Jonathan Clements's Blog, page 223
March 18, 2022
The Greatest Virtue
Yet I would argue that the greatest investment virtue—and the one that’s currently most lacking—is patience.
According to Morningstar’s Michael Laske, the average turnover ratio for U.S. stock funds is 63%. The turnover ratio for U.S. pension funds is similar, estimated to be 70%. The latter would imply an average holding period of just 17 months. That’s nuts. Do we really believe that a thoughtfully constructed portfolio should be remade every year and a half? Think of the excess fees incurred from so much turnover and the tax burden for those trading in taxable accounts.
Warren Buffett says his favorite holding period is forever. That may be slight hyperbole, but it’s not far from the truth. Studies have shown that investors err badly when selling stocks and would be better off doing nothing.
Nowhere is the importance of patience more evident than in asset allocation decisions. The past decade hasn’t been kind to value investors, nor to investors with sizable international holdings. The patience of emerging market investors is wearing very thin. It’s one thing to say you’re a believer in mean reversion and long-term investing, but it’s quite another to sit patiently for a decade or longer waiting for your thesis to play out.
It’s been said that the stock market is good at maximizing regret. One of Bob Farrell’s 10 rules of investing is, “The public buys the most at the top and the least at the bottom.” Here’s my corollary to this rule: The majority of investors will lose patience and give up on asset classes just when the tide is about to turn. The longer the period of underperformance, the fewer the investors who remain—and who stand to benefit from mean reversion.
Is this time different when it comes to value stocks or emerging markets? Maybe. There are no absolutes when it comes to investing. But I’m willing to bet that the tide will eventually turn. When it comes to value investing and investing more generally, mispricing doesn’t result from a lack of information. Instead, mispricing occurs because of how we process that information in our heads. In other words, as long as markets are dominated by human beings—with emotions and —inefficiencies will always be a part of the investing landscape. Remember, it’s always darkest before dawn.
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Finding My Balance
SUCCESSFUL INVESTING is about temperament. Keeping an even keel. Knowing your capabilities. Avoiding excesses of ambition or emotion. Having patience and humility. Only a smidge of investment knowledge is needed. But it’s critically important to know what you don’t know.
Unfortunately, I was not born with such a temperament.
From a young age, I had a desire to learn about investing. I can remember Janie Corcoran turning away from me in eighth grade as I expounded on Schering-Plough or some other long-forgotten company I didn’t own stock in or really know much about. I’d been at my father’s side, watching Wall Street Week on television.
What was most attractive about investing was the idea of getting something in return for nothing—nothing except the exercise of my supposedly superior brainpower. Put another way, I liked the idea of getting rich by outsmarting others.
Therein my weak character was revealed: For much of my younger years, I assumed I deserved more than others did, that I had been unfairly denied. I wanted what was not mine to have. It was an attitude that went beyond money. It destroyed things beyond wealth. But it did destroy wealth.
To the extent I have anything useful to say to you now, it’s because character and integrity have been beaten into me over the decades and because the advance of years has tempered my temperament.
Any which way but happy. Leo Tolstoy opened his classic novel Anna Karenina this way: “Happy families are all alike; every unhappy family is unhappy in its own way.”
To apply to investing: There are numerous labor-intensive, emotionally fraught, overly complicated ways to lose—many of them slickly promoted by Wall Street. I define losing here as trailing the market significantly over many years. That’s the almost predictable result of trying to beat the market, and it’s a virtually certain outcome of trying to get rich quickly.
Meanwhile, there are some simple ways to win, by which I mean capture the long-term return potential of stocks. That’s most reliably accomplished by simply matching the market’s return with broad market index funds. Those with the right temperament could follow this passive approach, accept somewhere around 9% a year and be happy. But that was boring to me. I made myself unhappy in a variety of ways until I fully absorbed those kindergarten lessons: Patience is a virtue. Slow and steady wins the race.
A foreshadowing of my future ego-driven investing miscues was my penny hoard. Some people collect coins. As a young teenager, I hoarded them. A whole $23 worth, in one of those bags from the bank that you see robbers carrying on TV. I had read that pennies—then made out of solid copper—cost the government more than one cent to make. That meant my rolls of pennies were worth more than $23, right? Melted down or… whatever? Who knows what I was thinking as I fancied myself outsmarting other people? As would be the case for decades to come, I had a wildly inflated view of my ability to understand world events and profit by anticipating them.
Perhaps I was minted from the same stuff as my late father, who kept South African Krugerrands in his sock drawer. I often faulted him for not investing more in the stock market in the early 1980s after he sold his business. But the truth is, I would ultimately do far worse for my family.
I would also do much worse than my late mother. I thought she knew little, and that her financial advisor—with whom I clashed—knew little more. But Mom had absorbed one lesson from her mother: Never sell.
She simply held on to good funds such as American Balanced, Income Fund of America and Vanguard Wellington for decades without worrying much about what the supposed gurus said on Wall Street Week. Thirty years after she inherited investments from her mother, and 20 years after she inherited more from my father, my siblings and I inherited them from Mom in 2021. She never sold.
It was I who had to do some selling for her to pay the huge expenses for her care in her final years. Her home care cost more than $200,000 in the last year of her life. Yet she still had a substantial estate to leave to her heirs.
Diary of futility. Sadly, from my early days gaming what the U.S. Treasury would do about pennies, my investment wisdom advanced fitfully—and my ego fended off all efforts to contain it.
In my 20s, I dabbled in Vanguard Group’s gold and energy sector funds—completely missing the tremendous performance of its health care fund. See a pattern? Copper, oil, gold—I sought riches in tangible things. Which, in the disinflationary boom of the 1980s and ’90s, was the wrong place to look. I imagine I avoided the health care fund in part because it was already popular with other investors, its portfolio manager lionized by the press.
I also invested in Vanguard’s STAR and Windsor II funds, which bored me. What do you mean it’s only up three cents a share? I wasn’t going to watch paint dry. Little did I realize that I was positioned for great success with those funds. I was contributing to my retirement nest egg from an early age, as encouraged by my father, and those dollars were going into solid, low-cost funds.
Neither STAR nor Windsor II became the stuff of legend like Fidelity Magellan Fund. I looked back recently, however, and was stunned by the wealth I had forfeited by failing to simply continue contributing to those funds over 35 years. There’s that word again: simply.
I was dating my future ex-wife when the sudden bull move hit in 1991, and I was seized by the prospect of doubling my money in a year in an aggressive growth fund. Never mind whether the fund was already popular. This time, I wanted in. I was chasing performance now. Many funds had posted eye-popping returns that year, but—like lightning—such good fortune rarely strikes in the same place twice. Instead, most of 1991’s biggest winners went on to disappoint—or to crash and burn.
I still recall that nearly 10 years later, my then-wife was beckoning me for some alone time, but I put her off to keep poring over my spreadsheets. I had to get rich for the sake of the family. We didn’t get much richer, if at all, although I weathered the dot-com bust reasonably well. But it wasn’t long before my family was broken.
Blaming myself, I took a brief hiatus from my investing obsession. But my investment knowledge, such as it was, was still just a dangerous tool in the hands of my ego. By my late 40s, during and in the aftermath of the 2008-09 financial crisis, I had lost almost everything through a stomach-churning series of horrible decisions. It was like a perfectly choreographed dive. I couldn’t have fallen faster if I had tried.
I had virtually nothing left with which to ride the market back up. Then, at the end of 2009, I was laid off from my newspaper job. It would be a year before I could make 401(k) contributions again.
Hard lessons. You’re not here for my personal tale of woe. Suffice it to say, there was divorce, excessive drinking, illness, two jobs lost, a home that plunged in value, spending well beyond my means and investing with borrowed money—with predictably disastrous results.
I thought I knew the risks of investing on margin—that is, borrowing money against your stocks—and I thought I was doing so within safe limits. But I didn’t realize that the broker has the right to declare that some of your holdings no longer qualify as collateral for your margin debt. They are no longer marginable. When that happened to my substantial investment-bank holdings in 2008—I was bottom fishing like a genius, you see—my margin gig was up.
Being forced to sell near the market low of 2009, I even lost the money I had mentally set aside for my kids’ college expenses. It all culminated in 2010 with my bankruptcy filing.
Slowly, I learned to live with myself again. Even more slowly, through better spending habits and by keeping my nose clean at work, my finances began to rebuild. The long bull market helped.
Though I was more responsible—and sober—still more investment lessons were to come. I hadn’t fully embraced indexing, although I admired index-fund pioneer Jack Bogle, founder of Vanguard, and learned a lot from his books and interviews. Contrary to Bogle’s advice, for much of the 2010s, I listened to the siren song of those who said market-cap indexing is blind, dumb and risky. I have a value bent, so that notion appealed to me. I was back to seeking gains anywhere except where other investors already had made them. Forget the FAANGs, I said to myself, as Facebook, Apple, Amazon, Netflix and Google continued their historic run.
My portfolio was chock full of value funds and foreign funds. Anything but substantial exposure to a U.S. market-cap index fund. I dabbled in faddish exchange-traded funds (ETFs), such as those seeking to profit from the growth of consumer spending in developing countries. Emerging markets were cheap, the experts said. I revisited my favorite themes with gold, agriculture and energy ETFs. I can’t tell you how much of the bull market I missed in such vain pursuits.
I knew that only a handful of investors can beat the market with skill, so I tried to find them. My last two big hopes were famed value investors Carl Icahn and Dan Loeb, both of whom have publicly traded investment vehicles. These investments languished for years while the market soared. Even as I eventually gravitated toward indexing, I didn’t give up on Loeb and Icahn until early 2020, when I replaced the last position with a total market index fund. (Loeb’s offshore fund has outperformed the index since I sold it—just goes to show—but still has lagged over the seven years since I bought in.) I ultimately had to fire not just two billionaire portfolio managers, but also demote myself as manager. No more trying to get rich by outsmarting other people.
Back on track. Of course, because I’m mainly tracking the market now, my results are closer to the index’s return. That may not feed my ego, but it feels right, like I’m a good steward of my capital. Realizing you have lagged the market by a mile year after year feels like hell. Not knowing how much you’re lagging is irresponsible, so I monitor my performance closely with a spreadsheet.
I’m still engaged with investing in a way that I enjoy. I still make decisions in which I find my experience and lifelong learning helpful. First, we all have to make fundamental asset-allocation choices based on our risk tolerance, time horizon and diversification preferences. Mine have been fairly steady for years, but I reevaluate them once in a while.
I have set trigger points for rebalancing and buying market dips. I make decisions about Treasury bond funds versus corporates and Treasury Inflation-Protected Securities. I also allow myself little side bets—satellite positions around the core of broad index funds and the balanced funds that I inherited from Mom. Those side bets are within preset limits, so I avoid dragging my whole portfolio down if I make a mistake.
I maintain an investment spreadsheet and investment journal tracking my stock-bond and U.S.-foreign mix, my satellite positions and other decisions, and my performance. Yes, I actually enjoy that. I’m happy with my recent batting average on the side bets. But I require accountability and I need guardrails—established limits on my investment opportunism. You could, of course, skip all this effort and just use balanced, asset-allocation or target-date retirement funds.
My system is likely to change soon because I’ve decided to seek professional financial help. With the inheritance from Mom, my circumstances have changed. And at my age, probably about 10 years from retirement, I need to know more than just what to invest in.
Getting help. I’ve learned the value of financial advisors. Proponents of doing everything yourself can turn self-sufficiency into a fetish, arguing that advisors’ advice is not worth the cost. But you will recoup those fees many times over if the advisor keeps you away from foolishness.
In 2016, when it came time for me to take over my mother’s affairs, I met with her retiring advisor, Joan, with whom I had bickered 16 years earlier, and her successor, Casey. They were prepared for the worst, but I was a changed man.
Casey, along with an estate lawyer, helped us create a family trust with a portion of Mom’s assets. I don’t expect market-beating advice from advisors any more than I expect it from the most illustrious investment gurus. I consider a financial advisor mainly a guide, a check on my worst impulses, and a source of counsel on broader personal finance issues. Casey wasn’t infallible, but she did redirect me on two occasions. The resulting profits more than covered her fees.
Now that Mom has died, I have retained Casey’s colleague Danine as my advisor—the first time I’ve had one for myself—and I have persuaded my brother to do the same.
I’m no longer trying to get rich by outsmarting other people. But I just might amass considerable wealth and leave my children a decent inheritance—if I don’t outsmart myself.
William Ehart is a journalist in the Washington, D.C., area. In his spare time, he enjoys writing for beginning and intermediate investors on why they should invest and how simple it can be, despite all the financial noise. Follow Bill on Twitter @BillEhart and check out his earlier articles.
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Walking Away
Could it be that he has added another GOAT designation with his epic fail at retirement? Brady reversed his retirement announcement from the Tampa Bay Buccaneers after just 40 days. What did he figure out in those 40 days that changed his plans? The Bureau of Labor Statistics says the median NFL player career is six years. Brady has played for 22. Didn���t he know that retirement was coming?
Maybe it���s a matter of finances. Despite earning in a few years what most people earn in a lifetime, an unfortunate number of NFL players file bankruptcy after their football days are over. Tom and his wife Gisele reportedly have $26 million worth of homes in various states. Perhaps they neglected to factor the mortgage payments into their retirement plan. Maybe they miscalculated how much early retirees pay for health coverage. Perhaps they forgot to fund 529 plans for the kids��� college. Still, with a reported individual net worth of $250 million, coupled with his wife���s $400 million, I���m guessing Brady doesn���t need the paycheck.
In a HumbleDollar article last October, Mike Drak described ���failing��� retirement because he didn���t recognize in advance what retirement would mean for his identity and sense of purpose. For Brady, maybe we shouldn���t discount the feeling that comes with having millions of fans scream his name at every snap.
Brady���s stated reason for reversing his retirement decision was ���unfinished business.��� The fans take this to mean he wants another Super Bowl win. This speaks to Brady finding his life���s purpose in his work. He reportedly has other business interests and could readily step into a variety of post-NFL careers. We have to presume that, even at age 44, none of these other career options has the appeal or the competitive juice Brady finds in throwing the football to players half his age.
With any job, there���s always unfinished business. The question is whether you can walk away from it. If you were hit by a bus, chances are the business would continue without you. Will the NFL struggle to survive without Brady on the field? It���s doubtful.
Regardless of your work, there���s something to be said for going out at the top of your game. Being originally from Detroit, I remember running back Barry Sanders, a near GOAT, who walked away from the game in his prime. Tom Brady probably still has it. But it would be unfortunate if he plays so long that he ends up tarnishing his brilliant career.
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Cashing In
I sampled the cuisine of every country I visited. There was goulash in Hungary, hummus in Israel and escargot in France. In each location, I tried to learn how to ask for ���the bill, please��� in the local language. It���s ���k��rem a sz��ml��t��� in Budapest, ������������� ������������� in Tel Aviv (pronounced ���khesh-bon be-va-ka-sha���), and ���l'addition, s'il vous plait��� in Paris. The smile on the server���s face was well worth the small effort of learning a few words of the local lingo.
In each case, I used a credit card to pay the bill. Note that I didn���t say pay the ���check.��� Outside the U.S., a check is that piece of paper old farts sign promising to pay someone else a certain amount of money. While the concept of using a credit card is ubiquitous worldwide, the actual use of one is far less consistent.
In Nordic countries, credit and debit card use is so pervasive that a law was passed in Sweden to ensure people could still get cash from a bank. The law���s purpose was to prevent the country from going completely cashless, which could be a problem during an electricity or internet outage.
Canada is also a prodigious user of credit cards, being named the ���world���s most cashless country.��� At the other end of the spectrum is one of the most advanced economies on earth, Germany. Often, when I asked for ���die rechnung bitte,��� I was politely informed that a kreditkarte was not accepted. I asked a Berliner why, and he informed me���in impeccable English���that ���Germans like to feel their money.��� I���m not exactly sure what he meant, but I think it had to do with Germans not trusting credit and liking to control their spending through the use of cold, hard w��hrung���cash in English.
Germany���s bias against credit cards is so pronounced that it actively worked to prevent the abolition of the 500 euro note. It appears that in Germany, a businessman���s need to settle up after taking a large group of clients out for expensive schnitzel and schnaps had trumped concern that large bills might help facilitate terrorism. The 500 euro note is unsettlingly known as the ���bin Laden��� in Germany because of its link to terrorism financing. In 2019, Germany and Austria became the last countries to stop issuing the 500 euro note.
This German-American begs to disagree with the preference for cash-driven transactions. He loves his credit card for three obvious reasons. One, I can easily track my spending. Two, I don���t have to carry a large number of forints, ���������� or euros. Three, saving 2% with my Capital One Venture Card rewards me with a discount on every transaction.
Recently, I discovered another reason to love my credit card. Capital One offers the ability to use virtual credit cards. What���s a virtual credit card, you ask? Well, through a browser extension that I loaded on my good-enough HP computer, I can shop online without giving merchants my actual card number. Instead, for each online purchase, my team at Capital One creates a one-time virtual credit card number just for me.
I have found a virtual credit card has two benefits. First, the virtual card number is specific to each merchant, which provides me with an extra measure of security. If someone steals my virtual card number, it���s useless to the thief because it can���t be used again. This also eliminates the subsequent hassle of having to replace a stolen credit card.
A second benefit is it allows me to sign up for various introductory and promotional offers without worrying that I���ll be automatically re-upped. For example, I just received a free month of music from Spotify, with subsequent months billed at $9.99. I used a virtual credit card to sign up. The next day, after listening to the Boz Scaggs album, I locked the virtual card so it couldn���t be used again. I enjoyed 30 days of unlimited tunes without having to worry about remembering to cancel my subscription.
I used this same trial-offer technique to binge-watch Outlander on Starz for free. That Caitriona Balfe��is a very good actress. I used the virtual card again to charge the ���Top 12 Wines��� with ���BONUS Bottles & Glasses��� from the WSJ Wine Club. The Alambrado Malbec 2020 was particularly juicy and jammy, by the way.
Currently, Citibank, Bank of America and Capital One offer virtual credit cards. If you carry a card from one of them, you definitely need to avail yourself of the service.
Michael Flack blogs at��AfterActionReport.info. He���s a former naval officer and 20-year veteran of the oil and gas industry. Now retired, Mike enjoys traveling, blogging and spreadsheets. Check out his earlier articles.The post Cashing In appeared first on HumbleDollar.
March 17, 2022
Family First
MY WIFE AND I ARE blessed with 11 grandchildren and two step-grandchildren. They range in age from six to 18. Amazingly, as we get older, they���ve gotten older, too. We���re fortunate that all of our family is no more than an hour and a quarter���s drive away.
How I miss the days when they were delighted to play with Pa. We went to parks, to playgrounds, to see koi in a pond. We made sandcastles, dug for sand crabs, dunked each other in the ocean. The times on Cape Cod were the best, as were the occasional sleepovers.
Then they started going to school and our time was limited. As they grow older, their activities and friends take priority. Vacations on the Cape are limited because they need to be home for sports. But there���s good news, too.
Over the years, we���ve attended concerts and award ceremonies. Twice, I was invited to one granddaughter���s school when they held a celebration and breakfast for veteran parents and grandparents. I was surprised to see I wasn���t the oldest in attendance.
In normal times, we see our grandchildren regularly, only now it���s at soccer, baseball, basketball, track and lacrosse games. They���re all good athletes, a skill they surely didn���t get from me. I played Little League as a boy, with the less-than-enviable record of never getting a hit���not even getting my bat to touch the ball. My children weren���t into sports, either. One of my sons spent his time in the outfield picking dandelions.
I���m glad to see the parents attending their children's games. Neither of my parents ever saw me play Little League. My relatives also weren���t into sports. One Christmas, all I wanted was a basketball. Seemed like a simple request. But when I opened the package, it was a beachball printed to look like a basketball. My mother insisted I take it to the park. Oh, the embarrassment. The wind carried it away���into a pricker bush. I was saved.
All these sports activities are costly for parents. There are fees for the teams, buying uniforms and equipment, and���in some cases���private lessons to hone their children���s skills. I never had that expense. Maybe a future college scholarship will offset these outlays. Or not.
There���s a cost to grandparents, as well. ���Pa, would you like to buy��� for my team���s fundraiser?��� That���s not counting the Girl Scout cookies. I decided to donate the 15 boxes I just bought from granddaughter No. 3. No sense risking the 15 pounds I lost being quarantined prior to my recent surgery.
Many people disagree with me, but based on my experience with college���nine years at night���and paying for our four children to attend private schools, I think grandparents should help their grandchildren if they���re in a position to do so. We started a 529 plan when our first grandchild was born. I have to admit, our funding plan didn���t anticipate 11 grandchildren, but there���s no turning back. We send money each month and an additional amount for birthdays.
The grandchildren have added more to my life than I could ever repay. Our family is our top priority. If at all possible, reasonable and prudent, I���ll never say no to our children, and neither will my wife. An exception: One son asked me to cosign a loan so he could remortgage his house, and I did say no to that.
If they need help���be it our time, a loan or emergency cash���we want to be there. Once we secured our own financial independence, what���s the money for?
Richard Quinn blogs at QuinnsCommentary.net. Before retiring in 2010, Dick was a compensation and benefits executive.��Follow him on Twitter��@QuinnsComments��and check out his earlier��articles.
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March 16, 2022
Crude Comments
Moreover, like most Americans, I earn more money today than I did a decade ago, so $45 to fill up the tank doesn���t hurt as much. Go back even further, to July 2008, and oil was above $140 per barrel. At that time, the average gasoline price was similar to today. Maybe we���ve all been spoiled by abnormally low energy costs in recent years.
Consider three intriguing charts. The first illustrates the decline in energy goods and services as a percent of total personal expenditures. Back in 1980, it peaked above 7%. Fast forward to 2022, and the figure is 3%. Prof. Timothy Duy���s graph shows that Americans spend much less on energy, compared to other goods and services, than we did in the 1970s and ���80s. Conditions are much worse in Europe���the region���s energy costs now rival its 1980 highs.
Next, check out this chart, which compares gas prices to hourly earnings. Adjusted for wage gains over the years, U.S. retail gas prices peaked at $6.13 in mid-2008, according to energy analyst John Kemp. That compares to today���s average pump price of $4.30.
Our last chart adjusts a barrel of Brent crude oil���the global energy benchmark���for inflation. While $100-plus per barrel makes for dramatic headlines, it pales compared to the 2008 peak above $180 and the 1980 high near $160, both figured in today���s dollars.
To be sure, this year���s jump in the cost to heat and cool a home, drive to work and run a business is especially rough on lower-income families. Still, whenever we see today���s alarming headlines, it���s important to consider the context���and take a longer-term perspective.
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March 15, 2022
Life’s a Circus
After completing General Electric���s two-year financial management program, I wanted to do something different. I applied to both the Wharton MBA program and Clown College. To my surprise, I was accepted by both. The decision was easy. I turned down Wharton to go to Clown College.
During the day, we had classes in pantomime, juggling, stilt walking, unicycling, slaps and falls, makeup, costuming, building props, developing routines and even elephant riding. We spent evenings watching comedy films, sewing our costumes, making props and practicing skits.
In the 1970s, Ringling employed 60 clowns in its two traveling shows. Since the average career of a Ringling clown was two years, they needed 30 new clowns each year. Clown College had 60 students. Upon graduation, half were offered contracts to join the show. If offered a contract, we were obligated to accept.
Life in the circus was rigorous. The show was three hours long and usually moved to a new city each week. There were two shows a day, Tuesday through Friday. Saturday and Sunday had three shows each day. On Sunday night, the show was torn down and packed on the train. Monday was a travel day and Tuesday a new cycle began.
I was not offered a contract, so in January 1979 I started at Wharton. Truth be told, I didn���t try hard to get a contract. I had been dating a young woman and was worried what it would mean for our relationship if I traveled across the U.S. for a year. By not joining the circus, I could continue the relationship. Happily, we were married within a year.
Clown College teaches nothing that helps with asset allocation or retirement withdrawal rates. But it did illustrate five important financial lessons.
1. We can be happy without many possessions. Ringling shows traveled by train. One car was the clown car. It had a small communal kitchen and common toilets. A clown���s room was three feet wide and six feet long. Two seats faced each other with a small table between them. At night, the table dropped down and turned into a bed. Above the window was a shelf that was 18 inches wide and six feet long. All your worldly possessions had to be stored on that shelf. It worked well and people were happy.
Today, I have a large home filled with a lifetime���s accumulation of stuff. I would like to downsize but I struggle to get rid of things. I have to remind myself that my possessions are not the source of my happiness. I would not be happy today living in a three-by-six-foot room, but I could be happy with far fewer possessions.
2. Supply and demand matter. In the late 1970s, clowns were paid pitifully little, about $150 per week. Show girls were paid twice that. Even show girls admitted that clowns��� work was more demanding. Why the discrepancy in pay?
For clowns, Ringling is the pinnacle. Clowns aspire to work with Ringling. We were told that Clown College had 3,000 applicants each year. There were 60 of us vying for just 30 spots. But no show girl aspires to work for Ringling. A show girl wants to work on Broadway or in Las Vegas. Show girls have to be paid better to get them to join.
We need to remember supply and demand. It explains a lot of what we see around us.
3. Be prepared. One of my favorite quotes is, ���I am a great believer in luck, and I find that the harder I work, the more I have of it.���
Why was I one of the lucky few to be accepted into Clown College? I have no idea. But I believe at least some of it was because I had already taught myself juggling and stilt walking. I was prepared. Others who showed up at the audition seemed to be there because they had seen the ad and had nothing better to do that day.
We can���t expect our investments to do well if we know nothing about investing. We don���t need a doctorate in finance, but we can���t expect the best results unless we know something about investments and financial markets.
4. Unions are not always effective. Clowns and other circus performers used to be represented by AGVA, the American Guild of Variety Artists. When I was in high school, I attended the circus when it was in town. I talked to some of the clowns after the show and they invited me backstage. That day, many of the clowns were complaining about the union. They hated to pay union dues and believed they received absolutely no benefit from the union. By the time I attended Clown College, clowns were no longer unionized. If unions want to represent employees, employees have to be convinced of the value of unions.
5. Sometimes, it makes sense to quit while you���re ahead. Karl Wallenda was the patriarch of the Flying Wallendas. The Wallendas walked the tightrope and never used a safety net. Karl died at age 73, while walking a wire stretched between two buildings. The wire slipped because of improper rigging and he fell to his death.
I attended a talk by Tino Wallenda, Karl���s grandson and an accomplished wire walker in his own right. During the question-and-answer session, someone asked Tino what lessons he had learned from his grandfather���s accident. Tino thought for a moment, then smiled and said, ���Quit wire walking before you reach 73.���
This lesson applies to both our financial portfolio and our career. Sometimes, things don���t turn out well when we continue to invest aggressively after having enough. Sometimes, we continue to work when our faculties have diminished.
I always encouraged my college students to lead lives of reflection. If I can find financial lessons or life lessons in something as outlandish as Clown College, we can all find lessons in our own experiences.
Larry Sayler is the only person with a Wharton MBA who also graduated from Ringling Bros. and Barnum & Bailey���s Clown College. Earlier in his career, he served as CFO for three manufacturing and service organizations. For 17 years before his retirement, Larry taught accounting at a small Christian college in the Midwest. His brother Kenyon also writes for HumbleDollar.��Larry's previous articles were Gifts With Interest and Making a Difference.The post Life’s a Circus appeared first on HumbleDollar.
If I Could Go Back
I recently stumbled across the��channel, and scrolled to my senior year, which was 1974-75. I played tight end on arguably the worst team in my high school���s long and storied history. We had won five and lost three the previous year, and the local paper predicted we���d win our division. Instead, we lost every game.
I was a bit apprehensive as I opened the first game of my senior year. I remembered the final score (we lost 10-7) and some of the details. What I didn���t realize was how badly our team played. We fumbled five times in the first quarter. Before the game was over, we had several more fumbles and an interception. Our quarterback got pummeled.
A high school football game can be condensed into 25 minutes of viewing with good editing. It didn���t take long to watch the whole game. I think I played every offensive play. We ran a very simple offense, more 1950s than 1970s. We only passed when absolutely necessary. My primary role was blocking.
I watched the film closely and felt I played pretty well. I blocked well in direct runs, and especially when the offensive tackle and I would double team the defensive end. The challenge was when I had no one in front of me, and I was supposed to find a linebacker to block. They knew we were most likely running the ball, and they played close to the line. It made it harder to reach them before they got to the runner.
I found myself wishing I���d been a better player, that I was stronger and faster and more experienced. I thought of the things I could have done to be better prepared or to contribute more to the team. One thing I noticed, however: I never stopped hustling. Often in football, you see the players on the opposite side of the play���s direction take a play off. On the film, I was happy to see that even when the play went to the other side I hustled down the field to find somebody to block. This worked well a few times, helping the ball carrier extend his run.
Later in the day, as I was thinking about the film, I started thinking about how many other things I wished I could do over. I���ve always felt that way about investing. I should���ve known about Berkshire Hathaway 10 years before it became iconic. I should have put more into GE stock when I worked for the company, and then sold it all before the crash. I should have moved all of my 401(k) into Lockheed Martin stock when it dropped toward $20, and not sold until it broke $400.
I watched a good friend accumulate Apple stock around $20. There are so many others I missed. Instead, my wife and I worked hard, saved in our 401(k)s, drove sensible cars, took camping vacations, invested for our children���s education and paid off our mortgage. We ended up okay. I sometimes still regret not being a better investor. But I���m happy I never stopped hustling.
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Get to Choose
The premise of the book is that life is a journey, not a destination. We should set some basic goals that help guide our journey, but���as with all journeys���there are choices to be made along the way.
Campbell believes the foundation of a happy life is the ability to control those decisions to the maximum extent possible. If you come to a fork in the road, you want to be the one who chooses which way to go. You don���t want to be forced in one direction or, worse yet, have no good options.
How do you get to control your choices? By doing the necessary work throughout your life to gain the assets needed to make the decision. These assets are the attributes, skills, experiences, family, friends and knowledge you develop as you grow. The more assets you acquire, the more choices you���ll have.
This is also true in our financial life. The more financial assets we have, the more choices we���ll have. But we also need to acquire some non-financial assets.��You probably possess many of these assets. They include innate intelligence, an ability to learn and some facility with numbers. Some of us are born into families where finance is openly discussed. That���s a terrific advantage, especially as you start your financial life.
If we lack knowledge, there���s a tremendous amount of free educational material to help us learn how to save and invest. There are great books, websites such as this one, and courses. Many of us can point to investing icons whose teachings were pivotal in our growth. Names like Munger, Buffett and Bogle are responsible for much of my knowledge.
There���s one more asset that I think is critical to acquire. I liken it to emotional intelligence. We need to develop self-awareness of how we think about money. Studying economics, and then examining ourselves through that lens, is one key to building wealth. If we���re in a committed relationship, understanding our partner is also important. Building these insights, and applying them to our life, can help us to build wealth.
I���ve studied financial planning for three decades, including reading dozens of books on investing. I helped found and run an investment club. I completed the coursework and passed the test for the Certified Financial Planner designation. I also completed the Retirement Income Certified Professional certification.
Despite all this, I���m struggling mightily with completing a retirement income plan for my wife and me. I���ve taken early retirement, and the thought of spending our hard-won retirement savings is scary. I also tend to overanalyze things, looking for the perfect solution.
Over the years, I���ve learned that when I get into ���paralysis by analysis,��� the best thing to do is pick a relatively easy task and finish it. In this case, I set up a recurring withdrawal from my Vanguard Group IRA, enough to cover the gap between my pension and our expenses. We���ll run this way for 2022, while I think about our next moves, such as signing up for Medicare and when to claim Social Security. It isn���t optimal, but it���s one small step on our retirement journey���and the good news is, we control where we���ll go next.
Richard Connor is��a semi-retired aerospace engineer with a keen interest in finance. He��enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter��@RConnor609��and check out his earlier articles.The post Get to Choose appeared first on HumbleDollar.
March 14, 2022
How to Be Bookish
But what���s the next step?
Sending it off to a publisher is a longshot, especially if we don���t have an agent. We���ll probably never hear back���that���s a ���no,��� by the way. Even if we get published, we might receive royalties of just 8% to 12%, depending on the genre and whether it���s paperback, hardcover or e-book. The publisher will do the printing, but the author must do a lot���usually almost all���of the promotional work. I���ve gone this route with textbooks, and it can be disheartening to see successful sales but minimal royalties.
A route you shouldn���t go: vanity presses. Basically, if a publisher asks you for money, run away. Such publishers will compliment your book and tell you that it���s in your interest to pay because then you get 100% of sales thereafter. But as the publishing company is basically a printer, it has no skin in the game and the writer is often left with a garage full of unsold books.
As an alternative, I suggest self-publishing. I don���t like promoting a company that doesn���t need help, but Amazon has made it very easy to self-publish with its��KDP program. You upload your manuscript, design your book cover, adjust as needed���et voila.
There are some twists, but it���s nothing you or your computer-savvy niece can���t learn with plenty of guides from KDP and elsewhere. You set your own price and see the effect on royalties. Amazon still takes a large chunk and you have to do all your own promotion. But on the whole, you get more than if you went with a publisher. You can publish your memoir, the secret to your financial success or your rage-against-the-machine manifesto. You can even write a story using your own children���s or grandchildren���s names, and then order just enough���at the author���s discount���to deliver it to them as a gift.
I���ve self-published children���s stories through Amazon, then promoted the books how and when I wished. Last year, I published a story about giving, with the proceeds going to a local charity.
Speaking of shameless self-promotion, allow me to tell you about my latest project. I used to teach public speaking, including how to think of a topic and create a speech devoted to it. After delivering a homily last October at a local school���s chapel, the priest was lamenting how kids and adults say they wouldn���t mind giving a homily or other presentation, but didn���t know how or where to start. After some keyboard pounding and a lot of editing, I stuck my thoughts on the topic between two covers.
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