Categories
Investing

Bottoms, Bulls and BlackRock

Fact 1: Corporate insiders have historically had a knack for buying near market bottoms.

Fact 2: Investor bullishness has declined during 2021. However, sentiment has recently recovered.

Fact 3: Over the past decade, small cap tech stocks have underperformed small cap cyclicals. Technology leadership has clearly been limited to big cap indices.

Fact 4: A sign of a liquidity trap, deposits have grown massively since the start of the pandemic, hitting $4.5 trillion. Of course, this additional savings hasn’t accrued to everyone, as many people continue to live paycheck to paycheck.

Fact 5: The post-shutdown experience was supposed to be one of massive economic recovery. Instead, Q3 GDP estimates have been trending down since the summer, with current estimates as low as <1%. Meanwhile inflation is spiking. Stagflation anyone?

Fact 6: During the pandemic, BlackRock’s AUM has quietly reached almost $10 trillion.

Categories
Investing

5 Facts Every Investor Must See

The world right now is overrun by opinions and people talking their book. What we as investors, decision makers, concerned citizens need instead are facts. Facts to form our own opinions.

To help you do this, I share facts in visual form: charts. My hope is to provide you with quick, digestible hits to provoke further thought so you can form your own opinions.

Charts and graphs are the most efficient and effective way to convey large amounts of information. Consider a simple 10yr chart of monthly stock prices, for example. That simple line enables you to absorb 240 intersecting data points (time and price), plus information on volatility and trends (implying the 10yr performance of company earnings).

All this from a 2 second look at a chart.


Fact 1: Cryptocurrencies consume the same amount of electricity as Sweden.

Fact 2: Loan loss provisions at banks are being released, providing a tailwind to earnings.

Fact 3: Electricity is being rationed across China, due to fuel shortages.

Fact 4: China’s dollar junk bond yields kiss 20%, suggesting serious market stress.

Fact 5: Ongoing supply chain shortages are due to a combination of strong demand and weak supply.

Categories
Wealth Work

Equity performance and inflation

Right now there are over 10 million job openings in the United States. Meanwhile, 4.3 million Americans quit their jobs in August. It has been a long time since labor has had so much power.

Many of these job openings and quits are hitting small businesses especially hard. Competition for skilled, unskilled and semi-skilled labor is fierce.

When the quantity demanded is high but the quantity supplied is low, prices rises. And that’s what we’re seeing in the market. Small businesses are raising worker compensation to compete for labor.

Wage inflation is now the most commonly-reported type of inflation affecting US businesses, closely followed by higher raw materials and transportation costs.

If these inflationary trends persist, it is reasonable to expect interest rates to rise. The 10yr US Treasury bond yield has risen to 1.544%, and many expect the rise to continue.

The Fed continues to buy $120b of bonds each month, so there is quite a bit of runway before they must raise short term rates, but what would happen if they did? The following chart looks at equity market returns during previous tightening cycles. Although, this time could be different as inflation today has much different characteristics than during previous cycles.

What if someone invests today and the market subsequently crashes?

The following table looks at how someone would have performed if they invested right at the market peak before major market crashes. On a long-enough time horizon, the markets have historically been quite forgiving.

Categories
Uncategorized

The Biggest Asset Class in the World

Chinese real estate is the biggest asset class in the world. It isn’t a stretch, therefore, to argue that the success or failure of China’s property market influences the global economy. One only has to look at the ripples caused by Evergande’s recent instability to see this.

Both in absolute dollar terms and as a proportion of domestic GDP, China’s real estate sector dwarfs that of the US, even at its mid-2000s peak. Remember what happened to the US and global economy when US real estate went bust during the 2000s? This is why global markets react so violently to any hint of trouble in China.

The Chinese economy and property sector have been weakening for a while now. Data surprises in China have been negative since around June. Negative surprises are now occurring more frequently in the US and EU too.

Why do surprises (both positive and negative) matter? Economic expectations are baked into asset prices, so if a new data point defies expectations the market must adjust up or down to accommodate this new information.

Well, at least your portfolio is diversified across stocks and bonds to reduce shocks created by a Chinese real estate bust, or any other source. Right? Maybe not.

The chart below shows correlation between bond yields and stocks has declined dramatically recently. This means that when stock prices decline so do bond prices.

Categories
Climate Change

Major Drop in 2021 Canadian Field Crop Production

In Canada, October 11th was Thanksgiving, traditionally a celebration of the harvest. This year, that harvest is experiencing significant stress putting continued upward pressure on food prices.

Ongoing widespread drought conditions combined with a summer ‘heat dome’ in Western Canada have slashed projected harvests.

According to Statistics Canada:

An assessment of Normalized Difference Vegetation Index (NDVI) curves, which are a measure of plant health, indicated that in almost all parts of the Prairies, crops reached peak health well ahead of normal. In some instances, peak NDVI occurred up to four weeks earlier, before decreasing rapidly as a lack of moisture and high temperatures took a toll on plant health.

This is the first time since 1987, when Statistics Canada began monitoring crop conditions using coarse resolution satellite images, that NDVI curves have peaked so early in the growing season. The CCAP also indicates that dry conditions have impacted almost all of Western Canada. By comparison, other notable droughts such as in 2002—while difficult for many—were less widespread than this year’s.

These conditions are leading to double-digit declines in principal field crop production. Nationally, wheat production is projected to decrease 34.8% year over year to 22.9 million tonnes in 2021. Similarly, canola production is expected to fall 24.3% to 14.7 million tonnes.

The chart below illustrates year over year production declines for all principal field crops in Canada. Given widespread production declines, it seems reasonable to argue that food prices will continue to experience upward pressure.

Categories
Geopolitics

The Last Days in Vietnam

Categories
Climate Change

The latest IPCC report explained in 7.5 minutes

Read the Summary for Policymakers: https://www.ipcc.ch/report/ar6/wg1/#SPM

Read the full report: https://www.ipcc.ch/report/ar6/wg1/#F…

Read the IPCC’s FAQ: https://www.ipcc.ch/report/ar6/wg1/#FAQ

Categories
Life Work

Do you Live to Work?

Are you really free? If you’re like most middle-aged people, you’re probably living a life to serve the system.

Everyone starts with 24 hours:

  • 8 hours for sleep
  • 1 hour for showering, breakfast, etc. in the morning
  • 1 hour commute
  • 8-9 hours at work
  • 1 hour commute
  • 1 hour meal prep, eating, cleaning
  • 1 hour of exercise
  • 1 hour kids homework

What does that leave you? 1-2 hours of ‘freedom’. Yeah, your best hours to invest in yourself can begin after you’ve fully drained all your mental and physical energy.

Do you have hopes and dreams? Save them for between the hours of 10:00pm and 11:00pm.

You’ll notice I’m leaving out laundry, groceries, repairing the back stairs, mowing the lawn, dry-cleaning, picking up pencil crayons for your kid’s art project, and so on. That’s where your weekends go. And if you’re like many people, those obligatory social gatherings – after work drinks, in-law’s birthday party – might as well be minor forms of work too.

The time each of us have to actually do what we want is minimal. If you’re like me, you have to find enjoyment in the daily chores.

The funny thing is, most jobs don’t require 8-9 hours. How much of your day is wasted? This has become especially apparent when we started working from home. This new setup is amazing! I can get my work and daily errands done much faster than before.

But the system doesn’t like it. The system wants us indebted with minimal free time. This keeps us dependent on our employers for money. Moreover, with little spare time we blindly purchase short-lived dopamine hits – retail therapy, objects of desire – benefiting our employers. The house always wins.

Yeah, that’s it…your pusher wants you to happily return every penny he provides you so you’re totally dependent. It keeps you coming back for more, despite hating every minute of it.

Ever have a boss suggest you buy a bigger house or upgrade to a new car? Perhaps after they just gave you a raise? They certainly don’t want you using that extra money to pay down your debts to achieve financial freedom. If they’re to shape your behaviour they need you financially subservient. Highly mortgaged people with families to care for make the best indentured servants employees.

God forbid you smoke a little ganga when not on the clock and your employer tests. That stuff stays in your system for a while – doesn’t matter how good you are at your job. Even your free time is co-opted by the system.

In the end, you’re just an anonymous cog in a machine. Those people at work that call each other family will fall off the face of the earth as soon as they retire/quit/fired/die. Although turnover is a pain in the ass, in the long run everyone is replaceable. We’re all just worker drones.

So don’t give your life to work. Because work will happily take it. Break free by striving to become debt free while owning income-producing assets. Only then can you live life on your terms.

Categories
Gardening & Food Life Self Sufficiency

5 Reasons I Grow Vegetables

For most of my life I’ve relied on the ‘system’ for my basic needs, food being the most fundamental. Going to the grocery store is convenient, fast and easy. The selection is enormous and for most people living in developed countries grocery store food is quite affordable.

The system works and has worked for decades. So why would anyone go through the time and effort to grow their own food?

Spring 2021 I made my third attempt (my first serious attempt, however) to grow vegetables in my small urban backyard. I am growing tomatoes, peppers, squash, basil, jalapenos and ‘the happy plant’ from seed. So far, things are going much better than I expected. In fact, I think I might end up with more than I can handle. I’ll probably need to learn how to preserve food, but I’ll cross that bridge later.

I’m not the only one who started taking gardening seriously this year. Working at home has turned us all into renovators, decorators, gardeners, etc. as we focus on the homestead in which we are spending more time. Moreover, the pandemic has opened our eyes to the vulnerabilities of the ‘system’ upon which we rely.

There are 5 main reasons why I believe it is important that all of us should start growing our own vegetables:

Increase Self Sufficiency and Food Security

Although we rarely give it a second thought, it’s flabbergasting that we completely outsource our most essential need to others. Considering society is only 3 missed meals from anarchy, it only makes sense to reduce dependence on others for our food.

For most urban (and even rural) gardeners, it’s unlikely you can grow 100% of your own food requirements. However, replacing some portion of groceey purchases with home-grown vegetables helps increase self sufficiency in the event of a disruption to the industrial food supply chain.

Learning to grow food takes time, and it’s not something you want to figure out during a crisis. So developing the skills now (when you don’t need them to survive) is good practice for any future failures.

This goes beyond the individual household. If everyone in a community had the skill to grow some of their own food, it would alleviate pressure on the industrial food system. Some say that this community skill helped people survive the collapse of the Soviet Union 30 years ago.

Immigrant families in Canada and the United States have carried the tradition of growing food because of what they and their ancestors have witnessed in their home countries. Gardening is an essential skill.

Reduce Consumption of Pesticides and Herbicides

Industrial-scale food production isn’t possible without massive use of chemicals to kill bugs, eradicate weeds and feed plants. While the food we buy from the grocery store is generally safe, it’s still exposed to unwanted residues.

When you grow your own vegetables, you can cut out unwanted inputs. At a household scale, it’s far easier to manage pests and weeds by hand or other less harmful methods. (For example, many use a mixture of dish-soap and water as a safer alternative to pesticides.) You’re never going to win 100% of the battles, but once you accept that a portion of your crop will inevitably be lost to pests you can enjoy the remainder with less worry about what you’re ingesting.

Quality and Taste

Most varieties of vegetables grown on industrial-scale farms are bred to survive mass production, as opposed to taste. They are picked before ripening and shipped over long distances, often stored in fridges or freezers. As a result, many vegetables bought in the grocery store are of mediocre quality. Sure, they look nice (because that’s what ultimately sells the produce) but they lack flavor.

When you grow your own vegetables, you can go from farm-to-table within minutes. This means you can pick your vegetables when they are ready for eating, as opposed to when they are ready for transport and storage. Also, because your vegetables don’t need to be bred to survive the food distribution supply chain, you can use varieties that are bred for flavor.

Mental and Physical Health

Aside from the nutritional and security benefits, gardening can help improve your mental and physical health. Getting outside, moving, lifting and so on beats watching Netflix on the couch. Moreover, research has shown that being in nature can help people de-stress.

I particularly find gardening fulfilling. It is the most fulfilling activity I do. It is a rare opportunity to see something go from nothing to something valuable, entirely dependent on my effort. I have full control (mostly) and the more I put in the more I get out. You simply don’t get that from most day jobs, where your efforts are often lost in bureaucratic noise.

Gardening is the antidote to corporate life.

Community

Most successful harvests result in an overabundance of food. While it’s important to learn how to store a harvest over long periods (e.g. canning, drying), donating a surplus of vegetables is a great way to connect with others in your community.

Give baskets of tomatoes to your friends, family and neighbors. It might encourage others to start their own gardens or find other ways to become more self-sufficient.

This benefits everyone.

Categories
Uncategorized

Quick update on DumbWealth

I’ve been doing some housekeeping. I’ve moved the website to a new host because my previous host was jacking up prices.

I’ve done my best to keep the same look and feel. It’s amazing how much time it takes to do what appears like nothing to the outside world.

To do the move, I had to import all archived posts to the new host. For the most part it worked. Except many images imploded. I’d love to source and re-upload the missing images, but am I realistically going to do that?

I’ll pick away at it over time, but I’d rather produce new content. It’s a shame, but I suppose it’s better than losing everything.

I still have to plug in the subscription feature and a few other widgets. But the core is up and running.

You’ll also notice I’ve changed the tagline to “where money meets late stage capitalism”. I’ll still write about wealth accumulation, passive income and careers, but I think I’d be doing a disservice if I didn’t dive into the intersection of money and late stage capitalism.

What is late stage capitalism?

At it’s extreme, late stage capitalism characterized by collapse. Many things are culminating that will affect our ability to build and keep wealth – climate change, resource scarcity, massive debts, slowing rate of technological progress, polarization of ideologies, wealth disparities, military overreach and so on. In such a world wealth goes far beyond just money. So expect to see articles on permaculture, urban farming, community and useful skills.

Stay tuned…