Macroeconomics – Page 13

On Current Credit Conditions

Posted on 18 July 201418 July 2014 by David Merkel

This should be short. ?Remember that credit and equity volatility are strongly related.

I am dubious about conditions in the bank loan market because Collateralized Loan Obligations [CLOs] are hot now and there are many that want to take the highest level of risk there. ?I realize that I am usually early on credit?issues, but there are many piling into CLOs, and willing to take the first loss in exchange for a high yield. ?Intermediate-term, this is not a good sign.

Note that corporations take 0n more debt when rates are low. ?They overestimate how much debt they can service, because if rates rise, they are not prepared for the effect on earnings per share, should the cost of the debt reprice.

It’s a different issue, but consider China with all of the bad loans its banks have made. ?They are facing another significant default, and the Chinese Government looks like it will let the default happen. ?That will not likely be true if the solvency of one of their banks is threatened, so keep aware as the risks unfold.

Finally, look at the peace and calm of low implied volatilities of the equity markets. ?It feels like 2006, when parties were willing to sell volatility with abandon because the central banks of our world had everything under control. ?Ah, remember that? ?Maybe it is time to buy volatility when it is cheap. ?Now here is my question to readers: aside from buying long Treasury bonds, what investments can you think of that benefit from rising implied volatility and credit spreads, aside from options and derivatives? ?Leave you answers in the comments or email me.

This will sound weird, but I am not as much worried about government bond rates rising, as I am with credit spreads rising. ?Again, remember, I am likely early here, so don’t go nuts applying my logic.

PS — weakly related, also consider the pervasiveness of BlackRock’s risk control model. ?Dominant risk control models may not truly control risk, because who will they sell to? ?Just another imbalance of which to be wary.

One More Note on Failure

Posted on 12 July 2014 by David Merkel

Recently, we had a problem at the Merkel house: a toilet overflowed and the water did not shut off, flooding the room, and leaked into the basement. ?Why did this happen? ?Two things went wrong at the same time:

The toilet needed to be plunged, because there was a blockage preventing water discharge, and
The flapper malfunctioned, and so water continued to flow.

If only one of these problems had happened, we would have had an ordinary problem. ?I can plunge a toilet, easy. ?I can hear the toilet singing, and know that the flapper is up, jiggle the handle, and end the problem.

Most of the time, when we plan against failure, we look at solutions that address single failures. ?We do not contemplate two things going wrong at once.

Yet, when we look at big failures in investment, there are often?two things that went wrong at the same time. ?Usually it follows a pattern like this:

Take a risk that in ordinary times often works out, but
You don’t get that times are not ordinary, and so the odds are actually stacked against you.

I have several examples for this. ?Taking on debt to buy a house was a wonderful strategy until overall debt levels to finance housing got to high, but at that time, the momentum effect of rising house prices was sucking people into buying houses, because they thought it was easy money.

Financial stocks were the market leaders for many years up through 2007, as investors assumed that ordinary risk control would protect the banking system. ?But what happens when debt levels are too high, so that many debts are incapable of being paid?

As Warren Buffett has said (something like), “We get paid to think about the things that can’t happen.” ?Multiple failures leading to large bad results are worth thinking about. ?So what aren’t we thinking about now?

Failures in retirement security systems as the Baby Boomers age.
Failures in government debt as overleveraged governments can’t make debt payments.
Inflation rises rapidly as the economy revives amid increased lending from banks.
Deflation persists as the central?bank tries to force-feed credit to an already overleveraged economy.

(There are many patting themselves on the back thinking that the Central Banks and Governments got us out of a crisis, when they only delayed the crisis. ?High nominal debt levels relative to GDP create their own crisis.)

I would encourage you to think about your investments, and ask the following questions:

Are there hidden factors that could lead to a big failure? ?(Think of what happened to mortgage REITs in 2008 when the repo market crashed.)
How well would the investment?fare if inflation went up significantly?
How well would the?investment?fare if real interest rates?went up significantly?
How well would the?investment?fare if?we hit another patch where financing is not available? ?Can the investment self-fund?
How much future prosperity does the current price of the investment embed in its valuation?

I know, glum words. ?But this might be a good time to look at what you own, and ask how survivable it is under stressed conditions.

All for now.

Inflation?

Posted on 27 June 2014 by David Merkel

Is price inflation growing? ?I see three data points, amid slow nominal growth:

Japan
US
Crude Oil prices have been rising, amid the relaxation of exports in the US, and weak global demand.

This is early, but I have adjusted my bond portfolio to reflect this last month, buying some TIPS.

This is not worthy of full action, but it is interesting to see the three above rising at the same time. ?That’s all.

A Few Notes on Bonds

Posted on 25 June 2014 by David Merkel

My comments this evening stem from a Bloomberg.com article entitled?Bond Market Has $900 Billion Mom-and-Pop Problem When Rates Rise. ?A few excerpts with my comments:

It?s never been easier for individuals to enter some of the most esoteric debt markets. Wall Street?s biggest firms are worried that it?ll be just as simple for them to leave.

Investors have piled more than $900 billion into taxable?bond?funds since the 2008 financial crisis, buying stock-like shares of mutual and exchange-traded funds to gain access to infrequently-traded markets. This flood of cash has helped cause prices to surge and yields to plunge.

Once bonds are issued, they are issued. ?What changes is the perception of market players as they evaluate where they will get the best returns relative expected future yields, defaults, etc.

Regarding ETFs, yes, ETFs grow in bull markets because it pays to create new units. ?They will shrink in bear markets, because it will pay to dissolve units. ?That said when ETF units are dissolved, the bonds formerly in the ETF don’t disappear — someone else holds them.

But in a crisis, there is no desire to exchange existing cash for new bonds that have not been issued yet. ?Issuance plummets as yields rise and prices fall for risky debt. ?The opposite often happens with the safest debt. ?New money seeks safety amid the panic.

Last week, Fed Chair Janet Yellen said she didn?t see more than a moderate level of risk to financial stability from leverage or the ballooning volumes of debt. Even though it may be concerning that?Bank of America?Merrill Lynch index data shows yields on?junk bonds?have plunged to 5.6 percent, the lowest ever and 3.4 percentage points below the decade-long average, the outlook for defaults does look pretty good.

Moody?s Investors Service predicts the global speculative-grade default rate will decline to 2.1 percent at year-end from 2.3 percent in May. Both are less than half the rate?s historical average of 4.7 percent.

Janet Yellen would not know financial risk even if Satan himself showed up on her doorstep offering to sell private subprime asset-backed securities for a yield of Treasuries plus 2%. ?I exaggerate, but yields on high-yield bonds are at an all-time low:

Could spreads grind tighter???Maybe, we are at 3.35% now. ?The record on the BofA ML HY Master II is 2.41% back in mid-2007, when interest rates were much higher, and the credit frenzy was astounding.

But when overall rates are higher, investors are willing to take spread lower. ?There is an intrinsic unwillingness for both rates and spreads to be at their lowest at the same time. ?That has not happened historically, though admittedly, the data is sparse. ?Spread data began in the ’90s, and yield data in a detailed way in the ’80s. ?The Moody’s investment grade series go further back, but those are very special series of long bonds, and may not represent reality for modern markets.

Also, with default rates, it is not wise to think of them in terms of averages. ?Defaults are either cascading or absent, the rating agencies, most economists and analysts do not call the turning points well. ?The transition from “no risk at all” in mid-2007 to mega-risk 15 months later was very quick. ?A few bears called it, but few bears called it shifting their view in 2007?– most?had been calling it for a few years.

The tough thing is knowing when too much debt has built up versus ability to service it, and have all short-term ways to issue yet a little more debt been exhausted? ?Consider the warning signs ignored from mid-2007 to the failure of Lehman Brothers:

Shanghai market takes a whack (okay, early 2007)
[Structured Investment Vehicles] SIVs fall apart.
Quant hedge funds have a mini meltdown
Subprime MBS begins its meltdown
Bear Stearns is bought out by JP Morgan under stress
Auction-rate preferred securities market fails.
And there was more, but it eludes me now…

Do we have the same amount of tomfoolery in the credit markets today? ?That’s a hard question to answer. ?Outstanding derivatives usage is high, but I haven’t seen egregious behavior. ?The Fed is the leader in tomfoolery, engaging in QE, and creating lots of bank reserves, no telling what they will do if the economy finally heats up and banks want to lend to private parties with abandon.

That concern is also revealed in BlackRock Inc.?s pitch in a paper published last month that regulators should consider redemption restrictions for some bond mutual funds, including extra fees for large redeemers.

A year ago, bond funds suffered record withdrawals amid hysteria about a sudden increase in benchmark yields. A 0.8 percentage point rise in the 10-year Treasury yield in May and June last year spurred a sell-off that caused $248 billion of market value losses on the Bank of America Merrill Lynch U.S. Corporate and High Yield Index.

Of course, yields on 10-year?Treasuries (USGG10YR)?have since fallen to 2.6 percent from 3 percent at the end of December and company bonds have resumed their rally. Analysts are worrying about what happens when the gift of easy money goes away for good.

With demand for credit still weak, it is more likely that rates go lower for now. ?That makes a statement for the next few months, not the next year. ?The ending of QE and future rising fed funds rate is already reflected in current yields. ?Bloomberg.com must be breaking in new writers, because the end of Fed easing is already expected by the market as a whole. ?Deviations from that will affect the market. ?But if the economy remains weak, and lending to businesses stays punk, then rates can go lower for some time, until private lending starts in earnest.

Summary

Is too much credit risk being taken? ?Probably. ?Spreads are low, and yields are record low.
Is a credit crisis near? ?Wait a year, then ask again.
Typically, most people are surprised when credit turns negative, so if you have questions, be cautious.
Does the end of QE mean higher long rates?? Not necessarily,?but watch bank lending and inflation. ?More of either of those could drive rates higher.

Q&A with The Forbidden Game Author Dan Washburn

Posted on 22 June 2014 by David Merkel

For anyone interested in learning more about Dan Washburn, author of The Forbidden Game, ?you can consult his blog here. ?Aside from that, you can read my Q&A with him here. ?Hey, thanks for reading — I’m not a golfer, though I did it as a child, and was a caddy for some years. ?It is a phenomenon is society, and should be understood.

Anyway, here is the Q&A. ?In general, I say to authors that they don’t have to take all of my questions, and thus, you will see gaps in the numbers. ?Here it goes:

1.???????From the book?Prisoner of the State, Zhao Ziyang, even while in captivity was allowed to go golfing.? Now, many in the Party distrusted Zhao because he had adopted too many Western habits and modes of thought.? Has golf been legitimized for Party members to partake in, so long as they aren?t too flamboyant about it??

I don’t think so. Golf remains a taboo topic for China’s political elite, perhaps even more so now than in years past thanks to Xi Jinping’s ongoing crackdown on government corruption. Simply put, Chinese officials shouldn’t be able to afford to play golf in China. Their salaries are modest (last year, it was reported that President Xi’s annual salary is just $19,000) and golf in China is extremely expensive (it can cost $150, often more, to play 18 holes). So, while most Chinese assume that all government officials have other sources of income, playing golf on a regular basis would be a rather conspicuous admission of double-dealing. We all know some Chinese officials are filthy rich, and some indeed do play golf ? but they still need to do so on the sly.

4.???????In the US, golf is usually thought of as a rich man?s game.? Your book seems to indicate that it is also true in China, but is it more so, or less so than in the US?

Golf on average is much more expensive in China than in the United States. There are no public courses, per se, so you’re stuck having the pay a hefty fee to get on a so-called “private” course. Those on a budget usually stick to the driving ranges, which are often quite crowded.

5.???????You got me to root for each of your main characters, Zhou Xunshu, Wang Libo, and Martin Moore.? It?s a much more interesting book as a result, than say a straight golf history of China book.? How did you settle on this structure of the book?? How many other characters did you try out before settling on these three?

That’s great to hear, David. I always envisioned this as a character-driven book, narrative non-fiction that keeps you turning pages like a novel. Originally, the book was going to focus solely on Zhou, with other stories related to golf’s development in China branching off from his underdog narrative. But eventually my editor and I decided, I think wisely, to add two more characters that readers could become invested in. The first people who came to mind were Martin and Wang. They were good people with very interesting stories to tell, and they allowed us to explore aspects of golf’s rise in China that Zhou on his own did not.

6.???????Why did the Chus, running Mission Hills in China insist that they had to build the largest golf course complex in the world, not just once but twice?? Were they that way in all of their business dealings?

I’m not quite sure where the drive to be the biggest and best at everything stemmed from, but the Chus certainly weren’t alone. I recall at one point during my time in China that Shanghai had plans to be home to the world’s fastest train, the world’s tallest building, even the world’s largest ferris wheel. As China has emerged in recent decades, it has become a nation of superlatives. Mission Hills fits right in.

8.???????As you wrote the book, what thing or things surprised you the most?

When I started covering golf tournaments in China in 2005, I knew little about the issues surrounding the development of the game there. But the more I dug, the more I realized that golf, and the complex world that surrounds it, is really a microcosm of China at the moment. The story touches on everything: the booming economy, the widening gap between rich and poor, rural land rights, environmental concerns, wild west development, and political intrigue. Golf, surprisingly, seemed to be perfect lens through which to view China during the first decade of this new millennium.

9.???????Why did the book?s title change from?Par for China, to?The Forbidden Game?

It was a natural evolution.?Par for China?was always my working title, but the publisher really fell in love with?The Forbidden Game, which was the title of a related story I wrote for?Slate?a few years ago. And it works on many levels. Golf was, in fact, forbidden in China for some 35 years after the Communists came to power (2014 marks the 30-year anniversary of the opening of modern China’s first golf course). Playing golf was also forbidden for Zhou when he worked as a golf course security guard. And today, building new golf courses is supposedly forbidden in China ? and we all know how well that’s working.

10.???How long were you at work on the book?? 6-8 years?

Yes, it’s been a labor of love. I first met Zhou late in the summer of 2006, and I found his story so fascinating I immediately started formulating a book in my mind. Of course, it took me another four years to actually sell the book, and a few more after that to write it. Those extra years allowed be to add a lot more depth to the story, though, so it all worked out in the end.

11.???How avid of a golfer are you?

I’m not. So, it’s a good thing this isn’t a how-to book. I took some lessons while in China, but quite honestly couldn’t afford to be an avid golfer there. Once I moved back to the U.S., all of my free time was spent writing. So, now that I have completed my golf book, now maybe I can finally take up golf!

Book Review: The Forbidden Game

Posted on 22 June 201422 June 2014 by David Merkel

I’m not a golfer, but I really liked this book. ?The charm of the book is that it takes us through the lives of three men, and a host of lesser characters, and shows us how the growth of golf in China shaped their lives. ?Two of the protagonists are?Chinese, and one American.

The American, Martin Moore, was a promising golf course designer who did increasingly well designing courses in the US, Thailand, and China. ? He learned how to get things done amid demanding bosses and ambiguous regulation. ?Is building a golf course forbidden or not? ?What if we call it a “health club?” ?What if many locals object to their land being expropriated?

He succeeded amid many obstacles. ?The next protagonist, and the one who had the most dramatic success was Zhou Xunshu, a man who went from not knowing anything about golf — an industrial worker, a common man, to being a golf professional. ?His efforts were significant, and he underwent many hardships as he pursued his dream.

Then there is Wang Libo, a man who gets displaced by his home getting taken from him to build a golf course, and he takes the opportunity and builds a store/bar/restaurant near the complex to profit from the opportunity.

Three engaging characters amid the ambiguity of changing regulations, and whether it was legal to build new courses or not.

You will learn a lot about China in the process… what it is like dealing with an all-powerful Party whose machinations are secret. ?And yet, one where if enough people protest, you can’t do anything, even if you have all of the permits in place.

You will get a behind-the scenes look at creating the world’s largest golf course twice, and the ambition of those who wanted to see it done quickly.

You will also experience the Chinese Dream, as the book’s subtitle suggests… the dreams and goals of those who want to live a life similar to middle-class Americans, but all the more poignant, because the path to getting there is often unclear.

To those reading me at Amazon.com, please Google “Aleph Blog Washburn” and you will be able to read a special Q&A with the author that I will post after writing this post.

This was an enjoyable book to read, and I think most people would learn something from it.

Quibbles

None.

Summary

This is a great book. ?It will make a great gift to friends of yours who are golfers. ?If you want to?you can?buy it here:?The Forbidden Game: Golf and the Chinese Dream.

Full disclosure: The PR flack?asked me if I would like a copy and I said yes. ?She invited me to write a Q&A also. ?Hey, look at the next post.

If you enter Amazon through my site, and you buy anything, I get a small commission.? This is my main source of blog revenue.? I prefer this to a ?tip jar? because I want you to get something you want, rather than merely giving me a tip.? Book reviews take time, particularly with the reading, which most book reviewers don?t do in full, and I typically do. (When I don?t, I mention that I scanned the book.? Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.? Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.? Whether you buy at Amazon directly or enter via my site, your prices don?t change.

To the Fed: A Picture is Worth 1000 Words

Posted on 19 June 2014 by David Merkel

The FOMC statements are much longer than they used to be, and as such, are less clear, giving faulty signals to the markets. ?If language is not likely to change much ?for a while, why not drop the language ?entirely, especially in cases where it affirms ideas that are obvious.

We may?all know people in our lives who will say more and more if you don’t agree with them, because if you don’t agree with them, you don’t understand. ?More words will bring clarity to you, and you will understand. ?But what if they are nuts, and you are a sane person? ?This is how I think about the FOMC — they are bad forecasters, and they don’t understand how weak monetary policy is in a period where there is too much debt.

So let’s try some pictures to replace the words of the FOMC:

As I have said before, the FOMC is composed of overly optimistic neoclassical economists, who don’t know that their theories don’t work when and economy is too indebted. ?They think: Real growth is our birthright, and price inflation promotes growth. ?Neither are true.

Note that they have been consistently pessimistic on the unemployment rate, flawed measure that it is. ?Thus they think they need to keep monetary loose.

Their views of PCE inflation reflect a view that monetary policy can easily achieve a 2% rate of inflation in the long run. ?Pray tell, when have actions of the FOMC ever led to an equilibrium result?

Aside from that, the PCE index does not fairly represent inflation for the average person in the economy. ?Maybe it reflects what the rich experience.

This is a study in contrasts. ?They were once more optimistic that Fed Funds rates would rise sooner, and that has not happened. ?That said, they are now more certain that the Fed Funds rate will rise significantly in 2016. ?As for the long run they are getting more pessimistic about?economic growth, at least in their Fed Funds forecasts.

This is another example of where the FOMC should take a step back, and not try to interpret every short-term wiggle. ?As a group, they whipsawed in their view of when tightening would happen over the last three datapoints, when I would not have changed much.

To the Fed I say, “Say less, and provide more graphs.” ?I understand that you don’t want to discredit yourselves because you are bad forecasters, but maybe you could get your points across in a more potent way by not diluting your message by many needless words.

Redacted Version of the June 2014 FOMC Statement

Posted on 18 June 2014 by David Merkel

Comments

Small $10 B/month taper.? Equities and long bonds both rise.? Commodity prices rise.? The FOMC says that any future change to policy is contingent on almost everything.
They shaded household spending down, and raised their view on business fixed investment.? Don?t know they keep an optimistic view of GDP growth, especially amid falling monetary velocity.
The FOMC is ignoring rising inflation data.
The FOMC needs to chop the ?dead wood? out of its statement.? Brief communication is clear communication.? If a sentence doesn?t change often, remove it.
In the past I have said, ?When [holding down longer-term rates on the highest-quality debt] doesn?t work, what will they do?? I have to imagine that they are wondering whether QE works at all, given the recent rise and fall in long rates.? The Fed is playing with forces bigger than themselves, and it isn?t dawning on them yet.
The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.? As a result, the FOMC ain?t moving rates up, absent increases in employment, or a US Dollar crisis.? Labor employment is the key metric.
GDP growth is not improving much if at all, and much of the unemployment rate improvement comes more from discouraged workers, and part-time workers.

A Brief Note on Dividend-Paying Common Stocks

Posted on 16 June 201416 June 2014 by David Merkel

The equity strategy that I have run for the last 13+years always has a slightly higher yield than the S&P 500. ?But I never look for dividends. ?It’s not a factor in my process. ?That said, looking for businesses that produce free cash flow, and voila, the dividends appear.

At present, with interest rates so low, many people look at dividend paying common stocks as a means of obtaining income. ?They also add REITs, MLPs, BDCs, and an assortment of other things that trade like stocks and have yield. ?I don’t think this is a safe way to get yield, at least not now. ?Here’s why:

1) Think of the 1970s, when I was a teenager. ?Not only were interest rates higher, and?inflation eating away at purchasing power, but when companies got into trouble, they would cut their dividends, and often severely. ?During that era, you had to make sure that the company was actually earning the dividend, or were they borrowing to pay it.

2) There have been many flameouts in REITs, especially mortgage REITs. ?I remember buying broken mortgage REITs in the mid-90s at less than half of their net worth after they had bought exotic CMO pieces, trying to create funds where the value rose as interest rates moved higher. ?They got crushed in the early-90s by Greenspan’s hyper-easy monetary policy. ?In 1994, as rates were rising, they rallied significantly.

Mortgage REITs also got crushed in 2008-9. ?But Equity REITs have their times of trouble as well — they tend to be bull market babies. ?When commercial real estate is doing well, they do extra well. ?When it goes badly, extra badly for the REITs because of all the leverage.

3) I mentioned 1994. ?In 1994, as rates rose, dividend paying stocks underperformed. ?The value manager that Provident Mutual used at that time was an absolute yield manager. ?In other words, that manager only bought stocks that had a yield higher than a fixed threshold. ?At that point, the threshold was 4% or so. ?From 1982 to 1993, as interest rates fell, this manager was golden, but it was an artifact of the era. ?In 1994, the?performance was abysmal. ?The manager?was replaced the next year.

High yielding stocks paying out a large portion of their earnings as dividends tend to have their dividends grow slowly, because there is little left over to reinvest into new business. ?It is akin to owning a bond disguised as a stock. ?Lower-yielding stocks often grow their dividends more rapidly, as they reinvest more free cash into new business. ?With Equity REITs, the latter strategy has generally been more successful. ?Better to buy the lower yielding REITs that grow their dividends faster.

4) The REITs, MLPs, and BDCs that pay out a a high proportion of their taxable income are weak vehicles because they are forced to pay out so much. ?During crises, that really bites them.

(This wasn’t as short as I thought it would be. ?Oh well.)

Conclusion

If interest rates rise, and I do mean if, because the economy is weak, be ready to see these modern income vehicles take a hit. ?If we have a severe recession, be aware that dividends do get cut. ?Do not rely on stocks for income. ?Bonds are designed for income and return of principal. ?Stocks are designed for gains or losses depending upon the underlying business performance. ?They aren’t income vehicles, but performance vehicles.

Enabling Others

Posted on 10 June 2014 by David Merkel

Whether on a micro-level (a business) or on a macro-level (a government) the way to build value comes from a simple concept. ?What can I/we do to enable the goals of others? ?Growth and success come through service.

Balzac famously said, “Behind every great fortune lies a great crime.” ?There’s only one problem behind this statement — it’s only true in crony ?economies, where connections to siphon tax dollars matter more than meeting human needs. ?It is false elsewhere.

I know there are some who will begrudge anyone the wealth that they have, because they are envious. ?Envy is a bad guide to life and public policy. ?If you want a poor society, encourage envy. ?If you want a rich society, encourage service.

Division of labor is an amazing thing, and it aids the well-being of all. ?I could see a business created that would aid rich people who are stretched for time, where many people would work for them, directly or indirectly, solving their needs. ?That could employ a decent number of people, much like things were in the UK in the early 1800s, where the wealthy gentlemen, living off of rents from their lands, employed servants. ?Those servants gained a better life, and so did the families of the gentlemen. ?Was it perfect? ?No, nothing is perfect aside from God, but when we help meet the goals of others, society improves, and the economy does as well. ?It reduces unemployment. ?People who work are far more happy than those that don’t work, even if the wages are small. ?We were created to work, and it is no surprise that when we don’t have work, we tend to be sad.

Governments should think along these lines as well — what can we do to enable our people to work hard and produce valuable goods and services? ?Some parts are easy:

A predictable legal structure
Regular enforcement — enforcement is not a surprise
Don’t be burdensome — government can’t solve every problem, so limit regulation to the most important aspects of society.
A tax structure that doesn’t change often, and reflects economics rather than politics. ?Tax businesses and individuals on their increase in value on an accrual basis, and at a single rate.

These policies would free businesses to produce, while meeting the most important goals of society (don’t force pollution on others, etc.)

Personal Application

Do you want to be well-off? ?Meet the needs of others, even if those needs are not well-known yet.

Mark Zuckerberg met the need of many people who want to share their lives with others via Facebook. ?The same applies to Twitter and Instagram.

Bill Gates created the operating system of Apple Computers at a much lower price point, enabling many people to have a GUI that could not afford a Mac, even if it had a lot of bugs.

Samsung created a competitor to the iPhone at a much cheaper price point using Android, software free from Google.

People want to look thin, sexy, etc? ?Provide shapewear for them a la Spanx.

The list could go on and on… there is a surfeit of human need, particularly on the low end of income, and those who meet those needs can do very well for their clients and themselves.

As for me

So what about me then? ?Well, I don’t charge anything for anyone to read me. ?I write this as a public service. ?People can evaluate whether it is really to their benefit or not.

That said most of my clients started as readers of my blog. ?What good do I do for my clients? ?Several things:

I leave them free. ?I don’t ask for all their assets, I don’t want to control all of their finances.
I free them from greed and panic. ?let me adjust risk to market conditions, and we will do well.
Transparency. ?My fee is my only income.
In general, my performance has exceeded the market in the past. ?There is nothing that says it will be true in the future.
I’m not going to lie to clients?or deceive them. ?After all, 80%+?of my own liquid assets?are on the line with them?in the same proportion– clients get a clone of my portfolio.

My clients get peace of mind. ?I am focused on improving my own wealth, and they travel along with me. ?My interests are entirely aligned with theirs.

I do think that all of us should have an attitude of service toward others. ?It makes for a better society, and better business practices. ?Beyond that, Jesus said, “Do to others what you would have them do to you.” ?Everyone wants good service, well, go deliver good service. ?The world will be better, and you will be happier with your own life. ?After all, no one is truly happy who cheats others in order to prosper.