Riding high on stocks? Aiming for high finance? Beware of the Dutch disease.

Long legged blondes

Dutch disease

White Sensation Parties

Dutch Disease White Sensation

Windmills

moulin rouge

Picturesque landscapes

Art

van gogh 1280px-Van_Gogh_-_Starry_Night_-_Google_Art_Project

-What’s not to like about Holland?

Well, free drugs and (almost) free women are perhaps debatable, except to us ahimsas.

dutch disease stoned

After workout, September 15, 2015

 

What’s not, is ‘Dutch’. And, no, I’m not talking about the people or their guttural language, but about the Dutch disease.

This short (5-minute, tops) post is all about the risk of losing one’s way and letting a windfall gain get the best of you.

 

The Dutch disease

“The Dutch disease” sounds better than it is. Trust me.

The old double-D is usually reserved for countries that get a windfall gain by striking oil, gold, diamonds or some other natural resource.

The discovery is supposed to be an unequivocal positive for the country, but most of the time, several dormant negatives are strengthened and actually make matters worse than before:

  • Politicians struggle for power over the the newfound wealth, breeding corruption and mismanagement.
  • The currency appreciates, strangling the export manufacturing sectors, while stimulating imports of (luxury) consumer goods.
  • The trickle down wealth erodes productivity and creates a nation of leisurely shoppers and welfare addicts.

Once the process has run its course, the country suffers from inflation, high cost level, unemployment, low productivity, low adaptability, corruption, poor governance etc. And its right then that the cause of the Dutch disease, the natural resource discovery, is exhausted, leaving the country much more worse off on all accounts than before.

You know, when you’ve been double-D:d

 

The ZIRP version of the Dutch disease

Zero interest rates work much the same way, just worse, in particular when the entire world plays the same ZIRP (zero interest rate policy) game simultaneously. After the interest rate cycle has run its course, what’s left is a world of dysfunctional and disconnected speculators with zero useful skills, instead of educated, creative and productive people in a functional society.

The Greenspans, Bernankes, Yellens, Kurodas, Draghis and Carneys of the world, not to mention the Swedish “let’s go negative” full retard interest rate champion, Ingves, “discovered” the natural resource of ZIRP and made sure the entire world contracted the Dutch disease.

In effect, they went to the streets and gave every junkie, every person with gambling debts, every irresponsible wacko they could shake a stick at, a wad of dough and said “There, I hope you’ve learned your lesson. And if you haven’t, there’s more where that came from”

 

Your own strain of the 2D

At an individual level, a bull market combined with zero interest rates might even have made you specifically contract the Dutch disease.

Check if you tick any of these boxes:

  • You think a quarter point interest rate rise would hurt your finances
  • You’re not even considering rising interest rates; “Why would they raise if it’s bad?”
  • Your mortgage is more than five times your annual disposable income
  • You’ve run up a sizable student loan or car loan without really gaining any useful skills
  • You actually don’t have a reliable income, since you left your job to “invest on the stock market”
  • You aren’t worried your real job skills are fading, since trading is going so well
  • Your only holdings are story stocks (no profits or no revenues, world domination plans, advertising dependent, story company clients only)

If just one or two of the statements above resonated with you, you should get checked for Dutch disease.

The risk is clear and present that you are financially fragile and couldn’t cope with a normalization of the economy (including 6% policy rates, 50% lower stock prices, and a decimation of finance related jobs and the professional support services that go with them), let alone an undershoot with even higher interest rates, costs (inflation) and lower stock prices and reduced dividends.

Oh, and then there is the creeping issue of automation that will kill off office workers, taxi and truck drivers and many other blue and white collar employees, outside the world of finance.

Feeling worried yet? Butterflies in your stomach?

 

Freakonomics

Here’s a tip for you:

Check out the Freakonomics podcast from October 16, 2014. It’s called “How Can Tiny Norway Afford To Buy So Many Teslas”.

It tells you how Norway finally cured itself from the Dutch disease, on the third time round of windfall oil gains. Now the Tesla is the most sold car model in Norway, and with only 5 million inhabitants, Norway is Tesla’s largest market outside the U.S.

Before that, they fucked up twice when oil prices increased (Norway found oil in 1969, and temporarily prospered during periods of rising oil prices before sinking back with a case of DD).

 

Don’t be that guy with the Dutch disease (Summary and conclusions) 

I’m sure you’ve heard several stories about people winning the lottery, only to be broke a few years later, with high debts, no job, no skills and no friends.

Don’t be that guy.

Low interest rates, surging stocks, increasing house prices etc. are like winning the lottery, like so many sirens of the sea luring you into stagnation and apathy.

Not even I am safe, despite my wealth, perhaps because of it… Remember, it’s not paranoia if they’re really after you.

Instead, make yourself change resistant and future proof:

  • Keep your skills updated, study online, use the abundance of free resources, such as Stanford, MIT, Khan, Codecademy, etc. Here is a list of 144 sites for that!
  • Keep your contacts up to date. Meet IRL, have fun, discuss what you would do if your income dried up, keep networking on LinkedIn
  • Keep your investments diversified
  • Check your spending while you can, instead of waiting until you have to (the latter will be much worse). Is that car really that fun or are you just trying to impress somebody?
  • If you’re still in school, think about which industries might be most resilient to automation and de-financation
    • Hint: It wont be stock brokering, stock research, portfolio management or algorithmic and HFT trading
    • It won’t be car or truck manufacturing either.
    • As discussed before, however, it might be psychology, design, marketing, programming, and as always, various forms of healthcare (unless your government has already ruined that market).
so you want to work in finance retarded hedge fund manager

Tell me more how you plan to buy happiness with your stock winnings

Yes, that’s right, even when things are going your way, interest rates are low, jobs, dividends and profits come easy, you’d better Always Be Investing. Most of all, make sure life’s journey is enjoyable and not dependent on becoming or staying ‘rich’.

If this article resonated with you. If you liked it, if you want more… Why not leave your e-mail address with me, i.e., subscribe, and I’ll send you my free eBook on finance, and weekly updates in my newsletters?

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Shooting for the wrong stars will land you in the gutter of Hollywood Boulevard

Theme of post: If you don’t change direction you might end up where you’re heading

Reading time: 2-5 minutes, depending on how long you spend on my list of role models

floyd mayweather and maria Sharapova

Floyd and Maria (Sharapova)

Choose your role models carefully

If your favorite celebrities are Floyd Mayweather, Messi, Ronaldo, Djokovich or Tiger Woods, the odds that you are going anywhere relevant are not ever in your favor. The same goes for U2, Lady Gaga, Justin Bieber and Taylor Swift. Actually, Justin Bieber is the one to emulate if anyone. However there can be only one Biebernator.

If you keep staring at the opposing traffic lane, you risk ending up there.

If you actually did become the next sports or music superstar all would be well. However, you’re more likely to end up in the suburbs of LA handing out free ass passes. Come to think of it, it’s not that different from JBs life as I imagine it.

A financially or spiritually rewarding occupation, which is more important?

We all want to have fun, be happy and feel fulfilled. But money is also nice, given it serves a different purpose than making others envious.

Peter Diamandis asks his students at Singularity University what they would do with a billion dollars – if they couldn’t spend it on themselves (or friends, family, conspicuous consumption and so on).

Coveting fame for fame’s own sake is something you should seek professional help for. Wanting money to buy fame is a symptom of an even worse personality disorder. Pursuing wealth to gain personal freedom or to make the world better, however, is something else altogether.

Think hard about your priorities; what life will look like in the retrospect if you take a certain path. Then choose the right role models, the ones that will act as a magnet on your life’s course.

 

From negative role models to positive

I wish I had had more guidance on things like this. My list came about as I realized that certain people already were doing what I thought I had to be the one to do to get it done. I always felt relieved every time I found a worthy master of an area, since it meant I could leave it to them.

One of the more important was David Simpson and his book series (heptology?) Post-Human. After reading the first few books in that series, I knew I didn’t have to bother with writing Singularity Fiction, since the best was already done.

Then I found the blog Wait But Why by Tim Urban, but this time, rather than dancing naked in the streets of joy that I didn’t have to try to write a really good blog about this and that, I just felt inspired to do something equally good.

Gradually I realized I had at least one role model in every interesting area of life. I still sometimes think of them in ‘negative’ terms, i.e., that I don’t have to do what they have already mastered. Mostly however, they just inspire me to be better and not be afraid give it a try even in their particular areas of expertise.

That’s it really for this time. Try listing your own role models. Do they feel right? Are they in the relevant areas for you? Perhaps you should look for others? Before you leave, don’t forget to subscribe to my newsletter (you’ll get a useful and somewhat fun eBook, for free, about how investment decisions were really made at the Hedge Fund Of The Decade 2000-2009)

Here is my list: 

Role models

Overall: Richard ‘Dick’ Feynman (physicist, bongo drummer, safe cracker, womanizer, Nobel Prize winner, teacher, the first Nanotechnologist [in 1959!]). He has done it all and is among the smartest and simultaneously most humble people alive. Always curious, never giving a damn about what other people think about him, always investing.

Economics (sub category Pedagogy): Peter Schiff. I hope to write a similarly pedagogical and readable book on an as highly relevant and important topic as Schiff’s How An Economy Grows…, and Friedrich Hayek for his important, readable, clarifying and entertaining book “The Road To Serfdom” about socialism.

Finance: Klarman (psychology of investing), Hussman (historically informed investing without resorting to technical analysis), Howard Marks (risk deconstructed), Faber (pragmatism on crazy markets; there is always an opportunity somewhere; inspired the quattro portfolio), Spitznagel (losses are gains [in knowledge]; a kind of investment Zen [or Dao]), Grantham (bubbles defined)

Visionaries: Kurzweil (technological predictions, entrepreneurship, pattern recognition), Diamandis (doer extraordinaire, longevity research)

Technology: Drexler (nanotechnology revived 30 years after Feynman), Venter (artificial biology, non-fossil fuels)

Writing: Michael Lewis (finance fiction documentaries), David Simpson (Singularity Sci Fi), Douglas Adams (Hitchhiker’s guide to the galaxy which is just so much fun and still surprises me with its insights)

Artists: Julia Louis Dreyfus (billionaire heiress cum funny girl in Seinfeldt and Veep)

Philosophy (and writing): Ayn Rand (objectivism, every man is an island, from each according to his ability to each according to his ability), Taleb (black swans, risk, tail hedging)

Science, quantum mechanics, astrophysics, string theory: Edward Witten, Stephen Hawking, Brian Greene, Brian Cox

Robotics: Google/Boston Dynamics (though, not that impressed yet – too little integration, I still nourish dreams to get involved in the robotics space to connect the technological ‘islands’)

Life optimization: Tim Ferriss (just damn impressive)

Blogging (writing): Tim, Wait But Why (so fun, so readable, so informative: numbers, procrastination, Fermi’s paradox)

Mobility: Kelly Starrett (repaired himself, then became the world’s foremost mobility expert. Forget splits and focus on functional mobility)

Gym blogging: Styrkelabbet (A swedish site on strength training -and some hypertrophy; informative, readable, straight to the point, all the most recent research presented for the layman and practiced by himself as a budding power lifter and strongman)

Copy (marketing/writing): Gary Halbert (but what do I know? I know nothing about writing copy or marketing. This seems to be the guy to emulate though)

Corporate leaders: Mark Zuckerburg (I mean, wtf?! How did he do that? How did he see it, how did he avoid temptations to sell, how did he kill off competition? Who starts Facebook when MySpace already owned the niche?)

Websites: zerohedge (fun, fast, provocative, biased, amazing), Khan Academy (world changing knowledge resource and teaching), KurzweilAI (find the future today), Clarifying Concepts (on Facebook; difficult scientific concepts explained for the layman, brain gymnastics)

Pod casts (for inspiration, for knowledge, for fun, but also for finding future role models): TED Radio Hour, Minute Physics, Gastropod, Freakonomics, Brain Science

feynman

What areas do you care about? How are you going to play a part, and who are your role models that can pull you from today’s point A to where you want to be in the future, point B?

P.S. Don’t forget to leave your e-mail address to get my eBook and future newsletters (spam free, about one a week)

Aim low 2 get high

What you’re getting into:

10 minutes of actionable advice for improved health, strength, posture, intelligence, stamina, focus, finances etc. – in short a blueprint for effortless life enhancement.

Squat, Beans, Omega3, Bacteria, Cold Feet, Variation, Processes vs. Goals, Meditation/Mindfulness, Use Your Left, Read “Surely you’re joking, Mr Feynman” and install Evernote.

Using the left (weak) arm

 

Don’t set your ambitions too high

Around 15 years ago, just as I began my hedge fund career, my little brother (today, not yet 30 years old, a national strongman finalist, an 800lbs deadlifter, and soon [well…] a Quantum physics PhD) experienced a sort of panic attack when browsing his math book in the beginning of the semester.

The realization that he didn’t know it all and couldn’t learn it all right away made him feel he could never learn it.

At the same time I had no goals or ambition whatsoever, apart from putting in less work than before. And we all know where that got me, one step at a time.

If you are new here and don’t know what I’m talking about, subscribe to my newsletter immediately and read my free eBook about how I became The European Hedge Fund Manager Of The Decade.

Hence, if you aim for the moon, the risk is it’ll stay just a dream. You won’t even hit the tree tops. Best guess is you’ll simply stay in bed, overwhelmed by your own ambitions.

Instead aim low, ridiculously low. But with a twist, with a process in mind, and a growth mindset.

Apparently you can reach the moon without more than a shy glance at it now and then, instead focusing your energy on enhancing those stone tools of yours – aiming ‘ridiculously’ low.

Feel free to have moonshot visions in the back of your mind. But aim for nothing more than getting out of bed, perhaps take a quick look out the window and check for trees, maybe even walk up to it… and perhaps grab the lowest branch and just feel it…

You know where that story ends.

moonshot aim low

Don’t be Tim Ferriss

On the one hand Tim is just like us. On the other he is an unattainable demi-god. Don’t model your goals on guys like Peter Thiel, Tim Ferriss, Steve Jobs and Jack Welch. Sure, everybody can emulate them, but very few actually will.

That kind of ambition is more likely than anything else to set you up for failure, discouragement and unhappiness.

If you try to learn parkour, French, big wave surfing, MMA etc. at master level in a week, you’ll most likely end up physically hurt or broken down psychologically. But just trying those things, aiming to get a little better every day, and you’ll exercise brain and body, and maybe finding a rewarding new hobby for life.

 

Aim low too, like I do

About a year ago, I wrote my first few blog posts on a precursor website called Always Be Bruce Wayne. On August 11, 2014, I presented one of my mottos “Aim Low”, which focused mainly on health and fitness, but also mentioned many other areas of life, such as  finance, work, gym, studying and reading.

This post is part two: Aim Low 2, Beginner’s Guide, a.k.a. “Just One More”

There will be a more thorough part three in the future, that delves deeper into various areas and expands the number and complexity of easy self improvement advice: Aim Low, Master Class

In fact, that 1-2-3 structure in itself demonstrates the principle of aiming low:

I had a very vague vision from the beginning about writing thoroughly on the topic but chose to ignore it. Instead, I said to myself: “Write just one short article advocating the three easiest and most rewarding mobility exercises”. I aimed low, then wrote just one more (the current one; Aim Low 2), and after that realized I should do just one more (again), some time in the future.

Trying not to get too wordy here, Let’s jump right into the advice:

 

The principle of aiming low

Whatever you do, make it easy to start. If you don’t start you won’t get anywhere. Start with the simplest step possible, then take another one. In a while, the momentum becomes self-sustaining, and getting going doesn’t take any effort at all. Then you have a habit of doing as well as of improving.

I’ve seen suggestions of imprinting habits by repeating them 21 days in a row. That’s probably close enough, but I would still focus on day 1, and then day 2…

 

Indulgence cum discipline

In short, this is the Aim Low, Just One More “formula”:

  • Do it now – whatever it is, do not put it off, not even for a minute. Now. Since you are aiming really low anyway you can start at a second’s notice
  • Just start – going running? Put your shoes on. Aim for a walk around the block. Perhaps another block. Perhaps just a few jogging steps. perhaps run just one block.
  • Just one (arbitrary [small] unit of your choice, in the case of the Aim Low blog post series a unit is a blog post, but it could just as well have been a single paragraph, or just a sentence or a headline) – aim for performing just one unit; one push up, one block, one kilometer/mile, one sentence, one page, one article.
  • Just one more – right when you finish your “just one” unit, make the thought “Ahhh, done. No more” your cue for “Just one more” or maybe just the half or quarter, since you took the trouble to start. It’s the sunk cost fallacy turned into a strength. Further, the “one more” process nulls the anchor effect (since you don’t have an absolute benchmark, just a process of adding one more arbitrary unit).
  • Celebrate every ‘one’. Computer games are built around levels, smaller and bigger levels. Sometimes there are more difficult “bosses” to beat after decimating his easier minions. The bosses are both proof of your skill and help honing it before going to the next level. Life in general and projects in particular are no fun if they are too long and there are no intermediate “bosses”. Celebrate completing a “one”; vanquishing an intermediate game “boss”.
  • Enjoy the process, focus on it, make sure it’s a good process that you like and can be proud of. Good or bad luck can lead to any outcome, independent of the quality of the process, but a good process will always be a good process. And a tautology is always true (straight out of Retard’s Playbook). If the endgame is all that matters, if you shoot exclusively for the moon, then failure is both likely and will be complete. If the process, the investing, the growing.
  • End up where you are heading. The real trick though is to steer in the right long term direction, or you might end up where you are heading. However, only glance at the ultimate goal to not get overwhelmed. Every one should be a reward that makes you want to go for (just) one more.

On moonshots: Don’t (aim to) become so good they can’t ignore you. For one, it’s near impossible for most. Second, you don’t need them anyway if you become that good. A pragmatic strategy must build on leveraging others without having to be nr 1. Be different and good enough, rather than the best. Most important of all, live for you, not for them – in all aspects of life.

 

 

Beginner’s Guide For Aiming Low

  • Hygiene: Wash less. Trust your bacteria. Don’t kill them with solvents, leaving room for new strains. I haven’t used anything but water on my face for 9 months. Apart from the obvious health benefits it saves time too.
  • Sleep: Sleep with your feet sticking out from the bed (cold feet signal time to sleep), lower temperature in the bed room. Meditate for just one minute (or add one more), instead of checking your phone, computer or TV 30 minutes before bedtime. Sleep as dark as possible (aluminum curtains/blinds), neutral spine (harder bed, head aligned with body, i.e. not turned to the side relative the body)
  • Workouts: Variation. Vary the number of sets and rep ranges between workouts and weeks. No extra effort or time required, just vary those two parameters if nothing else.
  • Cardio: Small increments, low threshold. Start by putting your shoes on. That’s enough, but my guess is you’ll want to at least walk around the block once laced up anyway. Always tell yourself, this is the last unit (that fools your brain to release the body’s reserve powers). Then do one more. However, I personally don’t do cardio.
  • Mobility: Hips & Shoulders. Squat, Couch stretch and Morpheus if nothing else. Do it between sets in the gym, when watching TV or waiting for the bus. Zero time consumption. Almost zero effort. Adds years of quality life. And don’t sit in chairs all the time. Stand at work. Sit on the floor at home. For the master class, this one needs some serious elaboration (in the meantime you can check out this old post I wrote a year ago).
  • Brain training: I throw tennis balls for my dog using my left arm during our walks, thoroughly thinking through how to copy the movement of my right arm. No extra effort, no time consumed. Try balancing on one leg with your eyes closed.
  • Variation: use a different store for grocery shopping, take a different path to work
  • Skills: start things, do them wholeheartedly for a while, then quit if boring. Go to Khan Academy. Watch some videos when idle. Start doing some math or programming. Download DuoLingo and try French or Portuguese. Do the exercises whenever you usually would check Facebook/Instagram/Twitter. Make “social media” your cue for “but first, just one minute of skill improvement”
  • Writing: just start, just get to the computer and write one sentence, one headline, then another, then one more, then start filling out the blanks in between. First just write simple words, then whole sentences, then refine them into paragraphs, then make sure they are in a readable order.
  • Meditation: the easiest meditation in the world is lying on your back, with your eyes closed, focusing on your breathing, identifying and feeling every part of the breathing apparatus. In through the nose, out through the mouth. If a thought shows up. Acknowledge it is there and then focus on the breathing again. Nose. Mouth. Nose. Mouth. Move up the meditation ladder, by going through every part of the body starting with just one toe. Can you feel it, can you imagine where it is? Make micro movements, moving a finger just a millimeter or two and notice if your left feels different from your right. Try that instead of being online the last 30 minutes before going to sleep.
  • Mindfulness: Just look/listen/smell/touch anything really thoroughly. What is the texture, what components does that smell have, how does that bird or insect move through the air, what instruments are there in that song
  • Inspiration, knowledge: read a book/article (Surely you’re joking, Mr Feynman) or listen to a podcast (TED Radio Hour) by somebody obviously smart or accomplished. Think, really think about the message and its implications. Does it affect you? Should it? How can you apply the same concepts? 
  • Motivation: Don’t be a little bitch. Real people don’t need motivation
  • Happiness: Focus on processes rather than goals. Celebrate periodically. Life should be like a challenging computer game. It can be a little tough sometimes, you fall and pick yourself up, but every now and then you win over an intermediary boss or get to the next level. Celebrate those wins instead of only thinking about some ultimate endgame. Ask yourself “What’s wrong with right now?” and forget about some moonshot dreams. 
  • Productivity: Use a commonplace like Evernote. Write down ideas and ToDos in a structured manner right when they occur. That frees up capacity to move on without risk of losing the idea
  • Studying: Don’t rush it. Understanding takes time. One step at a time. First one, then one more. Construct each level of understanding carefully or you won’t have anything stable to build on later
  • Teaching: Same as studying. No rush. Make it easy by taking very small steps but requiring full understanding
  • Food: Drink omega3 oil and eat beans and leafy greens every day. Everything will improve (incl. less inflammation, speedier recovery from exercise, illness and injury). Also, try fasting every now and then. Personally, I fast for 16 hours every day, and typically work out during the 16th hour. It saves time, prevents inflammation and cancer, and makes use of the body’s positive response to convexity. For the master class, the food advice section will need to be at least as long as the master class mobility advice.
  • Alcohol:

alcohol

  • Sex, pick-ups, relationships: I have no shortcuts, no hacks, no tricks for these, but you could try boosting your testosterone by “power posing” a few minutes when walking the dog, or waiting in line, for the lift or other idle moments
  • Finance: Patience. That’s all. No greed, no fear, no know-it-all advice, just Study, Wait, Pounce
  • Health: Don’t sit. Don’t stand completely still. Apply Convexity in all aspects of life, i.e. explore moderate extremes; the “corners” of life
  • Convexity: Eat/Fast, Contrast Showers, Ice Bath/Sauna, Focus/Relax. Even Drunk/Hangover/Dehydrated/Recovery. The body and brain respond really well to moderate extremes, or “convexity”.

bonus 1: If you aim low, you expect little, and have both a higher likelihood of achieving your goals and attaining happiness

bonus 2: if you aim low, with a focus on growth rather than an endgame, you are more likely to start, and to continue, and maybe actually progress to the very top, while enjoying every step of the way and avoiding feeling empty when finally ‘there’.

Just one more aim low

Just one more…

Summary

Just do one.

Then one more.

To really sum it up: Squat, Beans, Omega3, Bacteria, Cold Feet, Variation, Processes vs. Goals, Meditation/Mindfulness, Use Your Left, Read “Surely you’re joking, Mr Feynman” and install Evernote.

P.S. I just found out that Self Improvement Guru James Clear wrote something similar today in Habit Creep