Kuta Beach

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Tuesday, 29 December 2009

Living Off Dividends

Living off dividends is one of the best goals you can aim for, and it is certainly something I aim to do.

Dividends are payments companies make to shareholders. If you own shares, every so often the company will will drop money into your bank account as dividends. By owning shares, you can provide income for yourself without actually doing any work. Income from work requires time and effort, but you can earn income from shares by sitting back and doing nothing. This passive nature of earning income is why dividends are a form of passive income.

It is important to understand that ownership of shares is not the only way you can earn money from doing nothing. You can receive passive income from savings accounts, term deposits, real estate, bonds, royalties from book sales, and so on. When I say that living off dividends ia a worthwhile goal, I am referring to living off passive income. I talk about dividends because I personally use stock ownership almost exclusively to earn passive income. For the average person, I think it is probably not a good idea to exclusively rely on stocks for passive income. Do as I say, not as I do. You should diversify into less risky income-producing inverstments like term deposits. There are some term deposits out there now that give you 7 per cent per year. I have not invested in these mainly because you need to save up a whopping $25,000 to invest in them.

The main benefit of living off dividends is the freedom it gives you. When you live off interest, rent, and dividends, you live off the fruits of other people's labour, not your own. You don't work for others. They work for you. This gives you incredible independence. Many people who are dependent on work income to fund their mortgage, car payments, etc are essentially slaves to their bosses. If the boss tells you to lick the toilets clean, if you depend on your job to pay for your food, mortage, car payments, etc then you have to lick the toilets clean in order to survive. There is no dignity in being a slave to your boss. However, if you had passive income, you don't need to lick the toilets clean if your boss tells you to do so because you can quit and still comfortably live off dividends. While you are unemployed you can find another job but even if you take a long time finding a job or even if you never find another job, it doesn't matter because you don't need to work for yourself. Others work for you.

Many people say that debt is dangerous. Just to be clear, I am not anti-debt. I think debt can be used as an effective tool to build wealth. If you borrow money and invest in an asset that goes up in value significantly, you can build yourself massive profits. The problem is that there is no asset that is guaranteed to go up significantly all the time. (If such an asset exists, why would anyone bother working. Just borrow money, buy that asset, and then retire.) For the average person, I recommend you stay out of debt. This not only means staying away from the debts that almost everyone thinks are bad such as car loans and credit cards but also the so-called good debts like home loans. I recommend you try to buy a second-hand car and to live with parents if you can. I am different to most people in that I broaden the definition of debt. Most people think of debt as obligations to pay money placed upon them because of some bill that appears in the mail, e.g. credit card bill. My definition of a monetary debt is as follows: "a future obligation to pay." Hence a credit card debt is a debt since you are obligated to pay X dollars by a certain date. The same applies to home loans and car loans. However, using this definition, it becomes logical that hunger and shelter are also debts. All humans have a need to eat food for energy and a need to cover himself for shelter from cold and heat. In order to eat and in order to cover himself, he need to pay. Hence eating and sheltering are future obligations to pay and hence by definition they are debts. We all are born with debts because we all need food and shelter. They are necesities for life. The best way I think you can eliminate these debts is to produce passive income. The more passive income you produce, the less indebted you are and the less indebted you are, the further away you move from a state of slavery. The greater your passive income, the greater your freedom.

If the need to feed and cover yourself is a debt, then image how much more debt you'd be in if you had a child. If you produced a baby, not only do you have to feed yourself but you are also legally obligated to feed your child (if you don't, you will go to prison). Hence having a child is one way of going into immense debt. The problem is worse because if you have a child without being able to pay the debt then you harm not just yourself but you also harm an innocent child.

CNN Money is a critic of living off passive income. In their article Living Off the Interest? Good Luck, they say that living off passive income is a poor strategy because "few people will amass a big enough nest egg to live without touching principal." The problem with many of these analyses is that they assume that your investments will not provide enough income for your lavish lifestyle. The way to live off dividends then is to keep your expenses low and to invest in high-yielding investments.

If you are an Australian resident who wants to produce passive income, I recommend you invest in the Vanguard High Yield Australian Shares Fund (High Yield Fund). The management fees of 0.90% are a little high, but given that this mutual fund gives you monthly distributions (most of the time) and franking credits, I think it's worth it. The High Yield Fund doesn't really track any existing index and so it cannot really be called an index fund but an actively managed fund or maybe a mixture of both. Rather, it takes the ASX200 index, strips AREITS out, and then invests in the companies in the index that pay the highest dividends. Another investment that I think shows good passive income potential is the SPDR S&P/ASX 200 Listed Property Fund (SLF), which in an ETF you can buy on the ASX. As of Christmas 2009, SLF has a 8.03 per cent dividend yield.

Ultimately, dividend investing is an inexact science as it is difficult to predict how dividends will change over time, so it is up to you to select the best investments. The two products I recommend above are just recommendations for those who don't know where to start. They are products that I use myself.

I have about 20,000 units in the High Yield Fund. The graph below shows the historical distribution payments from High Yield Fund if you had 20,000 units in it. The horizontal axis shows the date, the vertical axis is in Australian dollars, the blue line shows the distribution payment, and the red line shows the 12-month moving average of distribution payment.

As you can see, about 30% of the time the fund does not pay a distribution. The 12-month moving average suggests that on average the distirbutions are fairly stable. It would seem reasonable to live off this income stream. There are a few spikes, suggesting that some years there are windfall profits to companies.

According to my estimates, my passive income at the moment is about $254 per month, so I am about halfway to being able to live off passive income. At the moment I am investing 80% of my pay, which I think is the most I can handle without suffering immense pain. I think an individual should save up at least 50 per cent of his pay initially and, when he is comfortable, be more ambitious and slowly increase that savings rate higher if he can till it is, say, 70 or 80 per cent. This way you can most quickly get yourself into a position where you can live off dividends. If you are not living off dividends, you are a slave, and what is the best thing for a slave to do? Escape.

Monday, 28 December 2009

Outcomes-Focused Thrift

Many people who save money save in different ways. I notice that Trent over at The Simple Dollar has a collection of tactics that he uses, for example, how to make your own laundry detergent. Even Ramit from I Will Teach You To Be Rich has what he calls the Scrooge Strategy that is essentially just a collection of tactics on how to save money, so it is really no different to the other tactics out there. What distinguishes Scrooge Strategy from others is that Ramit claims that you should focus on cutting costs on things you do not like, e.g. credit card bills, but you should spend extravagantly on things you love, e.g. if you love latte or buying wristwatches. A few days ago I spoke about a friend at work who tries to save money by never buying items at retail price. She always went for discounts (see Beware of Christmas Discounts).

All these people are inputs-focused. They focus on a collection of methods that, when implemented, is expected to save them money. I do things differently. Instead of focusing on how to save money, I initially set myself a goal of saving at least 80 per cent of my take-home pay. That is, every payday I log into my bank account and save 80 per cent of whatever came from my employer. I then try to live on what is left. If I can, that is great. I may even consider increasing the savings rate to, say, 85 per cent and seeing what happens. However, after increasing the savings rate bit-by-bit for a while, you will inevitably notice that you reach a point where you just cannot save any more. This happens when you start to pay on things using credit card and when payday comes you find that after you have paid off your credit card bill you can not longer afford to save 80 per cent of your take-home pay.

If you do not save 80 per cent in one pay period, then simply make up for it by saving more in the next pay period so that the net effect is that you save 80 per cent. To do this you create a speadsheet to track how much you undersave and then make sure that you oversave. Below is a chart that I use to track whether I am reaching my savings target. As you can see, I have undersaved by about $500, which tells me that I will need to be super frugal for a while to make up for this lack of savings. When I am in a super frugal state, I tend to question everything I buy.


An outcomes focus acknowledges that your objective is to save money and you focus on a metric that matches exactly what your objective is. This I believe is better that an inputs focus that can cause you to forget what your objective is. For example, if you focus so much on only buying discounted items, you may end up buying so many that even if each product is 50 per cent off you end up still paying heaps in total and not saving much money at all.

Sunday, 27 December 2009

Index Funds Are Overrated

Virtually every single personal finance blog or book I read claims that index funds are the solution to all your money problems. Simply invest in an index fund and you will be rich.

Normally what happens is the person recommending index funds will claim that investing in passively managed funds is cheaper and less risky than investing in actively managed funds.

I think that index funds can be great (I use them myself) but there are many misconceptions people get from the index buy-and-holders that I feel I should warn you about.

1. Is the index diversified?

Many people say that investing in a single company is risky because that company could collapse. They then recommend you invest in a fund that tracks the S&P500 index. But the S&P500 index tracks the performance of only American companies. How can you be properly diversifying if you invest in companies that are headquartered in one country and there are hundreds of other countries whose companies you can invest in? What if national tax laws negatively affect American companies? What if the American economy simply collapsed?

2. Holding for the long run does not guarantee gain.

Many people say that if you buy-and-hold for the long run you will reduce risk. This is not true. There is no solid evidence for this. The companies that sell you mutual funds know they cannot give this guarantee so they tempt you by showing you long-run charts showing their investments going up over the long run to give you the impression that in the long run it will go up, but when you read carefully their contracts they always say, "Past performance is no indicator of long-term performance."

The reality is that perpetually rising index performance is dependent on perpetually rising company profits and perpetually rising company profits depend on perpetual technological innovation. How can perpetual technological innovation be guaranteed?

Many buy-and-holders often concede this, saying that of course there is risk in investing for the long term. But then they often say that they have incredible faith in business, in capitalism, in America, or whatever. Warren Buffett's line is, "It never pays to bet against America." I don't disagree with this. I think you should invest in whatever investments you strongly believe are undervalued. However, buy-and-hold indexers are not supposed to believe this. They are supposed to believe not in stock selection but in diversification. That is why they prefer indexing as opposed to selecting specific stocks. Likewise, if you want to diversify over time you cannot be a buy-and-holder because by doing so you bet on long-term success as opposed to short-term or medium-term success. If indexers believe in diversification they should diversify across time as well instead of just betting everything on the long-term performance of corporate America.

3. Laziness, not just greed, can create asset bubbles

The Great Recession of 2007-09 was triggered when the residential property market in American collapsed. Many citizens saw property values going up and up. "Property always goes up," they all said at barbecues and dinner functions. "Property doubles every seven years." "Property cannot go down." All these lies get passed around and people, driven by greed, invest in an asset based on ignorance. An asset bubble occurs when the value of an asset is above fundamental value. Price is above fundamental value if people investing in the asset are ignorant of its true value.

Just as greed can drive people to invest in poor assets, so too can laziness, which is how index funds can create asset price bubbles. Many people just lazily invest in index funds thinking it is an infallible investment. The problem has gotten worse lately as many retirement funds also invest in index funds, which mean that many average citizens invest in index funds without even knowing it. Because this investing is completely blind, prices are guaranteed not to reflect fundamental value since fundamental value requires people buy according to information about that asset and if people are lazy and just buy anyway, prices are bound to be higher than fundamental value.

This is most obvious when you look at the dividend yield of S&P500 funds. The Wikipedia article on the S&P500 dividend yield says the following:
In 1982 the dividend yield on the S&P 500 Index reached 6.7%. Over the following 16 years, the dividend yield declined to just a percentage value of 1.4% during 1998, because stock prices increased faster than dividend payments from earnings, and public company earnings increased slower than stock prices. During the 20th century, the highest growth rates for earnings and dividends over any 30-year period were 6.3% annually for dividends, and 7.8% for earnings. As of 2008, the average dividend yield is around 2%
Sure, investing in the S&P500 index fund would make sense when the yield is 6-7 per cent, but nowadays the yield is 2-3 per cent.

The chart below from Imarc.org shows how S&P500 dividend yields have gone down over time.


Now I do understand that not all indexers recommend you simply buy into a fund that tracks the S&P500 and then just leave it forever. Many now claim you should diversify into non-American stocks, into bonds, commodities, and so on. Many even recommend the Permanent Portfolio. But this is not how it used to be. I think many of the Bogleheads have become more conservative after losing so much money after the GFC.

I do think it's wise to diversify if you don't have information and you want safety, but if you're going to diversity you should diversify totally, which means more than just the S&P500. I only believe that you should totally diversify for money that you need, i.e. money you need to cover necessities like food. I believe that if you have quite a lot of money (a net worth of more than, say, $100,000) then you can afford to take on more risk, which means you should try to diversify less and, if you have time and think you're good enough, you should try to time markets or select good investments.

Excerps from I Will Teach You to Be Rich

As I have already mentioned in earlier posts, I really do like reading the I Will Teach You to Be Rich blog, but there are sone things written there that I think are puzzling.

1. Do I give in to emotion?

According to Top excuses and tactics: Why haven’t you started your own business?, Ramit is a robot who has no emotion. He acts according to reason and rationality: "I hate emotions. I tell my friends to call me an Emotional Robot because I care about the tactics, not how you feel."

However, according to Irrational but good things to buy, he claims that he loves to buy stuff that makes him feel good. What kind of robot is he?
2 things that (I think) are worth spending money on: the irrational things that make no financial sense, but you love, and anything that gives you the potential to make more money.

These are the things that you love, the ones you can’t resist. Your friends might wonder why you spend so much on them, but they make you feel good.

Maybe it’s a massage once a month, or eating out with your friends every Friday. My weakness is hot salsa and good pens. Yeah, I know.

But they make me so happy.

2. Should I buy a new car?

In Cost vs. Value: Why I Bought a New Car, Ramit goes against the mainstream personal finance rule that you should always buy a used car and uses the following rationalisation: "Sure, a new car costs more. But over the long-term, not that much more."

A new car lasts longer than an old car. A used car can be less reliable and buying one old car after another can have significant transaction costs. However, if you buy a new car and hold it for a long time, you will have to hold the car even when it is old and out-of-fashion. If you buy a 2009 car now and hold it for 30 years, by 2039 you will be driving an old bomb that's 30 years old while everyone else is driving flashy cars.

To summarize, Ramit says you should buy a new car and expect to hold it for a long time. However, he also claims in Why do delusional people think their spending will be different than other people’s? that most people underestimate the power of social influence and that you should give yourself the freedom to change your mind in the future. If you want to give yourself more options in the future, why lock yourself in by buying a new car and expecting yourself to hold it for the long run?
We like to believe we’re individual and different, but the entire field of social psychology illustrates how we mistakenly believe we’re in control of our own lives while systematically underestimating situational and social influence.
Ramit also quotes someone named Sara to back up his arguments:
To pretend you know exactly what you want now (at say, 25) for when you are 50 is the equivalent of adamantly stating when you are 5 that you hate all boys/girls and will never like them. It’s utterly ridiculous. All you can do is acknowledge that your current self cannot predict everything that will happen in your life, or everything that you will want...
If your "current self cannot predict everything that will happen in your life," how can you expect to buy a new car and hold it for the long run?

Social Influence is the Enemy of Thrift

A new personal finance blogger I am starting to read more about is Ramit Sethi. I have just been reading a blog post he has written titled 7 Lies We Tell Ourselves About Money.

One of the points he makes in this blog post is that you should not look to others as role models because most other people are failures when it comes to money. That is, if you see other people taking lots of vacations and buying luxury goods, you don't need to copy them. Ramit says the following:
Would you look at a bunch of blue whales for advice on losing weight? Then why would you look at your ordinary friends, who are making ordinary money decisions, and will end up with ordinary results — not having enough money — as role models? Refocus your financial aspirations to people you value and their conscious decisions...
Ramit has just told us not to be like everyone else. If other people buy a Mercedes, don't copy them. However, Ramit then goes on to say the complete opposite, that you should prepare yourself to be like everyone else, that you should save money based on the expectation that you will spend like everyone else.
People are delusional about what will happen in the next 10 years. For example, if you’re in your 20s, the next 10 years will bring kids, a new car, a mortgage, taxes, insurance, maintenance, travel, life insurance, medical insurance….etc.

Every day I get frustrated people who tell me they’ve implemented all my strategies, yet when I tell them the next step is to implement the Ten Year Savings Strategy — where they save for the most likely things they’ll encounter within ten years — they become oddly dismissive.
This strikes me as being contradictory. Earlier he said that you should not spend like others and then suddenly he is saying you should spend like others. Should I buy the new car or not?

As a thirfty person, of course I am not going to splash out on a new Mercedes. I'd be spending $100,000 for a car when I can easily get a car for maybe $20,000. Given that the average child costs $250,000, producing a child is monetarily equivalent to purchasing a Ferrari. If you've committed yourself to never touching luxury sports cars, why wouldn't you apply the same thrift to children?

This children-as-luxury-goods concept is something I always talk about to people. It's one of those topics of discussion that everyone loves. Whenever I tell people I plan to never get married and never have children, more often than not they tell me that I say that now because I am young, naive, stupid, or a combination of the three. According to them, I will change. What they normally say is that when they were my age they thought as I did but over time they fell in love and subsequently their whole way of thinking changed.

Ramit even says something similar to this to some degree. In the blog post Why do Delusional People Think Their Spending Will be Different Than Other People’s?, Ramit says, "We like to believe we’re individual and different, but the entire field of social psychology illustrates how we mistakenly believe we’re in control of our own lives while systematically underestimating situational and social influence." Ramit's main point, I think, is that even if you believe you won't have children, save up for it anyway because chances are you underestimate social influence and will end up having children.

I will concede that I do understand what he is talking about. I am fresh out of university and with my new full-time job I have a new group of friends who are more cashed-up than my old university friends. Already I do indeed notice how much social pressure there is, not just to wear the best clothes but also to drive a nice car, to have a beautiful wife and children, to fill your weekends with fun social activities, and so on. Being the rebel that says no to all this can be draining as I have to explain everything in detail from first principles. I am going against culture merely for the sake of saving money. To refuse to have children or buy a luxury car for monetary reasons is equivalent to walking into a wedding function naked because you want to save on the costs of clothing. You will save $100 or so from not having to buy a suit, but you pay for that with non-monetary and cultural costs, namely by incurring the emotions of shame, self-consciousness, embarrassment, and so forth.

So then what is the optimal trade-off? To what degree do we incur pain for cash? Saving money is a tool I use to gain security in the future, which in itself is something I do to achieve certain emotions since financial stability induces within me emotions like comfort and confidence. The solution then is to do what suits you. Do you value social conformity or are you willing to incur the costs of shame and embarrassment so that you can attain stability and comfort (as opposed to anxiety)? It's a dilemma because you either face shame or anxiety. If you buy a luxury car or produce children today, you reduce shame and gain pride but at the cost of comfort in the future as your loss of money creates anxiety. If you sacrifice the luxury car or children today, you feel ashamed at being such a rebel but the abnormal cash you accumulate reduces anxiety in the future and gives you comfort and stability. What is better for you depends on your preferences.

Ramit says that it is important to save up a lot because you are likely to underestimate the extent of unseen influences (such as social influence) on you. But saving up a lot is often dependent on your being able to resist social influence. Many of the big costs that we incur--buying mansions, having children, funding lavish weddings, buying expensive engagement rings, and buying luxury cars--are the result of social influence. How then can Ramit say that we should be thrifty for the sake of conforming to social influence when social influence itself is the enemy of thrift?

I haven't read too much of what Ramit has written, but based on casual observation I have a feeling that Ramit makes his living mainly by rebelling against mainstream thinking, kind of like Penelope Trunk and Jim Betts. Mainstream thinking is filled with contradiction, but knee-jerk rebellion or doing the opposite of what is mainstream will not fix that problem.

Friday, 25 December 2009

Beware of Christmas Discounts

Many people spend a lot during Christmas. A friend at work told me that she was now broke because she had spent all her money while shopping. She said that in order to save money her strategy is to never buy anything at full price for the next four months. This I think is a horrible idea. What matters is not how discounted a product is. What matter is how much you save. Suppose person A purchased a widget for $100,000 and person B purchased two widgets, each for $80,000. Person B paid less than person A and received a 20% discount, but person A is better off because he spent only $100,000 in total while person B spend $160,000. I think many people are so focused on the discount that they are forget just how much they are spending in total.

I must admit I am guilty of this myself. Last Christmas I wanted to buy a suit. I went shopping with my mom and purchased a suit for $500 because it was 30% off. But what I didn't realize is that I overspent because, after checking on eBay, I learned that there are many suits out there for only about $200. The discount then is completely irrelevant. What you need to focus on is spending as little as possible.

Wednesday, 23 December 2009

Australian Median Net Worth by Age

Source: http://www.livinginaustralia.org/Results_Income.htm

The graph above from Living in Australia shows how median household net worth changed between 2002 and 2006 for different age groups.

Couples have higher net worth growth than singles because typically single people live alone. Having children seems to have an effect on net worth. This may be because those who have children tend to buy larger houses and property prices in Australia have risen greatly recently, compensating those who buy more real estate.

Looking at household net worth I don't think is very useful as a measure of wealth. For example, if you are a young adult living with your parents, your household net worth may be high because your parents own the house plus they may have high income. But they won't necessary share this wealth with you or they may share only a small portion of it with you. What is important is wealth under your own personal control.

Below is a similar chart for Americans.

Source: http://money.cnn.com/2003/01/23/pf/millionaire/fedsurvey/index.htm

Thursday, 17 December 2009

Plasma TV versus Gold

Michael Pascoe wrote an article in The Age criticizing gold as an investment. In an article titled Is a Plasma TV Better than Gold?, Kris Sayce responds by saying that gold is a good investment because it is better than buying a plasma TV.

The value of your plasma TV isn't going to rise at any time, regardless of how long you own it.

Keep it for five years and you might be lucky to get back one-tenth your purchase price if you flog it on eBay. Adjusted for inflation it would probably be closer to one-twentieth the purchase price.

So why is there such a fuss about gold being in a price bubble? Sure, you can't watch your favourite soap opera on a bar of gold, but even if we look at gold as a consumer item rather than an investment item it doesn't make sense that so many professional investors and analysts and even the general public would rather not buy the stuff.

I mean, let's imagine you buy an ounce of gold at the current price of AUD$1,264.29, what do you think the worst possible outcome could be?

Could it fall to AUD$1,000? Sure it could. Could it fall to AUD$800? Why not.

And could it even fall to AUD$500? Of course it could. But we know the price of a TV is going to fall much more than that over the next five years. We know that as a fact.

Yet that doesn't stop consumers from splashing out a couple of grand on the latest 600 inch plasma.

I think what Sayce does not seem to consider is that you can get a lot of entertainment from a plasma TV whereas a bar of gold doesn't entertain you in the same way. You cannot watch a movie on a bar of gold.

I am personally not anti-gold. I think gold is a suitable element to use as an alternative currency simply because of gold's inherent physical and chemical properties, namely liquidity, scarcity, portability, and uniformity. These properties make gold very suitable as money. Paper money, I believe, is more suitable than gold mainly beause it's easy to carry around paper money (whereas carrying around a bar of gold to go shopping is not so practical). Even better is electonic money. But the problem with this type of money is that the supply is can be manipulated by government whereas gold supply depends on gold mining, which government has limited control over.

Sunday, 13 December 2009

Westpac Defends Rate Rise with Banana Smoothie Story

Westpac has been criticized for increasing interest rates above the Reserve Bank's rise in interest rates. In response to the criticism, the bank released an ad that explains their actions. Watch the ad at Westpac Banana Slip. The ad talks about how a storm that destroys banana crops would result in a rise in the price of banana smoothies. Likewise, the storm of the global economic crisis reduces the amount of money banks can lend and hence the price of money (interest rates) rise as well.

Many have criticized the bank's ad, saying it is patronizing. Even Kevin Rudd claims Westpac did the wrong thing and criticized the ad: "(They are) talking about people’s most basic things in life - a mortgage, an affordable mortgage, to underpin things as basic as a home."

I happen to think the ad is very good since it explains why interest rates rose very well. Kevin Rudd's claim that a mortgage is needed to underpin a basic thing like a home, but the reality is that although accomodation is a necessity, most people have gotten more home than they can afford, and that is the reason why they are complaining. If you save up, put down a large deposit, and buy a cheap home in the outer suburbs, a minor interest rate rise will have a negligible effect on you. However, if you saved up little and purchased an inner-city mansion, you really only have yourself to blame. When you sign a contract with the bank consenting to variable interest rates, that is what you do. It is silly then to complain about something you agreed to. If you don't like the volatility of variable interest rates, why did you sign up to it? It's like with any other good or service in life. If you don't like it, don't buy it.

I am also not a fan of the bailouts the government gave to banks as it rewards poor behaviour, and certainly the financial sector in Australia may be better off with greater competition, but there are other places you can get a home loan besides Westpac or the the other Big Four.

Sunday, 6 December 2009

Lessons from the Tiger Woods Scandal

Revelations that Tiger Woods slept with multiple other females other than his wife have tarnished the clean image that many say helped him become so wealthy doing sponsorship deals with Nike, AT&T, and so forth.

During the early days when it was revealed Tiger was involved in a car accident and was alledged to have been saved by his wife, and when none of the other females (e.g. the cocktail waitress) emerged, many people I spoke to did not believe the rumors that he was sleeping with other women. They trusted him too much. However, after the evidence came, many of these people were disappointed.

I felt very confident from the very beginning that Tiger was cheating. A man of great wealth and talent is clearly going to get a lot of attention from women, so there would have been great temptation on him to cheat. Many people criticize Tiger by saying he is stupid to have slept with such ugly cocktail waitresses when he already had a beautiful wife. I find it surprising that these people judge woman by their appearance and occupations and then proceed to criticize Tiger's moral standards.

Even though I think Elin is very beautiful, humans naturally want variety. It is the reason why we get sick of our workplace and want to go on holidays.

The Tiger scandal also makes me wonder whether marriage is safe. Everyone says that marriage is worth it if you marry the right person. They say that you know you are marrying the right person if you are in a relationship with that person for a long time, which gives you an opportunity to check him or her for suitability. However, half of all marriages end in divorce, and surely these people who committed themselves to marriage thought they were doing the right thing. Furthermore, the world trusted Tiger woods when it turned out he was unfaithful, so if it's so easy for half the married population and for Tiger fans to be deceived, why would any individual think he is immune to deception from his spouse? People underestimate the power of deception. No matter how well you think you know someone, you really just don't know how they really are inside and if hypothetically they are perfect now, you just don't know if they will change in the future. Any potential husband or wife then needs to be aware of these credence attributes of spouses. They also need to be aware that not only can their spouses change behavior but their own behavior, tastes, and expectations can change over time.

What is one to do? Charlize Theron, a very beautiful woman, is not legally married, although she claims that she is "married but not married" to Stuart Townsend. The two have agreed to act as if they were married without actually getting married, similar to a de facto relationship. Some of my friends argue that marriage is important because it communicates to other people that you are together, but why would you want to communicate to other people that you are married? If someone thinks you are still on the market and tries to hit on you, just decline if you don't want it.

Another argument for marriage is the old-age argument. It is argued that it is important to marry because you don't want to be alone when you old otherwise you will rot in an stinky nursing home all by yourself, with nobody who loves you taking care of you. But if you have a wife, the argument goes, she can look after you, and you don't have to worry about dodgy nursing homes. This argument assumes that a poor-quality nursing home is the only option you have if you don't have a wife (or husband). But like everything in life, if you are willing to pay more, you get more. With nursing homes, you can pay more for high-quality nursing homes (or retirement villages). The other problem with relying on your spouse to take care of you is that she may not do it. Who is to say that once you are sick and bed-ridden your wife won't just dump you and go off with a healthier man? Love is fickle. On the other hand, if you paid a carer to take care of you, that person has a monetary incentive to take care of you. This is a personal preference but I have much more faith in the power of monetary incentives than I do in marital love's obligations or duties. If I had the option between having a family member cook for me out of love or a restaurant cook for me for cash, I would prefer the latter, and experience tells me that restaurant meals are far better quality than family meals simply because monetary incentives bring out quality in goods and services.