It’s a lot harder to get somewhere in life if you don’t know where you want to go…no Definiteness of Purpose.
Take some time and think about what you really want in life. When you know, the wind will start blowing.
Inflation and Time Value of Money
As time passes, the value of money declines.
Consumer-price inflation rose to 8.6% in May, its highest in forty years. This tax on households and businesses threatens the overall health of the U.S. economy. Deficit fiscal spending and supply shocks and Russian invasion are the primary causes of the current historic inflation.
Inflation is defined as the decline of purchasing power of the U.S. Dollar over a certain period of time. Inflation is usually expressed as the change in prices over a one-year period.
Purchasing power means how much your money can buy—its “buying power.” You lose purchasing power when prices go up (inflation) and gain purchasing power when prices go down (deflation). Inflation changes the value of a currency over time.
Inflation, risk and opportunity cost together reduce the value of the dollar as time passes. And, when inflation increases, the purchasing power of the U.S. Dollar decreases.
Inflation is rampant, the Federal Reserve seems poised to raise interest rates even higher than previously expected, financial markets are free falling, and there are fears of recession in the air. All this signals economic pain ahead for Americans.
A recession is my no means certain, with a strong jobs market and consumers still flush from pandemic fiscal government handouts. But inflation is sapping consumer and business confidence.
A tax increase would reduce investment and further restrict supply, which would arguably increase inflation.
Inflation is a cost spread over every American. Unemployment, a byproduct of a recession, lands especially hard on specific Americans and American families. Thus, it natural for economists to accept a little more inflation to protect employment and strive for a soft landing.
Blossoming federal role in directly supporting the consumption of a vast number of Americans is a primary driver of fiscal deficits and persistent inflation.
- 75 million receive a combination of Medicare, Medicaid and Social Security
- 98 million receive veteran and retired federal government benefits, college aid, rental assistance, Obamacare, food stamps, etc.
These transfers are financed by chronic fiscal deficits. To remedy the problem, politicians would face the career ending choice of benefit cuts, tax hikes or increase borrowing regardless of the worsening effect in inflation.
If prompt and effective actions are not pursued by the Federal Reserve and Administration, the nation may revisit the Stagflation of the 1970s which persisted more than a decade with great consequences to society and the economy.
References:
Immunity Boosting Foods
Food is medicine.
Food, along with exercise and adequate sleep, are done of the most powerful tools you have to help prevent disease and improve your overall health. And, a healthy body and mind begins with a healthy immune system, writes Angie Ferguson, an exercise physiologist and Tony Robbins Results Coach.
In addition to developing healthy lifestyle habits, the food you eat can help to reduce the risk and severity of infections, cardiovascular disease and diabetes. In short, healthy, nutrient dense “food can be medicine”.
When trying to stay healthy, it’s best to cut back on foods that lead to inflammation (processed meats and foods, saturated fats, refined carbs, sugary foods and beverages) and instead fuel yourself with foods full on nutrients, antioxidants, vitamins and minerals.
- Citrus fruits – vitamin C is an antioxidant
- Garlic – contains the antioxidant allicin, which has antibacterial properties and strengthens your immune system
- Ginger – has anti-inflammatory, antioxidant and antimicrobial properties
- Mushrooms – packed with vitamins and minerals and bio-active compounds called beta-glucans known to boost immunity
- Green leafy vegetables – provide anti-inflammatory antioxidants, vitamins and minerals
- Berries – rich in vitamin C and anthocyanins, which possess antioxidants agents, anti-inflammatory properties and support a healthy cardiovascular system
- Turmeric – contains cur cumin which is an anti-inflammatory, antioxidant, anti-bacterial and detoxifying ingredient that’s amazing for digestive health.
- Sweet potatoes and carrots – excellent sources of beta carotene which can reduce inflammation and boost immune function by increasing disease fighting cells in the body.
- Olives – this fruit is an antioxidant powerhouses, which reduces inflammation and fight bad bacteria. Studies have shown that eating olives can raise levels of glutathione, a powerful antioxidant which acts as a defense against bacteria that cause airway and stomach infections. Olives possess a monounsaturated fat called oleic acid, which prevents heart diseases like atherosclerosis, heart attacks, plaque build-up, and strokes. The oil of olives is where this oleic acid is located; it can lower blood pressure and cholesterol, which reduces the chances of cardiovascular complications and general stress on the system.
Enjoy these nutrients dense foods in their different forms and see how healthy they can make you feel!
Reference:
- Ferguson, Angie, “First Line of Defense”, Florida Times-Union, , June 7, 2022, pg 1D.
- https://www.organicfacts.net/olives.html
Angie Ferguson is an exercise physiologist and Tony Robbins Results Coach.
Your Health is Everything
Health is the greatest wealth!
People who’ve been sick and infirm understand that your health is everything and without health, nothing else like wealth and financial freedom matters.
You may wonder what being in good working order that has to do with wealth. Well, for starters, you can’t build wealth if you’re falling apart at the seams.
How bitter would it be to discover that your physical health is in tatters by the time you’ve achieved your wealth building and financial freedom goals.
So keep it simple: A healthy diet, regular exercise, sufficient sleep and regular doctor and dentist visits for checkups and at the very first sign of a problem.
Commit to a life of slow and steady wealth building, not the hope of a sudden windfall.
You might need to institute some austerity measures at first, which sounds neither fun nor glamorous. But some of the wealthiest people in the world have accumulated wealth without flaunting it.
Like a healthy diet, wealth creation must become an integrated part of your lifestyle. You’ll want to invest and build wealth for the long term. This doesn’t imply that you make an investment and hope it’ll grow miraculously on its own. Like a home, car, your kids or pets, you need to care for your investments, measure them, research them, feed them and adjust them.
Health is wealth 👊🏾 When you’re a hard working entrepreneur it’s easy to find excuses to neglect your health. But remember, we owe it to the people who we take care of to make health a priority.
Shout out to @chrisronzio my partner from @trainual for this great conversation. pic.twitter.com/QpTVWpiAzo
— Daymond John (@TheSharkDaymond) July 2, 2022
Physical health is built through the long-term compounding of daily actions:
- Exercise—daily movement
- Nutrition—mostly real and natural foods
- Sleep—good sleep habits
It’s never too late to start building—or restoring—your physical wealth.
Healths is wealth!
References:
“The trouble with most people is that they quit before they start.” ~ Thomas Edison
The Power of Dividends
Dividends account for about 40% of total stock market return over time
Value of dividends
There are 2 ways to make money in the stock market: capital appreciation and dividends.
Capital appreciation—an increase in a stock’s price—gets most of the attention, but dividends can be surprisingly powerful.
Fidelity Investments’ research finds that dividend payments have accounted for approximately 40% of the overall stock market’s return since 1930.
What’s more, dividends can help prop up returns when stock prices struggle. For example, stock prices in the S&P 500 fell during the 1930s and 2000s, but dividends almost completely offset the decline. In the 1940s and 1970s, when inflation surged, dividends accounted for 65% and 71% of the S&P 500’s return, respectively.
“From a multi-asset income perspective, I am always seeking investments that pay a high enough level of current income to help cushion the blow during down markets. Conversely, in rising markets, this income component contributes to the overall total return of the investment. In this regard, companies that pay a sustainable and growing dividend have the potential to grow their income to keep up with inflation,” says Adam Kramer, portfolio manager for the Fidelity Multi-Asset Income Fund
References:
Thought of the Day
“You ask, what is our aim? I can answer in one word. It is victory, victory at all costs, victory in spite of all terror, victory, however long and hard the road may be; for without victory, there is no survival.” — Winston Churchill
Purchase Price Matters
“If you think about the environment we’ve been in for the past 10 years, purchase price has not mattered.” Marc Rowan, CEO & Director, Apollo Global Management, Q4 2021 Earnings Call
The profit of an investment is often determined by the purchase price since “Price is what you pay; value is what you get”, quips billionaire investors Warren Buffett.
The price of a stock is determined by human characteristics and emotions, such as fear and greed, market tendencies and other factors. All of these things affect the price of a stock, sometimes to a large degree but rarely do they significantly affect its value.
“If you think about the [stock market] environment we’ve been in for the past 10 years, purchase price has not mattered”, said Marc Rowan, CEO & Director, Apollo Global Management. “The more risk you took, the more outrageous, generally the higher the pay off.”
Rowan and Apollo Global Management has consistently followed the investment philosophy that “purchase price matters”. Although, over the past decade in the equity stock markets, their strategy of “patient, value-oriented, disciplined approach to capital deployment” had not been consistently rewarded.
Share Price and Intrinsic Value
“Losing money can happen when you pay a price that doesn’t match the value you get. Look for opportunities to get more value at a lower price.”
Before purchasing a stock, it’s essential to compare the market price of a stock to its fair intrinsic value. When you find a company whose stock’s price is trading lower than the company’s intrinsic value would mark the opportune moment to purchase the company. Since value investors believe that an undervalued market priced stock will eventually climb to reach its fair, or intrinsic, value.
This is a process known as value investing, a type of investing that puts the utmost importance on the valuation of a company and uses various metrics to determine whether the valuation is low, high, or where it should be.
Some of the most important metrics include:
- Price-to-Earnings Ratio (P/E Ratio). The P/E ratio compares the price of a stock to the company’s earnings per share (EPS).
- Price-to-Sales Ratio (P/S Ratio). The P/S ratio compares the price of the stock to the annual sales, or revenue, generated by the company.
- Price-to-Book-Value Ratio (P/B Ratio). Finally, the P/B ratio compares the price of the stock to the net value of assets owned by the company, divided by the number of outstanding shares.
- Price-to-Free-Cash-Flow Ratio (P/FCF Ratio)
Before buying a stock, you must attempt to compute the intrinsic value of the company. If you’re following the value investing strategy, you’ll want to make sure the stocks you buy are undervalued compared to their peers.
Even when following other investing strategies, it’s important to avoid purchasing overvalued stocks because the market has a history of correcting overvaluations with price declines. Because in the long term investing, purchase price does matter.
Growth at a Reasonable Price (GARP)
Overvaluation will ultimately matter. In the short run, stock prices are based on hype and current news. Over the long term, valuations will ultimately matter when the hype declined and the market will correct the price.
When a stock is falling in price, it’s difficult to purchase a stock when it’s out of favor and widely being panned by the crowd.
References:
- https://www.apollo.com/~/media/Files/A/Apollo-V3/documents/apo-q421-earnings-call-transcript.pdf
- https://www.moneycrashers.com/factors-buying-stock-price-value/
- https://www.forbes.com/sites/forbesfinancecouncil/2018/01/04/the-important-differences-between-price-and-value/
Mindset, Discipline, Patience, Opportunity
- It’s about process and being contrarian to current market sentiment and the crowd’s emotion
- Why the hype: Optimistic vs. Pessimistic
When you purchase a stock, you are buying a Piece of a Company, not just a Ticker Symbol.
Every Investment is the Present Value of all Future Cash Flow.
Do you understand how the company makes its money (e.g., revenue, profit and free cash flow)
If the share price is surging; but the company’s corresponding fundamentals correlating and are skyrocketing.
Free Cash Flow – the true life blood for a company :
- Pay down debt
- Buy back stocks
- Pay shareholders’ dividends
- Acquisitions
- Organic growth
Start Early to Build Wealth
The single most important thing you can do to build wealth is to start early. Getting started is more important than becoming a financial expert and the easiest way to manage your money is to take one small step at a time.
You, like most people, do not need a financial adviser to help you build wealth. Instead, you need to set up accounts at financial institutions, such as Fideltiy or Vanguard, automate the day-to-day money management (including bills, savings, investing and paying off debt). And, you need to know a few things to invest in, and then be patient and wait thirty years for your money to grow.
But, that’s not cool or exciting. Instead of listening to the noise of the financial entertainment media, instead you want your money to go where you want it to go in accordance with your goals and values. You want your money to grow automatically, in accounts that don’t nickel-and-dime you with excessive expenses and fees.
It’s essential to start today to learn about building wealth and take small steps to save, invest and manage your money. You don’t have to be a genius or financial expert to build wealth. Successful wealth building takes time, discipline and patience.
What do I want to do with my life–and how can I use my wealth to do it!
Investing early is the best thing you can do; ‘doing nothing’ ranks right up there with trying to drive a car without tires; it’s a bad idea and it won’t get you anywhere.
The single most important thing you can do to build wealth is to start early.
Here’s a great example of why investing early matters, that puts it in numbers:
- If you invest $5,000 every year (which is $417/month) for 10 years, from age 25 to age 35 and then never invest again, you’d still have more money at retirement, than someone who starts at age 35 and invests $5,000 every year until they retire.
- The 25 year old starter invests $55,000 and ends up with $615,000 (given an 8% annual return, which is close to the average return of the stock market per year). The 35 year old invests $130,000 and ends up with $431,000.
So, remember the adage “The best time to start building wealth is twenty years ago. The second best time is today.” You can save and invest modest amounts, like $20 a monty, and over time realize thousands of dollars in gains.
There are a lot of societal problems, but it’s important to focus on what you can control. Don’t be a passenger in life. It’s a lot more fun to be a captain of your own ship, even if you go off course a few dozen times. Building wealth does require some work. But, the benefits and rewards will surpass the effort.
Take a long term view. The economy grows and contracts in cycles ( business cycle). Fear is no excuse to do nothing with your money. You cam automate your saving and investing, thus you can continue to save and invest whiles others respond to emotions of fear.
Investing for average stock market returns (8% to 9%) is great since most retail and so call smart money fail to beat the average returns of the stock market. Moreover, theses investors tend to do the things that guarantee their failure: trade frequently, make outlandish investments, incur high taxes and pay unnecessary fees. The single most important factor to building wealth is getting started.
The challenges and opportunities with building wealth, and the corresponding solution, are you. Your mindset, behaviors and actions are the number one problem.
- You’re the only one responsible for your financial problems.
- Know how much money you have coming in and then automatically direct it where you want it to end up.
- It’s essential to start early and to start investing today, even if it’s just $1.
References:
Failure has to be part of Growth
Failure has to be part of growth.
“As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle,” Jeff Bezos, founder of Amazon wrote in his 2018 annual letter to shareholders.
This tolerance for failure is deeply ingrained in Amazon’s culture. It’s a point Bezos has made every year since the very first Amazon shareholder letter in 1997.
“We will continue to measure our programs and the effectiveness of our investments analytically, to jettison those that do not provide acceptable returns, and to step up our investment in those that work best. We will continue to learn from both our successes and our failures.”
References:
The Tremendous Power of Thoughts – You are What You Think About
“Our life is what our thoughts make it.” Roman Emperor Marcus Aurelius
It’s vitally important what you think since your mindset and thoughts makes you what you are today and will become in the future.
Writer Napoleon Hill wrote “the biggest problem [or opportunity] you and I have to deal with is choosing the right thoughts.”
Since, your mindset and thinking influences your behavior. You behavior influence your actions. Your actions influence your outcome. Your outcome determines how successful and happy your future will be.
So, be careful of your thoughts, what you feed your mind and how you think because it’s going to affect your behaviors and actions–which will affect you happiness and success in the future.
Hope and a positive mindset
Individuals must master their mindset in order to navigate the opportunities and challenges successfully.
In general we get what we expect in life. Norman Cousins remarked, “The main trouble with despair is that it is self-fulfilling. People who fear the worst tend to invite it. Heads that are down can’t scan the horizon for new openings. Bursts of energy do not spring from a spirit of defeat. Ultimately, helplessness leads to hopelessness.”
If your expectations for life are negative, you end up experiencing a lot of negatives. And those negatives are compounded and become especially painful, because negative expectations cause a person not to learn from their losses.
But, you can change your thinking from a negative mindset, in which you feel hopeless, don’t learn from your losses, and are tempted to give up, to a positive mindset, in which you believe things can get better, you learn from your mistakes, and you never quit.
You must renew your hope, change your thinking for the better, and believe that good things can and will happen to you. Doing these things can literally change your life.
Dr. John Maxwell says that if there is hope in the future, there is power in the present. The reason is simple: Hope in the future has a dramatic impact on your thinking today. Your thinking today determines your performance today, and your performance today has a direct bearing on your future.
There is a tale of a salesperson who went to a remote region of the world to sell shoes and reported back to his company that it was impossible to sell shoes there because nobody wore them. His replacement reported back that it was the most exciting market he had ever seen because nobody had shoes.
One salesperson had a positive and hopeful mindset, the other had a negative mindset and no hope. Without hope and the right mindset, there will be no effort or deliberate action.
This fact is true for building wealth over the long term as it is for selling shoes in a rural area. Without a positive mindset and hope for a brighter financial future, there will be no efforts.
Even in the worst of time, it important for you to think positive, courageous thoughts and refuse to let defeat and fear defeat you. “As a man thinketh in his heart, so is he.”
Bottomline, your peace of mind, the joy you get out of life, and wealth you build depends solely upon your thoughts and mindset. Your opinion of events and thoughts is entirely up to you.
“A man is not hurt so much by what happens, as by his opinion of what happens.” French Philosopher Montaigne
References: