Oct 13, 2016 | Investing
“The Age of Man is over. The Time of the Orc has come.” –Gothmog, The Lord of the Rings “The Age of the Saver is over. The Time of the Borrower has come.” –Ben Bernanke, former Federal Reserve Chair No, the second quote was not actually uttered by Ben Bernanke, but it may as well have been. You might remember that the people of Gondor in the final Lord of the Rings film have two choices: they can listen to Denethor, the same crazy old man who has been leading them for decades, or they can listen to this Gandalf the White character who has come back from the dead and has all these magical notions. At the beginning, they listen to Denethor and charge the river, at which point the orc general Gothmog issues the above proclamation. Savers, welcome to Gondor. A full 62% of Americans have less than $1,000 in their savings account according to a recent Google Consumer Survey (from Market Watch). Among millennials, a whopping 30% have zero dollars in a savings account. Some of us are not even fighting the battle! But what do you do if you are ahead of the game and are actually saving money? Money market mutual funds—the symbol of “super safe investing”—were offering 0.01% until the Fed hike last year. Now they are offering…wait for it…0.5%. Treasury bonds were once the next-step up—pretty safe, assuming the government doesn’t go bankrupt. The 10-year Treasury bond is 1.7% right now. That means if you give the government $1,000 for 10 years (or risk selling the bond before then, in which...
Sep 14, 2015 | Investing
The Ancients were not known to be entirely investor-savvy people. The great Aristotle believed it was unnatural for money to breed money and thus condemned investing. There are always exceptions, however. Take Marcus Porcius Cato the Elder, for example. Imagine that you’ve just returned from Spain after a successful campaign and have captured quite a bit of local silver. What could you possibly do with all that money? Well, Cato had an answer. Invest and Diversify Investing wasn’t so easy, though. No banks. No corporations. No bonds. No registered investment advisors. So what did Cato do? He bought boats… ,well, parts of boats. Here’s what the ancient biographer Plutarch wrote regarding Cato: “He used to loan money also in the most disreputable of all ways, namely, on ships, and his method was as follows. He required his borrowers to form a large company, and when there were fifty partners and as many ships for his security, he took one share in the company himself, and was represented by Quintio, a freedman of his, who accompanied his clients in all their ventures. In this way his entire security was not imperiled, but only a small part of it, and his profits were large.” While Plutarch still believed investing was disreputable, we have a clear example of an early form of diversification, or trying to invest in different assets so that your risk is minimized. Let’s look more closely at what Cato the Elder did: He ensured that all of his borrowers, or investees, formed one large “corporation” in a sense. By pooling their resources, he ensured that not only he,...
