You Are Already a Multimillionaire

 

“There is a gigantic difference between earning a great deal of money and being rich” – Marlene Dietrich

hood emblem

(Photo: Loco Steve)

I woke up in a cheap Motel 6 hotel room somewhere off the interstate in East Florida. I had been on the road now for over a month, traveling in an old Acura that I bought off my roommate for $1500 bucks. I had been out of work for months now with very little money in my pocket so I resorted to sleeping in my car or in cheap hotel rooms seeing how little I could live on each day. I spent my days sightseeing, hiking, seeing the country and trying to find myself. For the first time in my life I was completely free, accountable to nobody, and I was as happy as I had ever been.

The reason for me being in Florida was because it was now the middle of winter and Florida was one of the few places where it was warm enough that I could sleep in my car most nights without freezing to death. I’d been reading a book I picked up at a used book shop for a dollar called Victorian Florida and became fascinated by the life of Henry Flagler. Flagler built the railroad line into Florida along with a number of luxurious hotels over a century ago where millionaires would come from up north each winter to vacation. If you were rich and you were anybody you were in Florida staying in one of the grand hotels built by Flagler. Many of the hotels still stood and I was determined to visit them all. I took a tour the Casa Monica Hotel in St Augustine, explored the Old Ponce De Leon, now part of Flagler College, had a drink at Breakers in Palm Beach and toured the Flagler Museum. I tried to imagine what it must have been like all those years ago being a multimillionaire and arriving in your own private railcar at one of the majestic hotels.

One day while talking to one of the tour guides I learned what it was really like to be one of those multimillionaires staying at one of the Flagler grand hotels a century ago. The tour guide explained that many hotels just barely had hot running water and it was unreliable. The water in the room smelled like rotten eggs because of sulfur and air conditioning and refrigeration has not been invented yet. I realized something amazing that day, even as I was living like a vagabond staying in a cheap motel room. The quality of my life was better than that of multimillionaires 100 years ago. I had reliable hot running water in my room, I had a fridge, the water did not smell and I had a working air conditioner. All the luxuries that the rich did not have all those years ago I had for less than $30 bucks. I realized that being in that motel room; I had it better than the richest of the rich a century ago.

I then decided to look at other parts of my life to see how it compared. What would I do if I was a multimillionaire living all those years ago? Well, if I was living in the roaring 20s or early 30s I would probably buy a Duesenberg. It was the fastest and fanciest car and all the millionaires and celebrities from Rudolph Valentino to Clark Gable had them. The Duesenberg could do 0 to 60MPH in under 12 seconds at a time when most cars could barely do 60, and it could go over 100 MPH. Back then, a new Duesenberg would set you back over $200,000 in today’s money. At the time I was driving an old Acura with 110,000 miles on it. So I decided to see how my piece of crap jalopy compared to the mighty Duesenberg, the car of the super rich. Here’s the breakdown:

 

1930 Duesenberg 

1992 Acura Integra

 

 Duesenberg

(Photo: Jack Snell)

integra

(Photo: GB_Packards)

0 to 60 time

11.6 seconds

7.6 seconds

Top speed

126 mph

134 mph

Price New

(In Today’s Dollars)

Over $200,000

Under $30,000 (I paid $1500)

I realized that the car I had was faster and better performing than anything the super rich could have purchased all those years ago. I had what the gilded age multimillionaires could not even imagine having.

I then started to see other parts in my life where I was living better than the super rich did all those years ago. How many millionaires in the past died from health issues that now can be cured with a $5 dollar pill? How much better is our technology, our medicine and our transportation? From that time on, even when I felt poor, I started seeing myself as a millionaire. I just wasn’t a millionaire from the current age. I saw myself as millionaire who had a higher quality of life than any oil baron 100 years ago. All I needed to do was just go forward in time. I have made a lot of money since then, but I have never forgot that big realization.

One of the most valuable pieces of advice I could give you is to never, ever label yourself as “Poor”. Being poor is a meaningless phrase. You are only richER or poorER than someone else, you are never poor. If you are struggling with barely any money to your name you should still see yourself as a millionaire, because you are. If you are living in a developed country, no matter how poor you are, the things you posses and have access to multimillionaires at the turn of the century could only dream of having. Your quality of life would make the richest of the rich from a century ago jealous beyond belief. As you become wealthy, realize that those considered poor 50 or 60 years from now will most likely have a quality of life that is even better than yours.

There is no such thing as being rich or poor, it’s all depends on who you compare yourself to. So compare yourself to the millionaires of old and see your life as being richer than theirs, because you have what they could never afford. So if rich and poor are all relative words then why not use a word that empowers you instead of one that makes you feel defeated? You are already a multimillionaire, so start believing it.

Michael Page

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Interview: Turn to Experts

 

interview

(Photo: Smiling_Da_Vinci)

 

Daniel from Turn to Experts interviews me. Oct 2013.

8:15 – Why nobody in society talks about being great with women without needing money.

10:25 – Advice for guys just starting out. What advice I would give myself if I could go back in time.

14:25 – Practical things guys can do to become great with women.

18:45 – Why affirmations work.

24:00 – How the fear of heaving nothing keeps you from having everything.

34:20 – Mindset of successful people.

40:12 – Formula to be great with women and money.

50:32 – On getting great and losing friends.

53:45 – Money and happiness. Mistake most people who become rich make.

57:50 – My advice for starting a new business.

 

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The Escape Velocity of Money

“You only need to get rich once” – Warren Buffett

rocket

(Photo: Steve Jurvetson)

Sometimes a simple quote can change your whole life. For me it happened over a decade ago when I was reading the book The Warren Buffett CEO, by Robert P. Miles. In the book, Warren’s quote “You only need to get rich once” hit me hard and altered how I viewed wealth forever. The quote was in response to one of his CEOs who wanted to short Internet stocks during the height of the dot-com mania, to which Warren advised against doing using that witty line.

To some that quote meant that there is no reason to risk something when you are already wealthy, but to me it was something much larger. To me, it was an understanding that becoming rich is a destination that you only need to arrive at once in your life. Even though what I am about to explain may seem obvious it will change how you view wealth and becoming rich forever.

So what do I mean by Escape Velocity and how does it relate to money?

Let’s say we wanted to shoot a rocket into space so we build one and launch it. The rocket goes up super fast but eventually slows down and then comes crashing back to Earth. We feel defeated so we now decide to build a rocket twice as powerful. This time we launch this multi ton super rocket and it flies to the edge of space but it eventually slows down again, and not able to escape the Earth’s gravitational pull, eventually comes crashing back to Earth again. This time instead of building a more powerful rocket, we build the same multi ton super rocket but simply remove a few pounds of cargo and launch it again. This time the same exact rocket breaks the Earth’s gravitational pull and goes into space and instead of coming crashing back down it escapes Earth’s gravity and travels into space. That rocket will be traveling in space forever and will still be flying long after our great-great grandchildren have passed away. A few pounds of weight is the difference between having our rocket crash back to Earth or having it travel billions of miles for thousands of years.

So how does this relate to wealth? The exact same way. The difference between being poor and always working versus never working and having your money work for you is what I call the escape velocity of money. The difference is tiny but it can make all the difference in the world because once you reach it, you no longer have to work ever again and your money will work for you forever.

How much money do you really need to never work again?

The escape velocity is different for each person but it is probably not as large as you would think. You can calculate it a few different ways, but a safe rule of thumb is that if you can live on roughly 3% of your net worth a year you will never run out of money if your money is invested in diversified low cost fashion. So if you could live on $30,000 a year you would need to have $990,000 saved up. The interest on your investments will never run out as long as you live on 3% of your money. You would never have to spend another day working at a day job ever again. Having $990,000 might seem like a big number, but it is not as large as you would think. If you are 40 years old or older you’ve probably had over 1 million dollars pass through your hands; you just didn’t hold on to it. If you held on to every penny you ever made, you would have enough now to never have to work again. Of course that scenario is only possible in theory not in real life but the concept is the same. The quicker you can derive at your escape velocity the quicker you never have to work.

Let’s take a far-fetched, over simplified example of two people, Bill and Todd. Both are the same age and both get a job making $75,000 a year and start working at age 19 and let’s say for the sake of this example neither one ever gets a raise. Bill lives well below his means and is able to put away $40,000 a year. Todd, on the other hand, lives much more comfortably, buying fancy cars and other luxuries. Todd saves nothing. Meanwhile, Bill invests his money wisely and is able to capture roughly the historic return of the stock market of around 9%. (We are being optimistic here)

By age 25 Bill has been living in a small apartment, driving an older car and has been living very thrifty never indulging and he has saved over $300,000. Todd, on the other hand, rents a huge house, is leasing a BMW and he has been living pretty comfortably spending $75,000 a year on his lifestyle.

Flash forward to 10 years later, Bill is 35 now, lives in a small but comfortable house but is still driving an older car. He has, thus far, managed to save over $1.3 million dollars; Todd has been living large but has not saved anything. Bill in envious of Todd, after all Todd for over 15 years has been living a great life. He has a two large Mercedes, a beautiful house with a big pool and takes fancy vacations. Bill wishes that some day he can do that, since he is living on almost half of what Todd is living on and although he is not struggling he is not enjoying all the luxuries that Todd is.

After another 5 years goes by, both are now 40 years old and something amazing has happened. Bill has over $2.5 million dollars saved up. Let’s look at that number more closely. Bill now can live on $75,000 a year (3% of his net worth) from his investments alone and never run out of money and he never has to work another day in his life ever again. Bill can now live the way Todd has been without lifting a finger ever again. Todd must keep working to maintain his $75,000 a year lifestyle. Bill has reached his escape velocity and he now retires at age 40.

Even though both are now living on roughly $75,000 a year and both can afford the same luxuries the only difference is that Todd must wake up each morning and go to work. Bill has all the free time in the world and can travel and have all the luxuries just like Todd by doing absolutely nothing. Bill has reached the escape velocity of money, where he can live on the interest on his savings forever.

Bill’s Age Bill’s Yearly Saving Total Saved (Assuming 9% Return on Investment) 3% of Net Worth (Amount he can live on each year without working)
       
19 $40,000 $40,000 $1,200
20 $40,000 $83,600 $2,508
21 $40,000 $131,124 $3,934
22 $40,000 $182,925 $5,488
23 $40,000 $239,388 $7,182
24 $40,000 $300,933 $9,028
25 $40,000 $368,017 $11,041
26 $40,000 $441,139 $13,234
27 $40,000 $520,841 $15,625
28 $40,000 $607,717 $18,232
29 $40,000 $702,412 $21,072
30 $40,000 $805,629 $24,169
31 $40,000 $918,135 $27,544
32 $40,000 $1,040,768 $31,223
33 $40,000 $1,174,437 $35,233
34 $40,000 $1,320,136 $39,604
35 $40,000 $1,478,948 $44,368
36 $40,000 $1,652,054 $49,562
37 $40,000 $1,840,738 $55,222
38 $40,000 $2,046,405 $61,392
39 $40,000 $2,270,581 $68,117
40 $40,000 $2,514,934 $75,448

 

If Bill had decided to retire at age 35 and start withdrawing $75,000 a year then he would eventually run out of money (his rocket would come crashing back to Earth), but since he waited till he was 40 he can now live on $75,000 a year and never run out of money. Since Bill has reached the Escape Velocity of money we can say that his rocket will travel forever. Waiting those extra 5 years meant the difference between eventually going broke and not having to work ever again.

If Bill lives to age 70 he never has to work again, if he lives to age 100 he never has to work again. Let’s now suspend all disbelief and pretend that Bill and Todd drink from the fountain of youth and both will now live to age 1000. Because Bill saved till age 40 he can live the rest of his 960 years without working single day. Bill can live like Todd for almost 1000 years because he chose to live on $35,000 a year instead of $75,000 for those first 22 years of employment. That is the power of compound interest and escape velocity.

Your escape velocity number is not as large as your think, as a matter a fact you probably have had the amount of money you need pass through your hands in your lifetime already.  

Find your escape velocity number and try to reach it smoothly and easily. In life you can have all the luxuries you want if you can put off the instant gratification of having them till after you are rich.

 Michael Page

 

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2013 Q2 – Report

 

Caution has not been a profitable investment tactic for a long time now.  I strongly believe it is about to make a comeback.” – Seth Klarman

 

money

(Photo: 401K)

This is not a recommendation to buy or sell any security; this is simply how I am managing my money and how I see the market. It is also a record to track my performance.
 All commentary is based on market levels at 6/30/2013. My market level valuations are based on historic PE ratios, profit margins and Q-Ratio among other criteria.


 

Current Market View:

The big question on investors’ minds is; will Ben Bernanke slow the bond purchase program or will he continue to provide liquidity? While most everyone looks at it from an economic perspective, I chose to take a more psychological look at the issue which very few are discussing. With Ben Bernanke’s term coming to the end I suspect the big question on his mind is what kind of legacy will he leave to the world? I suspect, consciously or subconsciously, that plays a much larger part in his decision making process than most realize. Slowing of the bond purchase program will most likely cause a big market drop which he would prefer to avoid on his watch. I would think Ben’s biggest concern now is to run out the clock on his term without “breaking anything”.

So, just like Alan Greenspan before him, I suspect that Ben Bernanke’s big goal is to leave on a high note and hopefully a market top and have the next Fed Chairman clean up his mess and deal with the consequences. For this reason I think the tapering might not happen till later than most realize.

There’s no doubt that the US market is tremendously overvalued. A crash or a series of crashes are coming and they will be worse than most are anticipating. It is possible that the stock market will continue to go up and up and that “this time it is different”, but I highly doubt that the two main drivers of the market, greed and fear, have changed very much so I am not holding my breath.

It’s been a bit frustrating watching an overvalued market continue to climb higher and higher over the last year while being mostly out of the market but I am happier staying on the sidelines in cash instead of trying to pick up nickels in front of a steam roller (even though over the last year there have been a lot of nickels to pickup). True bargains will come; it’s just a matter of being patient and waiting for your fat pitch to arrive.


 

Things I am watching:

There are a few countries which are becoming a bargain including Brazil, Russia and a few European countries which are starting to look very attractive. Hopefully further drops will allow me to put more money to work. Emerging Markets as a whole are also trading at a slight discount and would be a true bargain on a drop of 15% or so.


 

Current Market Valuations:

International Markets: International markets are overpriced by about 20% and need to drop about 40% to be a true bargain.

Emerging Markets: Emerging Markets are trading at a slight discount.

US Large Caps (S&P500): S&P500 is overpriced by about 50% to fair value. If we use Shiller P/E ratios the S&P is valued roughly at the same levels as before the great crash of 1929 and 2007.

US Small Caps (Russell 2000): US Small Caps continue to be tremendously overpriced and need to drop over 60% just to be fairly valued.


 

Current Portfolio as of 06/30/2013:

Name

Symbol

% of Portfolio

Cash and (Cash like Instruments)

60.04%

Berkshire Hathaway

BRK.A

19.26%

ProShares Short Russell 2000

RWM

9.29%

Asian and Emerging Market Currencies

8.31%

Gold Short ETN

DGZ

0.90%

Gold Miners

RING

0.78%

ProShares Short 20+ Year Treasury

TBF

0.52%

iShares MSCI Brazil Capped Index

EWZ

0.45%

iShares MSCI Brazil Small Cap Index

EWZS

0.45%


 

My Current Positions:

Cash and cash like Instruments – 60.04 %
I continue to hold cash while waiting for fat pitches.

Berkshire Hathaway – 19.26%
Berkshire Hathaway continues to be my core equity holding. It is also a play on quality by shorting Russell 2000 stocks.

Russell 2000 Short – 9.29%
US small cap stocks have been grossly overpriced for over a year now. I have added to my position as we hit new highs.

Asian Currencies – 8.31 %
My Asian Currency position is an insurance policy against the falling dollar. However in the short term I suspect the dollar will continue to go up as it is the main stable currency in times of trouble.

Gold Short /Long Gold Miners – 1.68%
Last year I wrote about the bubble I saw in the gold market. Since then gold has dropped over 25%. I took a small position on gold miners while shorting gold itself as XAU to Gold ratio dropped to a record low.

Companies that mine gold derive their value mainly on the price of gold that they are mining. Over the years there has been a historic pattern and a correlation between the price of gold and gold stocks. Over the last quarter the ratio of XAU (gold mining stocks) to the price of gold has reached the lowest levels on record. I decided to take a small position assuming that over time the ratio will get back in line. From my perspective it is really irrelevant if the price of gold goes up or down but only that the ratio of gold prices to gold producers will normalize. (I have to admit that I am not totally comfortable holding a gold short position in an ETN (Exchange Traded Note) since they are not as secure as ETF (Exchange Traded Funds))

Long Treasury Short – .52%
I took a small position to capitalize on any large drop in US Treasuries.

Brazil Equities – .9%
I took a small position in Brazilian equities as they became attractive. I will be glad to add to my position if the prices continue to fall.


 

My Performance:

I consider myself a buy and hold investor and judge the success of my investing over a full market cycle. The performance over a quarter or even a year is pretty irrelevant in the long run. But I am including it just for reference and record keeping.

Portfolio

2Q 2013 Performance

1 Year Performance

Performance since tracking (1/1/2012)

My Portfolio

.5%

2.47%

1.66%*

S&P 500 (IVV)

2.24%

12.68%

19.28%

Total World Stock (VT)

-1.47%

 17.64%

27.71%

     
       
       
       

* My performance was actually a bit better but for simplification I am not counting the return on my cash which was around 1%

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The Art of Drinking: Finding the Optimum Drinking Formula

“Drinking is an emotional thing. It joggles you out of the standardism of everyday life, out of everything being the same. It yanks you out of your body and your mind and throws you against the wall. I have the feeling that drinking is a form of suicide where you’re allowed to return to life and begin all over the next day. It’s like killing yourself, and then you’re reborn. I guess I’ve lived about ten or fifteen thousand lives now.” – Charles Bukowski

art of drinking
(Photo:
SnaPsi Сталкер)

Man has been drinking alcohol for over 9000 years, and for the last 9000 years has been trying to solve the same age old problem: How to avoid “Beer Goggles”. (No, not really)

The real problem man has been trying to figure out is how to keep the alcohol buzz going for the longest period of time without getting too drunk or too sober and without having a hangover. That’s a tall order but I am going to explain the best system that I came up with to answer that age old question and how it can help you drink better.

But first a quick back story: There was a time in my life when I was learning to become more social and good with the opposite sex so I would go out to bars and clubs 3 or 4 times a week. I would force myself to socialize with people, something which was very hard for me. I did this for a few years, and became very good and comfortable in social situations. I was never a big drinker but after about a year of going out I found myself drinking more and more. There was a period for about 12 months that I could legally be considered drunk at least 3 times a week. I made sure I was never over the legal limit when I drove home by keeping a breathalyzer in my glove box. (I also never drank more than 5 drinks a night) But never the less, I was drunk most Friday and Saturday nights and at least one other night during the week. Over that year which I call “My Drinking Year” I met a great number of women, got into a lot of harmless decadent stupidity and had a lot of indulgences. After about a year, I noticed a direct correlation between drinking and how I felt the next day. It’s not that I was physically hung over, that I could deal with, but it was a depression that started to creep in.

I noticed that if I drank one day, I would be depressed the whole next day. If I drank for two days in a row, I would be depressed for the next two days. I experimented with different types of liquors and mixers, but it made no difference. After a while, it was just not worth it for me. Since I only drank for the fun of it and I never needed it to be fun or social, stopping was pretty easy. So I started to go out to clubs and only drink bottled water. It was a pretty easy switch.

But during “My Drinking Year” I kept experimenting to find the optimum way to drink when I was out at a bar or club with friends. To me optimum drinking meant finding a formula for being able to maintain a buzz throughout the whole night without getting too drunk or not buzzed enough and ideally without getting a hangover.

For the most part, I think I found the right formula which worked for me and I think it should work for most people.

What to Drink:

The healthiest drink you can drink at a bar would be red wine due to its resveratrol content. But wine is a little bit of a different buzz and tends to cause nasty hangovers. If you’re in a crowded bar, the red wine often eventually ends up on your shirt, especially if you’re wearing white.

Darker liquors (Brandy, Rum, Whisky etc.) tend to cause more hangovers so they should be avoided as well. Beer makes you feel bloated since you need to drink 24 to 36 oz before the alcohol really kicks in. For me that leaves vodka. You do not need to drink a lot of vodka to get a buzz and it’s also a lot harder to smell it on your breath when you are talking to someone.

What Type:

For the most part, higher quality vodka gives less of a hangover so avoid the lower priced “house” vodkas. I preferred Skyy, Absolute or Chopin.

What to Mix with:

You can mix vodka with a lot of things but due to the possible hangovers you should avoid things with sugar like sodas, tonic or juice. Club soda works well. Unfortunately, Vodka & Soda combination tends to taste too strong for a lot of people. Luckily, flavored vodkas are available. You really can’t go wrong with berry, cherry, vanilla, orange or any other flavored vodka and soda.

How to maintain a consistent buzz:

I have tried a number of ways to pace myself by limiting 1 drink per half hour and other combinations. If you’re in a bar, it’s hard to keep up with time and after a while it gets too complicated when you are socializing and having fun to watch the clock. How the alcohol effects you is determined by many factors, such as when was the last time and how much you ate. (I recommend a meal a few hours prior to going out drinking, or a good solid “drinking base”. Drinking on an empty stomach is an express pass to drunk, I don’t recommend it.)

Here is the simplest, most successful formula I found that worked for me. I order a vodka and soda and drink it down within the first 15 minutes of arriving at a bar or club, then I order a bottled water. The bottled water will hydrate you and help you avoid a hangover and also pace you so you don’t drink too much, too quickly. After about 30 minutes, I am ready to order my second vodka drink. The second drink tends to take longer to consume, it may take me 30 minutes to complete it. Then it’s back to a bottle of water, which also tends to last about 30 minutes. Then back to Vodka. I find that 3 to 4 drinks was ideal for me if I am out between 10pm to 2am. Which works out to roughly 1 drink per hour, but the pacing of having the water in between is optimum for not drinking too fast or too slow. Stop drinking by 1am and you should be fine to drive home by 2am, but get a breathalyzer to be absolutely sure.

Summary:

So the simple drinking formula I came up with for maintaining a good buzz for the whole night while minimizing hangovers:

  1. Order high quality pure or flavored vodka with club soda

  2. Order bottled water after each drink

  3. Back to step one.

  4. Stop drinking alcohol at least one hour before going home.

That’s it. This formula should work for most people if you pace yourself.

If you fear getting a hangover, I found the best prevention was drinking a bottle of Gatorade before going to sleep and have a big fatty breakfast in the morning.

Happy drinking! (Cheers!)

 

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2013 Q1 – Report

“Believe me, there’s nothing better than buying from someone who has to sell regardless of price during a crash. Many of the best buys we’ve ever made occurred for that reason.” – Howard Marks

money

(Photo: 401K)

This is not a recommendation to buy or sell any security; this is simply how I am managing my money and how I see the market. It is also a record to track my performance.
 All commentary is based on market levels at 3/31/2013. My market level valuations are based on historic PE ratios, profit margins and Q-Ratio among other criteria.


 

Current Market Valuations:

International Markets: International markets are overpriced by about 20% and need to drop about 40% to be a true bargain.

Emerging Markets: Emerging Markets are fairly priced and need to drop little over 20% to be a true bargain.

US Large Caps (S&P500): S&P500 is overpriced by about 40% to fair value.

US Small Caps (Russell 2000): US Small Caps continue to be tremendously overpriced and need to drop over 45% just to be fairly valued.


 

Current Portfolio as of 03/31/2013:

Name

Symbol

% of Portfolio

Cash and (Cash like Instruments)

64.51%

Berkshire Hathaway

BRK.A

17.99%

ProShares Short Russell2000

RWM

8.54%

Asian and Emerging Market Currencies

8.46%

ProShares Short 20+ Year Treasury

TBF

0.50%


 

My Current Positions:

Cash and Cash Like Instruments – 64.51 %

Berkshire Hathaway – 17.99%
Berkshire Hathaway continues to be my core equity holding. It is also a play on quality by shorting Russell 2000 stocks.

Russell 2000 Short – 8.54%
US small cap stocks have been grossly overpriced for over a year now. If the markets continue to go up, I will add to my short position like I did in Q1.

Asian Currencies – 8.46 %
My Asian Currency position is an insurance policy against the falling dollar. I shifted a bit more money into the Singapore dollar over the last quarter, although I suspect that the problems in Europe might push the dollar up.

Long Treasury Short – .5%
A small position to capitalize on any large drop in US Treasuries.


 

Current Market View:

On June 28 1914 Archduke Franz Ferdinand of Austria was shot dead in Sarajevo. The death created headlines but nobody could have foreseen what would happen next. That assassination started a chain of events that eventually lead to World War I and the death of over 16 million people. (See Niall Ferguson War of the World). At times the smallest catalysts can create the biggest and unexpected fires.

I suspect the same thing will eventually happen in Europe or some place else in the world. It will be a completely trivial and unforeseen event that would set in motion a chain of consequences which would cause a great unraveling of the current markets. It might be a default on a bond payment by a small country, or a crash in an obscure bank, but sooner or later some black swan will cause things to become extremely ugly. When that will happen and how big the ramifications will be, is something nobody can predict. My feeling is the eventual stock market crash can be a lot uglier than people anticipate, especially in the US where stock prices are tremendously over priced and most likely will not be a lot higher in real terms seven to ten years from now.

The only problem with my hypothesis is that stock market crashes usually happen when there is complacency and optimism in the market. Currently most of the market spirits are cautiously pessimistic which would lead me to believe that the market crash might not be with us in the near future, even if evaluations would indicate otherwise.


 

Things I am watching:

There are currently about a dozen countries (mostly in Europe) which are within 25% of their buying range. If things become cheap enough I will be more than happy to put my money to work. Emerging Markets are also about 20% from a buy. If the US Stock market continues to climb I would add a bit more to my short position as well as shorting the long bond. These are very strange times to invest. Stocks, bonds, commodities all looked over priced, yet continue to go up. To me it would be tempting to go into the market and chase the trend. Unfortunately, it’s not a game I am good at or fully understand. I am a lot more comfortable sitting in cash and waiting for the market to offer some true bargains. Like it did last year with Italy, Ireland and Greece; all which I bought and sold for a handsome profit. 


 

My Performance:

I consider myself a buy and hold investor and judge the success of my investing over a full market cycle. The performance over a quarter or even a year is pretty irrelevant in the long run. But I am including it just for reference and record keeping.

Portfolio

1Q 2013 Performance

1 Year Performance

Performance since tracking (1/1/2012)

My Portfolio

1.14%

2.42%

1.58%*

S&P 500 (IVV)

10.47%

11.94%

20.2%

Total World Stock (VT)

5.79%

 8.31%

21.07%

     
       
       
       

* My performance was actually a bit better but for simplification I am not counting the return on my cash which was around 1%

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The Matrix is Scary: Why Men Learning to Become Great With Women Will Never Be Fully Accepted In Our Society

There’s no obstacles that you have to jump
There’s no walls that you have to climb
This is real, this is elementary dear
Elementary, Watson, Elementary “ – ODB “Nowhere to Run

http://www.lifelovesexandmoney.com/wp-content/uploads/ladder.jpg

(Photo: Digo_Souza)

Knowledge is an interesting thing. It seems that the most important things you need to know for a happy life you need to figure out on your own and are never taught in school.

I took wood shop in high school it was mandatory. I built a wine rack and a bird house. The wine rack is still collecting dust somewhere in my mom’s basement and I am not sure what happened to my bird house which came out looking like something Frank Gehry built after a weekend bender. If any bird was actually brave enough to inhabit my birdhouse I am sure they could have sued me for multiple safety code violations. I never picked up a wood chisel again and most likely never will. I think back at all the useless classes I took in middle school and high school (home economics, sewing, metal shop) so much wasted time, so much useless information. Yet one of the most important things in life I needed to learn for happiness and success was never taught to me. It was how to be good with the opposite sex, make friends and be social. Learning those things not only would have prevented my childhood from being emotionally scarring but also would have led to more love and self acceptance.

Unfortunately, I had to figure those things out on my own much later.

Out of all the things I have tried and achieved in life, none of them have helped me grow as much as becoming good with women. I am not saying that my life improved because I was able to get laid more, I am saying becoming good with women has helped me build my confidence. It helped more than anything else I’ve tried and has greatly improved my relationships in business and family and led to self acceptance. I am a MUCH better human being because of it.

I have talked to many men who took the same path that I did later in life and all swear that becoming good with the opposite sex was the one thing that helped them improve all aspects of their lives. Yet for some reason I have always felt awkward sharing this information even though I think it’s one of the most valuable pieces of advice I can give. I am not the only one, most guys I have talked to feel the same way. It’s not that they refuse to acknowledge that information it’s just that they feel there is some stigma attached to it and they would rather not volunteer it. Why is that? Why would a piece of information that can be so beneficial be so scary to discuss in public? Why is it so taboo to say that becoming good with women is a skill that can be learned? It’s no different than learning to ride a bike. Why does saying “I learned to be good with women and so can you” seem somehow dirty?

There is some belief in our culture which says that learning to have abundance with women is bad. It’s not that sleeping with a lot of women is bad, since we celebrate movie stars and rock stars who lead decadent lifestyles. But somehow going from a loser to someone who is desired by women does have a negative stigma attached to it. The notion of a man going from being a total nerd to becoming desired by many women is always depicted as a comical caricature only involving him becoming either rich, famous or building a great physique.

Let me give you an example.

Picture Walt. Walt is thirty six years old. He lives in a small studio apartment is 20 pounds overweight and drives a fork lift at Costco for a living. Walt has tried online dating and has even been in a few short relationships over the last decade, but the number of sexual partners he has had can be counted on one hand. Walt decides to start a band and write a few songs. The songs becomes popular on YouTube, Walt gets a recording contract and starts touring, his band starts playing larger and larger venues. Walt is now rich and famous, has his own plane and travels the world playing sold out shows and having sex with multiple women on a regular basis. Walt is a star and women want to have sex with him backstage after every show.

Now let’s try scenario number two.

Picture Walt. Walt is thirty six years old. He lives in a small studio apartment is 20 pounds overweight and drives a fork lift at Costco for a living. Walt has tried online dating and has even been in a few short relationships over the last decade, but the number of sexual partners he has had can be counted on one hand. Walt decides he has had enough, so he takes a workshop to learn how to be good with women. He learns how to talk to women, how to be more interesting and how to make women feel special. Walt still drives a fork lift at Costco lives in the same small studio apartment yet he is having sex with multiple women on a regular basis because he learned how to be sexually attractive to women.

Everyone can picture rock star Walt and why he is desired by women, yet the Costco Walt somehow seems phony. But why? Both Walts are highly desired by women, both get laid equally. Yet somehow as I paint that picture you assume that Costco Walt is somehow creepy or a phony and even if he is getting laid somehow he is tricking women into sleeping with him.

I have known a lot of “Costco Walts”. Those guys are out there. They are not the most attractive, they are not the richest but they learned how to make women feel special and how to make women want them. They get laid as often as “Rock star Walt”. Yet the notion that someone can learn to be great with women without “earning it” is still taboo in our culture. Having mobility on the sexual pecking order ladder is accepted as long as you accomplish something like becoming rich or famous, but climbing it on skill alone becomes somehow terrifying and wrong.

But why?

I’ve been thinking about this question for quite a while. Since I could not come up with any easy answer that jumped out at me, I assumed the answer must be a lot more primal, more obfuscated and more deeply and subconsciously engrained into our society. I have found that when it comes to sexuality, anytime you hit a roadblock the answer usually can be found by looking at evolution. I believe this is where this answer lies.

Throughout history for hundreds of thousands of years the sexual pecking order was set. The tribal leader was the one who was most desired by women, who had his pick of which woman he sleeps with. As you go further and further down the pecking order, less choices are available to those men. There were ways which you could make yourself more desirable and climb the ladder. You could slay a tiger or lion or be brave and heroic during a battle; all those things would make you more desirable to women. They would help you achieve more social status in the tribe. In other words, all those things involved “doing” something. The notion of just your average man at the bottom of the tribe’s pecking order seducing and becoming more sexually desirable to all the women in the tribe is not only foreign, it’s also dangerous and scary for everyone. Evolution of our species relies on the strongest and bravest men having sex with the healthiest and most beautiful women. The idea that someone can short circuit this unspoken rule without accomplishing anything and trick the system goes against what nature intended.

There are a few more reasons why it is frightening to know that being sexually desirable is a skill that can be learned. It is scary to women, because sexual power is a unique power that women have in our society. A woman knows that her looks play an important part of navigating through life. For women to have that power men must feel scarcity. If every man can get laid as easily as a woman that power goes out the window. Talk to any woman who is considered attractive in her small home town who comes to a place like L.A. or Miami which is full of beautiful women and you will understand.

But men are equally as guilty about being afraid to see the truth. For a man to know that he can learn to become great with women without accomplishing something means admitting that the treadmill of life he has been on has been waste of time. It’s one thing to think that you are not getting laid because you are not successful enough or don’t drive the right car because all those things can be fixed IN THE FUTURE. Once you have the money you can get the right car, once you reach fame women will want you, once you have more money you can get hair plugs and hire a personal trainer. Everything is safe as long as it’s in the future and you have an excuse. Once you realize that all those things are not nearly as important, you have to admit that YOU are the only reason why women are not attracted to you. It is not because of something you have yet to accomplish or posses. That realization is very scary. I won’t even go into why married men don’t want to know this.

Finally, corporate America does not want anyone to know that the sexual pecking order ladder can be cheaply traversed. How many billions of dollars are made each year by preying on men’s sexual scarcity? How many cars, beers, deodorants, fitness equipment and gym memberships are sold each day by making millions of men feel that if they just bought the right product they will be more sexually desirable to women? What if tomorrow men learned that you can skip the middle man and learn to attract women without opening up their wallet?

The reason teaching men to become great with women will always come across as manipulative is because it involves teaching men to act as if they are much further up the sexual pecking order ladder without actually earning it by societal standards. And this is dangerous.

But we are no longer living in caveman times, we no longer need to slay a lion or kill men in battle in order to be able to rise up the sexual ladder, we can climb it by redoing ourselves from within and earning our spot just the same. But that is all very foreign and very new.

This is why the notion of men learning to become great with women will never be fully accepted in our society and it will always come across slightly creepy when being discussed and will always remain mostly underground. This is why seeing through the Matrix of how the world really is and can be will always be scary to the masses.

Michael Page

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2012 Q4 – Report

We can only enjoy the rewards of long-term investing if we are prepared to tolerate short-term losses” – NG Kok Song

(Photo: 401K)

This is not a recommendation to buy or sell any security; this is simply how I am managing my money and how I see the market. It is also a record to track my performance.

 All commentary is based on market levels at 12/31/2012. My market level valuations are based on historic PE ratios, profit margins and Q-Ratio among other criteria.


Current Market Valuations:

International Markets: International markets are overpriced by about 15% and need to drop about 35% to be a true bargain.

Emerging Markets: Emerging Markets are slightly overpriced and need to drop little over 25% to be a true bargain.

US Large Caps (S&P500): S&P500 is overpriced by about 40% to fair value.

US Small Caps (Russell 2000): US Small Caps continue to be tremendously overpriced and need to drop over 50% just to be fairly valued.


Current Portfolio as of 12/31/2012:

Name

Symbol

% of Portfolio

Cash and (Cash like Instruments)

65.58%

Berkshire Hathaway

BRK.A

15.65%

ProShares Short Russell2000

RWM

8.91%

Asian and Emerging Market Currencies

8.68%

ProShares Short 20+ Year Treasury

TBF

0.50%

Greece

GREK

.69%


My Current Positions:

Cash and Cash Like Instruments65.58 %

My cash position increased slightly due to the selling of my Italy and Ireland holdings in 4Q.

Berkshire Hathaway15.65%

Berkshire Hathaway continues to be my core equity holding. It is also a play on quality by shorting Russell 2000 stocks.

Russell 2000 Short – 8.91%

US small cap stocks have been grossly overpriced for over a year now. If the markets continue to go up, I will add to my short position.

Historically in situations like this stocks eventually reach fair value either by going nowhere for many years and allowing inflation to lift all boats or the more likely scenario a sharp decline which allows stock prices to drop to fair market values. I suspect we will see the later scenario eventually. (Although the irrational exuberance can go on much longer than most imagine.)

Asian Currencies8.68 %

My Asian Currency position is an insurance policy against the falling dollar. I have been wanting to add to my Asian currency position but with a steady rise in their evaluations I have been reluctant to do so. Hopefully I will get another chance.

Long Treasury Short.5%

A small position to capitalize on any large drop in US Treasuries.

Greece – .69%

Even though I have made over 50% on my Greek stocks since my purchase in Q3 I continue to hold them since I feel there is still a larger upside.


Year in Review:

Things I got wrong:

2012 was a year of being defensive. I was hoping that US markets would drift more towards fair value, instead they continued to rise. I don’t know how much longer US stocks can continue to defy gravity but I am willing to accept that it may take place for much longer than I anticipated. Instead of being long I played it more safely. I stayed mostly in cash which earned about 1% and going long Berkshire Hathaway and shorting Russell 2000 which produced around a 1.5% return, compared to the Dow which rose over 7%. My underperformance was over 5%. Although for me the downside of going all long was a lot larger than the upside of a few percentage points, it nonetheless caused an underperformance to the overall portfolio.

Things I got right:

2012 was a year for staying in cash and waiting for fat pitches to come to me. Unfortunately there were very few fat pitches which came my way but the ones that I did swing at I managed to hit out of the park.

I purchased Ireland stocks in Q3 and sold them in Q4 after a 21% gain.

I purchased Italian stocks in Q3 and sold them in Q4 after a 36% gain.

I purchased Greek stocks in Q3 and continue to hold them with over 65% gain.

Unfortunately the markets did not allow me an opportunity to take on much larger positions so the great outperformance was not a large factor in my overall portfolio.


Things I am watching:

I continue to stay in cash and wait for fat pitches to come my way. I sold off my Italian and Irish holdings in Q4 and hopefully will get another chance to pick them up at bargain prices in 2013 if Europe unwinds. There are a number of countries (mostly in Europe) all within 20% of being a true bargain, if problems persist I hope I will be able to put a lot of cash to work.

Hopefully 2013 will be the year where amazing bargains will become available, until then I am disciplined and happy staying in cash and waiting for the markets to come to me.


My Performance:

I consider myself a buy and hold investor and judge the success of my investing over a full market cycle. The performance over a quarter or even a year is pretty irrelevant in the long run. But I am including it just for reference and record keeping.

Portfolio

4Q 2012 Performance

2012 Performance

My Portfolio

-.01%

0.84%*

S&P 500 (IVV)

-.87%

13.64%

Total World Stock (VT)

2.92%

14.44%

* My performance was actually a bit better but for simplification I am not counting the return on my cash which was around 1%

Michael Page

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The Dangers of Surpassing Your Idols (and Dave Chappelle)

I care about the work I do, but I’m not going to say that money’s not an issue.” – Dave Chappelle

(Photo: Benjamingettinger’s)

A while back my good friend had a nervous breakdown. It lasted about a week. He was not hospitalized but spent day in and day out in his house crying and staring at the walls without reaching out to anyone. After that episode, we talked a great deal as I tried to help him find the reason for his breakdown and the possible catalyst.

We talked about what events took place right before his episode. As we rehashed his life, the only one event that stood out was that he got a raise a week prior. That seemed to be a strange catalyst for someone to have a nervous breakdown, especially since his job title did not change and no more responsibility was asked of him. He had also received many raises before without any negative consequences. What made this raise different? As we talked, I casually asked how much money his father, who still worked, was making at the time? This was when all the parts came together.

His father, whom he looked up to and who has worked all of his life, was making a comfortable living. Now with my friend getting his raise he realized that he was now making more money than his father. Even though it was not a conscious realization at the time of his breakdown we both agreed that it had to be the cause.

I have talked about this to Frederic Lehrman, whose opinion on the psychology of money I respect, he points out that these types of occurrences happen more frequently than people realize. The idea of surpassing our parents or idols whether with money or success is more monumental than many people realize.

So how might this apply to you?

If you are stuck making roughly the same salary year after year, you might find that you are probably making the same amount that your parents did at their prime without even realizing it. What’s more amazing is that not only is that subconsciously implanted in us, it is also as Frederic Lehrman pointed out inflation adjusted. So if your parents were making $20,000 a year 30 years ago at their prime you may find that you are stuck not making more than around $50,000 a year now, which is roughly what $20,000 is if we adjust for inflation. This is certainly not the case for everyone but it is a large component that often is overlooked. But why does this happen?

Why do some people hit road blocks when surpassing their parents? Whether it is in financial successes or overall success? My belief is that when we surpass our idols it transforms them from being idols to becoming regular people. There is something painful when we realize that our father is not superman but an average man with warts and flaws. During the years we had worshiped him we were worshipping our concocted fantasy and not reality. For some this is a very painful realization. By never surpassing our parents, we allow them to stay ideal in our minds.

(Photo: Sam.soneja)

This brings me to Dave Chappelle. At the high point of his career having just been offered a $55 million dollar contract from Viacom, Dave stunned the world when he abruptly left the show and more or less show business. That incident always stood out in my mind since things did not fully make sense. For example, Dave has stated that his reason for leaving was that he felt the sketches on the show had become “socially irresponsible”. Being the creator and writer he could have easily changed the direction of the show. The other reason given was that he did not like the working environment. But certainly when you are the star at the pinnacle of your career, you create the environment you want and the network will jump through hoops to make it happen. Something never added up about Dave quitting the show. It’s not till I started writing this article that I decided to look if “Surpassing your idol” might have been a hidden factor in Dave’s decision.

One of the biggest influences in Dave Chappelle’s career has been Eddie Murphy, not only did he greatly influence his comedy but Dave also cast Eddie’s brother as a regular on his show. Dave has spoken numerous times about the tremendous reverence he has for Eddie Murphy. If we look at Eddie’s career the most money he ever made was on the movie Nutty Professor II: The Klumps just a few years before Dave walked off his show. The contract entitled Eddie to a salary of $20 million dollars plus 20% of the gross. (It was very wise for Eddie to take 20% of the GROSS and not the NET since Hollywoods numbers are never to be trusted.)

So what do the numbers look like? Nutty Professor II made around $166 million dollars worldwide. This netted Eddie Murphy around $32 million dollars from the gross plus another $20 million as a salary for the total of $52 million dollars at most. Dave’s contract was for close to $55 million dollars, making Dave a larger star than Eddie Murphy as far as showbiz was concerned.

It must have been a very strange and surreal to all of a sudden be seen by Hollywood and the world as being more valuable and bigger than someone you had idolized all of your life.

Does this explain why Dave left? No, I am sure there were many factors at play. In my opinion, it’s hard not think that there is a very large possibility that being thrust into showbiz stratosphere and the surreal feeling of surpassing your childhood idol was at least a partial factor in Dave choosing to leave the whirlwind of Hollywood to live a more simple and humble life.

Most people never consciously realize the psychological baggage that they may be carrying around about money and how that influences their day to day decisions. I have stated numerous times that I believe our subconscious (and conscious) relationship to money plays a much larger role in our net worth than how intelligent, educated or hard working we are. Being able to look at your relationship to money honestly and openly should be the first step on your journey to financial independence.

Michael Page

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Are We Living In The Golden Age of Cinema? Analyzing over a century of IMDB ratings.

People in Hollywood are not showmen, they’re maintenance men, pandering to what they think their audiences want..” – Terry Gilliam

(Photo: Scott Smith)

Everyone talks about the “Golden Age” of cinema and that they don’t make movies like they used to. But how much of that is really true? Were the movies made 40, 50 or 60 years ago really that much better than the movies made these days? I thought that would be an interesting question to try to answer, but how?

Luckily IMDB has a list of nearly every movie ever made along with the rating that people gave it. The rating is based on hundreds of thousands of movie fans who judge the movies they have seen and give it a rating from 0 to 10, with 10 being the best. IMDB makes its data available to the public, and if you take the time and effort to sift through the megs and megs of raw data, you can discover some interesting information. I was curious enough to try to find out.

After crunching the data and ratings of close to 250,000 different movies, I was able to come up with some answers. Let’s see how the numbers look.

Hundreds of thousands of movie fans rated over two hundred thousand movies which span over a century of movie making. For the first 20 years, starting in 1888, the average ratings are all over the map. This is probably due to very few movies being released (small sample size) which can create “lumpy” results. But starting in the 1920’s you can see movies ratings normalizing and evening out.

I decided to take a look at the median ratings as well as average ratings. The difference between average and median is that average takes all the votes and adds them up and divides them by the number of votes. Median lists out all the votes in order and then takes the number in the very middle. In other words if there are 1000 different movies which people voted on, median would list out all the votes in ascending (or descending) order and then take the value of the 500th movie. This means there will be an equal amount of movies rated better, as well as worse, than that median movie. As you can see with the median data, things started to normalize in the 1920’s as well.

But now let’s zoom in on the real data and ignore films made the first few decades after the movie camera was invented. I decided to make the starting point be 1922, the year that the Motion Picture Association of America got started. As you can see from the data, the quality of the movies has been steadily declining starting with the late 1920’s and bottoming out in late 1990’s. Since then, the data indicates that movies have been getting steadily better and better.

The same holds true for the median values as well. You can see a steady decline starting from the 1920’s all the way to the very late 1990’s and since then a very visible incline.

One thing to keep in mind is that IMDB only allowed people to vote for movies in the last two decades or so, so all the ratings are based on the mindset of the people living today. It is very possible that people living in a different time would vote differently for the movies and have different tastes. But from the perspective of the people living (and voting) today they preferred, on average, the movies made 70 years ago much more to the movies made 15 years ago.

Another thing to keep in mind is that people who might be fans of older movies are more likely to watch them and vote for them. So there might be a preference bias, since a fan of older movies might prefer them (and rate them higher) compared to newer ones. The average person might only vote for current movies and never have seen or voted for the older ones.

But how do the ratings look for the cream of the crop? If we count only the best movies ever made, are they getting better and better? The answer is “yes, but only slightly”. If we plot out the best 250 movies as rated by IMDB reviewers over roughly the last 75 years we can see a very slow rise in the quality of the movies in the 1990’s.

It is important to keep in mind that there are currently over 4 times as many movies made these days as were made in the 1950’s or 1960’s. And almost 8 times as many as were made in the 1920’s or 1930’s. So, yes there are good movies made today but the ratio of truly great to mediocre is getting worse and worse.

So what does this all mean? It looks like the late 1920’s and 1930’s really were the “Golden Age” of cinema. With the highest quality of an average movie made along with the slight increase in quality in late 1940’s. Ever since then, movies have been getting steadily worse and worse and bottoming out in the late 1990’s where the quality of the movies have been getting a great deal better. So while the average movie may have been getting worse and worse over the years till the late 1990’s the quality of the movies have been going up on average year after year. If the trends continue we might have already started entering into the new Golden Age of Cinema.

But wait there’s more……

After I looked at the data, one question kept popping up. Why did the movies all of a sudden start to get better around the late 90’s after getting worse and worse for decades? I found it just too much of a coincidence that the movies started to get better ratings right around the time that Amazon took over IMDB in 1998 when IMDB really started to become popular. Unless the rating algorithm was changed, which I doubt, then a possible explanation might be that people started to rate movies higher after seeing them in the movie theaters which might provide for a better experience. For example a person rating a movie from the 80’s has seen it either on TV or their laptop or in a movie theater over 20 years ago. Compare that to a movie that just came out which they might have just seen in the theater last night when it’s still fresh and new which might produce a higher rating. In other words if IMDB became popular 30 years ago, movies might have started to rise in ratings back then as well. It’s also possible that with the popularity of IMDB a lot more “average people” started to vote as well compared to movie aficionados who tend to be a lot pickier.

But regardless if Hollywood is making better or worse movies now there are so many amazing movies out there. Movies which can move you, enlighten you, inspire you and change your way of looking at the world. Next time bypass the typical Hollywood paint by numbers blockbuster and take a chance on something new and different. There are thousands of movies just waiting for you to discover them.

Information courtesy of
The Internet Movie Database
(http://www.imdb.com).
Used with permission.

Michael Page

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