I usually agree with everything that Jonathan says, but not with the rewards programs, especially the frequent-flier programs. Not that I covet the points - far from it. I see no value in them at all. So, I will always go with the cheapest fare (plus a combination of convenience and "do I have status with the airline this year that justifies the extra $20"). For smaller flights, I will gladly fly coach, and forgo the lounge. It is only for the longer international flights would I consider upgrading - all I need is a lie-flat bed, and every other consideration is secondary. The money saved (often in thousands of dollars) is much more than the benefits of loyalty to a specific airline. Google Flights is my only friend in these matters.
What a clear and candid article! For all the advice we receive on investing, in the end, it is our life that we finally get to live - with all the messiness and imperfections it entails. Those mistakes and shortcomings do not make that life any less important but serve as guides to reflect on our own imperfect lives. I hope that I can develop a clear and concise account of my financial adventures and misadventures as yours one day.
Enough is when you realize that, beyond your basic necessities (food, clothing, shelter), no amount of money or material possessions can ever be enough. Enough lies elsewhere.
Bravo! I have never been able to articulate so clearly why I need more than "three to six months of living expenses" as cash. Sure, if I were homo rationalicus, that would have been enough. But I know I am not. Having the years of cushion allows me to never look at the "market news" and consequently not disturb my investments and keep on adding any extra income. Fat cat I am not, but I can truthfully say that I am a "sleep-well" cat (or at least, none of the reasons behind my lack of sleep has to do with money).
I was relieved when I read the article. If there were lots of winners (and therefore lots of losers to balance them out - a winner or a loser is measured with respect to the average, after all), then the stock market is doing a poor job. A good market is where most companies are getting "market returns" - not great (because that would have attracted competition in their market segment), not bad (because that would mean that they are satisfying some (main street) market segments and yet the (stock) market is not rewarding their performance), but just about average in the long run. And there should be just a few segments of the market that will lack - hopefully, temporarily - enough competition, which is where we see the few sustained winners. At every point in time, there will be some companies that come along with a breakthrough product. And for a while, there is nothing like that product in the (main street) market, which is why its stock delivers above-average returns (hopefully, that period is relatively brief because the stock market would have internalized this outperformance relatively quickly). And then other companies come along with products that are either me-too (so price competition increases) or are such that they obviate the need for the product (typewriters after PCs). And so we have the next cycle of winners. The only way that companies can continue to deliver above-average returns for a sustained period is if they have some sort of "external support" that limits entrants - like in the healthcare industry. (The current crop of "FAANGM" stocks does make this cycle a bit more difficult because of their network effects (and data network effects), but who knows...) All of which brings us back to the same boring conclusion - unless you have a damn good set of eyes to spot either (a) the next big thing or (b) are eagle-eyed to observe the arbitrage opportunities in the (stock) market because it has temporarily underpriced an asset, you are best left holding large index funds that mimic the market at the lowest possible cost.
Just as with income and wealth, there is a difference between the elite private colleges and the elite private colleges. There are (a very few select) firms that will consider graduates only from H, Y, and P (and Stanford and, for the "techier" disciplines, MIT). The rest are elite, sure - but not elite enough. Think of it in this way: each of these places takes in around 1500-2000 students. By the time you have gone through all of them, you are talking about picking up the approximately 10,000th student in the country (I am speaking very broadly - of course there are many, many brilliant students coming out of every college across the country, but from an employer's point of view, the signal difference is palpable until proven otherwise). Which, from an employer's point of view, does not look very selective. But then again, As Dick Quinn pointed out, all this difference can lead to more open doors. It is entirely up to you what you do thereafter.
Comments:
Amazing. That's it.
Post: Never Quite Enough
Link to comment from September 21, 2024
It reminds me of Jonathan's classic from 2005, "How Houses Eat Money."
Post: Our Money Pit
Link to comment from January 20, 2024
Jonathan, you seem to become better and better with each new post. Bravo!
Post: What We Lose
Link to comment from August 26, 2023
I usually agree with everything that Jonathan says, but not with the rewards programs, especially the frequent-flier programs. Not that I covet the points - far from it. I see no value in them at all. So, I will always go with the cheapest fare (plus a combination of convenience and "do I have status with the airline this year that justifies the extra $20"). For smaller flights, I will gladly fly coach, and forgo the lounge. It is only for the longer international flights would I consider upgrading - all I need is a lie-flat bed, and every other consideration is secondary. The money saved (often in thousands of dollars) is much more than the benefits of loyalty to a specific airline. Google Flights is my only friend in these matters.
Post: Financial Slimming
Link to comment from June 8, 2022
What a clear and candid article! For all the advice we receive on investing, in the end, it is our life that we finally get to live - with all the messiness and imperfections it entails. Those mistakes and shortcomings do not make that life any less important but serve as guides to reflect on our own imperfect lives. I hope that I can develop a clear and concise account of my financial adventures and misadventures as yours one day.
Post: Road to Retirement
Link to comment from January 8, 2022
Enough is when you realize that, beyond your basic necessities (food, clothing, shelter), no amount of money or material possessions can ever be enough. Enough lies elsewhere.
Post: How would you define “enough”?
Link to comment from December 25, 2021
Bravo! I have never been able to articulate so clearly why I need more than "three to six months of living expenses" as cash. Sure, if I were homo rationalicus, that would have been enough. But I know I am not. Having the years of cushion allows me to never look at the "market news" and consequently not disturb my investments and keep on adding any extra income. Fat cat I am not, but I can truthfully say that I am a "sleep-well" cat (or at least, none of the reasons behind my lack of sleep has to do with money).
Post: When Cash Is King
Link to comment from November 6, 2021
I was relieved when I read the article. If there were lots of winners (and therefore lots of losers to balance them out - a winner or a loser is measured with respect to the average, after all), then the stock market is doing a poor job. A good market is where most companies are getting "market returns" - not great (because that would have attracted competition in their market segment), not bad (because that would mean that they are satisfying some (main street) market segments and yet the (stock) market is not rewarding their performance), but just about average in the long run. And there should be just a few segments of the market that will lack - hopefully, temporarily - enough competition, which is where we see the few sustained winners. At every point in time, there will be some companies that come along with a breakthrough product. And for a while, there is nothing like that product in the (main street) market, which is why its stock delivers above-average returns (hopefully, that period is relatively brief because the stock market would have internalized this outperformance relatively quickly). And then other companies come along with products that are either me-too (so price competition increases) or are such that they obviate the need for the product (typewriters after PCs). And so we have the next cycle of winners. The only way that companies can continue to deliver above-average returns for a sustained period is if they have some sort of "external support" that limits entrants - like in the healthcare industry. (The current crop of "FAANGM" stocks does make this cycle a bit more difficult because of their network effects (and data network effects), but who knows...) All of which brings us back to the same boring conclusion - unless you have a damn good set of eyes to spot either (a) the next big thing or (b) are eagle-eyed to observe the arbitrage opportunities in the (stock) market because it has temporarily underpriced an asset, you are best left holding large index funds that mimic the market at the lowest possible cost.
Post: The Cardinal Sin
Link to comment from September 25, 2021
Just as with income and wealth, there is a difference between the elite private colleges and the elite private colleges. There are (a very few select) firms that will consider graduates only from H, Y, and P (and Stanford and, for the "techier" disciplines, MIT). The rest are elite, sure - but not elite enough. Think of it in this way: each of these places takes in around 1500-2000 students. By the time you have gone through all of them, you are talking about picking up the approximately 10,000th student in the country (I am speaking very broadly - of course there are many, many brilliant students coming out of every college across the country, but from an employer's point of view, the signal difference is palpable until proven otherwise). Which, from an employer's point of view, does not look very selective. But then again, As Dick Quinn pointed out, all this difference can lead to more open doors. It is entirely up to you what you do thereafter.
Post: Are top private colleges worth the cost?
Link to comment from April 24, 2021