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Author Topic: The Mainstream Masses  (Read 924 times)
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tamo42
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« on: 2011 Jan 25, 11:01:55 pm »



As someone way outside the mainstream when it comes to... well... everything, I really did not understand how people could listen to the talking heads on tv and take them seriously. Then, over the Christmas holiday, I listened to a conversation between a 66 yr old billionaire and his 88 yr old millionaire father. They were discussing investments, and the father was telling the son about his bond investments that were maturing. Apparently, back in 1980, he bought a bunch of $100 30-year bonds. The interest from the bonds were reinvested each time, and now each of the bonds is worth $600.

That sounds pretty good, put $100 in and get $600 out.

But this was over 30 years.

So, being the nerd that I am, I did the math. That's a compounded interest rate of 6% per year. 6%!  

Here's the bottom line, 6% a year sucks. But the masses have been conditioned (through the Big Lie technique) to believe that it's great.  

It has barely beaten price inflation over those years.  

Don't get me wrong, 6% is better than the -90% overall you would have gotten if you had just held cash, but as an investment, you can do better. That's the price you pay for being passive with your money.

Without going off into a whole theoretical tangent, money represents some form of human effort. You can think of the effort as anything from the labor of a man carrying bricks to the paralyzed nerd thinking up designs for communications network. Somewhere along the line, someone exerted a will to shape the world around him or her in a way that others value. When you are passive with your money, you are voluntarily letting go of that embodied energy, and it will flow to where it is put to use. In the case of government bonds, it was put to use to pay interest on debt that was created for whatever politician's spending program.

6% is right around the level that the general markets return over long stretches of time. It's no wonder that's how much the bonds paid. In order to become wealthy, you have to do better. You have to take an active role in the control and growth of your money. In short, to do better than the market, you must be better than the market.

How do you become better than the market?

Well, you are on the right track by reading posts here at Live Business Chat. Go a step further and post ideas, questions, and comments of your own. LBC is really a giant mastermind group. It is a resource for all the would-be money makers out there to develop and refine concepts to their most effective form.

Always be open minded. The idea you dismiss out of hand could easily have been worth millions. There are lots of hurdles to being in business or making money in general. There are governmental obstacles, sale and marketing challenges, and the list goes on. The #1 biggest money-killer is the space between your two ears. Before you do anything, you must have a vision of what is possible. If you told me 15 years ago that I would make more money this morning clicking a few buttons on my computer and trading AAPL options than I would in a week of work, I'd have thought you were nuts. Then the internet became a mainstream force and the old brokerage models crumbled - it created a whole new reality in that segment.

Most importantly, think of how things could be better. Products and services are created by fulfilling a need in some kind of better way than there existed before. In some cases, these improvements are incremental. My new wi-fi router is 5x faster than my old one. In other cases, the improvements are in things we didn't even know needed improving. Before FedEx existed, nobody knew the need to have documents mailed overnight.

And remember, making money is not for the faint of heart. There will be ups and downs. That's why you've heard all those statistics like the average millionaire has gone broke 3 times before hitting it big. It's true. But that's what it takes to stand out from the mainstream masses.



These replies were posted before the article was published and you guys got to read this:

From FanofBadon
Quote
that really sucks!! I would have expected the rich people to be more greedy than this!

And from dobedo
Quote
Well, I think it's the peace of mind that matters more to those super rich. They don't have to sweet like capitalist pigs to day trade anything. I'll take 6% any time when inflation is very low or during the down years - oil crisis 80's, tech bubble 2000's, and financial bubble 07-09.


* Crowd.jpg (16.25 KB, 300x258 - viewed 374 times.)
« Last Edit: 2011 Jan 25, 11:13:40 pm by tamo42 » Logged

Neal McSpadden
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« Reply #1 on: 2011 Jan 26, 02:07:56 am »

tamo42,

Thank you for this post.  I hope people really consider exactly what is being said here.  I find that most people I run into cannot properly define inflation.  And very few people look at their net worth in terms of purchasing power or inflation-adjusted numbers to see if they are actually making headway.  The financial system is set up so that people HAVE to be risky just to maintain what they've already earned.  It's a recipe for disaster and that's exactly what we've seen the last few years.
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tamo42
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« Reply #2 on: 2011 Jan 26, 08:20:21 am »

The financial system is set up so that people HAVE to be risky just to maintain what they've already earned. 

This is exactly correct.

If you just ride the markets over the long term as an average investor, your returns will be exactly equal to the average rate of inflation. Someone in the chat posted a link to a New York Times piece in which the authors created a heatmap graphic that showed the various returns in the stock market depending on when you put in your money and when you pulled out your money. The overall average was right around 4%. The long term average of inflation? Right around 4%.

So you are left with fundamental choice between doing better than average or being subject to whatever happens to the markets and society as a whole.
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Neal McSpadden
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« Reply #3 on: 2011 Jan 26, 11:02:08 am »

So you are left with fundamental choice between doing better than average or being subject to whatever happens to the markets and society as a whole.
That's not much of a choice. And if the society as a whole decides to do better than average, then we'd just end up with a higher average. Does the law of large numbers (i.e., masses) play any part in this?
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tamo42
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« Reply #4 on: 2011 Jan 26, 11:23:35 am »

The law of large numbers does apply, but only in a mathematical way. If western society as a whole turns its course around and does better, then the average return will simply be higher. You still want to do better than average for yourself, but if average is OK, then it's less important.

The importance of power and money shifting to the East lies in the fact that western governments (especially the US) will be squeezed tighter and tighter as their debt increases. Individual politicians always want to spend more because it makes them popular and gets them re-elected. As the money required to pay on these debts increases, politicians will start grabbing the cash from wherever they can. This is why there have been hidden tax increases passed in jobs and health care legislation. This is why the politicos are starting to talk about seizing retirement funds, only they call it "safeguarding" your money. This is why they have even gotten foreign banks that deal with American clients to hold on to the client's money and sent to the US government. This is why you have to pay taxes on taking money out of the country. This is why they are considering creating a tax holiday on money you bring in to the country. The list goes on and on.

Obviously, this can't continue forever. You can't squeeze blood from a stone and all that. One of several things will happen: the governments openly default, the governments default through massive inflation, the governments will stop spending so much money (hah!), or the people will take the power back and force one of these options.

So far, in the US we have seen local governments start to openly default. The federal government is inflating as best it can while trying to spin it in a way that says they are spending less. We've seen a feeble attempt by some people to take power back, but to date they still believe they can do so while keeping the present systems with the same incentives.

All of these options lead to some form of breakdown in civil society. What kind and how severe a breakdown will depend on the details. This is why you have to either lie low or get out of dodge.

On the other hand, if, by some miracle, our whole culture stops doing stupid things with their money, then everything will be fine.
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Neal McSpadden
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« Reply #5 on: 2011 Jan 26, 11:37:20 am »

Very interesting indeed. This sounds really scary. So what's our exit strategy? Move to China? Build our own countries in our backyards? Become super rich (like Rich Dad) to buy our government?

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tamo42
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« Reply #6 on: 2011 Jan 26, 11:39:06 am »

Essentially, yes. I'll have a post coming out today or tomorrow that talks about the strategies to deal with this situation.
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Neal McSpadden
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« Reply #7 on: 2011 Jan 26, 02:10:36 pm »

I just came across a news report about something in my home state:

ATLANTA -- Georgia's State Revenue Commissioner addressed ongoing problems with paid out state tax refunds being pulled out of taxpayers' checking accounts at a news conference Wednesday afternoon.

Commissioner Douglas J. MacGinnitie said that $12 million was recalled from accounts where it had been paid out to between 31,000 and 32,000 Georgia taxpayers. MacGinnitie said the withdrawals were to deal with an overpayment to taxpayers of about $633,000.


This was from an article on 11-alive news. I don't know all the particulars, but basically the state thinks it overpaid people on their refunds and then took the money back for those who used direct deposit. Color me suspicious, but I'm willing to bet that not all that money was "overpayment."
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Neal McSpadden
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« Reply #8 on: 2011 Jan 26, 10:02:06 pm »

Very interesting indeed. This sounds really scary. So what's our exit strategy? Move to China? Build our own countries in our backyards? Become super rich (like Rich Dad) to buy our government?

Here's my take on the ways to survive the financial meltdown.
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« Reply #9 on: 2011 Jan 27, 10:47:08 am »

Wow, fascinating discussion running here. Like dobedo says, it sure does sound scary, even though we at LBC have been talking about it for the years running up to it. Now that it's here, it's creepy. Anyone that can get out of the USA safely, should do so.
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