One about Charlie Munger, one about Taylor Swift, and one about a NASA astronaut who also starred (no pun intended) on the Big Bang Theory.
Charlie Munger’s Deathbed Regret
A few weeks before he died, Charlie Munger was asked if he had any regrets in life.
Only one, he replied.
“I would have paid any amount to catch a 200 pound tuna when I was younger. I never caught one,” he said in an interview with CNBC’s Becky Quick.
But at age 99, he didn’t have the youthful strength and vitality of a 96-year-old, he said.
“I am so old and weak compared to when I was 96 that I no longer want to catch a 200 pound tuna. It’s just too goddamn much work to get it in. Takes too much physical strength … Now if you give me the opportunity, I would just decline going after [the fish]. There are things you give up with time.”
Lessons:
At the end of your life, you don’t think about your net worth. (Charlie’s is estimated at $2.6 billion.) You think about experiences. Don’t trade the opportunity to enjoy experiences for the sake of clutching onto your cash.
If you’re under 96, stop complaining that you’re too old. The future version of yourself will regard your current age as young.
There’s no alternative but to act now. Opportunities are fleeting.
Munger also described fishing as a metaphor for investing:
“I have a friend who says the first rule of fishing is to fish where the fish are,” Munger said when he was 93. “The second rule of fishing is to never forget the first rule. We’ve gotten good at fishing where the fish are.”
Taylor Swift’s Windfall at Age 18
From TIME’s Person of the Year profile on Taylor Swift:
But some months later, at Swift’s 18th birthday party, she saw [Kenny] Chesney’s promoter. He handed her a card from Chesney that read, as Swift recalls, “I’m sorry that you couldn’t come on the tour, so I wanted to make it up to you.”
With the note was a check. “It was for more money than I’d ever seen in my life,” Swift says. “I was able to pay my band bonuses. I was able to pay for my tour buses. I was able to fuel my dreams.”
Most people, at 18, would spend that cash on a more comfortable lifestyle, or pay for college, or make market investments (stocks, crypto).
Instead, she invested in her fledgling music career. Tour buses.
Lesson:
The best investment is the one that you make in yourself.
In expanding your business or side hustle. In building your skills and smarts. In honing your craft. In strengthening your relationships. And even — dare I say — in your appearance.
No, the ROI can’t always be measured. I doubt anyone has plugged the cost of those tour buses into a spreadsheet and amortized those across her 15-year career.
But *YOU* are the investment with the strongest upside potential.
The Astronaut Who Almost Didn’t Make It
In this special Afford Anything podcast episode, former NASA astronaut Mike Massimino explains how YOU can take your own moonshot.
We met at a video studio in Brooklyn and spoke for hours about tenacity, drive, determination — and about sending the first tweet from space.
He described getting mocked by Seth Meyers on Saturday Night Live, joining the cast of the Big Bang Theory 💥, and how astronauts fart in space.
And he shared lessons that anyone can apply to their own life, as they chase dreams that society says aren’t “realistic.”
The stock market is hitting new highs. What should we make of this?
This week, the S&P 500 reached yet another record high — marking its fourth consecutive day reaching a new all-time high.
Last Friday (the first of these four consecutive trading days) marked the first time in two years that the S&P 500 finished at an all-time high.
Here’s an 11-minute video recapping what happened:
After two years of not achieving any new highs, the S&P 500 is now breaking records daily.
How do we interpret this? Here are a few things to keep in mind:
(1) The high is comprehensive.
The S&P 500 — which tracks 503 stocks — represents about 80 percent of the overall market.
It’s a more comprehensive indicator of the overall market than the Dow Jones, which tracks only 30 large companies. The Dow took a slight dip today, but both the Dow and the NASDAQ hit new highs in December.
The Dow is an excellent indicator of how large companies are faring. But the S&P 500, by virtue of tracking a much bigger basket, is a better reflection of how the overall market, including small and medium sized companies, are also performing.
(2) The tech sector dominates the all-time highs.
Tech companies make up the largest chunk of the S&P 500. Here’s a chart of the top ten companies by weight for SPY, an exchange-traded fund that tracks the S&P 500:
Source: slickcharts
The top ten companies in SPY are nearly all in the tech sector. This stands in contrast to the wider, more expansive range of sectors that comprise the top ten Dow Jones companies by weight:
Translation: while the overall market (including small and mid size companies) is doing well, the bulk of the gains are still being driven by tech.
The same small group of megacap companies — the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) — that drove much of last year’s growth continues to lead the way, fueled by hopes of an artificial intelligence boom.
But what’s interesting is that the equal-weighted S&P 500, in which every company within the index gets the same weighting, is only slightly lagging the standard S&P 500. Yes, equal-weighted is behind, but not by much. Translation: even without the oversized influence of the Magnificent Seven, the index is running strong.
The market has also priced in the expectation that the Federal Reserve will lower interest rates this year, which leads to the next point …
(3) The Fed will send new signals at the end of January.
The next Fed meeting is Jan 30-31, at which point we’ll know whether the Fed is ready to start cutting interest rates yet.
The Fed held rates steady during their last two meetings, held in September and November 2023.
They’re widely expected to cut rates in 2024, but the debate that economists and market-watchers are holding is when? — could it be as early as next week? (Unlikely, but possible.) Or will it happen during one of their following meetings on March 19-20 and April 30-May 1st?
Many analysts expect that the Fed will hold rates steady this winter and begin cutting in the spring or summer, but the substantial improvement in inflation data has some people feeling optimistic that these cuts might come sooner than later.
The Fed rate cuts are expected to unleash pent-up demand for everything from cars to houses and make capital more accessible for companies.
Homebuying, in particular, is expected to rise as interest rates drop, leading to a projected minor climb in home prices this year. (Mortgage interest rates are at their lowest point since last May.)
Summary: Big Tech is fueling record-high market growth, inflation is under control, and the overall economy looks resilient.
The average person is starting to feel better about their wealth.
The U.S. Consumer Sentiment Index is at its highest point since July 2021. As the name implies, this index measures how confident and optimistic people feel about their finances.
This survey, conducted by the University of Michigan, shows huge gains in households feeling more confident that inflation is behind us, jobs are strong, and income can keep up with expenses.
The index climbed a cumulative 29 percent over the last two months. That’s the biggest two-month leap since 1991.
That said, we’re still no where close to our 2018-2019 confidence levels.
What’s the takeaway from all of this?
Economic data is strong. Markets are on a tear. Consumer sentiment is improving. The year ahead has plenty of cause for optimism.
Blackstone CEO Steve Schwarzman, at the World Economic Forum in Davos, mentioned that he thinks “animal spirits” — the role emotions play in the markets — will be strong this year.
Given how much is riding on consumer confidence in this (almost) post-inflationary world, that’s particularly apt.
For more detail, watch the latest YouTube breakdown.
This week’s Afford Anything blog post is a well-balanced diet:
Robert Kiyosaki predicts a massive crash — [philosophical]
Sobering stats about the housing market — [analytical]
Secret strategies to save on seasonal shopping — [practical]
The Robert Who Cried Wolf
Famed investor Robert Kiyosaki, author of Rich Dad, Poor Dad, recently caused an internet stir by predicting “the start of the biggest crash in history.”
Of course he did.
Kiyosaki is constantly crying wolf. It’s good for (his) business.
Bad news travels faster than good news.
People who prioritize attention over truth will use that to their advantage. Kiyosaki is a shrewd businessman. He understands the profit potential in strategic pessimism.
But that’s bad news for his followers. Per the law of large numbers, it’s reasonable that some people have kept their cash on the sidelines, rather than investing in the markets, after heeding his warnings. And that has massive lifelong ramifications on their wealth and retirement.
Lesson: Beware of anyone who peddles *negativity bias* in order to stay relevant.
These economic fear-mongerers don’t hold accountability for their track record of wrong predictions.
Their followers are the ones who suffer.
This is why it’s critical to choose your mentors carefully — and it’s precisely why you should never blindly enroll in an online class that’s taught by some random person whose ideas you haven’t vetted.
If you’re curious how often Kiyosaki has made the wrong call, note that Stanford-trained data scientist Nick Maggiulli, our guest on Episode 375 of the Afford Anything podcast, shared this illustration on X:
Pessimism has a visceral appeal. It’s evolutionarily advantageous to be hyper-aware of threats.
Our ancestors didn’t survive the jungle or savanna by appreciating the beautiful flowers. They survived by staying hyper-vigiliant of danger. This explains why negativity bias is so innate, so intrinsic. It’s a survival mechanism.
But in the modern developed world, pessimism keeps us overly conservative. We choose the “safe” major. We take the “steady” job. We tilt too heavily into conservative investments when we’re young, and we panic when our 401k’s start to decline. We avoid real estate investing and starting side businesses because these seem too risky.
Pessimism stifles innovation, entrepreneurship, and creativity. It locks us into mundane careers and middling investments as we muddle through risk-averse lives. In the end, we haven’t endured huge losses, but neither have we *embraced a shot* of winning.
As Episode 284 podcast guest Morgan Housel eloquently said:
“Pessimists get to be right. Optimists get to be rich.”
No, The Fed Lowering Interest Rates by 25 Basis Points Is Not Going to Flood the Market with New Housing Inventory 🙄
A little history lesson:
Once upon a time, in 2008, there was a Great Recession. It scared many investors and homebuilders, and they stopped making new homes.
In the decade that followed the Great Recession, new construction reached its lowest point since the 1960’s.
By 2019, the housing shortage amounted to 3.8 million units. This means there were 3.8 million more families and individuals who wanted a place to live — either to rent or buy — than there were homes available.
Then the pandemic struck. The prices of copper, lumber and other construction items shot through the roof (no pun intended). Builders had to raise home sale prices due to higher materials costs. Prices soared.
In 2020 and 2021, people across the internet cried, “Why are they charging so much more than the home is worth?!” — not realizing that “worth” is a function of the cost of labor + the cost of materials + the premium of scarcity.
And when supply is curtailed — as it was by 3.8 million units as of 2019 — there’s an ample scarcity premium.
Then inflation climbed. The Federal Reserve raised interest rates 11 times during their 2022-2023 cycle, resulting in a rapid escalation of mortgage rates.
This created a “lock-in effect” among existing homeowners. Nobody wants to trade a mortgage with a 3 percent fixed interest rate for an alternate mortgage with a 7 percent rate.
Existing homeowners with a mortgage have a huge incentive to hold.
Sellers who *need* to get rid of their property — for example, because they’re moving to another country — list their homes on the market. But homeowners who simply *want* to upsize or downsize are, for the most part, staying put.
This has created even more housing supply pressure.
Meanwhile, homebuilders — who must borrow money to finance their operations — are seeing the cost of capital skyrocket. Many have curtailed new construction, putting further pressure on the supply pipeline.
So we have a long-running confluence of factors that, piece by piece, keep exacerbating the housing supply crunch.
And this leads to today’s takeaway:
No, this problem will not magically solve itself the moment that the Fed reduces interest rates.
The Fed is meeting today and tomorrow. They’re widely expected to hold rates steady. (They’ll make an official announcement at 2 pm on Wednesday.)
There’s rampant speculation that the Fed will lower interest rates in Q1 or Q2 of next year.
— And —
There seems to be a pervasive myth that once interest rates decline, those “locked-in” homeowners will rush to list their homes for sale, flooding the market with new inventory.
The supply-demand imbalance will tilt in the buyer’s favor, home prices will plummet, and housing will become affordable once again.
Yet that is pure fantasy, disconnected from the data.
Imagine 10 people. Nine of them have mortgage rates that are less than 6 percent. The stat is 91.8 percent of mortgaged homeowners, to be precise.
Wait.
Imagine those same 9 people, the 9 out of 10 who have a sub-6 percent interest rate. Here’s how they break down:
One has an interest rate between 5 to 6 percent.
Two have an interest rate between 4 to 5 percent.
Six have an interest rate below 4 percent. The exact stat is 62 percent.
Let me say that again:
Six out of 10 mortgaged homeowners have an interest rate that’s below 4 percent.
Meanwhile:
One-half of mortgaged homeowners (49 percent) say they’d consider listing their home only if interest rates fell below 4 percent, according to a Redfin survey conducted by Qualtrics.
So this myth that if the Fed lowers interest rates, the market will get flooded with new inventory? — That scenario isn’t likely to happen for a long, long, looooong time.
As of Dec 12, 2023, the current average 30-year fixed rate for a buyer with a 740-760 credit score is 7.4 percent. Multiple reductions in interest rates won’t begin to approach the sub-4 percent rates of yesteryear.
The “lock-in effect” will last for longer than you might expect.
Lesson:Don’t wait to buy a home based on speculation about the market. If you have both the money and desire to buy a home, DO IT NOW. Homes are likely going to get more expensive in the future, not less.
How to Not Flush AS MUCH Money Down the Toilet This Holiday Season
Yeah, I know.
The holiday season is custom-built for parting with your money. Every store is promoting sales, discounts, offers. Limited time only.
It’s scarcity on steroids.
Holiday deals tap into the part of our brain that says — “this deal is only available now; I should snag it while I still can.”
Our FOMO creates jobs and drives the economy.
Since holiday spending is human nature, let’s forgo the guilting, shaming and finger-wagging that’s so endemic to the personal finance and FIRE community.
It’s counterproductive. Guilt and shame over holiday spending doesn’t change human behavior, it merely robs the joy from it.
It’s like chowing down a piece of chocolate cake while simultaneously fretting about the sugar.
You’re eating the cake regardless. You may as well enjoy it.
Instead, let’s accept that some degree of holiday spending is normal, and let’s focus on how to find the best deal possible.
Here are four pointers. (If you have more to add, please share these with the Afford Anything community) —
#1: If you’re buying an item at a mid-size company’s website (i.e., a merchant that’s bigger than a mom-and-pop shop, but not a big box retailer like Target or Amazon) — move your cursor near the “back” arrow on the browser.
This is called “exit intent,” and it often triggers pop-ups with discount codes.
#2: For online purchases: Create an account, put an item in your cart, and then leave the website.
This is called “abandoned cart,” and often triggers an automation in which the company emails you a limited-time-offer discount code.
#3: If you’re buying something expensive (over $500 – $1,000 or more), track the price for a few weeks, especially around the holidays. On sites like Wayfair, I’ve seen prices fluctuate daily.
#4: The least useful savings tip: Googling discount / promo codes or pulling these codes from mass aggregator websites.
You may get lucky, but typically 9/10 are expired or don’t work; they just yield a bunch of extra open tabs on your browser.
There’s an enormous selection of third-party websites and browser extensions that claim to help with this, with varying degrees of efficacy.
I’m not going to recommend any specific tools; recommendations are both dynamic and better crowdsourced. Please share your experience with the community.