There's been a slight change to the layout of this blog. As you look on the right sidebar, you can now see a new section titled "My Books," with a pretty picture just underneath.
As one might surmise, this is because I have published a book—The Best Congress Money Can Buy, a collection of short stories about political possibility. It is presently available on Amazon Kindle and will be available in hardcopy as well within a week or two. The first story is available for free on the Amazon page (which you can access by clicking on the image in the sidebar) using the "Look Inside" feature. Check it out!
If you ever wanted to read about replacing taxation with crowdfunded governments, congressmen who sell their votes to the highest bidder, or what happens when prisons are replaced with workhouses, give my new book a try. Plus, if you are a member of Amazon Prime, you can borrow the book for free on Kindle, and I get paid anyway—which is a pretty sweet deal.
God-willing, this will be the first of many publications. If you like it, please let people know by leaving a reader review on Amazon. Thank you all! Without my readers, I'm just another political nut talking to himself...
(I should preface this post by saying that nothing in here constitutes a recommendation to buy or sell securities, etc.)
Working in finance as I have for years now, I am growing more and more convinced that our societal attitudes toward saving and investing have gone haywire. We now assume automatically that when one saves, one is chiefly saving for retirement or for your children's college; that such saving is primarily done through the financial markets; that there is nothing strange about (for example) keeping part of your portfolio in bonds that pay 2% while at the same time carrying a home mortgage charging 4% or more.
Our assumptions about saving are driven by a combination of government policy, such as the creation of tax-advantaged retirement savings vehicles like the 401k, and a financial industry that is eager to market itself as the midwife of your future prosperity. Yet it seems odd indeed to save for a time that might be thirty or forty years off, when nowadays people can be laid off from their job at short notice—and if you want access to your 401k money earlier than the government prefers, you must go through lots of red tape to "prove" that you are in hardship. Otherwise, you are penalized.
It also seems odd that our first reflex is to use savings to buy securities. The long-term return for investing in the stock market is on the order of 7% or 8%, depending on your time period, and that assumes that you can phlegmatically wait out the bad periods without panicking and taking excessive losses. During the bad years, the destruction of your savings also causes immeasurable psychic harm to yourself and those around you. Stocks are still a decent vehicle for those with the discipline to invest over a 40-year window and then forget about it; their whole appeal is that your money can work for you without your personal involvement, freeing up your attention for other things.
Admittedly, some can make a study of market trading and, if they are of the proper cast of mind, secure annual returns that are much higher than the average—assuming that you are not one of the many who jump into such trading with dollar signs in their eyes, who then lose everything in a blaze of misplaced optimism. But here is another odd thing. To achieve above-average success, you must essentially turn stock market trading into a second job, or even a first job. Yet the whole attraction of stocks was that they shouldn't take up more of your time, no? And if you want another job that can turn your savings into profits, there are many industries with much higher rates of return on capital than stock market trading. Moreover, trading profits must necessarily come from someone else's losses; while in other industries, or other uses of capital, there is a net creation of wealth.
I've been thinking about this more because in the last six months or so, I tried my hand at options trading with disastrous results. At about the same time, I commissioned a pair of artists to illustrate a children's story I have written, which is nearly complete. The process of overseeing the book's creation has taken some work, but not much; it is also extremely fulfilling to see a work of art being created that will have my name on it. It was cheaper to commission the art than to trade options; and once the book is published, it would need only 20 books sold per year to achieve a higher annual rate of return than the stock market average. (It's a fun story, too, and should provide joy to many readers. To me, that's a definite plus.)
(Oh, and if you want to hear when the book is published, feel free to subscribe either here or on my other blog. The title is The Princess, the Dragon, and the Baker: A Hanukka Fairy Tale.)
There are many talented artists out there desperate for commissions, and lots of people with frustrated visions for artistic projects that they lack the skill to realize. Yet how many of these people are maxing out their retirement savings and handing their money over to Wall Street, instead of taking a fraction of that money and trying to bring something new into the world? Admittedly, many such projects wouldn't return a profit; but it would be a lot more fun than investing in WorldCom or Enron.
Other opportunities exist. Want a quick way to make 50% on your money? Buy in bulk at the grocery store. What about residential solar panels? Do you think you could beat a 2% return per year on them? What about investing in your own professional skills? For some people, improving their skills at working with others, or selling to customers, or marketing, or project management could easily increase their income far more than the same amount of money would earn in the stock market.
What about maintaining your health with a gym membership? Health care costs are a huge fraction of costs in retirement, and anything that can improve your health will pay off big. Plus, you'll enjoy your life more now, and you might even be more effective in your job.
I know people who are channeling excess savings into upkeep on their houses, rather than investing in the stock market. Stock market returns are unpredictable, they reason, and inflation is surely coming given our present central banking policies. But people will always need housing.
But for some reason, speculation is the order of the day for most people. Even those skeptical of the stock or bond markets often turn to some other form of sterile speculation, such as buying gold, a metal which is allowed to languish in inert bars rather than being turned into jewelry or circuit boards or something else of added value. In part, this is because we have been trained as a society to avoid the hard work of overseeing other people and creating new things. Far easier to speculate; you might lose your money but at least you don't have to talk to anyone in the process.
Take stock of your own opportunities. Is there any way that you can use your capital to add wealth or beauty or skill to the world, instead of merely chasing speculative profits? And would such uses actually be more lucrative than the Wall Street slot machine?