Worst Financial Advice

There is an old saying, which is not applicable to finance, "The road to Hell is paved with good intentions." The adage warns that having good intentions will not automatically synch up with the execution or results. Accordingly, there several piece of financial advice that make me laugh because when applied incorrectly or timed poorly, these nuggets of advice are better left unheard.

1. "Buy low; sell high"

Not all advice is equal

At best, this phrase is a simple answer for “how do you make money in the market?” As advice, it is virtually useless since it gives no meaningful instruction. At worst, the end result is constantly selling your winners to buy perennial losers.

2. "Never invest in something you don't understand"

If you learn by doing (as everyone does), then this advice leaves you nowhere to begin. You cannot understand the market or investments without being in them, which leaves nowhere to start. Even the most successful investors in the world understand how little sense the movement of the stock markets make.

3. "Time is money"

Neither is a renewable nor unlimited resource. There are certainly situations by which “time is money” is a reasonably adequate adage, but it is neither universally true nor good advice. Out of context and in the wrong minds, this phrase creates more confusion than clarity.

4. "Hope is not a strategy"

This can be a snarky response to hearing someone say “Here’s hoping.” Except, hope comes after putting a strategy in place, so this phrase can turn a wannabe soothsayer from a smartass into a dumbass quickly when used abundantly.

5. "If you do what you love, you'll never work a day in your life"

There is a small but important difference between this phrase and "If you love what you do, you'll never work a day in your life." The latter can be great advice for the right people. But the former advice could ensure financial ruin. If you grow up following this advice with poor execution, then it might as well be a cautionary tale, "if you only do what you love, then you'll never work a day in your life," because you are unproductive, selfish &/or immature. As Dave Ramsey (a man who seemingly loves what he does) loves to say, “Adults devise a plan and follow it; children do what feels good.”

The Full Motley -- 4Q, 2021

Welcome to the final stretch of 2021, and the stock markets have been holding strong! In fact, we could break out pinstripe suits and flapper clothes since it almost feels like the start of a new Roaring '20s. Aside from a drop in late-September into early-October, the markets have continued to rise. The dollar amount moving from my Total Stock Market Index Fund into my Total International Stock Market Index Fund this quarter was less than the amount moved in the third quarter.

Any lessons that the market has taught us lately are nothing unique, and they probably could apply generally to life as well. The first one that came to mind compared market returns to happiness. It's funny how we (society) talk of happiness as a destination when it is really just an emotion, the same as our other emotions. It passes, it returns, and we cycle through them all repeatedly. In the market, we say "buy low; sell high," but there is no instruction for what comes next. Selling with nowhere to go is truly poor advice. It is a lot like whatever road to happiness, and learning that the road keeps going through happiness.

I was listening to talk radio this morning, and the broadcasters discussed bubbles. Heavily implying that the market is in another bubble (or is it that they are still saying it?), they said that bubbles emerge out of reasonable and rational thoughts, but they keep growing beyond the reasons and rationale. Many examples exist from AAA-rated mortgage bonds never defaulting (as described in The Big Short) to ESG investing today. The hosts stated how illogical it was that the value of Tesla, Inc. ($TSLA) has exceeded the energy sector combined, considering ZEVs' reliance upon energy.

Lessons from a Kick-Six

Scoring on an unlikely play
will not win the game 

On Sunday, September 26, 2021, Arizona Cardinals (2-0) attempted an ill-fated field goal, which resulted in a rare "Kick Six," where Jacksonville Jaguars (0-2) returned the kick from one endzone to the other. As a result, the game went from 10-10 to 16-10 at the half. 

Another result was that the halftime show aired the play no less than five times, questioning the decision repeatedly. Jaguars were gifted a great opportunity, and they capitalized on it fully. Instead of falling behind three points, they took a six-point lead into the locker room.

Then, there was another half of the game to play, and Arizona Cardinals had a stronger second half, winning 31-19. After all the advantages of that improbable touchdown gave them, Jaguars were only able to notch three more points, which was not nearly enough to win the game. The "Kick Six" still made highlight reels throughout the evening and it was shared across Twitter, but it was not a once-and-done solution to winning the game. In reality, any team expecting to win games with a "Kick Six" will not fare well throughout a full season.

Here is the loosely connected analogy to finance. That "Kick Six" touchdown reminded me of getting a big economic win, such as exposure to cryptocurrency, NFT, $GME or the like. Getting the big lead is only one part. Holding onto it is a different game altogether. Buying into Bitcoin 10 years ago has been spectacular, but NFTs may become nothing more than a beanie baby-esque fad and what happens to $GME remains to be seen early next year as those oversized increases then qualify for long-term capital gains.

More important than a single play, economically or athletically, is the strategy for the full game. Sticking to the strategy is quite often the singular skill that separates winners from losers, if not in sports, then at least for professional careers or in finance.

I warn people who are expecting a large inheritance (or hoping a big lottery win) can provide their financial stability that having money in and of itself does not equate to any money management skills. 

Herein lies the beauty of slowly building wealth. Your knowledge often expands as your wealth does, even if both are abstract concepts. There is an immeasurable benefit to that unity.

BOOK REVIEW: "Everyday Millionaires" (2019)

I have listened to more Ramsey Solutions programming this year than I have throughout the rest of my life combined. As such, I have heard their constant references to the 10,000 millionaire survey that they conducted recently, rattling off numerous statistics repeatedly each week. It made me wonder whether the book "Everyday Millionaires" had more information than the same statistics provided on the show.

Specifically, I was curious whether introverts had an advantage in becoming millionaires. If "being weird" or rejecting the habit of "buying things that you do not really want with money that you do not really have to impress people that you do not really like" were keys to becoming a millionaire, then it seemed as though a disproportionate percent of millionaires might be introverts. To my delight, this answer was in the book and the numbers were very close. Of the 10,000 millionaires that they surveyed, 53% identified as introverts and 47% identified as extroverts (p.90). Granted, I was unable to ascertain whether this distinction aligned with Meyers-Briggs definitions of the terms or if it was self-reported. Regardless, it was interesting to get my answer, and I was surprised that it was so close!

The rest of the book is a quick read, especially for loyal listeners since they have heard most of it already or know where the material is going. Chris Hogan is a natural salesman, so his energy was a bit dialed down by the written word, but his pitch remains the same. There were some questionable promises made, such as paying off the house equates to a life of no more bills and not owing anything to anyone anything ever again (monthly utilities would still be due in a paid-off house, not to mention taxes, which he somewhat preemptively addressed while dismissing the fantasy that "financial freedom" alleviates a person from paying attention to their finances. (p.213-214).

Regardless, here are 20 of the most interesting quotes or other tidbits that I took away from reading over the past week:

(1) "I'm okay missing out on potential gains that could bring probable pain" (in short, the focus of an investment should be on its probable reward, not potential reward) (p.47)

(2) "If there's one thing I've learned from the millionaires we studied, it is that shortcuts are for suckers. The long road may not get you there as quickly as you ant, but it will get you there" (in short, if you don't work hard for your money, your money won't work hard for you) (p.58)

(3) "I know from experience that more (money) does not equal better (money), if you are not ready for it" (p.79)

(4) "Psychologist Rollo May once said, 'The opposite of courage is not cowardice, it's conformity'." (p.88)

(5) "Some people need to imagine a villain working against them to excuse their own failings or lack of motivation." They cannot (or won't) say, 'it's my fault I'm not winning' so they parrot the same tired old phrases they might have heard from their parents. There's a problem with this fallback position though. You'll never make any progress as long as you're making excuses." (p.89)

(6) There's a difference between "someone saying, "It can't be done" (and) someone saying, "You can't do it." (p.105) 

(7) Don't hide your mistakes, or hide from your mistakes (p.107, paraphrased)

(8) "In fact, 98% of (millionaires) say they actively integrate feedback from other people. Despite their success, they know they always have more to learn, and they look to a supportive network to teach them new things and encourage them along the way." (p.111)  

(9) "Sometimes I didn't need marching orders; I just needed encouragement" (p.112)

(10) "When you plan for obstacles, they don't shake your confidence or interrupt your progress when they happen." (p.114)

(11) "Millionaire-minded people don't let the unknown scare them off. Instead, 94% of the millionaires we studied say they're willing to try difficult (tasks) to get new results." (p.116)

(12) "Understand that a goal is simply a promise you make to yourself." (p.161)

(13) "Work brings a profit, but mere talk leads only to poverty" (Proverbs 14:23) (p.170)

(14) "In total, the ability to work hard gives you an advantage, builds your confidence, allows you to experience gratitude, leads to self-improvement, and makes you intentional in all other areas." (p.175)

(15) "We found that 96% are always trying to learn new things. They want to find new ways to do their jobs better (because) as you get better at your job, you produce greater results." (p.177)

(16) "Millionaires don't find time; they make time." (p.179)

(17) "Consistency requires planning, preparation, patience and passion." (p.192)

(18) (Millionaires) "are simple, humble, happy people who you would never know were millionaires" (p.213)

(19) "It turns out that, once you can afford to buy whatever you want, you may not want to anymore." (p.224)

(20) "When you help someone else," Thomas said, "you forget about your own problems" (p.229)

The Full Motley -- 3Q, 2021

Another update came and went this month, and I forgot to post an update because the movement was quite minimal. The total percentage moved was below 1% of my current account value, but as this account values continues to increase, these small percentages (while relatively insignificant) grow higher and higher in dollar values.

The biggest moves came out of the equity index fund, going into the international equity index fund; the amounts were almost equal. The rest moved a little more from the actively managed equity fund into the bond index fund and international bond index fund.

The most notable takeaway from this move was how, this time, I thought about the fees being charged in my account. Like I had said, only 1% of the account value was moved, but the dollar amount moved was a meaningful amount. I thought back to the not-so-distant past when actively managed mutual funds often charged 2% or 3% as an expense ratio. John C. Bogle had always warned investors to minimize the fees because the variance in performance among managers never justified the dollar value. Over the past 40 years, he was proven right. The investment industry was amid a price war that he essentially started when he passed on, truly a fitting tribute to his life's work.

Failures Gonna Fail

I am in a mentally abusive, love/hate relationship with Twitter. On the one hand, it is a toxic cesspool of negativity, fueled by inaction and targeting intolerance, yet blissfully unaware of its own hypocrisy. On the other hand, it is a fascinating glimpse inside the minds of certain people whose public personas vary greatly. Several years ago, Taxicab Confessions was a popular HBO show for its dirty laundry that people would never air in public otherwise. Similarly, Twitter handles are a guise for people to feel enough anonymity to say the things that they have too much civility (or that they lack the courage) to say publicly.

Tweets are limited in characters (pause to accentuate the pun), so Twitter is not an exchange of deeply formed thinking, yet it can provide insight on the reactionary beliefs of its users. If an excited utterance is admissible as an exception to hearsay, then there is some value to this aspect.

That said, I like to analyze certain arguments to pinpoint the fallacy of them. One discussion that captured my attention recently was revolving around the use of phrase "generational wealth." Numerous tweets use generational wealth to portend the elimination of the middle class. Many others use it to discredit good advice, generally treating difficult and impossible as synonymous terms. Then, it seems as though some people will set themselves on fire to prove no one cares that people are burning.

The first problem with generational wealth is that those with it are discredited by those struggling without it. The bigger problem is that the discussions fail to understand the other side’s perspective. I saw a tweet asking users whether more money would solve all their problems. One response noted that “the only people saying no are people with money.” It was true enough, but the irony is that he sounded as though people with money were not reliable sources. To the answer to the question as stated, the only reliable response would be from people with money.

How I read this meme

I spent way too much time thinking about that juxtaposition, and I came to realize that reliable information (such as first-hand knowledge) was disregarded as comminatory. It occurred to me that people without money are under the misconception that *having* money to throw at a problem fixes the problem. The reality (as people with money have experienced) is that is simply not true.

Almost immediately, I made the connection that the arguments surrounding generational wealth should really focus on generational knowledge instead.

I thought back to my childhood, complaining to my mother about whatever money I wasted on a useless endeavor or how much it would cost to repair a mistake, and she would empathetically reply, “Yup, that was an expensive lesson.” For the most part though, my parents steered me in the right direction the first time. Certainly, I have had some expensive lessons in my life, but there were a lot of experiences, especially in terms of personal finances, that I got right the first time. How? Because the first thing I was told to do was the right way to do it (or at least one that had been proven as reliable).

When I worked at Vanguard, I was instructed to share Vanguard’s investment principles (“We Believes”) with our callers as applicable. I am the type of person that, if I am telling someone else to do it, then I want to know that it works. Hence the short stints in selling Variable Universal Life insurance products or in a MLM pyramid. Sure enough, all of Vanguard's We Believes were reliably sound wisdom.

People can discredit my wealth or success through the same means of opportunity or inheritance, but my response is to question whether they actually think I would have received either if I had not proven myself capable of managing them? The catch is that they do not know my parents or grandparents. I do, and the honest answer is that I would not have.

This response works somewhat better than asking someone how they would spend a fictitious inheritance, because the responses are wildly disjointed from their actual actions a lot of the time. Apparently, they think there is a magical number (just above their reach) at which point responsibility begins. "If I had that much money, then I could manage it easily too."

The Full Motley -- 2Q, 2021

I have noticed that the broad stock market seems especially buoyant lately, and I had assigned it to more people keeping cash on-hand, post-2008, and the increased assets within index investing. But recently I started questioning whether that is enough to make the markets be so resilient. Is there another factor? Does reduced “information asymmetry” deserve credit? With social media sites discussing finance and market movements so openly and so broadly, are we less prone to fear of falling markets? Nowadays, we see so many others celebrating the price reductions when markets fall that it would seem logical that less people succumb to panic selling. Do we have a new collective wisdom? I explained (or opined) to friend yesterday about how collective wisdom can reinforce itself, using the antiquated conventional wisdom, “stocks and bonds are inversely related.” The logic was always sound; stock is ownership and bonds are loans, so when owning stocks is a liability, then it is better to own the debt as an asset. However, that belief in this reasoning drove its results, supplying its own proof in its functionality. Nowadays, we do not see stocks and bonds moving in reverse correlation as much. That might be a hard statement to make for as little downward pressure as stocks have suffered in the past 10 years. To act on this observation, I should revise my allocations to move away from the belief that they are inversely related. However, that change will be employed at another time. For now, I stuck to my established allocations - and once again, not much movement in the market. Sure, tech stocks hit a peak in February 2021 and they started driving downward since that time, but (after years of mild underperformance) value stocks have been moving in the opposite direction, and they currently look like Darlings of the Underground Press (to leverage a song title from The Black Crowes, which is apropos on a blog entitled "Wiser Time" ). Will that favor continue? Highly unlikely.

The Full Motley -- 1Q, 2021

For those who do not know me personally, my father died 30+ years ago this month. Recently, I saw some of his paperwork at my mom's place that he had written in the final 18 months of his life. It was calculating his pending retirement, which was anticipated within the subsequent five years (assuming he did not keep working longer to increase his monthly stipend, which I have always held he would have). While reflecting on the paperwork, I realized that this was the closest I would ever get to an adult conversation with my father.

My initial takeaway from what I saw in this paperwork was how his calculations would have failed in today's realities, a meticulously planned future that never panned out. At first, I chalked it off as naivety to the stock markets, but after reflecting a bit longer, I realized that my dismissal foolishly undermined his ability to adapt.

One big pet peeve of mine today is how often macroeconomic discussions online that outright ignore reactive behaviors. We saw it at play most recently within the false narrative of $GME, where the stock price of GameStop rose to bankrupt Melvin Capital Management. The pitch was that if $GME rose to $150, it would bankrupt the hedge fund. The folly was that it assumed a hedge fund would sit idly by as its losses mounted.

I hear other online dimwits proclaim that they will never buy ZEVs because there are not enough recharging stations, as if supply-and-demand would not create that reasonably foreseeable shift. I am waiting to see whether fueling stations will become hybrid models offering both refueling and recharging, but a belief that the number of today's recharging stations would remain static lacks any foresight (or hindsight, for that matter as things have changed when changes occur).

At work, I call it the kaleidoscope effect, where making one change causes ripples that might change the big picture, even unexpectedly. While we cannot plan for those changes, we cannot detail a plan past them either. Unfortunately, this is what happens too often from the collective wisdom of the vocal minority online. I even read articles stating what the $15 minimum wage “would” do while describing what it could do (which I expect to benefit the retirement crisis more than poverty rates). Their goals are based on unrealistic ability to prepare a future from a smörgåsbord, freely selecting which changes they want and what details remains the same (not to mention, determining how the world around them accepts the changes without reacting).

While my father's plans for the future were set on a past reality, his ability to adapt to a changing environment would have determined his success. Once consumer interest rates yielded <4% for 10+ years, his planned reliance on dividends would have required adjusting. Setting plans for 30 years is unreasonable. Things change, especially plans.

If things never changed, then rebalancing would be a futile exercise. But they do, so rebalancing is very worthwhile. That was my task today, moving 2% from my active and passive domestic equities to spread across my domestic bonds and international exposure. It was a small percentage (honestly, the dollar amount moving at first made me expect it would be a higher percentage, so it somewhat surprised me to acknowledge how far that account has appreciated in the past couple years) but it reacted to recent changes. Next quarter, it will react to those changes.

Meaningless Millionaires?

Rich & Famous

As I grew up in the '80s, "millionaire" was synonymous with the pinnacle of success! For those who were millionaires, they had inconceivable buying power (especially compared to us "Okie Yokels," which admittedly would be a misnomer for my family as-is since we were upper-middle class). The residual '70s tag team of "rich & famous" was still a mostly-conjoined pairing. While the 21st century has generated countless celebrities who are "famous for being famous," money and fame was a celebrity formula with origins like the-chicken-or-the-egg debate, where it was hard to ascertain which one provided for the other. Among the most notable examples of the time was Donald Trump himself.

As the late-'90s brought upon such pop cultural references of "Who Wants to Be A Millionaire?" and Calloway's "I Wanna Be Rich," that seven-figure threshold started showing signs of accessibility and, for headlines, insouciance. For all intents and purposes, "Lifestyles of the Rich & Famous" spawned an entire network (E!). The term "multi-millionaire" (which had a hat-on-a-hat impact through the mid-'80s) became a noteworthy distinction. Thomas Stanley fully normalized millionaires with his best-selling book, The Millionaire Next Door.

Among today's billionaires

In the past decade, Bruno Mars and/or Travie McCoy made the transition to the next level almost official by dreaming of becoming a "Billionaire." The largest lotteries have started to surpass billion-dollar-jackpots. Forbes reports that there are over 2,000 billionaires in the world today. The media has already started tracking the "race" to becoming the world's first trillionaire (a word only recently recognized by spellcheck). Meanwhile, varying reports estimate that there are 14.6 million to 35 million millionaires in the world today, and that number will only increase as time goes on.

Nowadays, being a millionaire is not the pinnacle of success as it was when I was a kid. Some argue that it has become a relatively meaningless term. Unquestionably, no millionaires are famous for that financial achievement alone. They are no longer considered excessively rich.

That said, becoming a millionaire is still a lofty goal (especially after starting out at $0) for any individual. But, for the youngest Millennials, it is reasonably achievable, even before they turn 40!

Millionaire for Grabs

There are a few recurring benchmarks where your money feels more significant: when you reach a savings goal of $1,000, and again when you hit $2,500, and again when you hit $5,000, then when you reach $10,000. Seemingly, reaching $7,500 instantly sets the mind toward the next marker, instead of marveling at the accomplishment. The process repeats with $25,000, $50,000, $100,000, $250,000, and $500,000, ahead of the still elusive but not exclusive $1,000,000.

Although the inherent prestige of becoming a millionaire is not present, a psychological satisfaction will occur.