Good reads from around the Web.
Stock markets continue to gyrate, especially in the US which was really the last domino to fall. Some giant US tech stocks dropped 40% or more on Friday, and the Nasdaq fell more than 3%.
As I said a few weeks ago [1], I think we’re in bear market conditions, whether or not any particular index is down 20% from its highs on any given day.
And at such times, gloom grows.
Telegraph of doom
The Telegraph – which it must be said has called 13 of the last 0 ends of the financial world – has a big story about this all being a perfect storm [2], and a unique sort of crash.
I’m not so sure about that, or at least not yet.
True, that low oil prices seem to be causing a panic not a boom is unusual.
And with negative yields spreading to Japan, it’s hard to discern a soaring cost of money in the developed world – the infamous “taking away of the punch bowl” that precedes so many slowdowns.
But much of the crash is familiar – especially the diminishing ‘breadth’ in 2015, when only a few big companies kept the US indices afloat.
Now those last leaders (Facebook, Amazon, Google and so on) are falling over, taking the world’s benchmark indices down with them.
Something is probably happening…
Soaring indebtedness in emerging markets – especially US dollar denominated debt – is certainly an issue.
And as the dollar has soared, this debt has become ever more expensive.
But why has the value of the dollar soared, anyway?
The 0.25% percent rise by the Federal Reserve seems puny. More a sort of gentle tutting from a teetotaller while the cups keep getting refilled…
Perhaps this is why many insiders seem to be panicking more than usual. It seems the mechanics of the market itself are causing fear this time, more than silly news headlines.That sort of thing has a bad track record – think 1987’s Black Monday, the Asian Financial Crisis, and of course the 2008 financial crisis.
Add seven years of near-free money to the mix, and the market is probably right to fear some sort of blow-ups are coming. Big over-leveraged funds, perhaps a major state default, and so on.
Still, that’s nothing we haven’t seen and survived before. (Touch wood. 🙂 )
Also, the bright side of market-driven fear is it can unwind as quickly as it comes, whereas genuine economic slowdowns take years to grind out. (Friday’s trading in the US did have an air of capitulation, though it’s far too early to say so.)
It will certainly be fascinating to see how things unfold if you’re an investing junkie like me.
But as I said last time [1], if you’re passive investor with a properly diversified portfolio, your best bet is probably not to watch it unfolding too closely and instead let your asset allocation take the strain.
(Particularly those government bonds everyone ‘cleverly’ kept telling you (and urging my passive co-blogger) to dump. They’ve been rising…)
Always remember investing is about years and decades, not days and weeks.
Nothing but cash only goes up – and not even that any more in some quarters!
Spare any change?
To refocus on the big picture, let’s instead consider three different stories I read this week about the opposite of losing money.
In Beyond wealth: What happens if you have enough?, posted at Money Boss [3], the original personal finance blogging superstar J.D. Roth explains how going from debt to abundance did not solve all his problems.
Has he started his new personal finance blog to get richer, quicker? Or is it because creating his first mega-blog (Get Rich Slowly [4]) was what gave him purpose in the first place?
J.D. doesn’t say, but there are other life lessons from the trenches:
Beyond the peak, Stuff starts to take control of your life.
Buying a sofa made you happy, so you buy recliners to match.
Your DVD collection grows from 20 titles to 200, and you drink expensive hot chocolate made from Peruvian cocoa beans.
Soon your house is so full of Stuff that you have to buy a bigger home — and rent a storage unit.
But none of this makes you any happier.
In fact, all of your things become a burden. Rather than adding to your fulfillment, buying new Stuff actually detracts from it.
The sweet spot on the Fulfillment Curve is in the Luxuries section, where money gives you the most happiness: You’ve provided for your survival needs, you have some creature comforts, and you even have a few luxuries.
Life is grand. Your spending and your happiness are perfectly balanced.
You have Enough.
In Drawing A Line On Enough, Mitch Anthony at the Financial Advisor website also argues money isn’t everything.
He relates the life of Mitch Mayo, the millionaire founder of the famous Mayo Clinic, who dedicated his life to purpose once the good life was nailed-on.
Anthony points out that:
More than a few million retirees have discovered (sadly, a bit too late) the truth of [Mayo’s] phrase “contented industry is the mainspring of human happiness.”
In our culture, the only question people think needs answering about retirement is, “Do I have enough money?”
The reality is that the preeminent question really is, “Do I have sufficient purpose?”
Without some form of contented industry present in our life, no matter what our age, it is doubtful that we will experience this wellspring of human happiness.
As I have moved closer to financial independence myself, the idea of retiring has gradually left my consciousness. I don’t yet know what I’ll do, but not working at all feels like it would be a disaster.
That might seem unusual, but I don’t think it is.
We often see very successful entrepreneurs or fund managers who never stop working, for instance.
Surely they have got enough, we ask?
Monetarily, yes – even they probably understand that they do. But a life without work isn’t enough for them.
Perhaps one difficulty is it seems ever harder to define work beyond what you’re paid for it…
Paying for it
A final article this week pointed out that you don’t actually need to have a lot of money to start suffering from these sorts of questions.
Now I’m not broke, I’m terrified [5] made for an interesting (if sometimes slightly head-slapping) insight into going from income-poor to having a decent salary:
The new money I’m making makes me happy, but it also means I have no more excuses for coming up short or not having enough money to live properly.
Which is why, when I got my first new paycheck, I went from doing a little dance to rocking back and forth on the edge of my bed out of worry.
I didn’t want to spend any of it, because for so many years, spending what I made quickly turned into having nothing left to spend.
I didn’t know how to manage my money.
While you may judge that some of his first steps into the life of a high-rolling wage slave look more like missteps, you can’t argue with the candor.
Let’s hope he discovers Mr Money Mustache [6] before too long!
- If you want to read more about how much is enough, try Vanguard founder John Bogle’s Enough: True Measures of Money, Business, and Life [7]
From the blogs
Making good use of the things that we find…
Passive investing
- Investors are so confused about bonds – A Wealth of Common Sense [8]
- Why investors are bad at picking alternative assets – Severian [9]
- A reminder to diversify globally – Abnormal Returns [10]
- Take it easy – Vanguard blog [11]
- Mature portfolios swing around in big numbers – R.I.T. [12]
Active investing
- Why it’s terrible huge companies are staying private – Mark Cuban [13]
- The best research might be none at all – Oddball Stocks [14]
- Postmortem of a good investment in Amlin – UK Value Investor [15]
- Why hedge funds are hiring poker players – The Alpha Pages [16]
- The paradox of unanimity – The Value Perspective [17]
- US stocks are not overvalued [Warning: Maths] – PIIE [18]
Other articles
- In praise of the pension Lifetime Allowance – Simple Living in Suffolk [19]
- Now That’s What I Call Financial Independence: 3 – The Escape Artist [20]
- The five best economic podcasts for 2016 – Tim Harford [21]
- Housing decisions in retirement [US but interesting] – R.R. [22]
- Security theater and investing – The Psy-Fi blog [23]
Product of the week: Mortgage Best Buy tables can be deceiving, warns The Telegraph [24] – you need to consider all the costs for a true comparison. HSBC’s five-year fixed rate mortgages [25] look to hit the sweet spot from its list.
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1 [26]
Passive investing
- EU clamps down on closet trackers – Investment Week [27]
- Morgan Housel: Most swans are white – Motley Fool US [28]
Active investing
- Invest in trusts for a £10,000 income – Interactive Investor [29]
- Active managers outperform, if… – Futures Mag [30]
- Apple is so cheap, it’s ridiculous – Investor Place [31]
- Time to bag a bargain UK bank? – ThisIsMoney [32]
- Google now the world’s largest company by market cap. Sell! – Bloomberg [33]
- Government bond yields send recession signal [Search result] – FT [34]
A word from a broker
- Do Super Bowl ads boost share prices? – TD Direct [35]
- The latest on Junior ISAs – Hargreaves Lansdown [36]
Other stuff worth reading
- Confusion about £1,000 personal savings allowance – ThisIsMoney [37]
- How stories drive the stock market – New York Times [38]
- Pension Lifetime Allowance won’t just hit richest [Search result] – FT [39]
- A pound is still worth a pound – for now [Search result] – FT [40]
- Behind the scenes of high-frequency trading – MarketWatch [41]
- Wolverhampton is the UK’s least happy place – BBC [42]
- A review of all the housing market reviews – Guardian [43]
- Stop slouching – Bloomberg [44]
- Lessons on making 500% betting on obscure sport [podcast] – Bloomberg [45]
- Pretentious and proud of it [Search result] – FT [46]
Book of the week: Amazon has launched its Prime Stations [47]
Like these links? Subscribe [48] to get them every week!
- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩ [52]]