member of a group is insufficient to achieve the rewards others receive. We see people succeeding by hitting targets. Top grades in education, becoming top in the league, hitting sales targets becomes the route to success and rewards. We sacrifice our personal identity to achieve a higher performance and hit those targets. It's time to do or die.
Act 5: Roles & Titles
Sometime around our 30's we realise that there are people receiving more rewards than us even though they often under perform and fail to hit targets. If anything we see that the people hitting their targets stay where they are on the rung of the social and employment ladder. We realise that what really matters is the role people perform and the title it carries. The bigger the role, the bigger the title, the better the rewards, regardless of actual performance and targets achieved. We steer our attention towards obtaining the best title. The impressive title of Senior Pencil Sharpening Analyst & Photocopying Specialist is within our grasp.
Act 6: Rules & Regulations
We hit our 40's and our career is buzzing because we have a great job title. But then we see that there are people with no fantastic title driving around in sports cars and living in a big house. How did they get better rewards without a great job title? Surely that's unfair. They must have been cheating. It takes a while for us to figure it out. Finally, we realise that society is based around rules and regulations. These people didn't require a superior job title, they merely used the rules and regulations to their advantage. They understood how to make the rules work for them. It is at this stage of life that we attempt to understand the rules and regulations so we too can exploit them to our advantage.
Act 7: An Amazing Journey
We are now in our 50's and slowing down. We've been though quite an experience, chasing our dreams with performance targets, job titles and searching for ways to exploit the rules of society. We can finally see who has done well in life and who has failed. What becomes apparent is that the people who are admired the most are those who have travelled the most interesting journey in life. They are the ones who have received the most accolades and rewards. Some have even reached the status of heroes and martyrs. To achieve the same accolades we must promote our journey, usually with a little embellishment. We must show that we have made an amazing journey through life and should be rewarded for doing so. We tell everyone who listens about our journey, and even those who don't want to listen.
Act 8: The Legacy
Finally we reach our twilight years. Our energy dwindles and our days are numbered. Will people remember us after we are gone? What will they remember us for? Why are some people like Einstein and Shakespeare remembered whilst others disappear forgotten in the depths of history? We realise that these people left a legacy for the generations that came after them. We must do the same. We must leave something that the next generations will remember us for. The final achievement is to become part of recorded human history.
Final Note
This is really a warning. I believe those who do not achieve these 8 stages in their life, and those who achieve them too early in life, will become miserable. There is no shortcut.
Read it here if you want to.
I have concocted a similar 8 Stages Of Man. In my version, each stage describes how we identify rewards and how we seek to achieve them at each stage of life. So here goes.
Act 1: Comfort
Act 2: Objects
Act 3: Personal Identity
Act 4: Target Orientated
Act 5: Roles & Titles
Act 6: Rules & Regulations
Act 7: An Amazing Journey
Act 8: The Legacy
Final Note
This is really a warning. I believe those who do not achieve these 8 stages in their life, and those who achieve them too early in life, will become miserable. There is no shortcut.
Sunday 5 February 2017
13 Buckets Of Money
Everyone with some wealth asks themselves the same question....what should I do with my money? They say "money makes money" and that's true...except when it disappears through a bad investment and inflation. The obvious answer to this question use to be to put it in a bank account.
"What should I do with my money?" is really the wrong question to start with.
The question should really be "What CAN I do with my money?"
This is because there are a limited number of options for investing your money. And these limited options are true for everyone in the world, from the kid saving a £1 a month to the billionaires in this world.
Think of it as 12 plastic buckets arranged on the floor. Everyone comes along and throws their money into these 12 buckets. When your turn comes along, you have to do the same. You have to decide which of the plastic buckets to throw your money into. Do you drop it all into one bucket or spread it around different buckets. This is the same dilemma every investor in the world faces. This is how those speculators and bankers in the City Of London and on Wall Street in New York see the world of money.
So, let me quickly go through what each of these buckets say on them.
The Cash Bucket - You simply keep your cash under the mattress or preferably in a safe deposit box. Inflation slowly eats away at it's purchasing power.
The Foreign Cash Bucket - You swap your currency for the currency of a foreign country. Then you hope the value of their currency goes up against your currency so you can exchange it back for a profit.
The Savings Bank Account Bucket - You give your money to a bank and they pay a regular interest payment on your money. The bank will take your money and invest it somewhere. They take the risk on the investment.
The Property Bucket - You buy property, usually a home. Most people just provide a deposit for a mortgage. The lucky few buy it whole with cash. Some inherit property. Landlords buy a property to let it out. Others buy commercial property such as shopping malls and office blocks.
The Collectibles Bucket - You buy real things that you hope will rise in value over time. These could be antiques, jewelry, gold and silver coins, artwork, wine or anything else expected to appreciate in value over time.
The Education Bucket - You invest in your own education to raise the value of your time. More knowledge and more skills make you a more expensive person to employ.
The Entrepreneur Bucket - You invest your money into your own business idea. You hope to profit from the sales of the product or service you supply to consumers. The government treats you as a CEO of the business.
The Debt Bucket - You buy other people's debt (IOU's) and they pay you interest on that debt. When people buy a savings bond with a fixed interest rate, they are actually buying government debt. It's also possible to buy corporate debt. Government and corporate debt can also be bought within Mutual Funds, pensions a Exchange Traded Funds. Another type of debt you can own is Peer-2-peer lending.
The Gambling Bucket - Yes, gambling on slot machines, horses, greyhounds and lottery tickets is an investment of sorts. However, you will have be one of the lucky few to profit it. Most lose their money.
The Equities Bucket - You buy shares in limited companies and corporations. You become a part owner of these companies and receive a dividend (share of the profit) from their operations. And you hope the value of the shares will rise on the stock market. This bucket also includes investment funds and pensions that allow you to buy a single share in a fund which covers shares from many different corporations. These are Mutual Funds, Investment Trusts and Exchange Traded Funds.
The Commodities Bucket - You invest in basic resources. A basic resource is usually something that comes out of the ground like iron, copper and oil but can also be agricultural products like corn, wheat, rice, soy bean and even trees and pigs. I would also include the virtual currency Bitcoin in the commodity bucket.
The Speculation Bucket - This bucket is a type of gambling, but it is done on a huge scale with stocks and shares and commodities. It includes complex types of investments such as spread betting, stock options, future options, binary options, naked short selling and contracts for difference. Investors bet against each other without actually owning the thing they are betting on. In the world of high finance, this is a very very big bucket.
Sorry, there is a 13th bucket. That bucket is the dreaded Tax Bucket....aaaggggghhh. That's the government's bucket which devours some of your money. At the bottom of the Tax Bucket is an infinite black hole. Most people try to avoid putting their money in the Tax Bucket.
The important thing is that all the money in the world ends up in one of these buckets. All those trillions of US dollars, British Pounds, Japanese Yen, Euros and many more are in one of those 13 buckets. And so is your money. All those savers, pension funds, city slicker traders and speculators in the world are deciding into which of these 13 buckets to spread their money.
Does that make our world of wealth and money a little simpler to understand?
It answers the question "What CAN I do with my money."
Well, you can put it in one or more of 13 buckets.
As for answering the question "What SHOULD I do with my money."
I cannot answer that. You have to figure that out for yourself how to spread it around the 13 buckets to fit your needs. Or get some professional advice to help you.
"What should I do with my money?" is really the wrong question to start with.
The question should really be "What CAN I do with my money?"
This is because there are a limited number of options for investing your money. And these limited options are true for everyone in the world, from the kid saving a £1 a month to the billionaires in this world.
Think of it as 12 plastic buckets arranged on the floor. Everyone comes along and throws their money into these 12 buckets. When your turn comes along, you have to do the same. You have to decide which of the plastic buckets to throw your money into. Do you drop it all into one bucket or spread it around different buckets. This is the same dilemma every investor in the world faces. This is how those speculators and bankers in the City Of London and on Wall Street in New York see the world of money.
So, let me quickly go through what each of these buckets say on them.
The Cash Bucket - You simply keep your cash under the mattress or preferably in a safe deposit box. Inflation slowly eats away at it's purchasing power.
The Foreign Cash Bucket - You swap your currency for the currency of a foreign country. Then you hope the value of their currency goes up against your currency so you can exchange it back for a profit.
The Savings Bank Account Bucket - You give your money to a bank and they pay a regular interest payment on your money. The bank will take your money and invest it somewhere. They take the risk on the investment.
The Property Bucket - You buy property, usually a home. Most people just provide a deposit for a mortgage. The lucky few buy it whole with cash. Some inherit property. Landlords buy a property to let it out. Others buy commercial property such as shopping malls and office blocks.
The Collectibles Bucket - You buy real things that you hope will rise in value over time. These could be antiques, jewelry, gold and silver coins, artwork, wine or anything else expected to appreciate in value over time.
The Education Bucket - You invest in your own education to raise the value of your time. More knowledge and more skills make you a more expensive person to employ.
The Entrepreneur Bucket - You invest your money into your own business idea. You hope to profit from the sales of the product or service you supply to consumers. The government treats you as a CEO of the business.
The Debt Bucket - You buy other people's debt (IOU's) and they pay you interest on that debt. When people buy a savings bond with a fixed interest rate, they are actually buying government debt. It's also possible to buy corporate debt. Government and corporate debt can also be bought within Mutual Funds, pensions a Exchange Traded Funds. Another type of debt you can own is Peer-2-peer lending.
The Gambling Bucket - Yes, gambling on slot machines, horses, greyhounds and lottery tickets is an investment of sorts. However, you will have be one of the lucky few to profit it. Most lose their money.
The Commodities Bucket - You invest in basic resources. A basic resource is usually something that comes out of the ground like iron, copper and oil but can also be agricultural products like corn, wheat, rice, soy bean and even trees and pigs. I would also include the virtual currency Bitcoin in the commodity bucket.
The Speculation Bucket - This bucket is a type of gambling, but it is done on a huge scale with stocks and shares and commodities. It includes complex types of investments such as spread betting, stock options, future options, binary options, naked short selling and contracts for difference. Investors bet against each other without actually owning the thing they are betting on. In the world of high finance, this is a very very big bucket.
Sorry, there is a 13th bucket. That bucket is the dreaded Tax Bucket....aaaggggghhh. That's the government's bucket which devours some of your money. At the bottom of the Tax Bucket is an infinite black hole. Most people try to avoid putting their money in the Tax Bucket.
Does that make our world of wealth and money a little simpler to understand?
It answers the question "What CAN I do with my money."
Well, you can put it in one or more of 13 buckets.
As for answering the question "What SHOULD I do with my money."
I cannot answer that. You have to figure that out for yourself how to spread it around the 13 buckets to fit your needs. Or get some professional advice to help you.
Friday 3 February 2017
Using Equity ETF's to cheaply buy shares in companies around the world
NOTE: This is intended as an example of how I invest. IT IS NOT INVESTMENT ADVICE. Neither is it a promotion of Vanguard products and services.
I like to spread my wealth between different investments. I don't like putting all my eggs in one basket. So I own property, pensions, bonds, cash and company shares. This isn't about speculation, completely the opposite.
This post covers my use of Exchange Traded Funds to buy a stake in lots of different companies.
ETF's (Exchange Traded Funds) provide an easy way to invest in multiple companies around the world with a single purchase of ETF shares. An ETF is an investment fund, bought and sold like individual company shares. But each share of an ETF is a composite of shares in real companies. This is also known as an Equity ETF's.
I've been buying Vanguard ETF's. Vanguard is one of America's biggest investment companies. They manage over a trillion dollars of investors money in their mutual and ETF funds.
So, for example, yesterday I bought £1,000 of the Vanguard FTSE Developed World ETF. This is listed on the UK stock exchange with the ticker VEVE.
VEVE is a simple Index Fund. When I buy a share in VEVE, I am buying a share of the biggest companies listed on the worlds major stock exchanges. Many of them are household names you would have heard of: Apple, Microsoft, Exxon Mobil, Johnson & Johnson, JPMorgan Chase, Amazon, General Electric, Wells Fargo and many more.
These companies cover many sectors of the world's economic activity including banking, mining, retail, technology, oil & gas, cleaning products .... pretty much everything we all use.
The total number of companies VEVE covers is over 2,000. Yes, one share of VEVE has bought me a tiny share of the 2,000 biggest companies in the world. I am spreading my investment risk over 2,000 companies, otherwise known as diversification.
Owning VEVE shares also entitles me to receive a small share of the dividends from those 2,000 companies. Every quarter I will receive a small amount of dividend revenue. As the dividends build up, I will use them to buy more VEVE shares.
If I assume that the value of a VEVE share grows by 4% a year and the average dividend is paying 3%. I am receiving 7% per year. If I hold it for 11 years, and re-invest my dividends, my initial investment of £1,000 will grow to £2,000. The current savings rates in a cash savings account would take about 50 years to double my money.
Yes, there is a risk of a global economic depression which would lower the value of these 2,000 companies and my VEVE shares. But there is a much bigger risk that inflation will eat away at a £1,000 of cash in a bank account.
Another benefit of owning an ETF share is that I can sell it whenever I like. If I need cash, I can convert my VEVE shares into cash within a minute during the trading day. An ETF is a very flexible investment tool. Compare that to say a pension, which you have wait years before you can cash in.
There are thousands of different types of ETF's sold by different investment firms. Another reason I chose a Vanguard ETF is because their transactions costs are some of the lowest in the investment world.
Because I'm in the UK, I also used another investment trick available to us Brits. I bought the VEVE shares inside a Self Select ISA. The gains made on shares inside an ISA allow me to keep any gains TAX FREE. Outside of an ISA, I would have to pay 20% Capital Gains Tax when I sold the shares. We are limited by how much we can invest in an ISA each year. Currently that limit is just over £15k a year.
So in summary, an ETF is one of the easiest ways to invest in a diversified range of companies within your own and other countries. But I am careful which ETF's I buy. Some of them, particularly commodity and leveraged ETF's have been volatile in the past. The large Indexed ETF's are considered the safest.
I like to spread my wealth between different investments. I don't like putting all my eggs in one basket. So I own property, pensions, bonds, cash and company shares. This isn't about speculation, completely the opposite.
This post covers my use of Exchange Traded Funds to buy a stake in lots of different companies.
ETF's (Exchange Traded Funds) provide an easy way to invest in multiple companies around the world with a single purchase of ETF shares. An ETF is an investment fund, bought and sold like individual company shares. But each share of an ETF is a composite of shares in real companies. This is also known as an Equity ETF's.
I've been buying Vanguard ETF's. Vanguard is one of America's biggest investment companies. They manage over a trillion dollars of investors money in their mutual and ETF funds.
So, for example, yesterday I bought £1,000 of the Vanguard FTSE Developed World ETF. This is listed on the UK stock exchange with the ticker VEVE.
VEVE is a simple Index Fund. When I buy a share in VEVE, I am buying a share of the biggest companies listed on the worlds major stock exchanges. Many of them are household names you would have heard of: Apple, Microsoft, Exxon Mobil, Johnson & Johnson, JPMorgan Chase, Amazon, General Electric, Wells Fargo and many more.
These companies cover many sectors of the world's economic activity including banking, mining, retail, technology, oil & gas, cleaning products .... pretty much everything we all use.
The total number of companies VEVE covers is over 2,000. Yes, one share of VEVE has bought me a tiny share of the 2,000 biggest companies in the world. I am spreading my investment risk over 2,000 companies, otherwise known as diversification.
Owning VEVE shares also entitles me to receive a small share of the dividends from those 2,000 companies. Every quarter I will receive a small amount of dividend revenue. As the dividends build up, I will use them to buy more VEVE shares.
If I assume that the value of a VEVE share grows by 4% a year and the average dividend is paying 3%. I am receiving 7% per year. If I hold it for 11 years, and re-invest my dividends, my initial investment of £1,000 will grow to £2,000. The current savings rates in a cash savings account would take about 50 years to double my money.
Yes, there is a risk of a global economic depression which would lower the value of these 2,000 companies and my VEVE shares. But there is a much bigger risk that inflation will eat away at a £1,000 of cash in a bank account.
Another benefit of owning an ETF share is that I can sell it whenever I like. If I need cash, I can convert my VEVE shares into cash within a minute during the trading day. An ETF is a very flexible investment tool. Compare that to say a pension, which you have wait years before you can cash in.
There are thousands of different types of ETF's sold by different investment firms. Another reason I chose a Vanguard ETF is because their transactions costs are some of the lowest in the investment world.
Because I'm in the UK, I also used another investment trick available to us Brits. I bought the VEVE shares inside a Self Select ISA. The gains made on shares inside an ISA allow me to keep any gains TAX FREE. Outside of an ISA, I would have to pay 20% Capital Gains Tax when I sold the shares. We are limited by how much we can invest in an ISA each year. Currently that limit is just over £15k a year.
So in summary, an ETF is one of the easiest ways to invest in a diversified range of companies within your own and other countries. But I am careful which ETF's I buy. Some of them, particularly commodity and leveraged ETF's have been volatile in the past. The large Indexed ETF's are considered the safest.
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