In a previous issue of Escape From America Magazine we discussed financial freedom and freedom of mobility in the article Retirement Planning: Investing in Freedom. These are important, but there are other types of freedoms that are even more important.
Money Isn’t Everything
Being financially wealthy is not the same as being fulfilled or happy. Some of the richest people I have met in my life are also the most miserable. And I’ve also met many financially poor people who appear to be content and happy with their lives.
Once we achieve financial freedom, many of us might feel an emptiness. Suddenly making more money is not improving our life. When I think of people like Michael Jackson or Britney Spears, it seems to me that having too much money played a role in their self-destructive behavior.
Giving Can Be More Fulfilling Than Receiving
Let’s take the two wealthiest people on Earth for example, Bill Gates and Warren Buffet. They both reached the epitome of money, and what do they do with it? They are giving most of it away. Bill and his wife Melinda have become full time philanthropists through the Bill and Melinda Gates Foundation. Buffet still lives in the same house he bought over 30 years ago for $31,500 and has pledged 85% of his billions to the Gates Foundation.
Mom, when I grow up, I wanna be a philanthropist! In my view, philanthropy is the ultimate profession. Social workers, volunteers and other non-profit endeavors also gain a lot of gratification from their efforts that go way beyond what money can buy.
So if money doesn’t provide the ultimate freedom, what does?
This is a challenging topic and not one I feel qualified to teach a course about. This is a topic in which I am still a young student, and I continue to learn every day. However, I have picked up a few principles which I think are part of the answer:
– Service other people’s needs – learn to put others’ interests before your own
– Live with passion and purpose – follow your dreams and do what you love
– Live in the moment – it’s the only one you have
– Spend time in nature – it always makes you feel better
– Give breathing the attention it deserves – you never know which will be your last
– Forgive others for their misdeeds – harboring animosity is self-destructive
In the event that we still have extra money to invest, what should we do with it?
Where should investors put their money for 2010?
2010 will be a year of volatility in stocks, currencies, and (potentially) interest rates. Global financial markets are still unstable and capable of big swings in prices for oil, gold, and agricultural commodities, as well as the price of money in the form of interest rates.
The “recovery” we are seeing is primarily a function of government stimulus – free money dished out to big banks – and is probably not sustainable without some unforeseen maladjustment. The maladjustment may come in the form of hyper-inflation, higher interest rates, and/or renewed deflation of assets tied to low interest rate environments (e.g. U.S. commercial real estate, Canadian and Australian housing).
General economic conditions in the U.S. and other advanced economies will remain poor with little to no improvement in unemployment levels. The Fed will try to hold rates low throughout 2010 but at some point late in 2010 or 2011, we could see a sudden spike in interest rates across the globe. It may not happen in 2010 as governments continue to prop up the system with “monetary easing”, but being prepared in advance is better than trying to recover after the fact. When interest rates do rise, they could rise very fast.
Most stocks have already priced in earnings that may not appear in 2010. Many of the billions in bailout money given to banks was re-invested in equities providing a false rally or bull run in a bear market. In general, investors should attempt to capitalize any gains they achieved in 2009 and preserve those gains through 2010 with a defensive investment strategy. The period around the U.S. mid-term elections may very likely be the most financially volatile period of the year.
The idea that U.S. equities will return to 2007 levels within the next couple of years is highly unlikely, unless we see hyper inflation in which case the purchasing power of those stocks will be greatly diminished with little to no net “real” gain for the investors. Of course, there will be pockets of hot stocks at any given time (certain technologies, alternative energy, resource companies, water filtration/purification/recycling, etc.) but picking individual stocks comes with its own inherent risk. Emerging market equities in the BRIC nations (Brazil, Russia, India and China) as well as economies with similar BRIC characteristics (e.g. Vietnam, Peru) are good long-term plays but be prepared for downside risk in the near term.
Here is a rundown of our general investment philosophy for 2010:
Buy Commodities – particularly agriculture, but also metals and energy. These are good investments for preserving wealth and may be the only good investment should hyper-inflation take hold. Gold and silver still have a lot of upside potential. If we had to make a prediction we would expect gold to hit 2000 USD before the end of 2012, with proportionate increases for silver.
Buy U.S. Real Estate – Buy only in very distressed U.S. markets that offer lifestyle benefits like Florida, Nevada and Arizona. Overall real estate will remain soft and higher-end properties in the $600,000+ range will continue to fall.
Buy International Real Estate – Rental apartments and commercial property in central districts of medium and large cities in emerging markets where yields from rental income are at least 8% net may also be good long-term investments. Examples would include Quito, Manila, Lima, Ho Chi Minh, Phnom Penh, and possibly others.
Buy Lifestyle – It is never a mistake to invest in your lifestyle. If you are ready for a retirement home, it may be a good time to buy in certain projects where developers are under stress and willing to offer steep discounts and/or good financing terms. Avoid projects that are still on the ground floor and favor projects where the amenities are already in place. If financing is offered, attempt to get the developers to lock in the interest rate for several years as opposed to some sort of variable rate. Watch out for money grabs in older developments where the home owners association is controlled by local developers in need of cash. We’ve heard about buildings in Mexico where suddenly the central air conditioner system needs replacing to the tune of $40,000 per condo owner.
Buy outside of planned developments, unless you are very sure about the quality of the developer and the residents. The reality rarely matches the vision rendered on the computer screen. Good deals on real estate can currently be found outside of planned developments where expats are being forced to sell at discounted prices to pay off debt they may have in their home country. Most local property owners in foreign countries will resist lowering their asking prices and prefer to wait until they can find a buyer willing to pay the old, “inflated” prices.
Buy A Farm – You can combine real estate with agriculture by purchasing a working farm. This as an increasingly attractive alternative for many people seeking a safe haven. A working farm offers some element of cash flow from farming activities where land prices are reasonable and farm labor is cheap. Examples are wine (Argentina), coffee (Panama, Ecuador, Costa Rica), fruits, nuts, coco, etc. The idea is not to get rich, but to supplement your income and achieve gratification from the production of your own product. Make sure your farm has ample water supply.
Sell Stocks – If you have significant exposure to stocks at the moment it may be a good idea to reduce equity holdings in favor of commodities or buy stocks in companies that will benefit from higher commodity prices. Buy emerging market stocks if and when we see another severe correction.
Buy Bonds – Bonds in emerging market currencies with short maturity and exceeding 5% p.a. Avoid U.S. Treasuries.
Mission For 2010
Now my mission is to help others create their own business and invest in their own freedom. This is why, with the help of some of my advisers, we have created “Business in A Briefcase” – an International Business Training Course where we teach others how to do what we’ve done.
How to Invest In Your Own Freedom
Starting and running your own business is not as easy as it sounds. It requires some skill and expertise but mostly it requires education and tools. If you were planning to build a house for the first time, wouldn’t you first want to learn from someone who has built a house, and learn how to use the right tools? When you go to cook a new meal, do you not first consult the recipe, and ensure you have the right tools with which to cook?
Meanwhile, I see people spending $75,000 to get an MBA that does not guarantee them job security. So here’s an investment idea, try out our
Business in a Briefcase International Business Training Course for $399. It might be the best investment you ever made.
Note: Escape Artist Readers – Save $150 – Register for Business in a Briefcase and pay just $249.
Business in a Briefcase Course Overview Course Outline: Read the Business in a Briefcase Course Outline and Instructor Bio
Next Course Starting Date: March 5, 2010
Registration Deadline: March 2, 2010
Lesson Delivery: One lesson every three days; lessons delivered via email; student questions encouraged
Course Requirements: Computer with Internet connection; ability to send and receive email