Tuesday, December 31, 2013

Three Cheers for Boring Investors!

As reported in the Wall Street Journal this morning, boring investors did well in 2013. Apparently, this is such big news that it was actually ABOVE the fold on the front page. Of course frequent readers of this blog have known this approach since day one. The extent that this strategy worked in 2013, however, was truly impressive. After literally several decades of pain, those who decided to Invest Like A Farmer notched a spectacular win this year. For a quick recap of the rule set T. H. RAPKO & COMPANY, LLC implements, see below:

Rapko's Rules

1. Boring is undervalued. Look for companies with established brands. If they are exclusive, finite, hard-to-get, vital, addictive, and/or monopolistic, so much the better.

2. I prefer companies that pay me to own them. Specifically, I want to buy companies that pay quarterly dividends that have historically risen over time.

3. Of the four possible outcomes; high margin, high volume is best.

4. A steadily moving higher and higher left to right stock chart is a good thing; the inverse it not.

5. Inevitably, and by definition, more time is spent holding a losing position than is necessary. Cut your losses.

This rule set has served the financial farmer very, very well in 2013 and based on the economic climate going into 2014 it should prove equally fruitful. What's really so surprising is that this is of any great news at all. Warren Buffet has preached this sermon for over 60 years and NEARLY every successful long-term investor follows a similar rule set in some form or another. There are notable exceptions, but for some reason they always seem to end up in jail. 

Going into 2014 individuals who wish to Invest Like A Farmer should laser focus on either buying or developing quality brands that have both scale and utility. America still has one of the best climates, quality of soil, and promising batch of seeds to plant for your own financial farm. Embrace calculated risk and plow ahead.

Here's a toast to very happy and profitable 2013 and may many more years of the same follow. Cheers!

Sunday, December 29, 2013

Market Momentum

Based on historical data from the 1950s to today, a yearly rally of over 20% in the S&P 500 is followed 82% of the time by an average increase of 11%. Put simply, there is a good probability (which I define as better than 50/50) of 2014 being another up year for the S&P 500. Prudent financial farmers enjoy utilizing positive market momentum to their advantage.

Statistical probability alone isn't foolproof, however, but it is an important planning tool for those who wish to Invest Like A Farmer; it acts somewhat as the investor's financial Farmer's Almanac when deciding what seeds to plant on our financial farm. Momentum can be a powerful ally when investing, and the odds indicate 2014 should play out well. I also suspect we will have a positive year in 2014 based on some derived empirical data.

First, the market rally itself has not been widely embraced by the average investor. "Mom and Pop" have not returned to the market since the calamity that was 2008/2009, and if they have, it is in bits and dribbles, not significant positions. The average investor still feels burned. The overall sentiment, and in particular trust, in the large financial institutions is wary at best even among extremely wealthy investors. That, surprisingly, bodes well for keeping enthusiasm in check. There are massive swaths of capital lying dormant on the sidelines. As those funds slowly renter the market in the form of equity demand, that should drive prices of the corresponding stocks higher.

Second, although margin usage is at an adjusted all-time high from a dollar standpoint, so is the amount of money in circulation. With a Fed balance sheet in excess of $15 Trillion and continuing to grow at a marked clip, I suspect we will add significantly more cash money to the kitty by the end of 2014. I was shocked that the Federal Reserve tapered at all at the last meeting, but assuming they stick to a conservative $10B or so reduction a month, that still implies nearly $500-650B being added through the end of 2014. Easy money is growing and here to stay. Margin, buying, and stabilization should all increase accordingly.

Third, I don't see any obvious chinks in the armor of this rally. Corporate profits are coming in repeatedly at record highs, interest rates remain abnomraly low, the housing market is recovering across the country, unemployment continues to fall (although the actual quality of the jobs is questionable), and a variety of new industries in the manufacturing, software, and hardware sectors have arisen. These are all very BULLISH indicators. 

All of these signs lead me to believe we should not only have a decent 2014, but as previously blogged in my Dow Twenty Thou post several weeks ago, an excellent chance of reaching the Dow 20,000 mark by December 31st, 2016.

Thursday, December 19, 2013

Shrimp Inflation

Sadly it appears that shrimp inflation is upon us. A recent report has identified a spike in the price of shrimp in the high teens and land-based protein inflation running into the mid-single digits. Indeed, even a basket of groceries notched a 2.4% increase in the second quarter. For an economy in many respects still emerging from the 2008/2009 financial crisis, this isn't good news.

We're now seeing solid evidence of food inflation. Add that to increases in health care costs, housing, and most notably eduction, and we have the beginnings of an inflationary environment. Some argue true inflation is currently running in the mid-single digits; if your personal consumer price index (CPI) includes food, housing, medical care, and education it probably is, if you prefer to use the established CPI like the Federal Government of tons of soybeans and computer processing power, you probably haven't seen a cost of living increase in decades.

Although the prospect of shrimp inflation may seem laughable to many readers, those who wish to Invest Like A Farmer should pay heed to inflationary signals, even in such small data points as shrimp; these can have jumbo implications for the financial farmer. Inflation eats away at your real returns; even a 27% increase in the S&P 500 eventually succumbs to inflationary pressure. This has the possibility of impacting both the wallet and palate of the average investor. Inflation is truly an enemy of the Republic and is most notably the sign of a fiscal and monetary policy run amok.

I read this shrimp inflation report as a solid signal that wholesale food costs are going to be rising markedly, which means REAL purchasing power is decreasing. The ability for retailers to pass along price increases depends largely on the type of customer; large chain-based restaurants are going to have trouble passing along meaningful price increases, whereas higher-end restaurants will have considerably less pushback. Along those lines, the same school of thought should also hold true for grocery retailers; the high-end retailers should have the ability to pass along prices increases whereas the lower-end shops are going to see their revenue and profit lines narrow. Keep in mind however, this isn't the whole story; inflation is insidious in that it has butterfly effects among asset classes.

Luckily, it appears that energy costs (especially in North America) are falling. Recent news out of Mexico indicating a push towards privatization of many of the resource-rich country's fields may further increase the supply and push prices down further. Notably, we're also seeing significant production increases in the United States which suggest even more pricing pressure to the downside. This impacts food pricing positively, meaning theoretically in North America it should be cheaper and cheaper over the coming years to product land-based protein and potentially harvest more ocean-based protein at a lower price point.

Nonetheless, I would argue that shrimp prices are a useful leading indicator similar to the lipstick index; it is something we at first smile and laugh about, yet often proves to be a harbinger of things to come.

Thursday, December 5, 2013

Dow 20,000 by December 31st, 2016

At some point during the next 3 years, the Dow Jones Industrial Average should hit 20,000 assuming even moderate growth of about 8% per year.

Although it has proven almost impossible to precisely forecast the financial future, and investors know that markets rarely act with linear frequency, I believe the stage is set for Dow 20,000 based on three factors; compelling strength in corporate earnings, sustained low interest rates, and a marked improvement in the employment picture. Even assuming Washington, D.C. continues in a state of relative gridlock and political angst, investors should still be on solid ground.

We are currently in the midst of the 4th or 5th (depending on how you calculate it) best bull market since the 1920s and, surprisingly, we're not too long in the tooth on a relative duration basis.  There is a distinct possibility that this rally continues and becomes one of the ALL-TIME best bull markets. Given the relative political stability for the next 3 years, systemic changes in the banking sector that have been implemented, and finally a surging "IPO 2.0" environment, this current bull market has many good things going for it.  

With easy money still flowing from the Federal Reserve, I see two industries in particular generating significant growth; technology and medicine. From a technology perspective, many companies are laser-focused on the fast-growing mobile sector. With a worldwide population approaching 7 billion, mobile technology is at the forefront of capturing users and revenue. The same can be said of the pharmaceutical industry that has successfully prolonged lifespans throughout the world. Additionally, there are many, many exciting nascent sectors in the economy such as 3-D printing which may lead to a fundamental paradigm change in manufacturing. Finally, as the economy further improves, there is a distinct domino effect on employment; as more workers simultaneously enter the work force (new college grads, the "re-skilled" unemployed, laid-off employees) AND leave the workforce (starting up new companies.) Both of these scenarios should fuel further growth.

What could possibly spoil the farmer's harvest? I see two things on the horizon that are very troubling; the first is the growth of unfunded pension obligations and the mother of all sociopolitical wrangling, the health care system in this country. Unless we can adequately address both of these topics, they stand to possibly derail this rally and cause lasting damage to our great nation.

The Federal Reserve will probably continue to inject billions into the bond market well into 2014 and beyond. There is little doubt this country will have sustained low or very low interest rates well past 2016; the consequences of making any preemptive moves prior to a sustained recovery in the housing, employment, and manufacturing base would be disastrous. I suspect that rates will remain artificially low until a significant inflationary target is exceeded. With that said, the only other major concerns that arise are geopolitical; those are by definition almost impossible to predict and typically have fracking effects throughout the world (Chinese airspace, Iranian enrichment, and the rise of conflict in Africa for example.)

Those hoping to Invest Like A Farmer should absolutely expect at least a dozen or so 3-5% corrections and most likely a pair of 10% drops along the way to Dow 20,000; as mentioned previously, the market rarely follows a linear path. If you plan to buy and hold, it would serve you well to have adequate seed capital in reserve as it has proven fruitful in the past to add to quality positions when there are inevitable dips. Invest accordingly, and as always, it behooves the prudent financial farmer not to get in the way of this "compounding machine" known as the stock market. Let Mr. Market do his thing.

Wednesday, December 4, 2013

Broke Billionaires

In regards to "The Coming Global Wealth Tax," the silence heard from the IMF's proposal was in actuality a collective gasp from billionaires worldwide. As even a cursory reader of "Rich Dad, Poor Dad" knows, the way to wealth is through ownership of corporations that use advantageous tax rates on capital versus income derived from labor. A certain oracle of Omaha is first in line to popularly endorse an eponymous rule championing higher incomes taxes, but it is truly the audacious billionaire indeed who would step forward to pay a wealth tax. Consider the consequences, nearly every "non-profit" would shutter, "giving pledges" would be upended, and generations of dynastic privilege would have to find meaningful employment. If anything ever so draconian as a wealth tax were to occur, just make sure to do it retroactively, otherwise the food banks will be filled with broke billionaires.

Saturday, November 30, 2013

Seeds of Gold

1/4 Ounce 92% Pure Alaska Placer Gold Nuggets

Lao Tzu said, "To see things in the seed, that is genius." As financial farmers we seek to identify opportunities that will provide us with the greatest return; with high returns, however, also come greater risks. A fine example for today's blog post is the "typical" Alaska placer gold nugget mine operation we see on such popular TV shows as "Gold Rush" and "Bering Sea Gold."

As we begin this discussion, it is vital to understand the acquisition of the very land from which this tremendous physical wealth is mined; originally termed "Seward's Folly" after U.S. Secretary of State William H. Seward, the Alaska Purchase was triggered by Russia's fear of war with Britain. Still recovering from the effects of the Crimean War and having a heavy debt to pay to the Rothschilds, Russia entered into negotiations with the United States to sell what was considered frozen wilderness. Negotiations concluded with a purchase price of $7.2 million dollars, or 2 cents per acre. The check below changed hands on March 30th, 1867.

America purchased an area twice the size of Texas and many in the general population considered it a barren wasteland. In 1896, however, the prevailing attitude changed as gold was discovered in Alaska. It triggered a gold rush which brought greater and greater numbers of prospectors, land developers, businessmen and scoundrels alike north to the virgin wilderness.

Thus begins our discussion of placer gold mining and a link to our Invest Like A Farmer philosophy. The earth does not give up its gold easily, and as previously discussed on this blog, I equate gold with toil. There is no "red-tag" sale on toil, it is constant, unrelating, and always present in the struggle of life. That is gold, toil. As a frequent viewer of "Gold Rush" and "Bering Sea Gold," I fully recognize the difficulty the miners have in acquiring the end product of placer gold nuggets. Hundreds, if not thousands, of hours go into the planning, development, construction, shipping, training, mining, and processing of a single ounce of gold. There is no easy way to consistently and successfully mine gold.

The vast majority of placer gold nuggets that are eventually acquired are generally small, even grain-sized. It is now rare to find large gold nuggets and it has even been said that a 5 ounce gold nugget is as rare a find as a 5 carat diamond. Why? The big nuggets  have all been mined and there is increasingly less virgin territory to mine which could result in large nugget discoveries. From a fixed commodity asset like gold, with an increasing demand from a larger and larger population, this is quite understandable. The natural resources of precious metals and gemstones by their very definition should increase in both real and monetary value based on population growth, cultural demand, and difficulty in obtaining these resources.

As financial farmers we then need to ask ourselves, from a utility and scalability standpoint, what investments do not necessarily have the constraints of a physical resource, yet provide similar increasing returns related to population growth, cultural demand, and difficulty in obtaining/creating these resources? I would argue the next gold rush is, and already has been, in the form of the internet, pharmaceuticals, and portable technology such as mobile phones, tablets, and to an increasing use smart watches. I see these three particular areas as having tremendous long-tail growth for anyone planning to Invest Like A Farmer; their respective scale and utility is nearly unparalleled. Gold, however, still has the timeless visual allure of a pure element, remains difficult to obtain, and has acted for thousands of years as a portable store of wealth. I have no reason to doubt the merits of this trend to continue.

Wednesday, November 27, 2013

Create A Brand


I'm often asked by readers of this blog the best (and fastest!) way to make money. I usually respond with the same answer; you can either buy brands or create them, but making money in either situation takes time and patience. Fast money is nice, but it also has consequences; repeatability is called into question, greater risk, and higher taxes on short-term gains are all concerns. Many young investors don't have adequate seed capital to purchase meaningful quantities of shares to help launch their financial farms early in their careers and find themselves in a quandary. How best to pursue creating wealth without seed capital? It is truly difficult to see a global stock rally and not participate in it, but fear not loyal blog readers, all is NOT lost!

One of the most important lessons is that to profit from growth, you need to be in the game in one form or another. That means securing some type of equity position, which generally leads to two choices for someone who wants to Invest Like A Farmer; purchase positions in real estate, bonds, or (preferably) equities OR go about creating your own brand. Many successful financial farmers do both.

What is a brand? It is the (ideally) trademarked name and/or logo of a product or service (or both) which immediately calls to mind what that product or service is when the brand is mentioned (termed a metonymy.)

Why is a brand important? A brand selectively targets a consumer for its product or service, and generally speaking, a branded product is typically sold at a greater premium than a generic product or service which in all actuality maybe nearly identical to the branded product. The successfully branded product, however, has established a greater perceived utility than a generic product and consequently charges a higher price for the good or service. The better the brand, the greater the implied prestige and usually the higher the margin, profits, and market share. Couple this with mass appeal and you may have a winner on your hands.

Assets come in a variety of forms; from physical assets like farmland, gold, and oil to legal assets including shares of stock, debt instruments such as bonds, and intellectual property including trademarks, copyrights, and brands themselves. The prudent financial farmer is always looking to cultivate quality assets on his or her financial farm; if buying a brand isn't feasible, consider creating one.

Tuesday, November 26, 2013

A Bet on Population Growth

If there has been a "sure" bet, it has been the bet that the worldwide population will increase; indeed, since the middle of the 14th century there has been continuous growth in global population. The United Nations estimates that by 2050 we will have between 8.3 and 11.9 billion people on Earth, from 7.1 billion today.

What does this mean for the individual that wants to Invest Like A Farmer? It is pretty clear to me that following some semblance of "Rapko's Rule's" (see below) should pay off handsomely assuming the financial farmer doesn't interrupt the compounding cycle and also has a reasonable (think several decades) of investable time on his or her hands.

Rapko's Rules

1.  Boring is undervalued. Look for companies with established brands. If they are exclusive, finite, hard-to-get, vital, addictive, and/or monopolistic, so much the better.

2.  I prefer companies that pay me to own them. Specifically, I want to buy companies that pay quarterly dividends that have historically risen over time.

3.  Of the four possible outcomes; high margin, high volume is best.

4.  A steadily moving higher and higher left to right stock chart is a good thing; the inverse is not.

5.  Inevitably, and by definition, more time is spent holding a losing position than is necessary. Cut your losses.

In summary, I look for boring, dividend paying companies that have a high margin, high volume business with steadily increasing left to right stock charts. I'm not afraid to cut my losses early.

Now, what do the Rapko's Rules have to do with making a bet on population growth? Everything!

The dynamics of population growth are very interesting because across humanity many of us want the same things; a sense of purpose, good health, longevity of our family, communication, pleasurable pursuits, and the ability to make a positive impact on the world are just a few. Having traveled a fair amount, I can see many, many similarities across the globe. HOW these goals are accomplished, however, varies greatly. Many developing countries have completely skipped the desktop, laptop, and advanced directly to mobile phones for their communication and internet access. The same can be said of medical care, where a drug delivery solution which may have taken hundreds of millions of dollars to develop by some of the most brilliant minds on Earth, can be administered globally with ease.

With a high degree of certainty, it can be surmised that the global population will continue to grow. Will there be drastic breakthroughs? Absolutely. But from the viewpoint of a financial farmer, there are many seeds that can be planted which focus on branding, utility, and scale that should perform very well without necessarily having to take a significant risk in terms of the disruptive technology. Will a disruptive technology create many billionaires and millionaires? Absolutely, but so will focusing on branding, utility, and scale that an ever-increasing population demands.

Saturday, November 9, 2013

Cotton Currency

Imagine turning a $365 investment into $31,360,000 whenever you want! Well it is being done every day in the United States when we turn on the printing press and turn a 480 pound bale of cotton (currently trading at $0.76/pound) into 313,600 $100 U.S. Bills! Talk about a bonanza, wow!

Below are some other examples of what can be produced from a bale of cotton from our friends at Cotton.org:

The 313,600 $100 Bills takes the cake though, that is one heck of a return. For the average person trying to Invest Like A Farmer, however, this would be impossible simply because one would need to establish his or her own government and then create a fiat currency.

Nonetheless, a financial farmer can glean some very, very valuable insight into the above example. Namely, the nominal value of currency is almost constantly increasing; meaning there is nearly a constant increase in the number of dollars in circulation. The result of this process is the true enemy of investors, and that is inflation.

As a financial farmer, I define inflation as paying more for less. Paying more for a gallon of gas, milk, acre of land, car, etc. Production efficiency over time helps mitigate the effects of inflation in some products, but fighting inflation is like fighting gravity. So what is a financial farmer to do with this weevil?

Buying physical assets and ownership interests is one way to fight the inflation weevil. By definition, inflation results in the buyer getting less for each dollar, euro, yen, or peso. The extent of how much less is directly related to the rate of inflation; the higher the rate, the less you get over time. This is precisely why gold has typically been such a relevant hedge; there is no easy way to get gold except from toil, and toil is usually a very fixed asset. The same can be said of raw land, cotton, and finished goods.

The better the physical asset, typically the higher the demand it currently enjoys, and the higher the inflation protection it may provide. With that said, the financial farmer should always have planting seed capital available, but also recognize it is truly a wasting resource; high quality land, ownership interests, and commodities offer the dual potential of real value and growth.

Thursday, October 31, 2013

High-Priced or Low-Priced Stocks?

All things being equal, I prefer high-priced stocks with few exceptions. While this may run contrary to popular thinking, as a financial farmer I prefer to own fewer shares of a company I deem to be a better potential investment than many shares of a less-promising investment.

There are several advantages to owning shares of high-priced stocks, although there is one significant disadvantage; the higher the price, the more room it has to fall. I've seen this scenario play out during several sell-offs over the years, where the point drop in high-priced securities typically falls more on a percentage basis than low-priced stocks. That is a risk of high-priced stocks, there is plenty of air between the top and the ground! With that caveat though, there are several good reasons to consider purchasing high-priced stocks over low-priced stocks.

High-priced stock, by definition, is priced higher than low-priced stock, and while intrinsically this might sound ridiculous, it actually points to several operations going on outside our normal purview. Generally speaking, there are less shares of high-priced stocks (which I consider an advantage for investors, as we want to own a larger and larger piece of the pie as time goes on) and consequently when you choose to Invest Like A Farmer you are very selective when deploying your seed capital into a handful of carefully researched positions rather then just throwing seeds into the wind and hoping for a winner by chance.

High-priced stocks also play on a theme we have discussed previously, namely momentum. Another seemingly unrelated occurrence begins to happen as a stock appreciates in price; more money is drawn to it. Everyone likes a winner, and there is no truer winner than a stock that keeps a steadily increasing left to right chart. This momentum often leads to one of my favorite events; a stock split!

Although a stock split actually decreases that high-priced stock's numeric standing, it also helps prevent a chart from going exponential, releases some of the pent-up momentum by providing additional shares to fill demand, and, also by definition, increases the share count which typically increases the pool of shareholders. So even though a high-priced stock may do a 2:1 split, say from 200 to 100, it is still priced above 80% of all other securities (the average S&P 500 stock price as of this blog post is about $70/share.)

Ideally, the financial farmer uses his or her seed money to purchase several handfuls of quality seeds that eventually spawn seeds of their own, pay the farmer to own them the entire growing cycle, and wealth is compounded. A high-priced stock "helps" concentrate wealth, causing the investor to focus on several potential successful business models rather than showering the fields with dozens upon dozens of cheap seeds; we want viable crops quarter after quarter, not weeds.

Sunday, October 27, 2013

Why Does Wealth Cluster?

A shared system of beliefs and values prompts, as the saying goes, birds of a feather to flock together, but there are also other significant considerations for the world's wealthy.

Why as a financial farmer should you care? Given that the goal of this blog is to Invest Like A Farmer, it is a very relevant goal to study, learn, and hopefully replicate success. A lot of successful learning can be gleaned by studying and implementing the habits of wealthy investors.  In an earlier post we discussed the blueprint of creating your very own Berkshire Hathaway, today we take a look at wealth clustering. 

The above image is of Washington, D.C. The red dots correspond to Apple iPhone owners and the green dots represent Android owners (image courtesy of MapBox.) The image below is an income view of the exact same area where blue represents higher income, and yellow lower income.

What does this prove? Not much, except that there is a clear overlap between income and general choice of smartphone device. This is one example, and there are many more that can be implied, but the general point being made is that wealth does indeed cluster in certain geographic areas.

Where does wealth cluster? Primary locations are major world metropolises and to a lesser extent remote, pristine sparsely inhabited areas. Why? Shared beliefs and values (ethnic heritage, religion, language, politics), geographic desirability (climate, safety, airports), and resources (education, health care, jobs) help provide the answer.

Is wealth the end result of luck, toil, education or some combination? If we assume it is of some combination, then naturally our initial question of what causes wealth clustering is really a question of why geographically wealth has (re)located itself in a particular area. Furthermore, is it "earned" wealth, inherited wealth, budding wealth, or some combination of that rule set? Oddly enough, they are all usually in proximity!

This proximity derives from the inherent advantages of being close to the prize; there is a reason that more promotions always come from the headquarters of an organization. HQ is a great place to be for an up and coming whippersnapper, these are areas of excellence often in more than one regard; from pure physical beauty to educational infrastructure to engineering know-how and even reputation plays a strong hand. (Consider the frequency Harvard is cited versus nearly any other university!)

Let's face it; everyone loves a winner, and by extension we like to be near winners; whether economically, socially, or politically. The reasons for wealth clustering are complex, but the proximity to excellence is nearly universal. How does this help us Invest Like A Farmer? Excellence is its own momentum, and something we as financial farmers want to replicate as our own personal brand. Sustained excellence becomes a self-fulfilling prophecy.

Saturday, October 26, 2013

Make Hay While the Sun Shines

Record earnings, low interest rates, and at least a modicum of economic certainty has once again led the stock market to near-record 2013 highs. As financial farmers hoping to Invest Like A Farmer, we love favorable economic climates to deploy seed capital. We have now been in fertile ground for approximately two solid years, and given the current conditions, I suspect this will continue for the foreseeable future.

Certain catalysts become apparent during a classic bull run, some of them include the following; significant strength in the IPO (initial public offering) market, increase in margin use by investors to leverage returns, "cheap" money, stability in the housing market, decent unemployment rates, and solid corporate earnings across a variety of sectors. We have all of these in place now, plus what I believe is the most important nutrient to any financial farmer's portfolio; stock momentum.

Day to day, month to month, and even year to year it is almost impossible to predict with any certainty a price target for the Dow Jones, S&P 500, NASDAQ, Gold, Oil, or specific stocks. What I have gleaned, however, is that momentum usually carries until it is broken. I'm a big believer in inertia.

On the radar we have a potential Fed tightening (unlikely due to the debt ceiling/government shutdown debacle), holiday spending (should be up moderately year over year), and February 2014 where we once again debate the finances of our country. I think there is low possible collateral damage to the stock market on any of these outcomes, and consequently, I believe inertia propels us higher with the Wall Street benchmarks tacking up from here. Nonetheless, I will continue to employ my simple rule set as previously posted to help guide my portfolio selection:

1) Boring is undervalued. Look for companies with established brands. If they are exclusive, finite, hart-to-get, vital, addictive, and/or monopolistic, so much the better.

2) I prefer companies that pay me to own them. Specifically, I want to buy companies that pay quarterly dividends that have historically risen over time.

3) Of the four possible outcomes; high margin, high volume is best.

4) A steadily moving higher and higher left to right stock chart is a good thing. The inverse is not.

5) Inevitably, and by definition, more time is spent holding a losing position than is necessary. Don't be afraid to cut your losses.

In summary, I look for boring, dividend paying companies that have a high margin, high volume business with steadily increasing left to right stock charts. I'm not afraid to cut my losses early.

Tuesday, October 22, 2013

Building the Next Berkshire Hathaway

Frequent readers of this blog well know that one of my favorite "books" is in fact the collected annual shareholder letters of Berkshire Hathaway run by investing legend Warren Buffet. For $20 you can pick up your very own copy here. This should be standard reading for high school students, college students, and anyone else interested in creating a proverbial wealth machine.

Invest Like A Farmer's goal is to help identify macro economic trends that can be implemented by the average investor to potentially garner exponential returns. Mr. Buffet has essentially laid out the entire blueprint in an orderly, step-by-step process. There are, however, several caveats that the average investor should be well aware of; mainly the starting block in this investing marathon is slightly to significantly skewed in favor of those who have either tremendous political or economic advantages. These two factors help push them along the time (x-axis) discussed in yesterday's post anywhere from a decade or more. They have the ability to fabricate time on a scale the average person does not. Those are just the facts, nonetheless is quite possible for an ordinary person with interest in investing, a hunger for education, and a decent salary to build his or her very own wealth machine. This is how Mr. Buffet did it, and I think any reasonable financial farmer can also create a sizable wealth machine over time too.

One of the key tenants in creating a wealth machine is how it is structured. Mr. Buffet ran in all respects a successful precursor to today's hedge fund; it was an investment partnership that netted the manager a hefty personal return. This investment partnership then purchased a publicly traded company that became the investment vehicle which purchased many, many other assets over the ensuing years. The average investor does not and probably will not run a hedge fund, and that's just fine.  The lesson to learn from this initial "start-up" scenario is that rather than draw personal taxable income, the investor runs a company that becomes a wealth machine. That's the first step, buy or create an entity that will house your potential compounding wealth. The genius in this is the compounding effects generated by "saving" unrealized gains that compound themselves. Let me repeat that because it is vital; the genius is not taking passive, unrealized gains. The business or businesses themselves are bought or started for a reasonable price; they hopefully increase in value (passive gain) and increase earnings (taxable income) to the owner(s) over time. 

After creating the correct "housing" structure for the wealth machine, the next step is either creating, buying, or otherwise acquiring additional business(es) that generate significant cash flow, and ideally profits. The insurance business was Mr. Buffet's big coup; it allowed him to control large swaths of capital, termed "float," which in turn let him invest in multiple other assets. Essentially the company became an asset grabbing machine that acquired and successfully integrated winning businesses, product lines, and additional market share in the respective existing businesses.

The effectiveness of this business model cannot be overstated; proper execution, however, is vital. It requires excellent management and diligence, but creating the next Berkshire Hathaway is completely possible, even for an average investor. I encourage readers of this blog to pick up a copy of the annual shareholder letters and read through them. What you will see unfolding is probably one of the greatest wealth creation systems ever successfully executed. What's really cool about this process is that it is repeatable. For $20 you get the proverbial receipt for success, and that's tough to beat!

Sunday, October 20, 2013

Time as an Asset Class

The most valuable asset is time, yet it is rarely ever mentioned as a distinct asset class. For those of us who plan to Invest Like A Farmer, labeling time as an asset class is vital. This concept is important because time is one of the key elements in conjunction with portfolio selection and investing knowledge that helps generate compounding returns. As financial farmers we loathe static returns and love exponential returns, especially if there is any chance of leap-frogging along the time axis.

The value of time to one who chooses to Invest Like A Farmer is tremendous; as financial farmers we think in terms of seasons, in years, in decades. That is where the exponential portion of the growth charts develops if we have invested prudently and also where, by definition, we find the greatest real returns.

I've often heard the analogy of Wall Street to a casino, but I would argue whereas the longer you stay at a casino the more likely you are to loose, the longer you stay in the stock market with a prudently constructed portfolio, the more likely you are to win. The primary reason for the former is that the odds are stacked against the player and remain static for the vast majority of games; the reasons for the latter result are that a number of variables sway in the investor's favor including innovation, efficiency, and population growth to name a few. This is precisely why young investors (think very young, like just born) should have a tremendous advantage in beginning their investment careers.

The sooner seed capital is deployed in a prudent investment portfolio the better, there is no better time to begin when the time curve is in one's favor; ideally investments are planted, grow, and compound as soon as possible. There is tremendous power for a newborn to have an investment portfolio established, funded, and invested frequently during the early years. The advantage of time is to ratchet up along the compounded rate of return chart as soon as possible, this is why time should be considered an asset class.

It is preposterous to ignore the significance of time; the seconds, minutes, hours, and days are all around us for the taking; even harnessing a fraction of the time provided during a statistically average lifetime is massive, over succeeding generations the wealth that can be created is basically limitless.

If early investing years have escaped the financial farmer, then he needs to fabricate time. How is time created? Simple, one needs invent, create, or buy compounding assets. These assets can come in multiple forms, from stocks, to real estate, to even patents. The greater efficiency of the asset, the greater potential in "creating" time or moving smartly across the spectrum of time.

There is a reason why children of wealthy parents often have significant advantages; many have been investing, whether they knew it or not, since birth. For older investors, the ability to fabricate time will boil down to finding and deploying seed capital in efficient portfolios that have assets capable of producing compounding returns, and the sooner those assets generate exponential returns the better. If one has time, then make the most it; if one is lacking time, make time.

Thursday, October 17, 2013

Walter White aka Heisenberg
Breaking Bad

If you want to Invest Like A Farmer, it is important to know when to plant and when to harvest. So when is a good time to deploy seed capital? As a general rule of the green thumb, it is a good time to deploy seed capital when monopolies "go on sale" (what Wall Street typically refers to as a sell-off, correction, or adjustment.) Having a grocery list of stocks you'd like to buy handy is helpful; it helps identify in advance these empires that can be had for a discount. 

A great example was found today in a major transportation company that controls significant land routes west of the Mississippi. Remembering one of the fundamental guidelines, mainly that boring is underrated, this proved to be a nice time to buy. By definition, a monopoly is an empire with branding, scale, scope, moats, pricing, and a variety of other advantages over its competitors.

As financial famers, we always want to have reserve seed money and a shopping list available of potential buys at our disposal; a significant return can often be made on a purchase of a distressed monopoly that is then held and has its dividends reinvested. Boring, and potentially very sexy with our goal of securing a compounding rate of return that ultimately goes exponential. The opportunity of a lifetime usually crosses a financial farmer's plow twice a month, be prepared to sow those seeds.

Wednesday, October 16, 2013

Health Exchanges

Utility and Scale. When we think of the next best, best thing in terms of the evolution of a new company providing a new service or product we need to think utility and scale; the corporations of past accomplished this via product cycles that literally took decades (some often centuries), but the new paradigm is a content-based platform that accomplishes some utility on a massive scale.

Along those lines, I wanted to illustrate (via the image above courtesy of Milward Brown) how NOT to capture scale, even with arguably a very, very good utility. What can we learn from this as financial farmers? Well, if you truly want to Invest Like A Farmer then you MUST have an understanding of utility and scale. On the Oct. 2 blog post we touched on this subject as the next best website or business being one that can capture the economies of scale that the web offers by providing a utility. We further went on to discuss the viability of having a DNA or health-based solution.

HealthCare.gov should have been the Next Big Thing; why did it fail (at least initially?) Sadly, it didn't mimic the ease of enrollment of nearly every other massive-scale website; think about the large online auction site, the social networks, the retailers, etc. ALL of them require approximately 5 minutes to enroll. 5 minutes. They are masters of utilizing a lean enrollment process to secure the largest, and fastest, exponential growth of a platform. A user wants to access the utility (see Oct. 2 post for further detail) as soon as possible otherwise interest is lost.

Utility and Scale; to Invest Like A Farmer we want to identify and consider putting capital to work with companies that have an effective process in place to rapidly acquire new customers and provide them with a useful utility immediately. This can be accomplished with a strong brand, accessible price point, and proven utility to the buyer; any impediment to the purchasing cycle ultimately drives buyers to alternative, more effective sellers; whether in automobiles, soda pop, or health care. The system that provides superior utility and scale wins.

Monday, October 14, 2013

Batten Down the Hatches!

One of my favorite Wall Street books is The Greatest Trade Ever which chronicles a group of traders who had the foresight, capital, and luck to both predict the fall of the mortgage market and trade on it. They all bet against the sustainability of the mortgage security market in one form or another (mainly through derivative contracts); they were all successful because despite the proverbial writing on the wall, no one else was betting that this could ever happen. I think we're in a similar situation right now.

As financial farmers we want to Invest Like A Farmer for some very practical reasons, a really good one is not to go broke. This is what is referred to as the risk of ruin. There is one goal that is paramount to every farmer; avoid ruin. This simple goal, frequently overlooked or ignored, bears repeating: Avoid Ruin.

Young or old, we all have different tolerances to risk. We should pay particular attention, however, to the risk of ruin. Broadly defined, the risk of ruin is the point of no return, that place or situation you've reached where your finances, and in particular, your farm is bust. You can't squeeze another nickel from the fruit stand. All your other options are seemingly impossible as well. Essentially there is no way out. Amongst the farmer's many concerns, the risk of ruin must always run paramount. Losses can be sustained, opportunities missed, leverage overdone, and a host of any other problems survived, but we want to avoid ruin at all cost.

Ruin can be devastating and possibly unrecoverable. For those who have clawed their way back from the brink it can be a valuable life lesson, but I've never heard it described in terms of nostalgic fondness. With full respect to Nietzsche, who wrote: "that what does not kill me, makes me stronger," ruin is painful, and regardless of your age or circumstances, the true financial farmer wants to avoid the risk of ruin. It is far too celebrated amongst the entrepreneurial elite who have never tasted true ruin; they had and have back-up plans and resources that are never revealed. Keep your farm well-tilled, planted, and enjoy every harvest even if it is at first meager. Your goal should be a lifetime of sustained financial farming, a lifetime.

A lifetime of farming is sustained by not being overextended even when everyone claims we (the USA) could never default. October 17th is fast approaching, but that date doesn't necessarily scare me. What I'm concerned about is the process that led up to this point, and in particular November 1st. The tax revenues are in place for continued short term operation, but beginning on the 1st we have significant outlays; I truly wonder as a country if we're ready to have a hard conversation of what we fund and what we don't. Do we pay the debt obligations, do we pay Social Security, Medicare, the military?

I maintain the prediction of a 50/50 chance of default; at this point every financial farmer should have cash on hand as well as either a fully or partially hedged portfolio in the event of October 17th passing without a deal. In the event of a deal getting passed, I suspect it would be a short term extension at best and ultimately we'd still be left with the same systemic problems in the federal budget. The "good" news, regardless of whether a deal is cut or not, I don't see any possible chance of the Federal Reserve tightening monetary policy; not at the next meeting, the one after, or even well into 2014. The economic recovery is still too nascent and obviously there are far bigger political problems that need to be solved. The two charts below help illustrate the challenge this country faces ahead; how do we bridge the spending and revenue gap while sustaining our yearly outlays?

Wednesday, October 9, 2013

The Grand Canyon is...closed?

Indignities of indignities, the Grand Canyon is closed? How is this possible? Resources are being spent to arrest "trespassers" (i.e. U.S. Citizens) hiking in their own National Parks? Yikes! What is a financial farmer to do?

Well for one, we can take a historical look at the other 17 shutdowns for some clue to what has happened in the past. Typically after several days, a compromise is reached and we go back to business as usual.

My major concern is the possibility of escalation. What I mean by escalation is that the government shutdown leads to a default which triggers several possible butterfly effects; but rather than the soft beating wings of a pretty butterfly causing ripple effects in the slightest of air currents, we see a cataclysmic pulse wave.

The way I can best relate to this is with a stock trade gone bad; at first the volume to exit the trade is low, and then everyone wants to get out; the probably being by that time there is no counter-party buyer. If you haven't had a chance yet to read The Crisis of 1837, now would be a good time to check it out.

A default would gravely affect the global financial system. The fact that the largest mutual fund company in the world, Fidelity Investments, has liquidated ALL of their short-term U.S. Government debt is very telling. These are smart people. What is the lowly financial farmer to do? Long-term holdings of the oft-discussed "boring" equities should wait out the storm; inevitably just when things look the worst, there is a recovery. Nonetheless, given my current prediction of a 50/50 chance of the U.S. defaulting, the fact that the National Parks are closed to U.S. Citizens, and other weird behavior on behalf of our government, rounding up some cash is a good idea. Will there be value in that cash? At least initially there should be as it is the de facto standard for conducting trade.

I see several outcomes if we default on the debt, none of them are good. Interest rates will undoubtedly spike (who wants to lend to a deadbeat?), the electronic funds transfer systems may lock up, and probably the most damaging and sustained effect will be a reputation hit to the United States. If things get bad enough, i.e. no Social Security payments, Medicare, etc. I see the situation quickly devolving.

Although we have been given a drop date of Oct. 17th, the reality is probably November 1st, as that will be when a majority of payments will come due. The first chink in the armor was on October 1st, the next test will be on the 17th, and if we don't have some type of resolution by the 1st of November, watch out. As it stands now, considerable political damage has been done to both sides of the aisle, and we're about a week away from triggering some very unpleasant consequences.

PS--A new Chair of the Federal Reserve was announced today; Dr. Janet Louise Yellen. She will be replacing Dr. Ben Shalom Bernanke whose appointment expires in January (assuming we still have a functional government in 2014!)
The Good, The Bad and The Ugly

The Dow’s down almost a 1,000 points since this government shutdown began, but who’s counting? For movie buffs, and budding financial farmers, there’s a classic scene in The Good, The Bad and The Ugly aptly termed a Mexican Standoff which puts our current situation in context. Clint Eastwood, Lee Van Cleef, and Eli Wallach each have the other in his sights, yet no one can make a move. This is what our economic, political, and social situation has devolved into; a true Mexican Standoff, and as anyone familiar with the movie knows, whoever shoots first loses.

What’s so troubling about our current dilemma is that just two weeks ago we had seen the Dow near all-time highs, the NASDAQ had recovered nicely to just under 4000, and the S&P 500 had climbed over 1700. All were very important metrics to the investor's psyche. Interest rates remained low, inflation was tame, and while not altogether spectacular, unemployment was creeping down. There was absolutely, undoubtedly, positive progress since the dreary days of March 2009 when as any investor can attest, even your puts were loosing money! All of this has come to a grinding, gridlocked halt just when many Americans were starting to see the light.

This is what makes investing so challenging, knowing that we’d probably be better off liquidating our entire portfolio and then waiting out the next couple weeks in cash; yet the problem arises of predictability. It is usually just about that time where you feel like throwing in the towel that the market makes a dramatic comeback. It’s a double whammy, you end up selling at the recent lows and are too cautious going back as the rally goes further. This scenario has played itself out time and again, and is precisely why I’m a champion of the Invest Like A Farmer philosophy.

By definition, when you Invest Like A Farmer your seeds are planted for the long-haul and the capital you invested is not rent, mortgage, or emergency savings. It is seed capital you have deployed in the expectation of compounded returns years, many years, into the future by specifically investing in companies with special characteristics. They are boring in the sense that boring is sexy; they are typically monopolies with significant barriers to entry selling products that are exclusive, finite, hard-to-get, vital, and/or addictive. These companies also typically pay you to own them, and usually every quarter. Generally they are high margin, high volume going concerns with a steadily moving higher and higher left to right stock chart. These are the type of assets we like to buy and let grow.

Sadly, even the best companies with the cleanest balance sheets and most promising products, brands, and customer base are no match for a government that fails to function. There is little remedy for a stalled democracy except patience and the next election cycle.

Tuesday, October 8, 2013

3 Traits of The Forbes 400

What differentiates you and I from the Forbes 400 list of the most wealthy Americans? Probably several, in fact, MANY millions of dollars. Indeed, the "cut-off" this year to make the list was nearly 1,600 million dollars!  That's right, the short-hand version of $1.6B.

From a percentage perspective, the vast majority were "self-made"; from a net worth perspective (that is, the relative average of their net worths) a large number of the members inherited their wealth.

Without taking away the accomplishments of the "self-made," let's briefly put that in perspective; "self-made" to the average American implies relatively little starting capital and few life advantages (i.e. having a powerful political figure for a father, or inherent back-up seed money, or simply what the Chinese refer to as guanxi) probably disqualifies many of the Forbes 400 immediately from flashing the "self-made" business card.

In fact, of the Top Ten, only Larry Ellison fits the "self-made" profile to a tee. So be a little wary of the term "self-made," that moniker can be deceptive when there are inherent advantages to starting life with the right guanxi. With that said, though, let's take a close look at what has sustained  the presence of the Forbes 400 members and also what it took to get there. I have dubbed these "The 3 Traits of The Forbes 400"

First, there is a consistency of purpose present. A member of this elite group has either held, or whomever they inherited their wealth from, a lasting and sustained consistency of purpose on building as what Walter White termed "an empire." Go through the list and next to the accompanying person you'll see a very distinct desire to be the best at whatever field they were in; from candy to software to automobiles. Rarely do you see a member that founded a conglomerate; they focused on a niche and grew rich.

Second, to a man (or woman) they are ruthless in pursuit of excellence; whether in the form of advantage, branding, market share, taste, material, logistics, etc. Virtually every aspect associated with their company is pursued with a ruthless passion. They are driven to be the best; extreme personalities are commonplace, as is eccentricity in thought and speech. Fitting the norm is not prized, or even pursued for that matter.

Finally, they all benefited from being prepared for luck; good or bad luck, multiple calculations and scenarios seemed to be in place which often resulted in a significant paradigm shift that benefited their net worth (a hostile takeover, sale of a division, an IPO, a funding event, etc.) Imagine a field general that has a written plan, but in reality has fifty mental plans at his disposal, and that is your Forbes 400 member. If not master strategist themselves, they have paid the expense of hiring the best tacticians.

Consistency of purpose, ruthless pursuit of excellence, and being prepared for luck. Those elements sound just like the goals of someone planning to Invest Like A Farmer!

50/50 Chance of a U.S. Debt Default Presents Perfect Black Swan Scenario

I've raised my estimate of a U.S. debt default from a 0% unthinkable chance to an even 50/50. We're a week into a government shutdown with no compromise in sight. Nearly every pundit has the debt default scenario pegged at 0% (including me, up until last night.) This brings to mind all the elements of a black swan event.

Popularized by the philosopher/poet/economist/trader Nassim Nicholas Taleb in his 2001 book Fooled by Randomness, a black swan event "is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme 'impact.' Third, in spite of its outlier status, human nature makes us concoct explanations of its occurrence after the fact, making it explainable and predictable."

These elements seem to correlate well with where we're at right now in regards to the debt ceiling. With nearly every expert predicting a 0% chance of a default happening and a political system that is behaving ineffectual at best, the days tick by and nothing is accomplished. What has materialized is the slow motion proverbial train wreck you can't take your eyes off of, but this potential disaster has a significantly wider zone of destruction.

I think the two most meaningful impacts are going to be a major hit to the reputation of the United States and the second is a direct hit to investment portfolios because Wall Street cannot stand uncertainty; the latter I think will recover promptly as the catalysts of a bull market are still firmly in place and I would like to believe our elected officials wouldn't ruin the republic. The reputation hit is another thing though, as it builds on what has become an increasingly stalemated government system. 

Sunday, October 6, 2013

"One must learn to be rich."

--Gustavo Fring

Alas, Breaking Bad is over; but the lessons from one of my favorite characters will resonate well into the future. As readers learning to Invest Like A Farmer on this blog, Gustavo Fring offers some very telling advice when he says to Walter White at dinner: "One must learn to be rich. To be poor, anyone can manage." Rarely have I heard such a more poignant and truthful piece of advice. 

Becoming wealthy, for the vast majority of people, is a process rather than an event. Part of Walter White's fall, in my opinion, was that he became wealthy TOO quickly. There is such a thing, and we see it all the time with lottery winners who burn through their stash and long for the the "good old days." Thomas J. Stanely has written extensively on the attitude, lifestyle, and spending habits of the typical millionaire in his seminal book The Millionaire Next Door.

My advice for today? Pick up a copy of this book and study it. The vast majority, think along the lines of 95%, of all millionaires fit the demographic profile Stanely identifies rather than The Forbes 400 members. Even many millionaires approaching the billionaire status could be classified as a "Stanely Millionaire."

Although Gustavo Fring was a criminal mastermind who "hid" in plain sight, he definitely fit the mold of a "Stanely Millionaire." The characteristics of these millionaires, albeit not criminals like Fring, are indicative of people who Invest Like A Farmer. The mindset, the methodology, and ultimately the end result speak well of the process that made them rich.

Saturday, October 5, 2013

Financial Thoughts for Young Couples

I had the pleasure of attending my cousin’s wedding yesterday afternoon and after the ceremony I started thinking about some of the financial considerations young couples face. Given that the majority of problems in a marriage ultimately stem from disagreements over money, I thought in today’s post it would be a good idea to touch on this subject. Please note, however, if as a newlywed you and your husband have just purchased a $10M apartment in New York, and you make comments like “I’m not fundamentally interested in making money,” please just close this internet browser now. Doing so will save you the confusion of many of the terms below like “work,” “mortgage,” and “embracing risk.” If you do not fall into the above category, good for you! The challenges facing a young couple are tremendously rewarding and if approached in the right manner will, I guarantee you, be some of your fondest memories in years to come.

Almost all the successful couples I’ve had the pleasure of working with over the years generally have many similarities; they have discussed their financial goals together, they have written these goals down, and they have acted on these goals. The REALLY successful couples have embraced risk. We’ll get back to the last point later, but I wanted to start with discussing, writing, and acting.

As a financial farmer, we know the value of discussing our plans aloud to provide our thoughts and also to hear what others might have to say. In a marriage, this is vital on the financial front because each spouse may have a different role in the relationship, different experience with money growing up, and drastically different goals than the other spouse. This is why going over expectations of income, housing, entertainment, lifestyle, etc. are so important. Talk all of it over and see what you’re each expecting.

Any couple, young or old, should be aware of the financial landscape, which segues nicely into writing down a summary of where you stand currently and also where you would like be down the road. Writing a goal down is very valuable, it sets in motion a whole chain of events. This financial snapshot should accurately capture as thoroughly as possible the complete situation; assets, liabilities, income, goals, etc. This experience usually isn’t done overnight, and it usually shouldn’t be done just once; financial planning in a relationship is an on-going element in your marriage.

The next, and critical step, is to act on your plan. If you want to buy a house immediately or in the next couple years, do your your research; understand the home buying process, understand financing, interest rates, and down payments. If you plan to rent an apartment and invest the difference, what type of monthly budget are you planning to use? When you’re a young married couple the runway is long and even minor advantages you implement early can have a meaningful impact on your net worth over time. The same, of course, can be said of mistakes. If you’re lacking in financial planning, talk with several financially successful older couples you respect and pick out what they did to succeed, and also if they’re willing to share, ask them about their financial failures.

As briefly mentioned above, this process of discussing, writing, and acting is not a stand-alone event; both of you need to be involved in laying the foundation of your future wealth.

One final note I’ll make today, and it is this; embrace risk. I’ve only seen lasting wealth created in a handful of ways, below are three of the most common that I’ve seen repeated often enough to make copious notes on the subject:

1. Steadily rising income that is squirreled away into a portfolio of investments that have the possibility of compounding exponentially, and rarely, if ever, touching them. Squirreling-away implies living below your means for a sustained period of time.

2. Being crafty, prudent, adventurous, careless, or whatever else in picking the RIGHT piece(s) of real estate at the RIGHT price (the money is made on the purchase, even if the sale is made decades away), at the RIGHT time. Buy the RIGHT real estate. When done correctly, real estate is the IDEAL (Income, Depreciation, Expense, Appreciation, and Leverage) investment vehicle.

3. Determined that a profession and real estate are both ridiculous, the entrepreneur chooses to spend every waking moment creating a (fill in the blank) company that does (fill in the blank) better than any other company. The success of that company then sustains everything else in life.

Now there’s a flip side to this coin, presented almost perfectly in a recent article I read titled “Failure to Launch” (hyperlinked) which bemoans the situation of the “New Lost Generation,” more often referred to as the Millennials.

Some generalized findings from the report: there are no good jobs, there are no good industries, there is a paradigm shift, and basically Millennials will probably earn less than their parents and work longer. And die younger. And listen to worse music. And not laugh as much.

So what? Life is a struggle. For each of these findings I can list ten advantages the Millennials have over previous generations. Here are a couple; it has rarely ever been easier to start your own business, interest rates are at historic lows, there are abundant entry-level jobs you can work to learn a trade, skill, or profession. Millennial computer skills far, far exceed the average of any other generation. Productivity in a creative environment is almost unrivaled. The list goes on and on.

So what am I trying to say? The field is fertile with opportunity, especially for young couples that have discussed their financial situation, written down their goals, and are taking effective actions to accomplish them. If you’re reading, you also probably have a pretty good understanding of one additional almost unquantifiable element, embracing risk. Go forth and do likewise!