Mindset: Steps to Success

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“A mind is a terrible thing to waste.” ~ Arthur Fletcher

The mind is a powerful and extraordinary thing. And, your mindset shapes your happiness, success and ultimately the direction and destination of your whole life.

Essentially, “mindset is a way of thinking; it is a habitual opinion or attitude that affects thinking”, explains Aaron Jarrels, a Licensed Therapist, and Certified Motivation & Mindset Coach. “A strong and growth mindset is confident, focused, determined, and maintains a desire to learn.”

Your life is a reflection of your habits and thoughts, and habits and thoughts are driven by your mind. Thus, the mind is everything… you become what you feed to it and what you focus on.

By developing the right mindset you can achieve almost anything. A growth mindset on the other hand, rewards those who want to get better at something. When you believe that you are capable of learning to do something, it sparks hope in the future.

Thus, it’s important to design your mindset and life for growth, learning and continuous expansion and improvement. Here are several steps:

1. Positive thoughts and outlook. Use positive thoughts and words to evoke feelings of strength, confidence, courage and success about yourself. Practice being kind and loving to yourself. You need to be able to keep yourself encouraged. Focus on the traits and skills that you like and that are productive, because what you focus on expands. Direct your thoughts towards the belief that you will succeed and achieve your life’s goals. But if you fail, embrace the failure, analyze, learn and grow from what went wrong. Give yourself credit and kudos for having the courage to try.

2. Build systems and a routine. Before you can permanently change your thoughts, you have to change your habits and behaviors. You must take responsibility and be accountable for you actions and behaviors. Discipline, patience and long-term perspective breed a positive mindset because you’re motivated by results and concentrating on achieving your goals. Delayed gratification is a key trait of successful people, states Jarrels. If you cannot control yourself and your desires, you will always be a slave to your impulses. When you develop the ability to maintain self-control, you conquer your biggest foe, your impatience. Owning your faults and how you respond gives you the power to change them.

3. See beyond today and maintain a long-term perspective. What the mind believes, the body achieves. Believe you can win. Visualize and focus on the end result, creating a mental image of the future you’re striving to achieve. Visualizing the desired outcome allows you to begin to accept the possibility of achieving your desired outcome. Perception is reality and the brain can be positively hacked with this simple strategy. And, be mindful of your tongue. If, you catch yourself saying “I can’t” you should stop immediately and replace it with “How can I?” Doing this will prime your mind and brain to look for possible solutions that were not imaginable prior. By asking “How can I?” you are creating a place for the desired outcome as well as the path to get there.

4. Step away from safety and liv outside your comfort zone. Operating in an stress free environment and using a limited set of behaviors won’t increase your performance or growth. It’s facing your fears and dealing with your challenges that allows you to realize your goals and to grow mentally, physically and emotionally. If you take risks and are willing to accept and learn from setbacks, nothing can stop you! Remember, if it scares you and makes you uncomfortable, it’s probably the right course of action to catalyze some next level personal growth.

High performance and growth is not realized when you’re comfortable and steering clear of stressful situations. You’re restricted by your self-imposed limiting beliefs. Becoming abundantly successful in whatever goal you want to achieve is simply a mindset shift away.

Developing a strong mindset takes the decision not to give up. It takes a willingness to grow and become more than you currently are now. It takes a strong determination to focus on what’s good, what’s going well and what’s positive in your life. It takes living a life of faith, rather than a life of fear.

Additionally, a strong mindset is one that sees, what others call failure as lessons and successes as steps along the way.

“The mind is everything. What you think you become.” ~ Buddha

References:

  1. https://aaronjarrels.com/how-to-develop-a-strong-mindset/
  2. Peter Oakden, There’sNo Such Thing as Luck: 4 Steps to Abundant Success, Muscle and Health Magazine: The Wealth Issue, Fall 2022, pg. 89.
  3. https://www.setquotes.com/a-mind-is-a-terrible-thing-to-waste/

Minimum Book Corporate Income Tax

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Book income is the amount of income corporations publicly report on their financial statements to shareholders. This measure is useful for assessing the financial health of a business but often does not reflect economic reality and can result in a firm appearing profitable while paying little or no income tax. ~ Tax Foundation

In August, President Biden signed a minimum book income tax into law under the 2022 Inflation Reduction Act. The law was passed in both chambers of congress by Democrats.

Book income is the amount of income corporations publicly report on their financial statements to shareholders, explains the Tax Foundation.

The appeal of the minimum book tax for Democrats is two-fold, explains Laura Davison, in an article written for Bloomberg.com.

  • First, the minimum tax goes after corporations that many Democrats say don’t pay enough in taxes.
  • Second, it’s a way to raise taxes on corporations without increasing the 21% headline tax rate.

Senator Joe Manchin, Democrat (WV), says the minimum tax doesn’t so much raise taxes as close a loophole — even though it would mean that some corporations have to pay more to the federal government.

The law enforces a 15% corporate minimum tax targeted at companies that earn more than $1 billion a year. President Joe Biden cited a report in his State of the Union address that found that 55 companies paid no federal income taxes in 2020, despite earning profits under the standards of GAAP.

The corporate minimum tax would require companies with at least $1 billion in income to calculate their annual tax liability two ways:

  • One using longstanding tax accounting methods, which is 21% of profits less deductions and credits;
  • The other by applying the 15% rate to the earnings they report to shareholders on their financial statements, commonly known as book income.

Whichever amount is greater would be what they owe to the IRS.

A corporation’s profits for tax purposes and for financial reporting to shareholders often vary. Book income sticks more closely to generally accepted accounting principles, or GAAP, while the Internal Revenue Service code includes a slew of deductions and credits that companies can use to offset their income. 

This roundabout method to collect more money from corporations provides much of the new revenue to fund the energy investments and deficit reduction that Democrats are hoping to tout in the midterm elections this November.

References:

  1. https://www.bloomberg.com/news/articles/2022-08-01/how-the-15-us-minimum-corporate-tax-would-work-quicktake
  2. https://taxfoundation.org/tax-basics/book-income-vs-tax-income/

Social Security Trust Fund

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Social Security’s Trustees project that the trust fund will be depleted in 2034. At that point, 71 million beneficiaries could face across-the-board Social Security benefit cuts of 23 percent if elected leaders fail to act.

With the retirement of baby boomers and lengthening life expectancies, programs critical to older Americans, such as Social Security, will come under significant strain in coming decades. Social Security’s Trustees project that the combined Old-Age and Survivors Insurance and Disability Insurance (OASI) trust fund will be depleted in 2034. At that point, 71 million beneficiaries could face across-the-board Social Security benefit cuts of 23 percent if policymakers fail to act.

Social Security is the primary source of retirement income for million of Americans. But without action, it will lack sufficient resources to pay for all of the benefits promised under current law.

Almost every American worker pays a dedicated payroll tax, which entitles them to benefits when they retire or become disabled. But as the population ages, fewer workers will be paying taxes to support each Social Security beneficiary, thereby endangering the program’s finances.

Understanding the importance of the Social Security program for low-income Americans is a critical aspect of reforming the program in a fair and equitable way.

In 2018, Social Security was responsible for lifting almost 22 million Americans out of poverty, nearly 15 million of whom were seniors age 65 and older.

Options for improving the financial outlook of Social Security’s retirement program include:

  • Increasing payroll taxes. Raise the payroll tax rate from its current level of 12.4 percent (half paid by employees and half by employers) on wage earnings subject to the tax. In 2022, earnings up to $147,000 will be taxed.
  • Raising the full retirement age. Propose increasing the retirement age above age 67 for younger cohorts to account for future gains in average longevity.
  • Reducing initial benefits. Change the amount that retirees can receive when they first apply for benefits. Many proposals combine a reduction in benefits for high earners with an increase in benefits for lower earners. (This is known as “progressive price indexing.”)
  • Adjusting benefits after retirement. Slow the growth of retirees’ benefits over time by changing the cost-of-living index. Many economists believe that Social Security currently uses an index that overstates inflation, so benefits grow faster than the true cost of living. They propose replacing the current index with chained-CPI, which is a more accurate measure of inflation. (That change would also apply to other inflation-indexed federal retirement programs and tax provisions.)

These proposals are intended to put Social Security’s finances on a long-term sustainable footing.

References:

  1. https://www.pgpf.org/finding-solutions/retirement

Investing Lessons Learned

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“To maximize returns, buy stocks when everyone hates them and sell them when everyone loves them. This is easy in theory, but brutally difficult in practice.” ~ Brian Feroldi

Brian Feroldi is a financial educator and he has been saving and investing for 18+ years. From his experiences, below he shares 10 painful lessons he had to learn and sometimes relearn the hard way:

1. You don’t need leverage.

Margin and options are fun on the way up and BRUTAL on the way down. Many investors have lost more than 100% on investment before. Why? Leverage.

Buffett said it best:

2. Optimize for longevity, not upside

Compound interest is the most powerful wealth-building force that exists. But, it only works if you SURVIVE long enough for it to work.

You must avoid investing to optimize for upside potential. Instead, you should follow the barbell method to optimize for longevity.

3. High conviction DOES NOT = correct

If you convinced yourself that a certain stock could only go up. you might be right on some. On others, you may lost significant value.

Conviction is useful, but just because you think you are right doesn’t mean that you are right.

Allocate accordingly

4. Stock prices and business results (and intrinsic value) are 0% correlated in the short-term and 100% correlated in the long-term

Do not sell future mega-winners because their stocks were down (dumb).

Instead of watching the stock, instead focus on the fundamentals of the business.

5. Not having a system

Do not try to keep everything in my head, which was dumb (and impossible).

Instead, use checklists, journals, or watchlist, which are invaluable free tools.

6. Not understanding the P/E ratio

Do not pass on high P/E ratio stocks that went up big and buy low P/E ratio stocks that went down big.

Why? It’s about understanding the P/E ratio’s flaws.

Now, P/E only works in stage 4. It doesn’t work in stages 1, 2, 3 or 5

7. Panic selling and panic buying

Emotions have caused many investors to panic buy hype stocks and panic sell future mega-winners.

It’s easy to say you’ll be greedy when others are fearful, and visa-versa.

It’s hard to actually do it.

8. Study history

Human nature is remarkably consistent. The same forces that drove markets 100+ years still exist in all of us today.

There’s always a smart-sounded reason to sell and it’s important to understand that.

9. Don’t focused on what you can’t control

Do not follow the news closely, or watch for clues to predict the market.

This will be time poorly spent. Macro factors matter, but you have no control over them.

It essential you focus far more on what you can control.

10. Not changing your mind

This one is REALLY hard, but it’s necessary to do well.

Changing your mind is hard. Admitting you’re wrong is hard.

But, @JeffBezos said it best:

Learning invaluable investing lessons, especially from the mistakes of others, is an essential part of becoming a more successful long-term investor.

References:

  1. https://bookshop.org/shop/Feroldi
  2. https://www.marketwatch.com/amp/story/the-critical-money-and-investing-lessons-i-wish-my-younger-self-had-understood-11651762064
  3. http://mindset.brianferoldi.com

Consumer Price Index (CPI) at 8.2% Inflation Rate

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U.S. inflation hits 8.2% in September — hotter than expected. Core CPI surges to 6.6%, the highest since 1982.

A key consumer inflation report, the Consumer Price Index (CPI), came in hotter than expected, signaling that the Federal Reserve will likely continue with aggressive interest rate hikes. Prices consumers pay for a wide variety of goods and services rose as inflation pressures continued to weigh on the U.S. economy.

The consumer price index for September increased 0.4% for the month, according to the Bureau of Labor Statistics. On a 12-month basis, so-called headline inflation was up 8.2%, off its peak around 9% in June but still hovering near the highest levels since the early 1980s. Core CPI, which strips out volatile food and energy prices, rose to 6.6% from 6.3%. Both numbers came in higher than economists polled by the Wall Street Journal had expected.

Source: Bloomberg

The report signals that inflation is a persistent problem even amid large interest rate hikes from the central bank. Going forward, the Fed will likely have to keep delivering increases and keep rates high until there are signs that inflation is cooling off.

References:

  1. https://www.cnbc.com/2022/10/12/stock-futures-are-up-as-investors-await-inflation-data.html
  2. https://www.marketwatch.com/story/u-s-stock-futures-plunge-as-september-cpi-comes-in-hotter-than-expected-01665664995

Mindfulness

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“Mindfulness is about being fully aware of your experiences as they are happening in the present moment. You are aware of your thoughts, emotions, and your body sensations.” Charles A. Francis

Webster’s definition of mindfulness is “a mental state achieved by focusing one’s awareness on the present moment, while calmly acknowledging and accepting one’s feelings, thoughts, and bodily sensations, used as a therapeutic technique.”

Mindfulness is a secular form of meditation that has its roots in the teachings of Buddha over 2,500 years ago. The main goal of the practice was to attain freedom from suffering. This is accomplished by developing self-awareness, or mindfulness, because it was your inaccurate views of the world that trigger your negative emotions and harmful actions.

With mindfulness, you can develop an awareness of the true nature of reality. By observing what is happening within your mind, body, and the world around you, you’ll begin to lift the veil of illusion that creates the suffering in your life, states Charles A. Francis, co-founder and director of the Mindfulness Meditation Institute.

4 Simple Mindfulness Practices

Mindfulness is a powerful practice that can help you avoid a lot of unnecessary anxiety and negative thoughts, writes Francis. It will enable you to cope with life’s many challenges and help you find peace and joy. Here are some of the simple tools you can use, according to Francis.

Mindful breathing. At the heart of the mindfulness practice is mindful breathing. Paying close attention to your breath will help you calm your thoughts and emotions. It will keep you from becoming overwhelmed. All you have to do is occasionally stop what you’re doing, and just observe your breath for a few moments. You can count 5-10 breaths, and then return to what you were doing. That’s it.

Mindful walking. This is another simple practice. Unless you have mobility issues, we all do some walking throughout our day. When walking from one place to another, pay close attention to your footsteps, just like you do with your breath in mindful breathing. If the weather is nice, you can go for a mindful walk. Try keeping yourself in the moment by observing your surroundings. Notice the different sights and sounds of nature. Focus on smelling the fresh air and observing all the critters, both large and small.

Your mind affects your body, and your body affects your mind, perhaps more than you realize.

Sitting meditation. Many people have the misconception that meditation is difficulty, and that they need to clear their mind before they can start meditating. That’s not so. Sitting meditation is actually quite simple. All you have to do is sit quietly for a few minutes, and follow your breath as best as you can. When your mind wanders off, and it will, just keep bring it back to your breathing.

If you’re new to meditation, try it for just 5-10 minutes each session. Then increase the duration as you’re able. Remember, you don’t have to do it perfectly. The ideas is to give your mind a break from the constant stimulation, and simply allow it to calm down naturally. And it will.

Writing meditation. This is a practice helps you overcome stubborn habits that are preventing you from being at peace. What you do is take the scripted meditation, which is a set of affirmations, and copy it by hand over and over. This will imprint the affirmations in your subconscious mind, and they will manifest themselves in your life without any conscious effort. And it only takes about 5 minutes a day.

An article in Fast Company, called How the Pope Does Mindfulness, revealed how company executive Drake Baer practices mindfulness. He practices daily “mindfulness” by:

  • First, remind yourself why you are grateful as a human being.
  • Second, lift your horizon for a moment. Call to mind some crucial personal objective, or your deepest sense of purpose, or the values you stand for.
  • Third, mentally review the last few hours and extract some insight that might help in the next few hours. If you were agitated, what was going on inside you? If you were distracted and unproductive, why?

You can use this executive’s short method and practice mindfulness several times a day. It is beneficial to focus on the present.

References:

  1. https://time.com/4184938/mindfulness/
  2. https://www.catholiccompany.com/magazine/turn-mindfulness-into-god-full-ness-5908
  3. https://mindfulnessmeditationinstitute.org/the-mindfulness-meditation-practice/what-is-mindfulness-meditation/
  4. https://mindfulnessmeditationinstitute.org/2022/07/14/7-powerful-mindfulness-tips-for-better-coping-with-grief/

September PPI 8.5% and Stubborn Inflation

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Inflation at the wholesale level rose 8.5% in September

September’s Producer Price Index (PPI) came in at 8.5% on a year-over-year (y/y) basis and 0.4% month-over-month (m/m) basis, according to the Bureau of Labor Statistics (BLS). Both numbers are higher than expected. Goods (ex-food & energy) added nothing on a m/m basis, but services (which are stickier) were up 0.6% m/m. Not great news in the fight against inflation.

The Producer Price Index (PPI), produced by the Bureau of Labor Statistics (BLS), is an index that measures the average change over time in prices received (price changes) by producers for domestically produced goods, services, and construction. PPI measures price change from the perspective of the seller.

Inflation operates much like a tax, a particularly egregious one that disproportionately falls on the poor and leads to a variety of economic problems, including, as we’re seeing, higher interest rates, slow economic growth, and reduced incomes, according to the Tax Foundation. Inflation reduces every Americans purchasing power.

With inflation stubbornly running high, bondholders and consumers bear much of the burden of inflation over the long run, however a new Congressional Budget Office (CBO) report reveals that lower- and middle-income households are disproportionately shouldering the burden of this current inflation wave.

Inflation is a burden on all those who use U.S. dollars, but the burden varies considerably across users. For instance, it falls particularly heavy on lenders, who subsequently are repaid in less valuable dollars.

In contrast, borrowers benefit from inflation, with the single largest beneficiary being the federal government, as Treasury debt is repaid with less valuable dollars. Publicly held Treasury debt is currently about $31 trillion, larger than the size of U.S. economy measured by GDP.

There is a long history of the federal government using inflation, or money creation, to finance spending instead of taxes, particularly in times of war, states the Tax Foundation. For example, the sharp increase in federal spending during World War II produced large fiscal deficits that were financed by Treasury debt. The debt was purchased by the Federal Reserve through printing money.

References:

  1. https://www.bls.gov/news.release/pdf/ppi.pdf
  2. https://taxfoundation.org/inflation-regressive-effects/

Quotes of the Day

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“I learned that courage was not the absence of fear, but the triumph over it. The brave man is not he who does not feel afraid, but he who conquers that fear.” ~ Nelson Mandela

“My mission in life is not merely to survive, but to thrive; and to do so with some passion, some compassion, some humor, and some style.” ~ Maya Angelou

“Never let the fear of striking out get in your way!” ~ Babe Ruth

“Obstacles are those frightful things you see when you take your eyes off [the prize] your goals.” ~ Anonymous

References:

  1. https://www.t3live.com/blog/2017/12/01/best-trading-investing-quotes/

Atomic Wealth Building Habits

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“You do not rise to the level of your goals. You fall to the level of your systems.” James Clear, a core philosophy of Atomic Habits:

“An atomic habit is a little habit that is part of a larger system. Just as atoms are the building blocks of molecules, atomic habits are the building blocks of remarkable results,” writes James Clear, author of the best selling book, Atomic Habits.

Applying the principles and philosophies of Atomic Habits to your wealth building, money management and achievement of financial freedom can grow into life-altering outcomes.

Focusing on little habits repeated over a long period of time is how to create good habits, break bad ones, and get 1 percent better every day.

Habits are the compound interest of self-improvement. Getting 1 percent better every day counts for a lot in the long-run. “It is only when looking back two, five, or perhaps ten years later that the value of good habits and the cost of bad ones becomes strikingly apparent,” writes Clear.

Thus, habits are a double-edged sword. They can work for you or against you, which is why understanding the details is essential.

Small changes often appear to make no discernible difference in the short term until you cross a critical threshold. The most powerful outcomes of any compounding process are delayed. You need to be patient. “Many of the choices you make today will not benefit you immediately,” Clear explains.

If you want better results, then forget about setting goals. Focus on your system instead. “You do not rise to the level of your goals. You fall to the level of your systems,” stresses James Clear. “Goals are good for setting a direction, but systems are best for making progress,”

Habits Shape Your Identity (and Vice Versa) There are three levels of change: outcome change, process change, and identity change.

Focus on who you wish to become

The most effective way to change your habits is to focus not on what you want to achieve, but on who you wish to become, writes Clear. Your identity emerges out of your habits. Every action is a vote for the type of person you wish to become.

Becoming the best version of yourself requires you to continuously edit your beliefs, and to upgrade and expand your identity. Your behaviours are usually a reflection of your identity. “What you do is an indication of the type of person you believe that you are either consciously or non consciously.,” Clear says.

The real reason habits matter is not because they can get you better results (although they can do that), but because they can change your beliefs about yourself.

A habit is a behavior that has been repeated enough times to become automatic. “Every action you take is a vote for the type of person you wish to become. No single instance will transform your beliefs, but as the votes build up, so does the evidence of your new identity,” said James Clear.

The ultimate purpose of habits is to resolve the routines, challenges and problems of daily life with as little conscious energy and effort as possible.

References:

  1. https://jamesclear.com/atomic-habits
  2. https://waymakerfinance.com.au/blog/applying-atomic-habits-to-your-finances

U.S. Has Vast Quantities of Untapped Oil

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Prioritizing climate change and green energy means that Democrats actually like high gas and fossil fuels prices. ~ American Enterprise Institute

The United States is sitting on 264 billion barrels of untapped oil — more than any other country on the planet, according to a new report from Rystad Energy. The vast quantity includes oil in existing fields, new projects, recent discoveries as well as projections in undiscovered fields.

More than half of America’s untapped oil is unconventional shale oil, according to Rystad. Thanks to fracking and the shale oil boom, the U.S. is sitting on more oil reserves than Russia.

Yet, the Biden Administration’s vow to make Saudi Arabia a pariah nation, to reduce the world’s dependence, and to curtail domestic fossil fuels production has made the United States more dependent on energy from foreign sources, writes Marc A. Thiessen, Senior Fellow, American Enterprise Institute. The hostility towards domestic hydrocarbons has also resulted in higher gasoline prices at the pump and in higher prices to generate electricity with natural gas.

Since taking office, the Biden Administration has leased fewer acres of federal land for oil and gas drilling, suspended all oil and gas leases in Alaska’s Arctic National Wildlife Refuge, and announced plans to block new offshore oil drilling in the Atlantic and Pacific oceans.

And the Biden Administration might be preparing to implement a ban on exports of gasoline, diesel and other refined petroleum products — a move that energy groups warn would backfire by reducing domestic refining capacity and further raising prices for U.S. consumers, explains Thiessen.

Prioritizing climate change and green energy means that Democrats may actually prefer high gas and fossil fuels prices. Higher gas and fossil fuels prices would encourage Americans to abandon fossil fuels. Rising gas and hydrocarbon prices would theoretically curb and ultimately end Americans use of fossil fuels.

References

  1. https://money.cnn.com/2016/07/05/investing/us-untapped-oil/index.html
  2. Marc A. Thiessen, With So Much Untapped US Oil, Why Does Biden Beg Dictators to Add Production?, The Washington Post, October 08, 2022