Sunday, September 11, 2016
Tuesday, August 16, 2016
The Pillars of Wealth
The four pillars of wealth have remained constant over time; Stocks, Bonds, Real Estate, and Gold. Barring the use of fiat currency, i.e. cash, for intermediate transactions, the world's wealthy have consistently built, stored, and extracted their wealth from those four pillars. Go and do likewise financial farmers; the means and methods vary, the intricacies differ, and the medium may change, but make no doubt about it, those pillars have remained constant bastions of wealth over time.
Saturday, July 16, 2016
Automation and the Gig Economy
What has been termed the Gig Economy may be the proverbial canary in the coal mine for the estimated 40% of the world's population that works in agriculture. As Marc Andreessen famously wrote in the Wall Street Journal article "Software Is Eating the World," there are tremendous implications for software disruption hitting many traditional industries. Not all of this is good, however, especially if you aren't skilled in software. I believe a massive net negative is going to feed the growing global dystopia of income and wealth inequality.
Historically, technological advances have actually produced more jobs, i.e. the industrial revolution, but recent advances in distributed software have made many jobs borderline sustainable; who really needs (wants) a taxi driver when a car installed with autopilot can get the job done? Others like farming, which are extremely labor dependent, are ripe for full automation. The unemployment implications are particularly disastrous in countries reliant upon agriculture for sustaining the bulk of their GDP.
The automation trend is on the cusp of cannibalizing many traditional jobs. The prosaic answer to this disruption, espoused by the billionaire networked elites, is "education." But how many programmers do we really need? Or better yet, how many programmers can this world support? Even programing has become commoditized as the H-1B visa saga illustrates; why hire a USA programmer when one from overseas can be had at a fraction of the price?
As readers of this blog know, we try to identify mass trends and tack our investment course accordingly. It is hard to believe the powers that be, i.e. Silicon Valley Venture Capitalists, will not pursue increased automation. It is a cheap solution to generating massive wealth without having to really create anything. By shirking existing laws, like occupancy taxes or taxi safety standards, software can leverage huge swarths of existing infrastructure, drive out the middle (wo)man, and siphon the profits upwards.
The transition to a Gig Economy is very telling. Many existing jobs are eliminated and traditional employees are dropped into the Gig Economy like Neo in the Matrix as essentially economic mercenaries looking to fulfill increasingly more challenging positions that are not consumed by automation. Expect this trend to continue and invest accordingly; boring, monopolistic, dividend-paying companies that this blog traditionally espouses once again fit the bill. Software may be eating the world, but the installed base of commodity-dependent consumer staples (of which technology now can be considered a staple too) is winning the alpha race.
Wednesday, July 13, 2016
"Yeah, But Gold Doesn't Pay Any Interest!"
Courtesy of our friends at the Federal Reserve Economic Data (FRED) division, pictured above is the Purchasing Power of the Consumer Dollar. Essentially from 1975, the US Dollar has lost more than 95% of its purchasing power.
As those who like to Invest Like A Farmer, we don't like losing purchasing power. It is a really bad thing; you receive less and less in terms of goods and services over time for each US Dollar you save. Traditionally this was offset by having FDIC-insured risk-free savings accounts that yielded interest.
With interest now completely laughable, in some countries it is even NEGATIVE now (meaning you pay the bank for the pleasure of them then lending your money,) savers either have to chase risk in the hopes of getting a higher return on their dollars or seek an alternative asset class to hold their fiat currency.
Although having seed capital available has always been a good idea, the mechanism of value in which that capital is stored is very important. Holding cash money long-term has proven to be a big-time loser for protecting the purchasing power of consumers.
Wednesday, June 29, 2016
How Does Your Retirement Cashflow Stack Up?
Projected GDP Per Person over the next 5 years through 2020 gives an idea of what the average citizen in each of the following countries makes (either passively or actively) in income. Great snapshot of where investors should be targeting their returns in terms of local fiat currency. Interesting to see the effects of inflation even over a short amount of time in regards to estimated cost of living. Inflation is the enemy that never sleeps.
Tuesday, June 28, 2016
So You Say You Want a Revolution?
Payments over the course of history have increasingly moved towards a digital ledger system, the latest entry into this evolution of Fintech (financial technology) is the newly coined...sorry minted...sorry invented...term "fintat," meaning a "financial tattoo," that is a truly wearable temporary tattoo. Yes that was all one sentence, and yes I tried one out at Dunkin Donuts (odd, but successful nonetheless.) The temporary tattoo is a Quick Read (QR) code and can be washed away with soap and water at any time or will naturally dissipate over the course of a week or so. If you ever forget your wallet or go for a run you can feel at ease knowing you have cash "on" you at all times!
Sunday, June 26, 2016
The Case for Gold
One of my favorite asset classes is Gold. Old Element 79 is pretty interesting for many reasons; it is highly ductile, an extremely good conductor, and it has proven exceedingly difficult to create or destroy over time. But probably my favorite characteristic of gold is that it has been intrinsically linked to stored human toil (value) for over 5,000 years. In fact, Warren Buffet's father in 1948 wrote an excellent piece on this very subject. If you read one thing today (besides the ILAF blog of course), I highly recommend Howard Buffet's speech to Congress entitled: "Human Freedom Rests on Gold Redeemable Money."
A company I recommend and personally use to buy and store Gold for a flat 1% of spot pricing is aptly named Goldmoney. You can chose where you'd like to vault your gold and it can be redeemed for physical gold on demand. They've essentially reinstated the Gold Standard after an over 80-year absence.
As the world watches the Olympics in Rio this summer and the economic fallout from the United Kindgom's Brexit vote, it is interesting that once again all eyes are on timeless Gold as the metric of excellence and value.
Friday, June 24, 2016
The United Kingdom becomes the first member of the European Union to voluntarily leave the group as a historic referendum pitted pro-EU loyalists against a rising wave of voter angst upset with being marginalized socially, politically, and economically from globalization. Last-minute attempts failed to unite the country and voters choosing to leave came in strong numbers.
The initial effects have been a massive sell-off in the global stock markets, with Asia, Europe, and the United State all down significantly. Almost every currency also fell against gold which enjoyed its best day in years, hitting a 2-year high in the wake of the Brexit vote.
Going forward the implications are ominous in that the EU itself may now face additional countries determined to leave. Time will tell, but the referendum results don't bode well for traditional establishment candidates and polices throughout the world.