Investing: How to Make Money

The Efficient Frontier
Optimal returns, for a given risk level, are on the efficient frontier – a statistical fact demonstrable by financial engineers. A market portfolio, or the index, is on this frontier,

It has long been known by investment analysts that optimising risk and return (which is their job) is achieved by tracking the market.  Experienced managers, analysts and data all consistently say that, if you want to invest in the stock market buy the index.  And hold it.

Young bucks, and old, would like to beat the market.  Some might do so for a limited time period.  But no one has consistently done so.  Why?  Because to beat the market you have to consistently do better than everyone else.  That is cocky and statistically very unlikely.

The opportunity to make better bets than everyone else has declined in recent years as computerised portfolio management and trading has grown and index investing has become the principal approach of behemoths which control sizeable fraction of global share trading, like BlackRock.

In addition, some data suggests that taking higher risks can in fact lower your expected return, as appeared to happen in the 2000s.  We are now 9 years into a bull market with little regulatory reform, growing political uncertainty and upward pressure on interest rates (which might attract capital from equities to debt).

Absoulte Portfolios Over Time
The return to risk shrunk as the financial bubble of the early 2000s grew.

The people who beat the market are the ones who take fees (from you) for handling money, or have inside information.

There are reasons to choose a narrower portfolio of listed equities. You might want to restrict your investment to a country, region or industry, or avoid places or sectors.  But to try to pick stocks requires a consistent focus and adaptability.  If you are going to do it yourself, fine.  But if you are paying someone else, they generally have an incentive to take risks with your money that they mightn’t with their own.  And of course their fees eat in to your capital.

So, simply, if you wish to diversify your savings beyond property (your home usually) or debt (bank deposits etc) by putting some in the stock market be careful not to be blinded by the attraction of “expected return” ignoring the danger of risk, and the cost of fees.  So buy a low load (i.e. low fees), index (i.e. market tracking) fund.

And remember, most people make money by working, not gambling.  Gambling is more likely to break your fortune than make it.

The following article by The Economist (11 June 2016) offers further insight. Continue reading Investing: How to Make Money

Bounce, Wobble, Smile – Ballin Temple notes at solstice

Bounce, wobble, spin – the solstice is here. And so the cycle continues.

Today is the day we’ve been looking forward to for a couple of months now. In the northern hemisphere, it’s the shortest day of the year and within a few days we’ll begin to notice the days lengthening again. Solstice is the root of the various festivities that occur at this time, like Christmas and Hanukkah, and increasingly it is celebrated for its own sake as more people reconnect with the natural cycles of our planet. That’s a good thing and it offers a contrast to the frighteningly consumerist nature of this time of year. Adverts on TV, emails asking for donations or promoting consumption and an extraordinary pile of “items” in the supermarket which will join the landfill before long are ironically in direct contrast to the spirit of the Christian Christmas. We are lucky to escape some of that commercialism as we live in a remote place.

The good side of this season is that family and friends gather, which we should do more regularly during the rest of the year. This gathering and goodwill is a wonderful opportunity to do things other than the daily grind, reflect on one’s situation and the coming year and liberate the better qualities of humanity. We are playing that game today as we tidy up and prepare for the arrival of family and friends over the coming week.

This is the time of year for reflection. It’s natural to do so since the earth is cool and quiet, birdsong is muted and the slowdown in natural cycles offers the opportunity to prepare for the coming spring. In many ways the past year has been “sad” to use a comical expression popularised by the Tweeter in Chief as nature has been further brutalised, environmental protection has been deprioritised and our economic and political systems have continued to widen inequality among people and between humanity and the rest of nature.

There might be a positive side to the regression that has been seen in the headlines: People are a beginning to notice and even change a little. Simple things like avoiding over packaged and out of season food, a bit more exercise and mindfulness (Pam really is a good yoga teacher who will help you feel parts of your body that you didn’t know existed, as I find out more and more!), and becoming more aware that a top down control model of society is not what we want, even if we are higher up the ladder than others. We are finding out that democracy without thought cultivates demagogues (as Socrates warned) and capitalism’s dark side is becoming ever more present as organisations amass control over public resources and our personal choices, even in rich countries – who would have though that the standard of living for those with less opportunity (say the lower 25% income bracket) has declined in the past decades!? So perhaps in the coming year more people will look up and ask “what is it really all for?” “how can I be more human?” “what can I do to make a difference?”

Our connection to nature is smothered by the technologically advanced virtual world we have chosen, from climate controlled buildings, to cars, planes and trains to whisk us hither and thither, to mod cons, to packaged food, to computers and mobile phones which allow us to communicate without facing another person. It seems normal, but it’s not natural – we’ve adapted well. But to live, rather than merely exist, our spirits need succour and that means connecting to real people and touching real nature. Enjoy that while we can.

So, if you want to touch nature, join us next week when we’ll host our Walk in the Woods here. We enjoy the gathering of people who we otherwise might not meet and many of whom we see too infrequently. The atmosphere in the woods and along the river seems to lift everyone’s spirits. Children enjoy clambering over logs and squishing through mud. Tea afterwards is accompanied by chat and laughter as friends catch up. We love it.

And if you like our eclectic perspective please stay in touch, join a yoga class, come for a holiday in nature, or read about how new perspectives can liberate your spirit.

Bounce, wobble, smile.

Pam and Tom

Bitcoin: the World’s first decentralised Ponzi scheme by David Webb

This article by David Webb is insightful and brief.  You may have no interest in Bitcoin, however, his observations are relevant to banking and the financial system.  For me, one conclusion is that it is immoral to support (buy) bitcoin, on the level of gambling, and, if you understand it as a pyramid scheme, morally worse than gambling because the scheme is destabilising and fraudulent (in that people don’t know what they are getting in to).

The original is here: Bitcoin: the World’s first decentralised Ponzi scheme  You may sign up for Webb’s free newsletter, which is particularly relevant for Hong Kong financial markets.

Summary: So long as we have governments with the power to tax and spend in their own currencies, digital pseudo-currencies will never gain traction. Bitcoin and its imitators are a zero-sum game in which the sum of all fiat currency paid for it is the sum of all fiat currency received for it, excluding mining costs. The earlier participants are now cashing out the billions that newcomers are putting into this distributed Ponzi scheme. Play it for entertainment value if you want, but remember that you are purely betting on the greater stupidity of others.

Continue reading Bitcoin: the World’s first decentralised Ponzi scheme by David Webb

My excuse for being lazy …

My excuse for being lazy is thinking up new ideas.

So why would I admit to laziness?

Guilt.  It’s increasingly clear that people are amazing.  Not just celebrities on TV, also regular people.  People who make our lives better,. People who work hard for family and friends and good causes.  Shop owners, tradespeople, “employees”,  and people who don’t have work, resources, maybe even friends, who share their talents and energy to help others.  Real people.  That’s a challenge to follow.  So I’m feeling a bit guilty.

And what were these ideas that I took time off to think up? Continue reading My excuse for being lazy …

The Cloud Problem

When people started referring to the internet as the cloud, it was more confusing than helpful.  Well, it helped some tech companies market themselves by creating a kind of insiders’ cachet of people who knew what the cloud was, but it created the delusion that the cloud was something different than the world wide web, the internet.

The term “the cloud” is a gimmicky and confusing way of describing the idea of having access to resources elsewhere on the internet via your device (PC, phone, tablet etc).  A decade ago it was already common for people to download files from websites – that was using the cloud.  People working in companies with internal networks could login to their office server from home in order to access their files – that was using the cloud.

As the “cloud” terminology started to be hyped by tech companies services like file sharing and storage began to be marketed with clever names and fancy adverts.  There was no new special cloudish technology but new packaging and marketing of certain capabilities of the web.  Well that’s OK if it helps people use the internet more easily.

But the dynamic has changed.  Continue reading The Cloud Problem

The Blue Economy

Here’s a nice 6 minute video that puts us in the picture.  The big picture.

It’s not the whole story, but its brief and is a super introduction and a refresher for old hands..

We are past the point of stopping disruption.  It was 15 oC this evening.  (Ireland, December) 13 oC would be OK, maybe in the realm of normality.  But 15oC is not a symptom of normality.

And then there’s the data.  We believe in data because we live off it.  It is data that runs our lives, our businesses, our cell phones.  And data shows us what’s going on, what’s behind the hype.  So check out the movie and research some data.  Change is happening. Adapt.

ZERI, initiated by the founder of Ecover, explains why the “green” economy must evolve to the “blue” economy and how …

Drawdown – a comprehensive plan to reverse global warming

Paul Hawken has edited Drawdown,  a comprehensive review and analysis of tangible actions that can mitigate the destruction of the natural environment which is now being precipitated by anthropogenic pollution and is most visible in global warming.  Drawdown is the work of many professionals collaborating to synthesise practical mitigation actions.

Yesterday he collaborated with The Security and Sustainability Forum to present a summary of the book via webinar.  The video is shared below and you can follow through the slides shared by Edward Saltzberg MD of SSF here:  The slides include summary financial and carbon data of the impact of various remedies.

Drawdown – 60 Minutes with Paul Hawken from Security & Sustainability Forum

The Mushroom Hunters

This poem by Neil Gaiman was shared at the funeral of Marquerite Konig which I was fortunate to attend.

Margueritte shared her energetic, inspirational soul for 98 years!  She even touched me, though I never met her, as I heard of her recent escapades from  her son.

The poem is an insightful endorsement of observation and higher values.

The Mushroom Hunters

by Neil Gaiman

Science, as you know, my little one, is the study
of the nature and behaviour of the universe.
It’s based on observation, on experiment, and measurement,
and the formulation of laws to describe the facts revealed.

In the old times, they say, the men came already fitted with brains
designed to follow flesh-beasts at a run,
to hurdle blindly into the unknown,
and then to find their way back home when lost
with a slain antelope to carry between them.
Or, on bad hunting days, nothing.

The women, who did not need to run down prey,
had brains that spotted landmarks and made paths between them
left at the thorn bush and across the scree
and look down in the bole of the half-fallen tree,
because sometimes there are mushrooms.

Before the flint club, or flint butcher’s tools,
The first tool of all was a sling for the baby
to keep our hands free
and something to put the berries and the mushrooms in,
the roots and the good leaves, the seeds and the crawlers.
Then a flint pestle to smash, to crush, to grind or break.

And sometimes men chased the beasts
into the deep woods,
and never came back.

Some mushrooms will kill you,
while some will show you gods
and some will feed the hunger in our bellies. Identify.
Others will kill us if we eat them raw,
and kill us again if we cook them once,
but if we boil them up in spring water, and pour the water away,
and then boil them once more, and pour the water away,
only then can we eat them safely. Observe.

Observe childbirth, measure the swell of bellies and the shape of breasts,
and through experience discover how to bring babies safely into the world.

Observe everything.

And the mushroom hunters walk the ways they walk
and watch the world, and see what they observe.
And some of them would thrive and lick their lips,
While others clutched their stomachs and expired.
So laws are made and handed down on what is safe. Formulate.

The tools we make to build our lives:
our clothes, our food, our path home…
all these things we base on observation,
on experiment, on measurement, on truth.

And science, you remember, is the study
of the nature and behaviour of the universe,
based on observation, experiment, and measurement,
and the formulation of laws to describe these facts.

The race continues. An early scientist
drew beasts upon the walls of caves
to show her children, now all fat on mushrooms
and on berries, what would be safe to hunt.

The men go running on after beasts.

The scientists walk more slowly, over to the brow of the hill
and down to the water’s edge and past the place where the red clay runs.
They are carrying their babies in the slings they made,
freeing their hands to pick the mushrooms.

Our Suicide is Painless

Yesterday was an unusual day filled with seemingly inane chores that had to be done.  I was arriving back home in the afternoon with groceries for guests and planned to turn the hay.   I drove past a field adjacent to our where a tractor was spraying and turned in to the drive to be greeted by a distasteful, though recognisable, toxic smell.


Usually I’d just accept that that landowner had to spray to make a living, but I didn’t like the idea that our hay was being contaminated while it was looking so good.  Unusually, I decided to take another angle, dropped the bags on the kitchen floor, said “Hi!” to guests and spun the car around back up to the field.

After working out which row the tractor was in I walked up to the driver, who kindly stopped and helped me get n touch with the landowner.

The driver said the spray  was only to stop “disease”.

The landowner said it was only to stop “disease”.

They both said it was “OK”.

The contractor couldn’t come back on a still day because he had to empty the tanks since the pesticide had been paid for.  The wind might die down so he could wait a bit.  I knew the spray would still be sprayed, and would drift.  Hopefully little would drift, though you could see a 20  metre tail behind the tractor and smell it quarter of a kilometre away.

I asked what it was.  “I dunno.  Let’s have a look.”

So we did. It was Imtrex.

Imtrex – dead fish, dead tree, dead human …

“Wow.  Look at the labels on it! Dead fish.  Dead tree.  Heart attack.  C’mon! This can’t be good.”

It’s weird though.  It’s being sprayed right on the ears of ripening barley, and we’re going to eat it.  There’s poison on it , and we’re going to eat it.  We’re killing ourselves and enjoying it.

We don’t make the connection between our demand for cheap, convenient food and lifestyles and the consequential impairment of diet and lifestyle.  Our monolithic food chain, standardised automated production, controlled by capitalists is withering our soul and costing our health.  Apart from the increased incidence of cancer which only affects a third or so of us, almost everyone is affected by the lower quality of food – processed, refined, packaged with a fraction of the dietary health benefits of real food, but extra poison.

Yet we all buy in to it.  We all live the lie.  The farmer can’t make ends meet if he doesn’t.  (Ironically, I found out since that this “T3” third treatment for “disease” was being applied too late, as the ears were grown, and so wouldn’t improve yield, although the farmer could prove he sprayed the “treatment”.)   We can’t make ends meet f we don’t play the pyramid consumption game.  So we all turn a blind eye to our gradual suicide.  It’s fairly painless anyway.

But it could be different.  It would be different if we all chose differently.  It doesn’t have to be much at first, but even little thoughtful choices make a difference.  And they lead to bigger thoughtful choice.  And when everyone starts choosing differently, the world changes fast.  So whether you’re in the tractor, in the shop, regulating the chemical, making the chemical, or financing the chemical, don’t turn a blind eye.  Think, and choose to change a little.

Because dying can be easy or hard, and withering from poison is not easy.

Blogging The Big Picture