Friday Finance – it really wasn’t financial advice

At the end of my irregular Friday Finance posts, I always add the disclaimer:

  • This article provides general information. It does not take into account your personal circumstances and is not intended to influence readers’ financial decisions. Get your own, professional advice.

I started doing this formally and consistently after the Old Country passed a law banning influencers from promoting any financial products and services.

I didn’t seriously think a tiny blog on the other side of the world spruiking the benefits of index funds would attract the Eye of Sauron, but why risk it?

You’ll see this sort of disclaimer all over the place and it is usually there as a legal fig leaf.


You really must do your own research and get your own personal advice. Recent events should have driven that point home rather painfully for those who got caught out.

The collapse of FTX was so dramatic and absurd that within hours people were debating who ought to play the slovenly t-shirt guy when it becomes a Netflix series. I would watch it. Here’s a small taste of the madness (click through to see the full thread):

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Friday Finance – charting the 4% rule

I’ve been meaning to post this priceless table for a long time and today I finally got around to it:

Success Rates for different SWRs, by equity share and retirement horizon (1871-2015) HT

I put it right at the top so that those who already understand the chart don’t need to read the article if they don’t want to. It’s all there.

For the rest of us:

Wot dis?

‘Dis’, as you so vulgarly put it, is an estimate of how long your money will last in retirement depending on how much you withdraw each year and the proportion of shares vs. bonds.

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Friday Finance – what happens when empires crumble?

Some assume that a retracting Global American Empire will cause economic chaos.

On the face of it, this makes sense. The US controls Middle East oil and the global currency (those two go together like electromagnetism), shipping lanes to Asia, plus it has massive sway in global bodies like the IMF, World Bank and so on.

Countries that attempt to break out of the GAE system tend to be destroyed or isolated and impoverished.

However, all of these are now under threat. Some countries are starting to use alternative currencies, including oil producers. China is asserting control over the South China Sea and is either taking over or creating alternatives to international organisations.

Small countries are not yet able to blatantly defy America and get away with it but China, Russia and India can do as they please. Much of the non-Western world is on the cusp of slipping the collar:

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Friday Finance: beating the house

I often refer to the S&P 500 on these pages. It is an index of the largest 500 US stocks.

This is because, as far as investing is concerned, the S&P 500 is The House. It is the standard by which all other investments are measured.

This is not because an index fund based on this particular index is necessarily the best. One that is even broader, encompassing thousands of stocks or perhaps including international stocks, might better suit some investors.

Rather, the S&P 500 is the house because (a) it is the biggest game in town, featuring the world’s largest companies, (b) it is the most well-known index, (c) it has excellent statistics and charts available going way back, and (d) its size and importance makes it a good proxy for how well stocks perform in general. Many other stock market indexes closely correlate with the S&P.

If you want to know how well some other investment option has historically performed, you must ask: compared to what? And the ‘what’ will be the S&P 500, just as you’d compare the carbohydrate content of sorghum against wheat or the strength of chromium against steel. It is the bog-standard investment everybody knows and understands, it’s been around for a long time and it is as mainstream as you can get.

The Holy Grail of investing is to beat this index.

We know that a few manage to do it – Warren Buffet, some lucky geeks who sold their crypto just in time and so on. It is physically possible.

We also know that very few actually manage to do it. The average investor underperforms the S&P because he buys high and sells low rather than buying and holding for the long term.

In this post we’ll analyze various investment options spruiked by some as index-beating miracles and see how well they do. The results may be surprising.

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This is financial advice (for Smaug)

Smaug the Magnificent by Michael Hague

Smaug pursues a unique financial strategy.

Being the Middle Earth version of the Wolf of Wall Street, he emerges from the Grey Mountains and attacks the great Dwarven kingdom of Erebor, located beneath the Lonely Mountain, in 2770. He piles up all the treasure of the underground kingdom in a great hall and makes it his residence. Forbes estimates his net wealth at USD $62 billion.

From this time on, Smaug only emerges occasionally to steal and eat a maiden from neighbouring Lake Town. Good thing he didn’t live anywhere near my town or he’d have been a very hungry worm. Eventually Lake Town is abandoned and he disappears for a long time, presumably inactive and asleep like those snakes in zoos that do nothing and only need to eat once every two years or so.

Smaug chooses not to invest his wealth in stocks, bonds, real estate (aside from the mountain) or in money market accounts. He doesn’t even have a bank account. Instead, he keeps it all in its original treasure form, mostly physical gold but also priceless antiques such as mithril armour and the Arkenstone.

Finally Smaug is killed in 2941, ending his wicked reign of 171 years.

Here are some finance tips that might have helped Smaug.

The Good

1. Bookkeeping
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Friday Finance – DON’T PANIC!

The S&P 500 is down 21% at the time of writing, making this the worst first half of a calendar year on the market since 1970.


Okay, if you’ve been reading this for a while you’ll know why that’s the worst thing to do. Unless you sell, the losses are paper losses. Wait long enough and stocks will recover. Based on history, this is likely to take anywhere from several months to several years.

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Friday Finance – stuffing up the 3 basics

It’s now been long enough since I published my book that I’ve received some feedback and seen how it has or has not helped people.

I was initially concerned about higher-level issues, given that it was aimed at absolute beginners: will they be able to figure out the most appropriate index funds/EFTs without me holding their hand? Did I explain the pros and cons of owning real estate well enough for them to make the best decision for themselves? Will an advisor overcharge them just to put their money in shitty managed funds, despite all I’ve said?

As it turned out, these problems rarely arise. It seems that people either get everything, from the basics up, or they grasp nothing at all.

Here are the three biggest finance blunders people are running into, even after reading the book:

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Friday Finance – Millennials will save America

The hard sell

‘Millennials will make the American economy boom over the 2020s.’

It’s an unusual sentiment to hear in this age of doom and gloom.

My first reaction was the same as yours, but Tom Lee has put together a convincing demographic case that American growth ought to be stronger than than of other major economies into the 2030s due to its comparatively large Millennial population.

Let’s examine the stats and consider counterarguments.

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Friday Finance – USD will die hard

female and dollar bills


[Edit: I wrote this article before the Ukraine war and have added an update at the end. Let’s see how wrong I was.]

We’ll all be rooned!

There’s a lot of panic about the American dollar going the way the Zimbabwean dollar, what with all the brrr* and inflation and what-not.

It’s important to keep this in persective.

In the foreseeable future, uncomfortably high inflation is likely but hyperinflation is not.

Given the Japanese experience, the chances of deflation are >0.

Reserve currency
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Friday Finance – 3 YouTubers

Here are three finance YouTubers and a brief assessment of each:

Graham Stephan

The titles and thumbnails are always clickbait but the content itself is sensible. While he addresses fun stuff like crypto and meme stocks, the bulk of his information reminds the viewer to invest consistently over the long term.

This channel is at just the right level for people who have already read my book. It often reinforces basic lessons that we’ve already learned but need to be reminded of: timing the market is a fool’s game, of course the market’s going to crash but nobody knows when, stick to your strategy and avoid fear and greed.

The Compound

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Friday Finance – how to win a stock-picking competition . . .

. . . and what this tells us about actively-managed funds.

[This is no prank, it just happens that April 1 falls on a Finance Friday this year.]

The situation

You may be invited to participate in a stock-picking competition, perhaps run by your workplace or the financial section of the newspaper.

Let’s say, hypothetically, that you have to choose three stocks for a period of one year. Winner takes all. Mathematically, what would be the best way of playing it?

The strategy
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Friday Finance – have you ever benefited from financial advice?

Image source

This is a question to anyone who’s ever received financial advice.

I’ve received advice a few time and on each occasion there was some good with the bad.

Occasion 1

Good: I should not lock up all my savings in superannuation as I may need it for other goals before reaching retirement age.

Bad: You need geared investing in shares to get anywhere (he told me circa 2006).

Occasion 2

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Friday Finance – money milestones

I’ve noticed that those who are good with money when they are young rarely have money problems when they’re older. Careful management of their assets will enable them to reach escape velocity so long as they get a good decade of growth somewhere along the way.

Those who piss money up the wall when they’re young often continue to do so throughout their lives, though some reform and sort themselves out.

Happily, the number of reformed prodigal sons is much greater than the number of prudent young people who become profligate oldies.

Having said this, how much money should you aim to have at different ages? What amount means that, all things being equal, you’ve pretty much made it?

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Friday Finance – are you rich?

“Darling, I can’t even afford an iPhone.” Source

As Thomas Sowell says, questions like the one in the title are meaningless unless you add, Compared to what?” Are we comparing ourselves to Congolese farmers or to the Bohemian Club?

So here we go: Are you rich compared to your same-age peers in the United States? That’s specific enough.

Before you read on, guess what percentile you’ll fall into. Got it? Alright, let’s have a look.

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Friday Finance – the everything bubble?

This is the Michael Burry who correctly called the 2008 housing crash as portrayed in The Big Short.

Pretty scary huh? You’d better sell everything, hold cash and wait for the big one.

Although, here are two things to remember:

– Michael Burry runs a hedge fund. He’s famous enough to shift the market through tweets, like Elon Musk does. I’m sure he’d never take advantage of that but if he did, his fund would profit nicely.

– I’m not counting but I think Michael Burry has called about a dozen of the last two bear markets.

Don’t relax yet. Here’s a prediction of gloom from another source:

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Friday Finance: oops, she did it again

Senior Economics Writer at the Sydney Morning Herald, Jessica Irvine (remember her?), ponders borrowing to invest in shares.

In case that site demands you log in with Gulag, here’s a summary: she considers borrowing against the equity in her recently-purchased home to invest in shares, rings around for advice using her MSM connections and is once again cautioned against this path.

The People’s Blog view is the same as it was last time: if you’re reading a newspaper (or this site) for financial information, avoid anything risky or complex like borrowing to invest.

Jessica is clearly not an example of someone with adequate expertise.

In the article, she skips too lightly over the risks.

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