Christmas Weekend Reading – $90,000 job or house, ways to save, cutting fees and dividend kings

So much to comment on in this Weekend Edition! It’s late and no one will read this anyway…

Carlson/“Get the big purchases right.” — exactly. Most PF bloggers focus intensely on hyper-frugality, but that’s definitely not what’s going to contribute the most bulk to any nest egg.

As Buffett/Munger have stated (paraphrasing), get a few big things right, avoid big mistakes, and you’ll be far ahead of the crowd. (Along the same mentality as conducting your life around a few unwavering central ideas and being completely flexible with all else.)

In addition, the commentary and insight of guest of Carlson’s most Dec 22 post, Adam Robinson, is great and people would do well to follow his lead. I’ve been attempting to develop a similar mindset over the last couple of years, focus on a few main drivers and attempt to find the asset class which will benefit most from said driver (e.g. what will give the greatest returns from interest rates).

Shirts w/Holes & Drake — the antithesis of the above. Wheat from chaff, regardless of income. I’d rather take financial tips from the dude on Youtube raking in $12 million a year…playing video games.

Inflation — “…in 2016 the average home had risen to $489,590…because of the steady march of inflation.

DEAD. WRONG.
The rise in real estate prices over the last 30-40 years has beed derived almost entirely from DISINFLATION, not inflation, as put forth by the quoted author (a former financial sector “professional”! Yikes!).

Not only that, but real estate prices (as with any and all financial vehicles) are not included in the calculation of “inflation” aka CPI, thus there is no correlation. CPI was constructed mainly to guide government monetary and fiscal policy, not to track household expenditure.

Prime example of how so many PF blogs propagate bad information and why the readership bases their financial decisions on these confused writings — and why my PF blog visitation/participation will be exceptionally rare going forward.

If a person is serious about building personal finance knowledge, they would do well to separate knowledge from entertainment/infotainment and realize almost everything on a blog resides in the latter category (or ‘latte category’, as it won’t do much more than fritter away your limited resources). If it isn’t helping you think better, it isn’t helping you.

In other words, the cost:benefit ratio of PF blogs is exceptionally low. From Seth Klarman (Margin of Safety), “information generally follows the well-known 80/20 rule: the first 80 percent of the available information is gathered in the first 20 percent of the time spent.” Further more, 80% of the most impactful/useful information will be derived from 20% of the sources; thus, if you read ten PF blogs, you only need to read two (or less). Problem is, you probably won’t figure out which two and you’ll continue to drown in infotainment.

More over, a recent meta study (~200 studies) found a weak correlation between financial literacy and financial decisions. All the information in the world won’t save you from yourself. But it’s easier to fool ourself into thinking gathering more info will be much more beneficial to us than expending the effort to develop self-mastery in order to beneficially apply the knowledge we already have. It’s also easier to blame external entities when things go wrong rather than blame ourselves.
(It’s most likely very easy to get rich — there is soooo much money out there! — unfortunately, we fight ourselves at every step, and most lose.)

BCM — we should all know by now that a goal-based endeavour is far inferior to a system-based endeavour. Forget the goals, SMART and/or otherwise. As for not screwing up as bad as last year, and to quote John Oliver: ”F@#$ YOU, 2016!”

Michael James & Retirement — “…the concept of retirement, as we understand it today, is outdated.” Yes, it is. However, we are misunderstanding it in the wrong direction. Most citizens of Western nations think “retirement” (and a booming “early retirement” industry) is an inherent Right or entitlement. It most definitely is not. ‘Retirement’ is a mostly modern invention, barely 100 years old, growing in popularity as the Middle Class (aka Boomers) grew in size; ‘early retirement’ gaining popularity as perceived wealth grew and working became more and more stressful. But consider Piketty’s ‘Capital’, which claims the Middle Class is an economic anomaly and will evaporate upon reversion to the mean, thus the modern concepts of Middle Class, such as retirement, will also become figments of our outdated understanding. Retirement, as always, will be for the rentiers.

(As a side note: ‘MJoM’ is one of the very few PF blogs I keep on my list. He writes what interests him — regardless of popularity — has the intelligence to come to logical and reasonable conclusions (and rebuttals), and publishes when he wants, thus his content isn’t rife with filler.)

“…here is what I think the best savings rate rule of thumb…”
Hate to say it, but this is, once again, a prime example of the amateur nature of the PF blogosphere. A “savings rate” is the return paid on your savings; a “saving rate” — no ’s’ — is the amount you save. Semantics? Sure. But if you are going to speak the language, why use the wrong words which mean completely different things? (the recent ‘adviser vs advisor’ article comes to mind…). Imagine an engineer, mathematician, or doctor not understanding basic tenets or continuously utilizing wrong notation…I wouldn’t want to drive across that bridge.

In closing, I went to the mall on the 23rd for a bit of free entertainment. Oh my! but humans are hilarious! It’s amazing we’ve come this far, but at the same time, painfully obvious why we’ve come only this far.

As Louis L’Amour said of the human condition: “I do not believe that man has even begun to realize who he is or what he can become. So far he has been playing it by ear, following paths of least resistance, getting by — because most others were just getting by too. I believe that man has been living in a Neanderthal state of mind. Mentally, we are still flaking rocks for scraping stones or chipping them for arrowheads.”

Time for a classic and relevant Christmas read: Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay.

Enjoy Winter!

Thanks for the mention Mark. Happy holidays to you and your family. I’m looking forward to 2017 and seeing what Trump will do once he gets into the oval office.

Thanks for the mention Mark, yes always try to do better than last year is the start of a plan, but be a little more specific.

Merry Christmas, Happy Holidays and a Happy New year, to you, your family and of course your loyal readership.