The Danish Way Of Wealth

Since 2012, the Sustainable Development Solutions Network (SDSN) has undertaken an annual comparative study of happiness within nations. The study measures …

Since 2012, the Sustainable Development Solutions Network (SDSN) has undertaken an annual comparative study of happiness within nations. The study measures a host of variables factored into measuring happiness then publishes its results in something titled the World Happiness Report. Now, for anyone who may be about to raise their eyebrows and question whether the study is nothing more than a hippie dippy tie dyed waste of taxpayers money, check your impulse and have a look at some of the study’s purposes:

  • Mobilize global scientific and technological expertise to promote practical solutions for sustainable development, including implementation of the Sustainable Development Goals (SDGs) and the Paris Climate Agreement.
  • Accelerate joint learning and promote integrated approaches that address the interconnected economic, social, and environmental challenges confronting the world.
  • Enable a large number of leaders from all regions and diverse backgrounds to participate in the development of the network.

Seemingly laudable goals? Sure seems so. And all the better for putting forth ideals recognizing that we live in an inter-connected world, a world where the force of an Australian sneeze may reverberate in Chile; a Chinese smile may ricochet in Iceland.

 

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Building Social Trust, Not Walls

Still, what do these stated goals have to do with Happiness?

To answer this question, I’ll pass the megaphone over to Jeff Sachs, co-editor of the study and director of the Earth Institute at Columbia University.

Jeff says that world leaders need to understand what matters most to people if they are to have any hope of creating sound policy. He goes on to say that,

“Happiness is a result of creating strong social foundations. It’s time to build social trust and healthy lives, not [arm our self with] guns or [build] walls.”

What Sachs is getting at is the idea that trusting each other, our elected leaders, and institutions, is essential for an individual and a society to establish a firmly anchored sense of well being. And the bonus about feeling groovy, about feeling in soulful harmony with our self? Aside from the genuinely positive vibrations we share with fellow humans and other creatures, we’re more productive, more peaceful, more compassionate, earn more, and live longer.

And this is how happiness connects to the study’s purposes: governments that truly wish to build an inclusive society, one that fosters social cohesion and sustainable economic development, first need a baseline assessment of their people’s current state of well being. Then comes the task of figuring out what’s working, what’s not working , and implementing change to make us better.

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Is Denmark Utopia?

Each year since the first World Happiness Report was issued, Denmark has ranked at or near the top. Why? What does a country that is home to less than six million people know that others don’t? A country where people prefer to stay inside for much of November through March owing to the cold, and pop umbrellas open for near 180 days of the year because of rain.

Ya, well, weather is a state of mind as far as Danes are concerned. I mean, we’re talking about a country that entertains a steady flow of foreign government representatives who are on a mission to find out what the heck it is that makes Danes so damn happy.

There’s no such rush to the USA, a country sitting at #14 on the happiness scale. Some argue that this relatively poor showing is a result of misguided political leaders who espouse misguided policies emphasizing economic growth above all else. The thinking among these leaders being that more money translates to a better, happier life. Really? Will they never learn?

Living in a monster house does not bring happiness. Driving a Mercedes does not nurture one’s soul. Having more money than one’s neighbour does not elevate self-worth or contribute to one’s value as a human being. Because here’s the thing: happiness is not driven by the bottom line. And this is where America (and some other countries) falls down; with an overriding emphasis on money, the economy, taxes.

Back to Jeff Sachs, he says,

“America’s crisis is, in short, a social crisis. Not an economic crisis.”

So what may the USA, and other countries (I’m not trying to pick here; every country has their pluses and minuses) learn from Denmark? First off, this Nordic country knows neither economic nor social crisis. Along with the other top 5 countries, they rank high for caring, freedom, generosity, honesty, health, income and good governance.  All reflective of a strong sense of community and understanding in the common good.

But you know what’s even better? You know what puts the Danes over the top? A little something known as HYGGE (pronounced ‘hoo-gah’ – see youtube video link here).

 

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HYGGE Is the Secret

‘Hygge’ is a Danish word. Though there’s no precise translation into English, here’s a few close approximations:

  • Cosiness of the soul
  • The art of creating intimacy
  • Cocoa by candlelight

Whichever definition you hang your hat on, Hygge is about an atmosphere, an experience. It’s about being with people we care for, people we love. It’s a feeling that we’re safe; that we may let our guard down; that we may engage in conversation about “big important” issues or silly nonsense; or that we may be silent in the company of others.

Of course, you could say that while Hygge sounds pleasant, the Danes have other reasons to be happy. Such as free health care, free education (from pre-school through university), subsidized childcare, job training and re-training, generous unemployment insurance (about $1900 USD/month after taxes), fuel subsidies and rent allowance for the elderly.

Yes, these social programs cost money. And to fund these programs, Denmark has the highest tax rates among European countries. Agh! Oh no! Taxes are evil! Or … are they? Is it not possible to find a compromise, a balance beneficial to both citizens and society at large, to the common good? Danish folks would say yes.

They say yes to a social system that has a burgeoning middle class, high taxes are acknowledged as a drag on economic growth but the welcome trade-off is a peaceful, caring society where no one, including vulnerable members of society, is left behind.

And this choice in favor of an expansive social system is made with awareness that collective wealth results in collective well being. In this regard, taxes are far from evil; rather, they’re perceived as an investment in society. They’re a purchase of quality of life. Because sharing and spreading wealth reduces risk, uncertainty and anxiety among citizens. And doing so nurtures happiness. And spreads the joy of Hygge!

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The Humility of Hygge

Oh, there’s so much more to say about Hygge, this word, this concept, this value, embraced by so many Danes, and contributing to one of the most successful societies we know.

Hygge is humble. Hygge is not rushing. Hygge is moderation. Hygge is watching leaves fall, baking cookies, sharing stories and laughter. Hygge is playing board games, swimming in the lake, dining on home cooked food. Hygge is saving money, making do with less, savoring simple pleasures, being grateful for what you have. Hygge is listening to birds sing, watching a child ride a bike or, better yet, riding a bike with the child. Hygge is the right atmosphere, degree of comfort and warmth, wanting to be engaged with people, caring for whom you are with. Hygge is real, balanced, down to earth.

In effect, Hygge is anti-bling, anti-consumption, anti-prestige not for ideological reasons but because it is not possible for money and entitlement to buy Hygge. In fact, if money is used in an attempt to improve Hygge, well, this act in itself is so anti-Hygge that the Hygge factor will be reduced or eliminated altogether!

What else?

Hygge is Candles. The Danes burn more candles by far than any other country. Candles, you see, create the right atmosphere.

Hygge is Presence. In this sense, Hygge is Buddha-like in emphasizing that we Be Here Now; welcome each and every moment.

Hygge is Simple Pleasures. Coffee, cake, cookies, chocolate. Whatever relaxes your mind and warms your heart.

Hygge is Equality. ‘WE’ takes priority over ‘ME’.

Hygge is Gratitude. Enjoy what you have; do not envy others.

Hygge is Harmony. Life is not a competition. We like you for you, not because of your achievements.

Hygge is Comfort. Get cozy. Relax. Take a break. Sip tea.

Hygge is Compromise and Truce. No drama. Let’s be kind and get along.

Hygge is Togetherness. Building relationships.

Hygge is Shelter. Your home, your country, this world, is your tribe. A place of peace and security.

If nothing else, my hope is that by reading the word ‘Hygge’ so many times that you now feel somewhat comfortable enunciating the word out loud (H00-gah). May you embrace Hygge!

ps. thanks to Meik Wiking, chief executive officer of the Happiness Research Institute in Copenhagen, for writing The Little Book of Hygge: The Danish Way To Live Well. A warm, inviting read that inspired this post, inspired me to continue learning more about Danish society, and to welcome more Hygge into my life.

 

MEIK WIKING jacket.jpg
MEIK WIKING jacket.jpg

 

 

Why We Give

Yesterday, a homeless man knocked on our front door asking for work. ‘Anything you can offer’, he gently said. I thought for a moment then recalled that there were …

Yesterday, a homeless man knocked on our front door asking for work. ‘Anything you can offer’, he gently said. I thought for a moment then recalled that there were sad looking flower beds in the yard that were crying out for attention. It was a job that never seemed to climb past the bottom of my things-to-do list, even though it wouldn’t take more than an hour or so.

Walking outside barefoot, I asked the man to follow me then showed him exactly what needed to be done.

“Sure, sure, that’s fine,” he said, “Any work at all is welcome.”

Not thinking, I asked, “ Do you have any gardening tools?” As soon as the words came out of my mouth, I gave my self an eye roll and head shake, wanting to take back the words. Gardening tools? Seriously? It was a hot summer day, the man was dressed in oversized long pants and a long sleeve shirt, sweating, uncomfortable, with no sun protective hat or sunglasses, and I ask him whether he happens to be carrying gardening tools? Oy.

“Nope. I don’t have anything but my two hands.”

So I found some gardening gloves, a trowel and several garbage bags. Before the man started working, he said he needed $31 in order to get room and board for a few days at the Tortoise, a homeless shelter. He didn’t ask to be paid $31, didn’t imply that I should pay him this amount or in any way play on my sympathy. Straight up, he simply asked for a fair wage.

He finished the work in less than an hour. I thanked him and gave him $50. Yes, that’s a fair bit for less than sixty minutes of gardening work. And I was fine with it. Because here was a human being who was down on his luck, who wasn’t asking to take something for nothing, and who made me reflect upon, and be thankful for, my good fortune. As far as I’m concerned, I got a heck of a bargain.

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Why We Give

Many of us give to create meaningful opportunities for others, to support individuals and causes that are close to our heart.

Equally important, giving leads us to reflect upon how fortunate we are to be able to support those in need. And it has a way of prompting us to be grateful for what we have, not just for our net worth but as importantly if not moreso, our health, friends and family.

As for giving to the man who knocked on my door, this was spur of the moment, not planned out giving and I didn’t receive a tax receipt that would go toward reducing my income taxes. The way I see it, that’s all good. Strict financial prudence need not dictate all of our actions. Sometimes, it’s good for the soul to hang loose (ya, this is the amusing thing, for financial types –- ahem, yours truly — foregoing the opportunity for a tax deduction is considered hanging loose).

And I engage in this type of wild, liberated giving now and then, whenever the opportunity presents and the mood strikes. This is in addition to planned giving. Meaning, each year, my wife and I allocate a certain dollar figure to charitable giving, decide which charitable organizations we want to support, then divvy up the funds to each organization as we see fit.

No one is telling us (and if they are, we’re respectfully listening then doing things our way) to give or how much to give because these are entirely personal decisions. And we don’t feel guilty for giving to one organization but not another, for telling charity volunteers who knock on our door requesting donations that we’re tapped out, that we’ve already determined who is on our Giving List and they didn’t make the cut this time around.

Because guilt should never drive decision-making. Rather, we choose for decision-making to be love centred. For the act of Giving to be a constructive act, something we feel good and right about, knowing that we’re doing what we can, doing our bit, to contribute to life.

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How Is Charitable Giving Different?

It goes without saying that you may give whatever you want to anyone, including charities. That said, if you want the tax benefit of giving, then know that there are certain rules around who to give to, what to give, and how much.

For tax purposes, ‘Charitable Giving’ is a defined term. It refers to making a voluntary gift to a registered charity or other government qualified organization. These gifts entitle you to a tax credit that vary depending on where you live. Only a charitable organization may issue official receipts that may be used for tax purposes.

As for whether or not a particular organization is a registered charity or otherwise qualified, for Americans, see the following IRS website:

https://www.irs.gov/charities-non-profits/organizations-eligible-to-receive-tax-deductible-charitable-contributions.

And Canadians, check out this CRA website:

https://www.canada.ca/en/services/taxes/charities.html


What To Consider Before Making a Charitable Gift

When thinking about how much to give and to whom, consider the following:

  • Importance. Start by thinking about what is important to you. In this regard, take time to consider what issues you care about and why you would offer support. Because giving is a completely personal issue, there is no right or wrong answer; we simply follow our heart.
  • Influence. Next, ask your self what kind of gift would be most effective in helping the charitable organization? What kind of gift would truly make a difference? And when should the gift be made (i.e., today, at a future time while you are living, or by way of your will)?

Often, gifts take the form of money. That said, gifts may also be made in other forms including: furniture, clothing, stocks, bonds, mutual funds, real estate, and other assets.

  • Gift Portfolio. Finally, consider how much you may afford to give. And once you’ve decided which charity(s) to include on your giving list, then figure out how much money, other assets and/or time to give to each charity.

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Giving Pledge

In 2010, 40 billionaires led by Bill and Melinda Gates and Warren Buffett, joined together in a commitment to give more than half of their wealth away.  They called the commitment, The Giving Pledge. And it remains an open invitation to billionaires to publicly dedicate the majority of their wealth to philanthropy.

The Value of Generosity espoused by these 40 people inspired others. And today, more than 170 wealthy people representing 21 countries, have signed on to the pledge. In effect, these additional signatories are saying, ‘we share your values when it comes to helping others.’

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We Give Because We Care

And that’s what this is all about. Values. And though the Giving Pledge is specific to billionaires, to the top 0.1% on the net worth chart, sharing productive values is open to everyone. How much you have is not the point. How much you give is not the point. Rather, it’s the act of giving, the mindset of sharing and caring, that matters.

Because in this simple act of giving, we experience a sense of purpose and well-being. In turn, these feelings deepen our sense of compassion. And acting with compassion, this is part of who we are, part of being human. When we stay true to who we are, we benefit our self, others less fortunate than us, and society as a whole.

 

 

Stock Market UnderBelly: Part II

A friend of mine, Tom, is a marketing expert. After reading the post published earlier this week (The Stock Market’s Dark Side), he flashed me a thumbs up for telling it like it is in the stock market world. Then he urged me to go further, not only because the subject matter makes for a good story, but …

“because people should know about the promotional side of the stock market, have their eyes wide open, before deciding to become an investor.”

So hats off to Tom for inspiring me to write Part II. To explaining to you why it would be wise to carry healthy skepticism toward corporate press releases, media reported snippets from CEOs, and any other sort of promotion be it splashy, widely circulated headlines, small time investment newsletters, or the ever more popular personal finance blogs (BuddhaMoney included).

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Let Me Tell You A Story …

Our society is huge on promotion. Whether it’s selling political drama on the right or left, running shoes, the latest Hollywood flick, toothpaste, tourism, financial products … whatever good or service or viewpoint is out there, it’s being promoted in big and small ways.

That’s all good. I mean, if old-fashioned word of mouth isn’t bringing in as much business or converts as desired, then you turn to other mediums to build awareness, bring in customers, and drive sales. This is simply how our system of commerce works.

The problem, however, arises when we’re not fully aware of the rules of the game, not seeing promotion for what it is, believing, hook, line and proverbial sinker, that the advertisement is completely truthful. When this happens, we’re bound to be disappointed, maybe taken for a ride, because the vast majority of promotion is about story telling. And commercial story telling, by its nature, involves suspending reality, manufacturing illusion, exaggerating a little or a lot here and there for the purpose of drawing more eyeballs, opening more wallets.


Watch Out For Cow Pies

Sticking to the financial world, noise is constant and relentless. Partly because the corporate arena is crowded  and you may have to raise your voice if you want to be heard.

Fair enough. And partly because the folks running banks, corporations, mutual funds, index funds, whatever financial product or service provider is out there, know full well how to play the human propensity toward fear and greed.

They know that, for too many folks, dangling fear and/or greed under the nose sells. And this isn’t cool, fair, or kosher.

Because it’s not a level playing field. Because financial service providers have vastly more information than Jane or Joe Consumer, and not sharing that information is detrimental to J or J Consumer. And when this happens, financial service providers are acting purely out of self-interest (i.e., with intent to gain more business) having little or no regard to potential harm done to honest folks handing over their hard earned money. And that … well … that’s just not the sharing, caring world that we want for our kids, or our self.

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Alright then, since it’s not a level playing field, since we don’t have access to certain relevant information, and are sometimes fed misleading information, what do you do?

You block out the noise and cut through stinky cow pies. Here’s a few pies I stepped around this morning while scanning through financial websites:

  • Sell These Stocks Before Market Closes!
  • Runaway Stock Baffles Analysts!
  • How One Man Turned $50,000 Into $5 Million!
  • Biotech Stock Explodes After Drug Announcement!
  • This Is Not An Investment Opportunity You Want To Miss!

Now, you may read these headlines, all of which are taken from small publications with important sounding names, find them mildly amusing and not give them another thought. But some folks don’t. Some folks click on the link, then get sold on shady content that feeds their investment decisions.

Unfortunate? Yes. Because here’s the thing: no legitimate, worth your time publication is going to run headlines like that, the purpose of which is none other than to draw you in. And once you’re in, that’s when the real selling starts. And if persuaded to buy (sigh), you’ll likely lose money.

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All Dressed Up

Major media players, multi-billion dollar companies, aren’t all that different from the small fish. In fact, because big media and big corporate have much deeper pockets, their promotions may be a less obvious sell, slicker, and more persuasive to a wider audience.

Take Nike, (NYSE:NKE) for example (I could have used any large corporation-not picking on Nike here). Are their shoes really better than Adidas or Reebok or any other shoe manufacturer? Because Michael Jordan is paid a gazillion dollars to promote Nike shoes, and you went out and bought Nike shoes, will you become a better basketball player, will you become like Mike, or just feel more cool? (I own Nike shoes because they’re comfortable and I can buy them on sale at discount outlets).

Aside from product quality workmanship, Nike isn’t selling guarantees. Plain and simple, Nike sells its shoes in the best way it knows how: by placing a storyline in your head. And we, the consumer, read into the ad whatever we want. And once we own the product, we feel whatever we want to feel, we perpetuate whatever illusions we like.

Financial companies are no different. Let’s use Blackrock Inc. (NYSE:BLK) as an example. The largest asset manager in the world, and provider of index funds and mutual funds, says this on its homepage:

“A suite of 18 low cost funds that can help make your long-term investment goals a reality.”

Yes, the funds could do that. And they could just as well blow up in your face. But Blackrock doesn’t mention this. However, in keeping it legal, Blackrock does state, in teeny, tiny print at the bottom of the page,

“The funds are not guaranteed, their values change frequently and past performance may not be repeated.”

Okay, good for them, check off the box next to full disclosure. But, really, how many people are reading teeny, tiny print? Even if you do read it, is the message really sinking in? I mean, it’s boring legalese with no emotional resonance.

Fact is, most of us focus on the stuff that gets our juices flowing, that makes us dream of rich, comfortable retirement years. And the ideal placement for emotional triggers is the top page. This is where Blackrock seems to promise to make my investment goals a reality. Shouldn’t I believe what they say? In short, nope. Trusting in any sort of promotional literature would not be wise, especially a promotional hook that is completely undermined by the teeny tiny legal print.

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Keeping It Honest

By healthy skepticism, I mean ask questions. Ask what is the motivation of a company to issue this or that press release, to have their CEO run the talk show circuit, or invite media to corporate sponsored events.

Know that certain major publications lean politically left or right (the center seemingly in hibernation) and this will influence both what information they present and the way in which they present information.

Know that stock analysts, those people who like to make you think they have a crystal ball when it comes to stock forecasting, are in the sales game too. Sure, they have access to company and economy specific information that we don’t, but their predictions remain simply that, predictions.

Know also that stock analysts almost always issue BUY or HOLD recommendations. SELL recommendations are exceedingly rare. Why? Do all stocks go up, indefinitely? Do all companies succeed?

The only reason SELLS are rarely issued is because analysts are engaged in their own form of stock promotion. And the last thing a stock analyst wants is to influence stock markets to move lower.

There’s a ton of promotional noise out there. The sooner you’re able to recognize noise for what it’s worth, the better informed you will be, the wiser decisions you will make.

ps. big thanks to Tom for the inspiration and a bit of promo in support http://www.reinfluenceinc.com/.

 

The Stock Market’s Dark Side

Elon Musk, founder and CEO of Tesla Inc. (NASDAQ:TSLA), recently did something highly unusual: he disparaged his company. Specifically, he knocked …

Elon Musk, founder and CEO of Tesla Inc. (NASDAQ:TSLA), recently did something highly unusual: he disparaged his company. Specifically, he knocked Tesla’s share price, saying it is “higher than we deserve.” Whether true or not, to publicly state that your company is not worth its current trading value is not only rare, it’s virtually unheard of. It’s just not what a CEO does.

Because in addition to assuming responsibility for day to day operations, a CEO also acts as a company’s primary media pitchperson, head cheerleader, numero uno fan, selling the company’s virtues to the public and financial analysts. And always with a positive spin. Unless you’re a rare breed known as Musk, so it seems.


Sales, Man, That’s What Corporate Life Is All About

I’m not here to riff on corporations as evil entities myopically bent on achieving profit and maximizing shareholder value, all the while paying little heed to contributing to the social good and society at large. To varying degrees, some companies adhere to a social conscience, others don’t. For better or worse, such is the diverse nature of organizations, and humanity.

Still, regardless of how much or little a for-profit company gives back to its employees, communities, and our world, they all share something similar: they’re in the sales business. Whether selling goods or services, companies need sales to generate revenue to turn a profit to stay in business. And selling involves promotion, marketing, and advertising. And if you have a media friendly CEO, well then, all the better for driving sales, all the better for business because that CEO’s favorable image connects with consumers, persuading consumers to use, watch, listen to, or wear a company’s product.

Think Steve Jobs and Apple. Media loved writing about Steve, and Steve knew how to play the media, to manufacture himself as a near mythical legend, and position Apple as not only best in class but in a class of its own worthy of sticker prices considerably higher than rivals products. This sort of image making, however close or far removed from reality, impacts consumers buying habits and investors desire to own the stock, and consequently bid up share price.

Now, I’m not saying that Steve wasn’t a genius visionary or that Apple doesn’t make exceptional products. Instead, what I am saying is that you can have the most excellent product or service on the planet but if relatively few people know about it, and sales lag, then the company will soon fade away.

Apple doesn’t have that problem. They remain as extraordinary at the sales game as they are at manufacturing. And to this day, their image among consumers remains intact, best in class. As does their market value, which is higher than any other company on this planet, by far.


Promotion, Man, That’s What The Stock Game Is All About

Whether you’re a stock market behemoth like Apple or Google (NASDAQ:GOOGL), or a teeny tiny penny stock, in one way or another, you’re promoting your stock, i.e., you’re selling the merits of owning your stock because you want more buyers than sellers; this is how share price marches upward.

The typical medium in which behemoths promote their stock is mainstream media. Be it an interview with the CEO, a quote, a prediction as to what comes next in the stock market or economy, an annual meeting turned Woodstock for Capitalists (i.e., Berkshire Hathaway’s (NYSE:BRK.A) annual shareholders meeting), or a product unveiling (i.e., Apple’s annual Worldwide Developer’s Conference).

And while the CEO may firmly, honestly, believe in what they are promoting, we the consumer would be wise to interpret their words with a grain or two of salt. Because they’re just words. In the investing game, words are not enough. Not even close.

Numbers, not words, tell the story. On a basic level: Revenue, Expenses, Profit, these matter more, so much more, than words. I mean, words can be beautiful and flowery and convincing, and we’re all susceptible to oratory charm. But it’s important to see words for what they are, and in the financial world, words decidedly take a back seat to numbers.

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When The Numbers Don’t Add Up, Run!

Penny stocks are a different animal.

Technically, a penny stock is defined as any stock that trades for less than $5 / share. But for our purposes, a penny stock is one that trades for less $5 / share AND is not listed on a major stock exchange AND is a small company AND is often illiquid (i.e., relatively few shares are traded each day, making it difficult to buy and sell).

Now here’s the dark side of penny stocks: scammers LOVE them! And they can make a small fortune off people who don’t know any better, people who chase pots of gold and ends of rainbows, people who lay their bet on spam email promoting the latest and greatest 10 cent stock promising to power through to $10 or $50.

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The typical penny stock company touted by scammers? Little to no revenue, little to no shares traded daily, little to no business prospects.

And the angle, the hitch, the hook? The company says (words, words, words) that it’s changing its business model and is now in a HOT SPACE. For example, if the price of gold takes off, the company will morph into a gold mining company. If biotech is hot, you guessed it, the company reinvents as a biotech company.

Then, if it’s a big time scammer, they pay a promoter(s) serious coin (we’re talking hundreds of thousands to millions of dollars) to scream about the INCREDIBLE, UNBELIEVABLE, FANTASTIC investment opportunity presented by this itsy bitsy shell of a company. And the promoter(s) sends out millions of emails, many press releases, and arranges for inclusion in hundreds of investment newsletters and stock chat rooms. This is the modern version of a boiler room (i.e., refers to a bunch of guys [rare for women to engage in this activity] hard selling stocks to random people over the phone – well depicted in the movie, Wolf of Wall Street).

Once the word is out, once enough people have been suckered into becoming buyers of this worthless stock, the scammers start selling. Because, you see, before all of the promotional activity was set up, the scammers arranged for most, maybe all, of the issued stock to be in their name or, if sophisticated, the name of a faceless corporation. The faceless corporation gives them cover from regulators who have rules regarding the boundaries of promotional activity.

And if the CEO of Penny Stock Corp. says he doesn’t know who is behind the promotion, and the regulators cannot identify the promoter, then Penny Stock Corp. CEO has no worries. And he dumps his stock to pie in the sky investors who bid up the price. Until, that is, buying momentum halts, selling ensues, and stock price craters in a matter of hours or days.


The Case of Dry Ships

But you need a real life example. So let’s briefly describe what happened recently with a company called DryShips Inc. (for the full story, check out the detailed accounting here).

In November, 2016, DryShips disclosed a huge loss and suspended debt payments to preserve liquidity. Shortly after, the company, with a market value of close to $5 million, didn’t just catch fire, it was a veritable inferno! In just four days, the stock price leapt more than 1500%!

On November 8, its stock was priced at $5107, with a grand total of 38 shares being traded. Two days later, price jumped to $13,328 with more than 5,000 shares traded. Come November 15, price it $81,760 with more than 9,000 shares traded. By November 29, price had tumbled to $4849.

The journalist who wrote the article referenced above ends his story by referring to the “stock’s mysterious rally.” Well, other than being able to prove who was pulling the scam strings, there’s no mystery. The stock blasted higher owing to deceitful manipulation and nefarious promotional activity. Because absolutely nothing related to the company’s business activity justified a massive move in volume and price. And at the end of the day, guess who loses? Right, Joe/Jane Investor who were suckered into buying worthless paper.

As an investor, you do not want to get anywhere near this kind of stock. So please do your best to ignore any spam investing emails, ignore talk of a stock being “the next Facebook”, ignore any and all penny stocks because buying penny stocks is akin to gambling, not investing, and nine and half times out of ten, you will not exit your stake a happy camper.

Ride Your Way To Wealth

Ride Demon (new name for my 11-year old son) recently bought a hoverboard. If you’re asking, ‘what’s a hoverboard’, well, know that you’re not alone. Because that was my immediate response when Ride Demon excitedly told me of his intended purchase. And my ignorance was cause for him to look at me as if I were from Mars. Or just really, really old and out of touch. I told him to go with the Mars theory.

Then Ride Demon proceeded to tell me all about hoverboards, starting with: they’re soooo much fun, move fast, and carving the streets on a board is awesome. It’s kind of like an electronic skateboard but wayyyyy more cool because they’re battery powered, come with Bluetooth speakers to play music while riding, and are controlled by body motion. Meaning, you lean slightly forward or backward to slow down or speed up, and steer right or left by placing more weight on one foot or the other.

After learning everything I always wanted to know about hoverboards, I asked Ride Demon about the cost (a few hundred dollars).

“I have it covered.”

“Oh?”

“I’m not asking you to pay.” (interpretation: it’s my money and I can do what I want).

“Okay.”

“I know it’s a lot but I’ve been saving my money for a long time and this is something I want.” (interpretation: I’d like to buy this without your opinions and analysis, Dad).

“Absolutely, your call.”

“And I’ve done all the research (the kid knows me; this would have been my next question), and this is the best board for the best price.”

“Totally trust you. Go for it.”

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Money Can’t Love Buy But It Can Buy Experience

So Ride Demon buys the board. And he’s having a blast. The added bonus is that a friend of his is into hoverboard riding as well. So the two boys venture out daily, doing their thing, no helicopter parents around to tell them to slow down or be careful.

Whether he’ll remain interested for a few days, weeks or months, who knows. And whether the expensive price tag was worth it, well, that’s a matter of judgment and perspective.

The way I see it, the kid is learning about money management. On his own, he reviews his bank balance, tally’s up the expense and consequent hit to his savings account, and makes the executive decision to forge onward with the purchase.

Sure, he gets a kick out of watching his balance grow. But, really, the three digit number only gives back so much in the excitement department. Ride Demon calculated that riding the board throughout the summer is worth a whole lot more than any squishy feeling he might get from hanging tight to money.

And I, the Dad in this equation, encourage the kid to jump through these mental hoops. To weigh the costs and benefits to any purchase. And when he makes a mistake, regrets a purchase, all the better. Because he’s learning, and what better time to learn than when you’re a kid, when life is generally free and easy (little does he know!), without financial responsibility, and no money mistake will end in any sort of enduring hardship.

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Self-Balancing

There’s another name for a hoverboard: self-balancing scooter. Yet, while the board does its best to facilitate balance, it won’t work unless you find your own center of gravity, bring your own balance to the board.

Ride Demon was a natural. He quickly learned how to stay upright and comfortably navigate. And as I watched him savoring one sweet ride after another, I’m thinking I’d like to try. So he lets me have a go at it. I step on, shake and wobble for a few seconds, then fall off. Again and again. It’s not as simple as it looks.

Neither is money management for many of us (you knew that, eventually, I was going to bring this around to more talk about money!). I mean, even when someone like Yours Truly passes on a wealth of knowledge (ahem), and you absorb that knowledge, decision making may nonetheless start from a place of discomfort (‘is this the right investment for me? Am I spending too much?) and end with a sense of uncertainty (‘I sure hope the investment works out because I really don’t want to lose money’; ‘it was fun going out for dinner four times this month but now I may not be able to pay off my credit card balance in full’).

So what do you do? Well, this is where I’m going to deliver one of those ‘sounds easy in theory but challenging to implement’ notions. You get comfortable with discomfort; you cozy up to uncertainty. You do your research, acquire information needed for wise decision-making, then make your call. And you do so with conviction knowing that the future is inherently uncertain. And if it works out, good! If not, that’s okay, you learn from it, adjust, and move forward. Not so different than life.

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Kid Rules

I love being around kids. We adults can learn so much from them. When Ride Demon falls down and scrapes his knee, bangs his elbow good, he doesn’t hesitate to get right back up, place himself in the proverbial saddle and get back to carving the streets. He seems to have an innate sense of balance, one that keeps it all in healthy perspective, one that doesn’t harshly self-judge, one that’s accepting, that exudes spirited enjoyment of life.

Now, all that said, the kid doesn’t have money issues and adult responsibilities. Okay, fair enough. But since you and I do, it’s even more important to find and embrace a healthy balanced perspective on money, and all other facets of life. Because it’s when we’re in balance that we’re healthy, wealthy, and just plain old feeling groovy about this gift of life.

 

 

 

 

 

Amazon Prime: The Inside Story

When shopping for books, my first choice is to buy used at the online marketplace, AbeBooks, a company that sources books from local bookshops around the world.

The fact that the books are used? Not an issue at all. I pay a whole lot less than what I would have paid if buying new, with the added bonus that every book I’ve ordered arrives in excellent condition.

The downside, if you can call it that, is that books may be mailed from countries like Australia or England and not arrive for anywhere between 7-21 days or so after placing an order. But I’m good with that. Because it’s rare, if ever, that I absolutely need a book immediately. And you know what? It’s fun waiting. It’s fun anticipating arrival, not unlike looking forward to going on vacation. Waiting reinforces my understanding of the phrase, ‘patience is its own reward’.

Besides, if I need a book immediately (owing to impulse control system shutdown), it may be available at a local bookstore. If not, there’s always Amazon.

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Prime Time With Amazon

Amazon bills its annual Prime Day as ‘a one-day only global shopping event exclusively for Prime members!’ Oh, how exciting, more shopping, more deals, more spending, more getting excited about … stuff.

Sarcasm aside, Amazon is not (surprise, surprise) acting out of the goodness of its heart when enticing consumers to shop until they’ve maxed out their credit card. Nah. Instead, Amazon is intent on taking over the consumer world (chewy thought: given Amazon’s voracious and insatiable growth, will the federal government step in one day, brand Amazon a monopoly and require it to break up into smaller pieces? Stay tuned).

And here’s where Prime Day greases the ravenous machine. July being a quiet retail period, Amazon offers big time deals. In the process, they attract new third-party sellers to their site (which, in turn, enhances product assortment) and persuade more consumers to sign up for Amazon Prime. Because, remember, this is a member’s only sale. And as one credit card company put it in an advertising campaign of years past, ‘membership has its privileges’. Right. The privilege to buy more stuff. Whooo Hooo (ooops, sarcasm reflexively returned).

Jeff Bezos, Amazon’s founder and CEO, knows exactly what he’s doing. Bezos knows consumer behaviour inside out. He knows that the first two Prime Days (this year is #3), generated profits 4x greater than the typical daily profit haul. And he knows that getting consumers to pay $99 to become a Prime Time member is only part of the pitch.

Because internal research has shown that Prime members spend more time noodling around Amazon’s ecosystem of services, and they spend more money. All of which further cements Amazon’s retail dominance.

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Why I Shop At Amazon

More and more, I buy stuff at Amazon. At first, it was only books that I couldn’t find on AbeBooks (did I mention that Amazon bought AbeBooks in 2008?), because even if they didn’t offer a new book priced lower than competitors, they offered free shipping. And convenience. And reliability. And excellent customer service if a package got lost or was damaged during shipping.

Now, for all those reasons, I’ve been buying other stuff at Amazon. And, obviously, I’m not the only one, their reach now being far (think India and China) and wide (think decimated mom and pop bookstores, not to mention the once substantial, now deceased, Borders and Circuit City, and the recent acquisition of Whole Foods). Recent talk of Nike selling their products on Amazon was enough to boost Nike share price and drag down their competitors (Foot Locker fell 6%; Dicks Sporting Goods dropped 5.3%, Under Armour shed 1.5%).

The thing is, Amazon lives up to its name in breadth. The company is a huge distribution channel and only getting bigger, selling everything from clothes to cat litter to car parts. So other retailers want access to that connection to massive hordes of consumers. And not having that direct line to potential consumers is proving damaging as people continue to shop more online than in store. So damaging that some are closing up shop (for example, Sears is now kaput and Macys has shut 100s of stores).

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It’s Just A Store

Amazon makes shopping easy. And the prices are good. The sales even better. Fine. Still, it’s just a store. It sells stuff. You want to spend $99 to become a Prime Member? That’s your call. But don’t buy stuff just because its ON SALE or a GREAT DEAL or a LIMITED TIME OFFER. Don’t fall prey to the marketing jargon, the nonsense, the only purpose of which is to get you, the consumer, to open your wallet and fatten Amazon’s profits.

As for me, I’ll survive just fine without Amazon Prime and their promise of delivery within 2 hours or 24 hours. Sure, it’s a convenient service. But is my personal convenience really that important? Nope. I don’t need it. In fact, I don’t want it. Because I prefer not living life at high speed. I prefer anticipation. I prefer the wait. And I prefer not to buy more than I need.


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Enter Buddha

To be impatient is to be anxious, uneasy, even greedy. Patience, however, is alert, active, expectant. Patience is not dull, it is radiant. It is a flame burning bright.

 

Dividends: The Ultimate Second Income

Bored with the same old games, my 11-year old son and teenage daughter rummaged through the games closet and found an ancient relic, Monopoly. And as I excitedly told them about its history, that is was invented by self-described anti-monopolist, Elizabeth Magie, in 1903, that its purpose is to illustrate the hazards of concentrating land in private monopolies, my kids looked at me as if what they were hearing was, ‘blah, blah, blah’, rolled their eyes in tandem, and walked away.

Not an unexpected response. I mean, hey, the kids just want to be free to play, not weighed down by an adult (that would be me) spewing historical facts and economic theory. And play they did.

From time to time, they would ask me to clarify rules, which I was only too happy to oblige. Eventually, after surreptitiously spying on them from the kitchen, watching and listening as they learned rules and strategy, I came in from the cold and asked, ‘Can I play?’

Of course, being the adult whose headspace has not yet adjusted to the idea of summertime freedom, to the idea that summer is a time for letting it all go, for letting it all be, for being here, now, the Dad in the room (that would be me) had a hidden agenda.

And as I sat on the family room rug, took a seat at the playing board, and chose the Hat piece because the RaceCar was swiped by my son, I prepared to teach the kids a thing or two about the joy of property ownership.

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Interest and Dividends Rule

In other blog posts (see Property Investing: Need To Knows and Thinking About Investing In A Condo), I’ve discussed upsides, downsides, and things to be on the lookout for when buying real estate as an investment. And I also batted around the advantages of owning Real Estate Investment Trusts (REITs). Whether we’re talking about owning REITs (i.e., stocks that pay monthly dividends) or real property (i.e., bricks and mortar buildings with tenants paying rent), the beauty of both is … they’re Income Generators.

I love Income Generators! What’s not to love? In essence, you’re paid for being the owner. An ‘income stream‘, is the somewhat poetic phrase describing the monthly cash flow that makes its way to your pocket.

While playing Monopoly, I tried explaining the concept to the 11-year old as he insisted on buying RailRoads (a kid with a fervent imagination, a romantic at heart, naturally he finds RailRoads captivating) instead of Marvin Gardens or Tennessee Avenue.

Listen, even if you own all four RailRoads, you collect only $200 each time someone lands on Pennsylvania or Reading or the others.

So.

So? You know how much rent you collect when someone lands on Tennessee and you’ve put up a hotel? $950!

I don’t care. Besides, I have way more money than you!

True, you do have more money. But I have more properties. And eventually, you’ll be paying that money to me for landing on my properties. Then Ill have the properties AND the money, and you’ll be left with bubkus.

I still want the RailRoads.

Ya well, kids see something special about trains and RailRoads. I get it. As for that particular game, it played out as expected, the kid coming up short. Same in the next game. But the third time around, the kid’s romantic heart took a back seat to his competitive nature. Taking a page from my playbook, the kid gave first priority to property accumulation, knowing that this was the eventual way to riches. At least in the game of monopoly.

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Knowing The Deal

Let me back up a moment. I’m not saying you’ll become wealthy if you own property. It may happen but it’s far from certain. But I am saying that property ownership is a truly excellent, outstanding way to generate income. That said, income is only one half of the equation. The other half being expenses.

When you own real property, like a condo (Thinking About Investing In A Condo), it’s absolutely essential to get a firm handle on expenses. Because if expenses outstrip income, then you have to revisit the question of … what’s the purpose of this investment?

If it’s not about generating net income, then it’s all about capital gain, i.e., expecting property value to increase before you sell the property. And if capital gain is the sole purpose, then you’ve ratcheted up risk level because you just don’t know what the property will be worth tomorrow or ten years from today.

Personally, I’m a big fan of REITs. And I’ll step outside my usual commentary and say that I prefer individual REITS over a REIT Index Fund. Why? Because while the REIT Index Fund typically offers less price volatility as compared to owning one or two or a handful of individual REITs, it will also pay a lower dividend, sometimes much lower.

So, I’m willing to trade off more volatility for more income. And I’ll do so knowing that REITs in general are not a volatile group like, say, technology stocks. And they usually do not see wild price swings.

Granted, you also won’t see price gains like you might in the technology sector. But I’m good with that. I’m good with owning stable REITs that offer relatively smaller price gains and a healthy dividend.

And I’m real good with watching the monthly dividend deposits to my account, knowing my total ownership expense is $9.99 for each purchase and sale.

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What Kind Of Income Are We Talking About

Let’s say you have a spare $100,000. And you want to invest in property. You could apply that 100k as a down payment toward a condo. Incur the costs of taking on a mortgage, monthly condo fees, legal fees, title fees, any property transfer tax. Then find a renter. And hope the renter is reliable, cares for your property, and minimizes your maintenance costs.

And maybe you would turn a profit each month. It just depends on the numbers involved. And you, being a BuddhaMoney enthusiast, would crunch, crunch, crunch all the numbers before making your purchase decision. I’m not trying to be a wet blanket here; these are just some of the realities of property ownership.

Or you could take that 100k and buy a few REITs. I lean toward REITs listed on the Toronto Stock Exchange because their dividend yields tend to be much more generous than those offered by companies with U.S. listings.

While there’s a whole bunch to choose from, I’ve listed a few below (though I want to emphasize that I’m not advising, telling, suggesting or otherwise whispering in your ear to go out and buy any of these REITs without first doing your research):

  • Pure Industrial REIT (TSE:AAR.UN). Pure Industrial’s portfolio concentrates on industrial properties located in both Canada and the U.S.A. It pays a yield of 4.65%.
  • Slate Office REIT (TSE:SOT.UN). Slate owns Canadian based commercial properties, with an emphasis on office buildings. It pays a yield of 9.65%.
  • RioCan REIT (TSE:REI.UN). RioCan is Canada’s largest REIT with a market cap near $8 Billion (CAD). It focuses on shopping centers, retail and mixed use properties. It pays a yield of 5.80%.
  • Dream Office REIT (TSE:D.UN). Dream owns a stable of office properties throughout major urban Canadian cities and pays a yield a whisker under 8%.

So for simplicity sake, let’s say on 100k the average yield for these four REITs is 7%. That’s $7,000/annually, less trading fees which would equal $9.95 x 4 = $39.80. And the bonus is that dividends are taxed at a lower rate than interest income (think rental income) meaning more money in your pocket.

Putting money to work for you. Generating an income stream. All helps toward building your wealth.

 

Hot Stocks Burn!

A little bit of knowledge can be dangerous, so its been said. And in the stock market, oh man, ain’t it the truth! Especially in a boom market like the technology heavy NASDAQ.

During the past nine years, ever since the financial world began healing from the Great Recession, the return on a NASDAQ index fund has been relentlessly positive.

Sure, temporarily, price dips into the dreaded valley of bears but give it a day or two or thirty, and charging bulls wrestle momentum forward as price resumes its heady ascent. Currently, the NASDAQ stands above 6110. A mere one year ago, it was at 4800. That’s a 27% gain in one year! Such a gain is outrageously potent when considering that equities historically return an average closer to 8%.

‘Ya, well, that was then, this is now. Get on board the gravy train or stand there with your hands in your pockets, money in a savings account and earn your 1%. Good luck with that!’

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Derailments Happen

More or less, that’s what Jake said to me the other day. Jake is in his late 70s. His wife, Nancy, passed away several years ago. Until bidding farewell, Nancy held the title of family investing guru. Despite having next to no knowledge nor experience with investing, Jake figured, how hard can it be?

And since he’s taken over the portfolio reins, Jake has done well. As have others who have invested in American based index funds.

But here’s the thing: Jake attributes success to his investing prowess. Fact is, Jake has no knack for investing, no know-how, no prowess. I don’t say this as a knock against Jake. Not at all. He’s a fine person with a warm disposition and a kind heart. It’s just that I know Jake well enough to understand that he’s been following the crowd.

And the investing crowd has been riding a tsunami sized wave of good fortune since late 2009. And for anyone whose investment days only just started after the last recession ended, it’s quite possible that all they’ve known are good times.

Cool. Good. Excellent for all who have seen their portfolio grind and bump higher and higher as the NASDAQ, S&P 500, Dow Jones continue to break records. And should Stock Market Gods continue to stoke global economies and shine light upon corporate profits then, hey, whose to say that, far from nearing its end, this party isn’t just getting started?

Hmmmm … hope for the best, nothing wrong with that. But choose to remain blind to the fact that the longest period of sustained economic growth in the USA was 10 years (1991-2001), that from the 20th century onward, recessions typically occur every three to six years, that we are currently in year nine of the economic expansion cycle … and you may be in for a nasty turn of your portfolio.

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This Is Not Chicken Little Calling

Jake talking:

‘Australia is experiencing its 26th consecutive year of economic growth; old age doesn’t derail economies, something has to kill them; consumers are spending; banks are lending; full employment; property prices rising … tell me: where’s the dark, foreboding cloud indicating recession and stock market collapse? Huh? Where?’

Absolutely, Jake. All signs look positively stellar. I mean, who can argue with what you just said or the zooming stock prices of Amazon, Apple, Google and Facebook this year? Wowzers!

But you know what? The stock market, and life, is about looking forward, not backward. Sure, we check out history to learn from others, to learn what worked and what didn’t. Still, as far as my limited knowledge reveals, we humans don’t know what’s coming in the next minute nevermind the next year or two or ten and beyond.

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What’s This Game All About

I’ll give Jake this: economies of the developed world are healthy and look to be getting stronger. And in year five and six and seven and eight, and now nine of the US expansion, pundits have been tripping over themselves to call the next recession and stock market downturn. Yet all they’ve done is fall flat on their face as growth continues and stock markets chug along.

But does this mean you shouldn’t be careful? (yes, yes, be careful!) Re-assess your portfolio? (again, yes!) Consider selling winners and taking profit (oh, yes!) rather than staying fully invested and letting all the chips ride? (yikes, don’t do that!).

Why? Because managing your portfolio is about managing risk. There is ALWAYS risk in your investment portfolio with some assets inherently riskier than others. And you can best manage risk by coming up with a plan that allocates fixed percentages of your portfolio to different asset classes.

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Laws Of Gravity Still In Play

Okay, real world example instead of blathering on: let’s say Jake’s plan involved allocating 20% of his investment portfolio to equities in the technology space, either through buying individual stocks or index funds. And with the gains Jake has made in the tech sector during the past few years, tech’s share of Jake’s total portfolio has ballooned to 45%.

Having too much exposure to tech, i.e., too much risk, makes for a portfolio out of balance. Because when (not if, but when) there’s a market fall, you can be sure that those tech related gains will wither if not evaporate entirely.

Now, since Jake wants to maintain technology exposure at 20%, assuming he accepts sage guidance from BuddhaMoney, he’ll happily sell 25% of his tech assets, pocket the profit, and reinvest elsewhere.

For example, maybe Jake will bump up his fixed income allocation (currently at 20%) and buy a Bond index or individual bonds because he wants to reduce portfolio volatility. Or maybe with interest rates seemingly, finally, on the rise, he’ll put his money to work in financial companies, banks and insurance, since their bottom lines tend to benefit from rising rates. Or increase his cash holdings (nothing wrong with cash; best to be patient and wait for opportunity rather than rushing into investment action).

Whatever Jake decides, the most sensible course of action is to maintain a balanced portfolio, diversified across asset classes (i.e., stocks, bonds, real estate), industries, and geographically. Because booms don’t last forever, crystal balls are the stuff of dreams, and the laws of gravity will not be repealed any time soon.