Not everyone wants to wait until they’re 65 to retire. Here’s how you can retire at 45 with $40,000 in passive income every year. https://t.co/nLcRl96uxA pic.twitter.com/UnmNESI5da
— CNBC (@CNBC) January 17, 2023
Gratitude 101
“Acknowledging the good that you already have in your life is the foundation for all abundance” — Eckhart Tolle
Gratitude is being thankful for what you receive in life. Not just tangible ‘things’ but also feelings, experiences, interactions, anything at all, from big, life-changing things, through to the smallest and most subtle, like awakening each morning.
Thus, the first step to expressing gratitude is to fully understand what it means and it’s definition. Robert Emmons, a professor at UC Davis and leading expert in gratitude has a comprehensive, two-part definition of gratitude:
- Gratitude is an affirmation of goodness. By expressing gratitude, we acknowledge that there are good things in the world and that we’ve received its gifts and benefits. It’s important to note that gratitude doesn’t ignore the bad things and hassles of life, but rather encourages us to identify some amount of goodness in our life.
- Gratitude involves figuring out where that goodness comes from. Expressing gratitude often reveals that many sources of goodness are outside of ourselves. We can still be proud of our traits and what we accomplish, but Dr. Emmons believes that true gratitude involves a humble dependence on others. By this he means that we acknowledge that other people’or even higher powers, if you’re of a spiritual mindset’help us achieve the goodness in our lives.
Expressing gratitude may seem like a light and fluffy practice, but it has significant and measurable benefits. In one study executed by Dr. Emmons, two groups of people were asked to keep a weekly journal. One group filled it with expressions of gratitude. The other wrote about the stressors or neutral events of their lives. The results: those who kept a gratitude journal exercised more regularly, had fewer physical ailments, and felt better and more optimistic about their lives.
The benefits of gratitude are:
Wellbeing – Gratitude has been shown to improve optimism, happiness, alertness and attentiveness, enthusiasm, progress towards goals, and energy levels. It has also been associated with fewer depressive symptoms, reduced stress, being more patient and thus, making better long-term decisions.
Relationships – Gratitude has also been linked with better prosocial interactions. Basically, it’s great for all your relationships.
Health – Gratitude has also been linked to better overall physical health, and specifically improved sleep, increased exercise, and reduced blood pressure.
“When you go deeply into the present, gratitude arises spontaneously, even if it’s just gratitude for breathing, gratitude for the aliveness that you feel in your body. Gratitude is there when you acknowledge the aliveness of the present moment.” — Eckhart Tolle
Gratitude research has found:
- Daily discussions of gratitude results in higher reported levels of alertness, enthusiasm, determination, attentiveness, energy and sleep duration and quality.
- Gratitude is a relationship-strengthening emotion because it requires us to see how we support and affirmation from others.
- People who rank higher on gratitude scales are less likely to retaliate against others and experience more sensitivity and empathy towards other people.
- Writing in a gratitude journal improves sleep.
- Gratitude reduces social comparisons and increases self-esteem.
There is significant evidence on positive benefits of gratitude – health, wellbeing, and relationships — and the benefits are shown over time,
References:
Be Grateful Always
“The best way to show your gratitude to God and people is to accept everything with joy….We may not be able to give much but we can always give the joy that springs from a heart that is in love with God. All over the world people are hungry and thirsty for God’s love. We meet that hunger by spreading joy. Joy is one of the best safeguards against temptation.” ~ Mother Teresa
Simply put, gratitude is both a mindset and a habit. It’s a way of looking at the world and all the good things in it with a feeling of appreciation, regardless of whether or not your current situation is to your liking.
Gratitude is a heart-centered approach to being at peace with yourself and with all you have. When you practice this feeling of gratitude, it attracts even MORE things into your life for which to be grateful.
Mother Teresa is credited with saying, “Gratitude to God is to accept everything, even my problems, with joy.” In short, be grateful and joyful always, in both the good times and bad times
Gratitude makes us humble and elevates us to a higher way of living at the same time, writes Jack Canfield. In all of the stages, ebbs, and flows of our lives, we can be grateful for the life we are living.
We’re either living our best life or preparing to.
To increase your gratitude and attract more abundance to your life, focus on being grateful always.
The best way to activate your gratitude is by acknowledging the gifts most people take for granted, explains Canfield. If you have food in your refrigerator, clothes in your closet and a roof over your head, you are better off than 75 percent of the world’s population.
If you eat three meals a day, you are far better off than the 1 billion people on the planet who eat once a day at most.
Do you have a phone? How about a car that allows you to travel to work or to explore the country? Is your family healthy? Do you have a computer and Internet access to stay in touch with the world, get access to education, and perform work for which you are paid? Do you have clean water to drink?
Celebrate these simple blessings. These daily conveniences are gifts that most people across the world do not enjoy.
a short story about gratitude.
A blind boy sat on the steps of a building with a hat by his feet. He held up a sign which read, “I am blind, please help.”
There were only a few coins in the hat – spare change from folks as they hurried past.
A man was walking by. He took a few coins from his pocket and dropped them into the hat. He then took the sign, turned it around, and wrote some words. Then he put the sign back in the boy’s hand so that everyone who walked by would see the new words.
Soon the hat began to fill up. A lot more people were giving money to the blind boy.
That afternoon, the man who had changed the sign returned to see how things were. The boy recognized his footsteps and asked, “Were you the one who changed my sign this morning? What did you write?”
The man said, “I only wrote the truth. I said what you said but in a different way.”
I wrote, “Today is a beautiful day, but I cannot see it.”
Both signs spoke the truth. But the first sign simply said the boy was blind, while the second sign conveyed to everyone walking by how grateful they should be to see…
References:
Return on Invested Capital
Investors should give serious consideration to a company’s return on invested capital (ROIC) before they invest in a company by purchasing that company’s stock.
Investor educational company, Compounding Quality, provides the following example. Suppose that there are 2 companies:
- Company A: ROIC of 5% and reinvests all its profits for 25 years
- Company B: ROIC of 20% and reinvests all its profits for 25 years
Can you guess how much company A and B would be worth if you invested $10,000 in both (assumption: valuation remains constant)?
In this example, an investment in company A would be worth $33,860 while an investment in company B would increase to $953,960!
This simple example beautifully shows the importance of ROIC and the power of compounding.
ROIC is a measure of how much cash a company gets back for each dollar it invests in its business.
ROIC is a much better predictor of company performance than either return on assets or return on equity. In ROA and ROE, the key metric is net income. Net income often has nothing to do with the profitability of a company. Significant expenses are not included in net income such as interest income, discontinued operations, minority interest, etc. which can make a company look profitable when it is not.
Also, ROA measures how much net income a company generates for each dollar of assets on its balance sheet. The problem with using this metric is that companies can carry a lot of assets that have nothing to do with their operations, so ROA isn’t always an accurate measure of profitability.
Companies with higher-than-median ROIC (when viewed in conjunction with their overall capital-expenditure and operating-expenditure strategy) will deliver better returns over the long term. A high ROIC rewards companies that are able to produce the highest net operating profit with the least amount of invested capital.
What does ROIC mean?
Return on Invested Capital ratio provides insight into the extent to which a company efficiently allocates capital to profitable investments or projects, thereby generating returns. Comparing the ROIC to the weighted average cost of capital (WACC) reveals whether or not this is happening effectively.
ROIC basic formula
The basic formula for ROIC is as follows:
ROIC uses net operating income after tax (NOPAT) in the numerator. This is obtained by reducing EBIT (“Earnings Before Interest and Tax”) by the prevailing tax rate.
For the denominator, this ratio uses invested capital. That equals total assets (current and fixed assets) minus non-interest-bearing current liabilities (all current liabilities excluding bank loans and leases).
- Current assets = all items that are relatively easy to convert to cash such as inventories, trade receivables, cash investments and cash.
- Fixed assets = all operating assets used by the company for a long time such as land and buildings which are considered tangible fixed assets. However, there are also intangible fixed assets to be taken into account, such as patents and goodwill.
- Current liabilities = current liabilities with a maximum repayment period of one year such as, for example, supplier credit or taxes payable.
Relationship between ROIC and WACC
Revenue growth and return on invested capital are the basis of value creation. However, regardless of revenue growth, the return on invested capital must always exceed the cost of capital. Even high sales growth combined with too low a ROIC will always result in loss of value. After all, excessive costs eat into profits. So, reducing costs takes precedence over revenue growth.
The cost of capital includes the minimum expected weighted average return (WACC) of all investors for bearing the risk that the future cash flows of an investment may deviate from expectations.
Consequently, the ROIC result should always be compared against the WACC. Only when the ROIC is greater than the WACC can it be concluded that the company is earning more than the cost of capital and thus creating value. The formula to calculate the Weighted Average Cost of Capital is equal to the firm’s average cost of capital (cost of equity + cost of debt).
The basic ROIC formula includes by default all excess cash, goodwill and acquired intangible assets (patents, brands, etc.). If you use a minimum ROIC of say 15%, you will already be able to eliminate a lot of companies from your list. What remains are companies for which you know with certainty that they create value.
What is ROIC?
It's one of the most important financial metrics in the world.
Here's everything you need to know: pic.twitter.com/IwuYPE6IWd
— Compounding Quality (@QCompounding) January 8, 2023
As an investor, you are searching for companies that are cash flow and earnings compounding machines. These companies have a high and consistent ROIC with plenty of reinvestment opportunities. This will allow the company to grow its free cash flow exponentially.
References
- https://qualitycompounding.substack.com/p/what-you-need-to-know-about-return
- https://www.chartmill.com/documentation/fundamental-analysis/indicators-and-ratios/416-Return-on-Invested-Capital-ROIC
- https://www.thestreet.com/opinion/10-stocks-with-high-return-on-invested-capital-and-why-you-should-care-13279076
Markets Closed in Observance of MLK, Jr. Day
All major U.S. stock and bond markets will be closed on Monday January 16, 2023, in observance of Martin Luther King, Jr. Day.
Box Breathing
Box Breathing is a good tool if you’re feeling anxious or highly stressed. It is a very useful technique to help slow down your breathing. It is also a technique used a lot by first responders and even Navy seals to help them remain calm and improve their concentration in order to respond to difficult and stressful situations.
Box Breathing works when you feel stressed or anxious by helping to distract the mind, as it’s focused on the deep breathing and counting, which then in turn helps calm the nervous system, lower your blood pressure and calm the heart, as well as helping you think and behave more clearly and rationally.
How does it work?
- Breathe in through your nose for the count of 4
- Then hold for the count of 4
- Exhale for the count of 4
- Again, hold for the count of 4
Repeat as many times as you need to until you begin to feel relaxed and calm.
Breathing properly brings more oxygen to your brain, helps your body and your mind to relax and heal, expands and strengthens your lungs, and calms your nerves. Box Breathing done consistently, first thing in the morning, a few times throughout the day, and right before bed can and will work wonders!
Collagen
Collagen is the single most abundant protein in the human body. Mayo Clinic
Collagen’s main purpose is to impart physical structure. Your bones are built on a matrix of collagen, your organs are held together by collagen, your skin is composed of a dense network of collagen, your joints are made-up of collagen, even your blood vessels rely on collagen for structural integrity. Needless to say, collagen is an all-important substance that is vital to health, beauty and well-being.
Collagen is concentrated in bones, ligaments, tendons, skin, blood vessels and internal organs. It helps provide elasticity and strength. As you age, you begin to lose the collagen within your body, and it becomes harder for you to make more.
At least 30 percent of your body’s protein content is made from collagen. Collagen is made from four amino acids, which are the building blocks for protein: proline, glycline, lysine and hydroxyproline. These amino acids are grouped together in a form known as a triple helix, and that is what makes up collagen. For this triple helix to be formed, you need to have enough vitamin C, zinc, copper and manganese in your diet.
Within the human body, 29 types of collagen have been identified, with three types making up the vast majority, according to the Mayo Clinic.
These are the types you’ll usually find in a collagen supplement:
- Type 1 – This type is found in bones, ligaments, tendons and skin for elasticity and strength. The supplement source comes from bovine and fish.
- Type 2 – This type is cartilage. The supplement source comes from chicken cartilage and joint.
- Type 3 – This type is found alongside type 1 in skin, blood vessels and internal organs. The supplement source comes from bovine.
From a general health perspective, it is important to ensure adequate protein within your diet. As you age, your protein needs increase slightly to maintain lean body mass. Consuming foods that contain the primary amino acids that make up collagen may help support skin, hair, nail and joint health as you age.
These foods are good sources of glycine, proline, lysine and hydroxyproline:
- Bone broth
- Unflavored gelatin
- Dairy, especially parmesan cheese
- Legumes
- Non-genetically modified soy, such as tofu
- Spirulina
- Animal sources, such as red meat, poultry, pork, fish and eggs
To support the formation of collagen, it is also important to ensure adequate intake of foods that contain vitamin C, zinc, copper and manganese, writes the Mayo Clinic. These nutrients can be found by eating a varied diet rich in fruits and vegetables, including green leafy and root vegetables, along with nuts and seeds – especially hemp, pumpkin and cashews.
Finally, being mindful of what can damage collagen production is important. Such factors include excess sugar intake, smoking, sun exposure or ultraviolet light, and environmental pollutants.
Unfortunately, collagen breaks down with age and diminishes over time. This loss of collagen is believed to be a primary cause of “aging” and has been linked to numerous health issues – including weaker joints, thinner cartilage and dry, wrinkled skin.
Collagen supplements can deliver targeted nutrition and bioactive collagen peptides to help counteract the loss of collagen as you age.
If you are planning to take a collagen supplement, either in liquid or powder form, it is important to mention that the triple helix that makes up collagen is unable to be absorbed in its whole form, according to the Mayo Clinic. It will first be broken down into individual amino acids within the gastrointestinal tract before reaching the bloodstream. The body will then reassemble and form new proteins where it sees necessary and for a use it feels is needed.
These new proteins may not contain the same amino acids that were initially ingested in the collagen supplement, and it is unknown if these restructured proteins will target the area a supplement manufacturer is advertising. Therefore, it is undetermined at this time if the body will use a collagen supplement that is purported to help skin, hair, nail and joint support to actually make collagen that would do so. In addition, limited large and long-term randomized control trials support the use and recommendation for collagen supplements for the general public.
Hydrolyzed collagen supplements advertise that they are a special type of protein that is “pre-digested” or broken down into smaller peptides for enhanced absorption into the body. Several studies have demonstrated that hydrolyzed collagen peptides are quickly absorbed after ingestion and readily deposited in the body’s tissues, where they act as building blocks and may help to trigger your body’s own internal collagen production.
Source: https://www.newstribune.com/news/2021/aug/31/Mayo-Clinic-Q-A-Collagen-and-biotin-supplements/
Give Your Best Anyway
“If you are kind, people may accuse you of selfish, ulterior motives: Be kind anyway. If you are successful you will win some false friends and true enemies: Succeed anyway. If you are honest and frank people will try to cheat you: Be honest anyway. What you spend years building, someone could destroy overnight: Build anyway. If you find serenity and happiness, they may be jealous of you: Be happy anyway. The good you do today, will often be forgotten by tomorrow: Do good anyway. Give the world the best you have, and it may never be enough: Give your best anyway.”
“Be happy in the moment, that’s enough. Each moment is all we need, not more.”
FTC Proposes to Ban Noncompete Clauses
The Federal Trade Commission proposed a rule to prohibit employers from imposing noncompete clauses on employees — a widespread practice that economists say suppresses pay, prevents new companies from forming and raises consumer prices, according to a Washington Post article.
The ban would make it illegal for companies to enter into noncompete contracts with employees or continue to maintain such contracts if they already exist, and it would require that companies with active noncompete clauses inform workers that they are void. Such agreements typically prevent workers from getting jobs at a competitor of a current or former employer for a defined period.
The FTC estimates that banning noncompete contracts would open new job opportunities for 30 million Americans and raise wages by $300 billion a year. If enacted, the rule could send shock waves across a wide range of industries.
One widely cited survey of economists from 2014 found that close to 20 percent of workers in the United States are bound to noncompete clauses across a variety of jobs, from hairstylists to software engineers to nurses. These contracts have forced workers to take on loads of debt during lengthy job searches, locked workers out of their own professions or shunted them into lower-paying industries.
A growing body of research shows that noncompete contracts reduce wages and mobility for workers across various industries by ensuring that employers do not have to compete against one another for workers by raising wages or improving working conditions.
The U.S. Chamber of Commerce contends in a letter to the FTC that reasonable non-compete clauses are pro-competitive because they protect an employer’s special investment in, training of and disclosure of sensitive business information to its employees. For these reasons, state legislatures and courts nationwide continue to protect and enforce such clauses. Moreover, in recent years, many states have adopted non-compete laws that restrict non-compete clauses in order to prevent abuses and to regulate to whom they may be applied, the circumstances in which they are appropriate, and to ensure procedural protections.
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The Power of Compounding
There are two things to direct your attention to.
- First, the power of compounding. A 12% return in one year isn’t life changing, but stay invested for 20 years and, on average, you’ve grown your capital nearly ninefold.
- Second, notice that the lowest number on the chart is the worst one-year return, a 39% loss. As the time extends, not only do the average results improve, but the worst losses also get smaller.
Over the long-term, the worst 20-year S&P 500 returns result has been a gain of 155%. The fact that risk decreases with time is apparent in the annualized standard deviations, which are lowest for the longest holding periods. That means the annual returns are not independent of each other, but rather, are mean reverting. And that’s good to know after a year like this year.
That’s why buying stocks only for investors who can leave their money in the market for multiple years is encouraged. If you expect to cash in your stocks in just a year, you expose yourself to a loss that is multiples of your expected gain. If you can wait five years to cash in, your expected gain is multiples of the worst historical loss. And if you can wait 20 years, there has never been an outcome worse than doubling your investment.
You shouldn’t buy stocks if you expect to sell within five years. And you’re also discouraged market timing. Most investors tend to throw in the towel after large losses and go all in after large gains. History says the opposite has produced better results market tended to increase more than usual following a bear market. The average two-year increase was 33% after hitting down 20%, meaning the market had usually recovered more than all its losses within two years. Further, that 33% gain was nearly double the median two-year increase. This positive outlook can be hard to wrap your arms around given that most advice you hear, especially from professionals, is to get more cautious after the market has fallen.
The tendency of good periods following bad and vice versa is part of the reason why the long-term risk-return characteristics of equities have been so favorable. The table below shows the average 1-, 5-, 10- and 20-year total returns for the S&P 500 for the past 77 years and the best and worst returns for each period.
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