Dear Reader, Personal circumstances have made this week a time for reflection. Climate change. Inept politicians. Ballooning debt levels. Increasing social tension. Pension crises. As important as they are, these topics can all wait for another week. My mother-in-law is dying. Death brings life into focus. We never expected her to make it to 2020, but true to form she defied the odds. Our last Christmas together was a memorable one. Drawing on her depleted energy reserves, she endured having makeup applied, being dressed in her favourite outfit and then getting hoisted into a reclining, over-sized wheelchair. When she entered the room of gathered family, she simply smiled. Being surrounded by her three daughters, six grandchildren and two great grandchildren, was the only gift she wanted…and it showed. The outpouring of love for her was priceless. No amount of money could buy what was in that room. The deep respect and affection afforded to her was earned from a lifetime of loving, nurturing and leading by example. My mother-in-law is living proof that the best investment any of us can make is in our family. Valuable lessons on how to create a rich life ‘The only lasting things that you can pass on to your children are not assets, but your value system, and yourself as the best role model you can be.’ Michael Cannon Brookes Snr This extract came from the following article: I thought it was a great quote. Michael Cannon-Brookes Snr is the father of one of Australia’s richest persons…Michael Cannon-Brookes Jr. Michael Cannon-Brookes Jr and his business partner Scott Farquhar founded tech company Atlassian. According to Australian Financial Review on 2 January 2020… ‘The two brains behind Atlassian again featured highly on this [rich] list. Mr Cannon-Brookes' and Mr Farquhar's respective $13.5 billion and $13.2 billion…’ His dad’s sage advice of ‘being the best role model you can be’, sums up our parenting responsibility in a nutshell. If we follow that advice, then there’s a pretty good chance your value system will be inherited. There were a couple of other notable extracts from the article that reinforced the values we should hold near and dear. Firstly… ‘Global issues were a topic at the dinner table, and the children were used to crossing the globe during school holidays.’ How refreshing to hear someone mention the value to be found in dinner table conversations. Turn the TV off. Put the phones on silent. Shut down computers. Dinner time is family time. Chat about each other’s day. Discuss topical issues. Ask what new things were learnt that day. Talk through any problems that may have arisen. Dinner time is precious time. It provides a fabulous chance to connect with each other. The dinner table is great for practicing the art of conversation and communication. Asking those open ended questions — who, what, how and why — to dig deeper into the subject matter. Travel is a great way to expand your horizons…opening up imaginations to what’s possible. To be thankful for what you have. To connect with different cultures. To see the world through the eyes of others. To make new relationships. Travel provides an excellent opportunity to make lasting memories with the family. Those ‘remember when’ moments. Secondly… ‘He and his wife taught their children to be humble and treat everyone equally, regardless of their station in life. This is reflected in Atlassian’s laser focus on being the employer of choice, its charitable foundation and values of ‘no bullshit’ and ‘don’t f--- the customer’.’ Humility and gratitude are two qualities we should strive to pass onto our children. Being thankful for what we’ve been given in life is one way of staying grounded…irrespective of our financial success. Treating everyone equally is a modern day version of ‘do unto others as you would have them do unto you’. Saying it and doing it are two different things. If you don’t walk the talk — by behaving in a superior manner to wait staff — then no prizes for guessing what lesson your children will learn. If we say it, we must live it by being the best role model we can be. Another father of a very successful son has written a book titled Showing Up for Life. The author’s name…Bill Gates Snr. I’m sure you can guess who his son is. On a side note, there might be some secret formula for success in naming your son after yourself. According to Amazon (emphasis is mine): ‘In his book, ‘Showing Up for Life,’ Bill Gates Sr. shares values and principles from a lifetime of ‘showing up’ — lessons that he learned growing up in the Great Depression, lessons that he instilled in his children and continues to practice on the world stage as the co-chair of the Bill & Melinda Gates Foundation. ’ Lessons learned. Lessons instilled. Lesson practiced daily. It’s a repetitious theme, but it’s the daily practice of good habits that produce quality outcomes. In discussing his book, Bill Gates Snr said (emphasis added): ‘There is one lesson I've learned over the years as a father, lawyer, activist, and citizen which stands above all the others that I hope to convey in these pages. It is simply this: We are all in this life together and we need each other. Showing Up for Life. Eighty percent of success is showing up.’ Being there. Reliability. Dependability. Knowing you can be counted on. Why do I show up so much? Well, I suppose there are a lot of reasons. In the book he expands on why he ‘shows up’ and how it’s influenced his family (emphasis added): ‘I show up because I care about a cause. Or because I care about the person who asked me to show up. And maybe sometimes I show up because it irritates me when other people don’t show up. ‘My obsessive showing up has become a joke among my children. Still, I notice they’ve picked up the habit. And frankly, that’s what happened to me. ‘I started showing up because as far back as I can remember I watched other people I admired showing up.’ Values are caught. After watching the actions of others, he developed the habit of ‘showing up’. Which in turn has influenced his own family. He went on to say: ‘My parents, on a scale of one to ten, were nines at showing up. My dad was somebody people knew they could count on. If there was money to be raised for a good cause, my dad was always willing to call on people and ask them to give a few dollars. He had led the effort to have a new park built in town. I read about it in an old newspaper long after he died. I had not known about it, but it didn’t surprise me. ‘My mom showed up for a long list of community activities that included everything from picnics to fund drives. ‘My parents never talked about showing up. They just did it.’ No fuss. No fanfare. Just do it. That’s humility being taught. From little things big things grow. Bill Gates’s grandparents had no idea that the value system they practiced daily would one day lead to the establishment of the Bill & Melinda Gates Foundation. According to Wikipedia… ‘The Bill & Melinda Gates Foundation (BMGF), previously the William H. Gates Foundation, is a private foundation founded by Bill and Melinda Gates. Based in Seattle, Washington, it was launched in 2000 and is reported to be the largest private foundation in the world holding [US] $50.7 billion in assets. The primary aims of the foundation are, globally, to enhance healthcare and reduce extreme poverty, and, in the US, to expand educational opportunities and access to information technology.’ If we show up every day and be the best role models we can be, we’ll create a legacy we can be proud of…one that could have far reaching benefits in generations to come. That certainly is my aim. If, when my time comes, I can be held in the esteem of my mother-in-law, then my life will have been a success. Regards | Vern Gowdie, Editor, The Rum Rebellion |
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What the End of a Boom Looks Like By Bill Bonner War, inflation, bull markets, bad marriages, eating binges, and benders — all are more fun at the beginning than at the end. And none goes on forever. Yes, Dear Reader. The music is still playing. The dancers are still on the floor. And the barmen at the Federal Reserve are still refilling glasses as fast as they can. But feet are getting sore…drunks are babbling…and the band is getting tired. The recovery began in the first quarter of 2009. And the stock market bottomed out in March 2009. We’re now in the longest business expansion…and the longest bull market… ever. And if the boom ends tomorrow, investors will have no cause for complaint. All they had to do was sit tight in an index fund and they would have more than tripled their money. The recovery in the economy has added about $7 trillion to GDP, bringing it to nearly $21 trillion. So, it’s been a great party. We know what the beginning was like. We saw that movie. But how about the end? That’s what’s coming up next… Beginning of the end At the beginning of a boom, manufacturing thrives. The furnaces are lit, employees are recalled, and output shoots up. At the end, the lights go out. Houston Molnar reported from our research department: ‘The Institute for Supply Management (ISM) released December’s US manufacturing data. And it didn’t look promising… ‘Manufacturing is contracting at a rate we haven’t seen since the global financial crisis. The index fell to 47.2% last month – its lowest reading since 2009. December’s reading marked the fifth consecutive month of contraction.’ When a boom begins, companies are lean…fast-growing…and have nice margins. When it ends, they are worn out, barely profitable, and overpriced. MarketWatch brings us up to date on what’s happening today: ‘The percentage of US-listed companies losing money over the past 12 months has risen close to 40% - the highest level since the late 1990s outside of a post-recession period, The Wall Street Journal reported. ‘Shares in the two most valuable loss-making companies have soared in the past three months, with electric vehicle maker Tesla’s stock doubling and technology and financial services company General Electric up 44%.’ Bad bet At the beginning of a boom, investors are skeptical. They part with their money reluctantly, almost grudgingly… carefully looking for value. But after a few years and a few drinks, they forget all about value. They buy companies that are in the news. They want the movers and the shakers, and they don’t care how much they cost…so long as they go up. Take Tesla, for example. It’s a company that wouldn’t last long in a normal stock market. But at the bubble-end of a long, Fed-fuelled boom, it’s a favourite. The more it loses…the more investors want a piece of the action. The electric auto builder is now worth more than GM and Ford combined. Investors bid up Tesla more than 100% over the last three months, to a market capitalisation of $95 billion. But Tesla sold only 368,000 vehicles last year. Ford alone sold 2.9 million in the US and another 3 million in China. Of course, the bet investors are making is that Tesla will be the Amazon or Google of the electric car world — with such a big lead on the competition that the others won’t be able to catch up. It’s a bad bet. Google and Amazon both benefit from the network effect. The larger they get, the more of an advantage they have. You are more likely to find what you want on Amazon, so why go elsewhere? But Tesla is like WeWork (the doomed ‘tech’ startup we last wrote about here), not like Amazon. It gets no network effect or first-mover advantage. Because car buyers, like office-space renters, do their homework…and take the best deal they can find. They don’t care when you got in the business; they want the best car. Money masochism Tesla will never be a one-stop shop for electric autos. But it is providing a great service to more established automakers. At huge cost, it is testing the market. The bigger players should have no trouble building electric cars and capturing market share when they see it is worth doing. They will have more dealers… and more options. And they’ll be able to quickly copy…and surpass…any technological innovations Tesla makes. More importantly, they’ll make money on their cars. Tesla, we suspect, will turn out to be an artefact of the Bubble Market of 09–20. Like the market itself, it depends on regular infusions of fake money. And like the whole stock market, it is financially fragile. Since Tesla makes no profits, it relies on investors who are willing to keep losing money. That money masochism will come to an abrupt end when the market goes down. And here’s our old friend, Chris Mayer of Woodlock Family Capital: ‘This is just getting crazier and crazier…How long can this continue? ‘Five stocks – Apple, Microsoft, Alphabet, Amazon and Facebook – make up 18% of the S&P. ‘Interesting to see the top contributors too… Apple was up 86% last year. Microsoft up 55%. Just those two accounted for nearly 15% of the S&P 500′s return last year.’ The big companies move, says Chris, because investors don’t bother with research. They just want to be ‘in the market’ with big-name stocks that go up. And the cheapest, easiest way to do that is to buy an index fund — which buys the most popular stocks, driving their prices up even higher. Then, even the hard-bitten old value investors have to buy the big names, too — just to keep up with the indexes. But then…finally…the bartender tightens the tops on the whisky bottles. The band unplugs its speakers. And the partygoers wish they had left earlier. Regards, | Bill Bonner, For The Rum Rebellion |
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