Lilja 4-Ever

I just saw this movie, which was about underground sex trafficking. I'm feeling really sad now. Feel like there needs to be something I can do to help these girls.
Sexual slavery is really an example of capitalism at its worst. If the private sector had its way, sexual slavery would be rife. In order to limit sexual slavery, the freedoms of enterprise must be curbed so that they cannot enslave innocent young girls for their profit.

This is why government must intervene to set laws that protect human life, why government must fund police departments that investigate sex trafficking.
We can hope that public servants can be idealistic enough to create laws that protect the innocent and police also be idealistic or altruistic enough to implement these laws.

Less Work, More Holidays

Whenever I speak to people, I make no secret about the fact that I hate my job. It is not really the work that bothers me. Rather, it is the fact that I have to work for a boss. I have to report to a boss, update him on what I'm doing, and endure his speeches on how I should be doing my job. Because my dissatisfaction comes from being averse to being subjugated, I simply cannot go back to university and study a different course, as my father has suggested to me. I need to do something different. If I want to be my own boss, one option is to start my own business, but this option has its challenges. Will I have enough to money to start my own business? How much does it cost to run a business? What sort of tax and compliance processes do I need to follow, and are they burdensome?

The more I think about it, the more I realise that I probably need to start taking more holidays. Less than a month ago, I turned 29. I am almost thirty, almost sort of reaching the middle of my life, and I when I think back on my life, I realise that I really have not done much. I have been overseas but only twice. Most people go on a foreign vacation ever year. I have been reluctant to go on holidays because of the costs. I believed it was more sensible to save the money.

Given how stressful my job is, I believe it is best if I start taking holidays. It is not just my career where I am facing crisis. There is also chaos in my family life. Going to a different place and leaving your old life behind is a great way to clear the mind.

I will still continue to save money, mainly because I want to invest the money to make more money. One day I may be able to save up enough money to be able to be on holidays for, say, six-month periods at a time. When I come back to Australia, I can work part-time, and when I feel like it, I can just get back on the plane and get out. I am starting to realise that one of the greatest freedoms is the ability to just get out. I pity those who have committed too much into wage slavery, the people who have a mortgage, two children, and a car loan to fund. I have none of these, but pressure from friends and family to be normal is really starting to ramp up. It's as if all of society is trying to set a trap for me. I've reaches a point in my life where I need to make a fundamental decision about whether I want to embrace the culture of wage slavery or the culture of freedom. What is most cruel about life is that the price of freedom is a decade of wage slavery.

Too much holidaying can be unhealthy. I could get bored. I just don't know. I need to give myself the flexibility to move in and out of holiday mode and work mode.

The Importance of Global Diversification

"Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land."

Ecclesiastes 11:2 (TNIV)

I have great respect of John Bogle, the founder of the Vanguard Group. I believe that if you are unsure how to invest your money, just do what John Bogle says. That being said, there are few issues I have with him. The first relates to his aversion to foreign (i.e. non-American) investments. According to John Bogle, if you invest in a mutual index fund that replicates the S&P500 index, given that most S&P500 companies are multinationals with operations all around the world, you are getting foreign diversification anyway.

This is wrong.

What Bogle completely ignores is the fact that, by investing in only American equities, you are limited to companies that list on a small and undiversified number of stock exchanges. Every stock exchange around the world has different listing requirements. Some stock exchanges have very strict listing requirements, demanding that companies meet demanding disclosure requirements. Other stock exchanges may have lax disclosure requirements. Furthermore, some governments or stock exchanges (or both) may be more corrupt than others. You simply don't know, and it is for these reasons that you need to diversify across stock exchanges and countries. It is not enough to invest in an index fund that replicates the S&P500. You need to invest in European shares, Asian shares, Australian shares, and so forth. And that is only looking at shares. You should invest in other asset classes as well, such as REITs, bonds, and commodities.

One good argument against diversification if it's just too difficult. For example, in my opinion it makes sense to invest in commodities like gold for the sake of diversification, but investing in gold is not simple. You can't walk into a bank and just ask for gold, and storage of the gold becomes another difficulty. However, diversifying your equity investments across different countries is easy. There are many mutual funds out there that automatically diversify across multiple countries.

Hide and Diversify Your Wealth

If I could give two pieces of advice on investing, it would be the following: 

1. hide your wealth
2. diversify your wealth.

The first piece of advice is due to safety. If you save up money and go around telling people how great you are at saving money, the risk of theft only increases. I don't even recommend you tell family or friends about money you're saving. If you spouse knows, the payoffs from divorce are so much higher, which would tempt him or her. Just keep it to yourself and, better yet, pretend that you are poor. If snobs don't want to be friends with you because they don't want to associate with poor people, it's probably better that you didn't know them anyway.

The second rule of investment is you must diversify. In fact, when I think about it, the first and second rule are similar in that they exist due to lack of trust. If you hide your wealth, it is because you cannot trust people who will tempted to steal. If you diversify your wealth, it is because you cannot trust those people who hold your money to destroy your wealth either due to corruption or incompetence.

The two rules above help protect your wealth.

Google Nexus 7 - An Early Christmas Present for Myself

I have recently splashed out online on a Google Nexus 7 tablet for $240 from Kogan. I may need to pay for expensive dential surgery in the future, so I need to start saving money, which means that this Christmas period I will not be going anywhere but will stay home. I need to keep myself occupied while I'm at home. I figure the Nexus 7 will keep me occupied with ebooks, games, web browsing, and so forth, and that will distract me from going out of the house and spending money on movies, holidays, etc. Some people claim that ebooks and games cost money, but there are plenty of free ebooks on the internet if you’re willing to read classics whose copyrights have expired, and there is a huge supply of good free games on the Google Play store. It looks like cheap entertainment to me.

The Myth of Good Debt and Bad Debt

A friend once told me the following:

If you borrow money to buy an asset that depreciates, this is bad debt, and you should avoid it. If you borrow money to buy an asset that appreciates, this is good debt.

This is crap. One reason is because it's very difficult to actually know whether an asset will appreciate or depreciate. For example, most investors who purchased subprime securities before the GFC wrongly assumed house prices only went up. As a result, borrowing money to buy an asset really only magnifies risk because, if the asset goes down, you lose more.

Another reason why this rule is crap is because it completely ignores the cost of borrowing, the cost of holding the asset, as well as whether the asset generates any income.

For example, suppose you borrow money from a loan shark at 20% in order to buy a house and assume that this house appreciates at 5% per year. You will actually be worse off than if you took out a car loan at 8% and purchased a car that depreciates at only 1% per year. In other words, if the cost of borrowing is so high, it doesn't really matter if the asset appreciates or not.

Some assets may appreciate over time but have extremely high costs. For example, suppose you purchased a run-down apartment that needs constant maintenance. As the landlord you need to fix the showers, clean the walls, replace the tiles, put more concrete on the driveway, and so forth. You may purchase an apartment that appreciates at a mere, say, 1% per year but if it costs you $1,000,000 per year to maintain this apartment, what is the point? These holding costs aren't necessarily in the form of fixing showers and tiles but may include council rates, land taxes, and other taxes or fees.

Another factor ignored when focusing only on asset price changes is the income-producing potential of the asset. If you take out a margin loan with your bank and borrow money at 8% to invest in shares of a company whose stock price depreciates at 1% per annum but it has a dividend yield of 10% then you are better off than someone who takes out a mortgage and borrows at 6% to invest in a house that appreciates at 3% per year and pays rental yield of only 3%.

In summary, if you borrow money to buy an asset, you need to look at a lot more than asset price changes. You need to look at everything that influences on costs and benefits. The idea that borrowing money to invest is a good idea simply because you expect the price of the asset to rise is thoroughly refuted in the examples above. Other things to consider include holding costs, costs of borrowing, and how much income the asset produces.

Chinese Buying Australian Farms

Read more: Sell the farm to buy a future as China's food bowl

There have been worries expressed at Chinese agricultural interests buying Australian farm land. The main issues with this seem to be the idea that the Chinese investor will use the land for Chinese interests rather than Australian interests. Many say that if a Chinese investor owns Australian land and grows food on it, it will export all its food back to China and leave nothing for Australians or it will export so much to China that food prices will rise.

The only thing I have to say to this argument is that it is already happening. It doesn't matter if the farmer is Chinese, Australian, American, or any other nationality. Investors only care about making more money and will export their products to wherever there is highest demand. Australian farmers and especially miners (e.g. BHP) already export significant amounts of agriculture and resources to the rest of the world, especially Asia. To think that simply changing the nationality of the investor will change anything is absurd. If Australians want to limit how much food is exported overseas, it can implement this by imposing trade restrictions on farmers, but this is highly unlikely as politicians should recognise that there are many benefits to farmers exporting their food overseas.

Patriotism is a tool that rich people use to ensure poor people are loyal and obedient to them. When patriotism is not profitable, rich people are quick to drop it. Farmers would love to tell Australians to support the local industry and buy Australian made food as they benefit from the higher demand. But farmers are very happy to start exporting the bulk of their food to other countries to maximise their profits rather than keep it all in Australia to lower prices for Australian consumers.

The same story unfolded in the Australian retail sector. Australian retailers will tell Australian consumers that they need to be patriotic and support Australian products. Of course they will say this because they are making money off the Australian consumer. But the Australian retailers like Harvey Norman, Myer, and so forth have nothing against importing cheap products from overseas, quadrupling prices, and then selling it to gullible Australian consumers.