Would Decreasing Interest Rates Decrease Fertility Rates?

Lower interest rates increases the value of stocks and property because the future stream of dividends or rental income is discounted with a lower discount rate. As a result, the value of stocks or property rises as interest rates go down.

However, the same would apply to liabilities and expenses (rather than assets and income). Having a kid is a liability. You calculate the net present value of the child by discounting future steams of expenses. If interest rates go down, discount rate goes down, and value of the liability of the child rises. Higher cost of children means you have fewer children according to the law of demand.

The empirical data seems to back this up. Interest rates were low during WW2 and then rose until the 1970s. This coincided with the post-war baby boom. Global fertility collapsed from 1970s right as interest rates went down.

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Grill'd Vegan Burger - Veggie Vitality

It might seem weird for a grown man to watch Bonnyrebecca videos, but that's what I was doing last night. While most people like to binge on alcohol on a Saturday night, I like to binge on YouTube. To be honest, I have a crush on Bonny. She's a beautiful young vegan girl, so I love to follow (or perve) on her via YouTube.

In her latest video, she is in Chiang Mai, Thailand for the now controversy-marred 2016 Raw Till Four Bike Festival, and for some reason she has decided to try out a raw vegan diet. See the entire video below. During her vlog, she randomly mentions the Grill'd vegan burger at the 2:40 mark of the video.

[youtube https://www.youtube.com/watch?v=PZiEIgh6dmw]

When I heard from Bonny that Grill'd suddenly had a vegan burger, I was shocked. I did some research on Facebook. Supposedly Grill'd had changed their menu to cater to different "tribes" such as those who want a gluten-free burger. As such, the burgers at Grill'd not only caters to vegans and vegetarians but also to people who are anti-gluten as well as those on a low-carb diet. The new vegan burger is called "veggie vitality." Not only is this burger vegan but it is also gluten free (not that I am anti-gluten).

[caption id="attachment_1432" align="alignnone" width="587"] Credit: Candice Nertney[/caption]

I admit I'm not a fan of the picture above. The veggie patty looks very bright red, which makes it look weird.

Reading further into various Facebook comments, it's clear that there are many vegans who, even though Grill'd has a vegan burger, do not want to support this business because they cater to meat eaters in addition to vegans, but I believe that Grill'd producing a menu that is 5% vegan is better than a menu that is 0% vegan, so they should be rewarded for this, and if they are rewarded enough, they will likely increase that percentage. The bottom line is that money must flow towards vegan products. Demand creates supply.

[caption id="attachment_1360" align="alignnone" width="537"] Credit: Candice Nertney[/caption]

As soon as I'd heard about this burger, I went to the local Grill'd with my father. My father is not a vegan, so he ordered a lamb burger. I told my father than I wanted the vegan burger. The menu stated clearly that the chips are all vegan, so I agreed to share sweet potato chips with him. He went to the counter and ordered the food. However, when the food came, I realized that I didn't think about the dipping sauce, which I suspect may not be vegan! Vegans are not omniscient. They should try their hardest, but if a mistake is made then learn from your mistake and move on.

[caption id="attachment_1399" align="alignnone" width="519"] Vegan sweet potato chips served with possibly non-vegan dipping sauce.[/caption]

When the waiter handed my father his food, he said, "Here's your lamb burger." He then handed me the vegan burger and blandly said, "Here's yours." There was no announcement that it was a vegan burger. I didn't know what to make of that, but nevermind. I digress.

[gallery ids="1408,1409" type="square" columns="2" orderby="rand"]

What I found interesting about the burger is that it didn't try to replace the meat with meat-like products such as soy protein or wheat protein. The patty is a true veggie patty made of beetroot, sweet potato, spinach, and quinoa. It tastes quite nice, full of flavour, and the beetroot gives it a very nice bright red colour. On the downside, like most veggie patties, it is not firm but quite soft. However, the softness of the patty is partially compensated for by the firmness of the bun.

[caption id="attachment_1414" align="alignnone" width="3264"] A close-up of the internals of the veggie patty clearly showing the red beetroot.[/caption]

What really redeems this vegan burger is the avocado, which goes well with everything else in the burger and gives it a nice creamy taste. I've been to Grill'd before when they had three vegetarian burgers but no vegan burgers. I veganized a vegetarian burger by ordering a falafel burger (called "Friends of Falafel") and, following advice from Peta, made it vegan by removing the tzatziki, which is a Greek cream that may have dairy or eggs in it. However, as a result of removing the tzatziki, the falafel burger was very dry, which turned me off Grill'd burger, and I have never been there since. Thankfully, the avocado in the new Grill'd vegan burger not only provides you with healthy fats but also gives the insides of the burger a creamy texture.

[caption id="attachment_1420" align="alignnone" width="2448"] Avocado is spread on the top and bottom, giving the burger a creamy texture.[/caption]

After the vegan burger, I went to San Churro and ordered a long black. An easy way to be vegan at a cafe is to order either a long black (coffee with water) or a soy latte (coffee with soy milk).

[caption id="attachment_1424" align="alignnone" width="2276"] Long black at San Churro.[/caption]

Nowadays I try to subtly encourage cafes to use almond milk by always asking them for a "latte with almond milk." Many cafes are starting to provide almond milk now, but about half the time they tell me that they don't have almond milk, just soy milk, so I go with soy milk instead, and I act as if I am really dissatisfied. Usually when I go back to the cafe in a month or two, all of a sudden they have almond milk! It's important to understand that the customer is king, and the vegan customer should use his or her purchasing power to influence businesses so that they provide more and more vegan products. Demand creates supply, as I said. If you make it a habit to pay assassins to kill people, businesses (and contractors) specializing in murder will be created. If you make it a habit to eat meat or other animal products, businesses specialising in the torture and slaughter of animals will be created and will grow in dominance. It's a battle between good and evil, and the best that vegans can do is to keep ensuring that money flows to vegan products as much as possible. Keep in mind the vegan flow of funds!

[youtube https://www.youtube.com/watch?v=9k9NnGyCUV8]

Five Rules of Wealth Accumulation

Is there more to life than money? Of course there is, but money is still important. For society, money (or currency) provides a medium for exchange that eliminates the need for barter and therefore avoids the inefficiencies of barter. For the individual, money gives you the means to buy essentials for life, that is, food, clothing, and shelter. Of course, if you have enough money to provide you with food, clothing, and shelter for the rest of your life, money is a luxury rather than a necessity. Regardless, below are important rules for accumulating wealth. Although some of these rules may be repeated in other posts, I think if an idea is important, it needs to be repeated.

1. Pay yourself first, automatically

I was made aware of this piece of advice from the book The Automatic Millionaire. The basic idea is that, rather than spending your income and investing what remains, it is better to invest a fixed amount as soon as you receive your pay and then spending whatever remains.

There are two ways to achieve this. One involves simply talking to someone in HR to put a specific amount from your pay into a separate savings account or fund. If you are a salaried worker who received a fixed amount every fortnight, another way to pay yourself first involves having two different bank accounts. You set your bank accounts up so that your pay goes into one bank account and then automatically, a few days after, a fixed amount goes into another bank account. You carry around a card for access to only the bank account you use for spending.

Regardless of the details on how you achieve this, you are fundamentally trying to make saving automatic. Life throws things at you. You don't want to have to think too much or bother with transferring money here and there in order to reach your savings goals. By making savings automatic, you don't have to do anything other than keeping yourself employed.

How much do you save? That is going to be different for different people, but I suggest that you start with an amount that is challenging and sticking to it. When I started working full-time out of university, I was only earning $40,000 a year before tax ($1538 a fortnight), and I automatically saved $1000 per fortnight simply because it was a nice-looking number. After a few years, I increased this to $1300 per fortnight.


2. Diversify

"Divide your investments among many places, for you do not know what risks might lie ahead."

~Ecclesiastes 11:2 NLT

It's one thing to automatically save your money but it's another thing entirely to make sure your money is safe. Personal finance experts often tell people to minimise risk by researching and doing your due diligence, but investments can be incredibly complex. Warren Buffet, the world's greatest investor, advises people to only invest in what you know. However, I believe that even if you think you know an investment, you may not. For example, if you buy shares in a company, you may know the business model, the products being sold, and so forth, but will you know every decision the managers make or what strategies they have to make the company profitable. You cannot possibly know all the conversations that go on behind closed door among the directors and executives. The problem of asymmetric information that exists between investors and managers is to an extent fixed with financial reporting and accountancy but there are limits to the accuracy and usefulness of this information.

In my opinion, when choosing investments, it is wise to research your investments but don't be afraid to go with your gut and, most importantly, regardless of what your gut says, you must diversify. In other words, do not keep your money in one place. Spread it across different types of investments in different financial institutions.

Diversification is hard work. It's not easy opening multiple funds or accounts in multiple financial institutions. The paperwork can get overwhelming and during tax time it can be difficult to account for the different tax treatments that different investments require (if this is the case be sure to use a qualified accounting at tax time). However, diversification is important, and if you have any doubts about this, do some research into Bernard Madoff. No matter what your research tells you, no matter what your gut tells you, and no matter what the financial statements say, all investments have risk, and the only way to mitigate risk is to diversify.



3. Invest for income

Whenever I invest, I like to invest in assets that produce income. The main appeal of these investments come from the idea that I can have money automatically dropped into my bank account without me doing any work at all. We all have expenses. We need to eat, buy clothes, and put a roof over our heads. If the income from your investments can cover the cost of these necessities, you do not need to work ever in your life and you may find that you enjoy your work a lot more because the pressure is off. You can take risks and be yourself rather than kowtowing to your manager. If your employer won't pay you, your investments will.

Positive cashflow is freedom and negative cashflow is slavery. It's as simple as that.

Of course, when investing for income, don't forget to diversify because high-income investments are risky. The higher the yield from an investment, the riskier it is. Some companies have high yields because their prices are going down because investors foresee future problems. Sometimes dividends are paid not from earning but from borrowings, which puts into question the sustainability of these dividends. You should invest for income but also remember to diversify.



4. Avoid debt, obligations, or commitment as much as possible

"The rich rule over the poor, and the borrower is slave to the lender."

~Proverbs 22:7

Debt is slavery. Try to stay out of debt as much as possible. Debt occurs when you borrow money from someone and have an obligation to pay back at a later date. The problem lies in the uncertainty of the future. Can you know for sure that you will earn the money to pay the money back?

But I will go so far as to say that it is not just debt you should avoid but all future obligations or commitment. This means, for example, avoiding phone plans that obligate you to pay a fixed amount (say $60 per month for 24 months) and getting a cheap but good phone and using a pre-paid SIM card.

Don't get a car loan. Save up money and pay cash for a second-hand car. Some people think a new car must be more reliable and that, when you buy a second-hand car, you are buying someone else's problems. Before you buy a second-hand car, you can easily get it independently checked for defects. Buying second-hand means you avoid the massive depreciation associated with new cars. When you drive a new $30,000 car from the dealer, automatically about $5,000 in value is wiped away. If you buy a $7,000 second-hand car, there will still be depreciation, but not as much.

You should also be extremely careful with intimate relationships with others as this creates commitment or obligation. One of the weirdest observations I have made is how society labels men who are cautious with commitment as "commitment phobes" who need to "man up" quickly. They talk about commitment phobia as if it were negative. If anyone tries to manshame me by labelling me a "commitment phobe" I will simply tell them that yes I am cautious about signing up to something that would bind me and that I am proud of it. If a car salesman tried to sell you a Ferrari and wanted you to go on a car loan and you hesitate, that is commitment phobia. You're expressing reluctance to commit to a long-term arrangement. It is a prudent thing to look before you leap. 

If you sign a marriage contract, you are entering into a serious commitment of your time and cash and there are extreme risks associated. Everyone needs intimacy but too many people rush into securing themselves what they believe is an infinite supply of intimacy without fully considering cost and risk. As a man, how I handle this issue involves treating female intimacy as a product that you buy. You pay a female money in the form of gifts, dinner, lunch, and events and in return she provides you with the intimacy, and you can alter how much you spend on her depending on the quantity and quality of the intimacy she supplies. Do not have the mindset that your girlfriend is the monopoly supplier of female intimacy because otherwise she will charge monopoly prices. Always have the attitude that whatever your girlfriend is supplying, you can get it somewhere else, and this will keep prices competitive.

Of course, there are some obligations you cannot avoid, for example, you need to eat, so you are obligated to spend money to buy food to eat in order to keep yourself alive (unless you grow your own food, but then you are obligated to harvest that food). There are also those necessities that you just must have that only come in contracts that involve future payments, e.g. broadband internet, private health insurance, utility bills, rent, and so forth.



5. Play the pauper

Once I have a fixed amount of my pay automatically invested in multiple investments, I don't keep track of how much money I have saved up. Many people track their net worth every month and proudly boast about it to the world. I don't because I know that I already have enough money saved up to fly off to Asia and retire if I need to. If I save up more than what I need to save up, why do I need to bother keeping track of how much I have? Being ignorant of my wealth helps because, if someone asks me how much money I have, I can, with all honesty, tell them I have no idea. It is genuine and plausible ignorance.

Why is it important to be ignorant of your wealth and be very vague about how much money you have? One word: theft. If other people think you're a pauper, they will leave you alone. If other people think you are rich, you have a target on your back. People will come up with all sorts of manipulations and cons to get to your money. This is especially true of people who are close to you, for example, relatives, parents, children, and spouses.

I would even go so far as to say that you should both conceal your wealth and also play the pauper. In other words, pretend to be poor. This goes against human instinct. Normally people purchase status symbols in order to show off wealth, but I do the opposite because the pride I would get from showing off wealth is nothing compared to the fear and anxiety I get from thinking about theft. This means you should dress modestly (but nearly, not like a bum) and avoid prestigious brand-name products. Constantly talking about how little money you have because of rising costs and try to convince others that you don't earn much money.

By playing the ignorant pauper, you avoid yourself a lot of heartache. Gone are the begging relatives or friends who want to borrow money off you or get you to invest in their coffee shop venture. People will leave you alone and theft risk is greatly reduced.

One potential problem with looking poor is that people who think they are richer than you may put you down. Class warfare is as old as human history. It will never go away, and if someone thinks he or she is richer than you then it is likely they will ridicule you. You can fix this problem by not looking too poor. You can also fix this problem by trying to ignore the bully. If that is not possible, my strategy is to act like a psycho mobster. When someone ridicules you, simply shout back at them and make vague allusions to your connections with organized crime. Constantly read true crime fiction and constantly talk about death and killing and murder. Your friends should become wary and scared of you over time and will be fearful of provoking you. You need to be careful that you act psycho only and that you don't actually kill someone or even threaten to kill someone, as these acts are likely illegal. I only go crazy this when it is clear that someone is a snob and continues to ridicule me and I cannot ignore them or distance myself from them easily.

Don't Get a 30-Year Mortgage

How to loosen the mortgage noose

This article from the AFR talks about most people underestimate how much interest they end up paying when they sign up for a 30 or even 25 year mortgage.

I will not get a mortgage, not even a small one. I would rather invest in bank shares and rake in massive dividends.

The main reason why I am anti-mortgage is because I believe the modern long-term mortgage is simply a more evolved form of slavery. When you take out a mortgage, you will sign a contract so long and convoluted that you will not read it, and the terms of the contract will be in the bank's favour. If nothing goes wrong, you slave away at your job for the next three decades, living in fear of being fired and sucking up to the boss. If things go wrong, you lose your job and the bank will quickly sell your home, which can result in massive capital losses for you. Unlike in America, Australian banks can pursue you for your debts no matter what. You cannot walk away from your debts.

My recommendation is, while you are young, to live with your parents or rent and share with many people to divide the costs. Then save aggressively and buy two cheap homes in the country, one that you leave empty and the other that you rent out to produce rental income. If things go wrong in your life, you have the security of knowing you can drive into the country, live in a house, and have another house producing income to feed you.

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.

Cheap Houses (~$50,000) in South-East Asia

The Christmas and New Years holiday is coming to an end. I had some minor surgery yesterday and so had permission from the doctor to take today off to recover, but tomorrow I will need to go back to work. I am dissatisfied with my job at the moment. I'll try to fix this problem by finding a new job. I haven't been applying for job for about a year, so getting back into it is difficult, but I am motivated by the desire to leave my old life behind and try something new.

Most people think they need $1 million before they can retire. They base it on the assumption that they would need to earn about $50,000 a year to have a reasonable retirement. In order to generate $50,000 per year from an investment that provides 5% per year, you'd need $1 million. But saving $1 million could take decades. Assuming you earn the average $50,000 per year, and then assuming that after deducting taxes and living costs you can save $30,000, then it will take you 33 years to save up $1 million (assuming, for simplicity, your savings produces no interest). In other words, you need to slave away for 33 years! I have gone through only four years of full-time work and I'm ready to throw in the towel!

There needs to be a better way.

One solution is to retire in South-East Asia. A normal two-story house with three bedrooms in an east-coast city in Australia will cost about $500,000. With aggressive saving, this will take about 15 years to pay. With a mortgage that adds interest charges and other fees, it may take longer, say, 20 to 30 years to pay off your mortgage.

However, according to the YouTube video above, a normal two-story house with three bedrooms near Chiang Mai, Thailand costs around $30,000 to $50,000. That is ten times less! Therefore, instead of working 20 to 30 years before you can afford retirement, you can afford retirement after two or three years of aggressive saving!

According to JC, there may be laws in Thailand or other Asian countries that prevent foreigners from owning real estate. Another option may be, instead of using your savings to buy a house, to put it inside a savings account in Australia (or the US or Europe) and then transfer the interest income to Asia to pay for the rent. This will often work because interest income on savings accounts tend to more or less be the same as as rental yields. Renting may be a safer option because, if you live in Chiang Mai for a while and don't like it, renting provides you with flexibility to move away whereas buying real estate normally comes with massive moving costs. If you have equity in your home, you can convert that into an income stream by renting the house out. This rental income stream, in addition to stream of income from interest on savings, can be combined to fund living costs in Chiang Mai.

What this means is that, for me, I could retire right now, even though I am still in my late twenties. For those who don't have any money, all it takes it two or three years of aggressive savings before you can afford to retire in Asia. There is hope.

Betashares Offers Commodity ETFs for Australians

Link: BetaShares

Most people invest in shares, bonds, and real estate. Shares and real estate tend to perform well during an economic boom. Government bonds are seen as safe investments since they are backed by government, and many people hold government bonds or government bond funds in addition to growth assets such as shares and real estate in order to diversify. But what about commodities?

The word "commodity" is not perfectly clear, but investing in commodities involves investing in such things as gold, oil, soybeans, wheat, and livestock. It is an investment in hard assets that are more often than not necessary for humankind. Investment in commodities are perfect not really for periods of economic booms or economic recessions. Rather, commodities are excellent to hold during times of stagflation, that is, a combination of stagnant economic growth and inflation.

One way of combating massive inflation is to adopt The Alpha Strategy, that is, hoarding essentials such as rice and toilet paper in your home. The less extreme option is to buy a commodity ETF.

For Australians, a firm called Betashares provides a diverse range of ETFs, including an ETF that invests in crude oil futures. I am thinking of using my margin loan to purchase a good chunk of commodity ETFs via Betashares but I am unsure if I should. Perhaps shares in resource companies already provide sufficient commodity exposure. The fact the Australian dollar is a commodity currency also provides some exposure. Then there is the worry about the safety of synthetic ETFs (read Quant Congress USA: Avoid synthetic ETFs, says Avellaneda - Risk.net) with some saying they are fine for short-term trading but not appropriate for long-term investing due to counterparty risk.

If anyone has any deep knowledge on this issue, please comment.

Carbon Tax Compensation Present Opportunity to Salary Sacrifice into Superannuation

To compensate for the impact of Julia Gillard's carbon tax on the cost of living, income tax cuts will compensate anyone who earns less than $80,000. For further details about the tax cuts, see the following: Individual Income Tax Rates (ATO website)

Basically, the tax free threshold will increase from around $6000 to about $18000 and instead of being taxed 15% after that, you will be taxed 19%. For each dollar you earn above $37,000, instead of being taxed 30%, that marginal tax rate will increase to 32.5% and then eventually to 33%.

What this means is that, for those who earn between $37,000 and $80,000, you can cut your income tax by 33% (rather than just 30%) if you salary sacrifice. One option is to salary sacrifice into your superannuation fund. Money that goes into superannuation is taxed, of course, but it is only at 15%.

Be careful when you salary sacrifice into your superannuation fund as there is a limit. For younger people, there is a concessional contribution limit of $25,000 per year. It is best that you speak to a financial advisor if you are concerned about exceeded this limit.

Personally, I have taken this as an opportunity to salary sacrifice more into my superannuation fund. All it involved was sending an email to HR requesting it. I now salary sacrifice $600 per fortnight into my superannuation fund.

My reasons for salary sacrificing into my superannuation fund are not just monetary. There are also some personal reasons why I am doing what I am doing. I find that having too much money around doesn't help and actually makes me worried or anxious, so putting money aside (so that it is out of sight and out of mind) actually calms me considerably. Instead of doing something stupid with the money and losing it, it is now safely stored away in my superannuation fund, and I don't have to worry about it until I'm very old.

Some people argue that putting money into superannuation when you're young is a waste of money. They argue that superannuation funds invest money in the stock market, which underperforms residential real estate. They would prefer to be hit with the higher tax and then put the money into residential real estate (by paying off their mortgages). The problem with this argument is that is assumed two things: the first thing it assumes is that superannuation funds invest only in the stock market and not real estate. This is wrong. Superannuation funds typically offer investors with the choice of a range of investments, but typically industry super funds tend to offer shares, bonds, listed property, and cash. These investments, in my opinion, are fine. But if you are absolutely desperate to invest in residential real estate, you can set up a self-managed super fund (SMSF) and invest in residential real estate. The benefit of salary sacrificing into your superannuation fund is that you can save on tax, but it is wrong to assume that superannuation funds only invest in the stock market. The second assumption is that residential real estate outperforms the stock market. This is not true. Residential real estate is very hard to measure but most studies done on this topic find that a broad Australian stock index is roughly the same in growth as residential real estate over the last few decades. Of course, you can always cherry pick some story about some guy who purchased some home for x amount and then sold a few years later for ten times the amount. Likewise, you can pick and choose select stocks like Westfield and Fortescue Metals and launch the same story in favour of the stock market, but what this teaches you is that past returns mean nothing. Just because something has performed well in the past, it doesn't mean it will perform well in the future, and in the world of finance it tends to be the opposite: i.e. those assets that go up in price rapidly in the recent past tend to be overvalued, and a correction in the form of rapidly decreasing prices usually proceeds.

In other words, there is no solid evidence that residential real estate will outperform the stock market in the long run. The best we can do is to diversify across many types of investments, from the stock market, to cash, to bonds, and even listed property and maybe some residential real estate as well. Ecclesiastes 11:2 states the following: "Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth."

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.

Similarities Between Economic Development and Prostitution

Rapid economic growth in Asia e.g. China seems to have occurred after these countries have opened themselves up to foreign trade and capital. This all seems to fit in with supply-side economics. Wikipedia defines supply-side economics as follows:

Supply-side economics is a school of macroeconomic thought that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services, such as lowering income tax and capital gains tax rates, and by allowing greater flexibility by reducing regulation. According to supply-side economics, consumers will then benefit from a greater supply of goods and services at lower prices. Typical policy recommendations of supply-side economists are lower marginal tax rates and less regulation.

In other words, in order to foster economic growth, it is important that policies are implemented that meet the demands of businesses because ultimately, all wealth is created by business.

This theory is remarkably similar, in my opinion, to prostitution. In the market for sex, prostitutes work hard in order to make money from customers. In order for prostitutes to improve their standard of living, they have to implement policies that appeal to customers, e.g. they have to maintain their appearance. Similarly, supply-side economics suggests that workers and government, in order to improve their standards of living, must prostitute themselves to global businesses. In other words, the Chinese government and its people must reduce its wages so low and demand that its people work so hard so that a company like Nike will be interested in coming over, exploiting the Chinese workers, and paying them for it.

Hence, in order for countries to develop their economies, they must become better prostitutes. They have to undercut their fellow prostitutes and work harder and harder at providing better services to their customer, i.e. global business. In other words, they must become better prostitutes.

Update 25 July 12

I have been thinking about this issue a little more and have the following to add.

Many people argue that prohibition, whether it is prohibition of alcohol, sex, or gambling, doesn't work. When the US prohibited alcohol, what it found was that drinking alcohol went underground. Organised crime supplied the liquor and made enormous profits. By legalising alcohol, the US government was able to essentially destroy the criminal element in the liquor industry. In the Australian state of Victoria, liquor, gambling, and prostitution are legal but highly regulation. Premises that sell liquor must have a liquor license that it purchases from the state government. The same applies to prostitution. Under the Sex Worker Act in Victoria, there are laws about use of condoms and the frequency by which prostitutes must be tested for STDs. The main argument for tax and regulate versus prohibition is that demand for sex, alcohol, or gambling will never go away. It is better therefore for the government to regulate these industries to allow consenting adults to participate freely but to protect minors and other vulnerable members of the community. Tax and regulate also allows government to earn revenue by selling licences as opposed to all the proceeds of crime being siphoned off by mobsters.


In my opinion, the prostitution theory of economic development works the same way. In the same way that there is a large group of men who, due to their innate sexual desires, will always demand sex, so too there will also be a large group of wealthy people who, due to their innate greed, will always want to grow their wealth. The best way for wealthy people to grow their wealth is to invest.


Instead of prohibiting prostitution, it is better for government to harness the innate sexual desire of men for the benefit of society. By taxing and regulating prostitution, government can collect extra revenue and can allow prostitutes to earn a living and thereby improve levels of employment. In the same way, government, instead of prohibiting the greed of wealth men (i.e. turn to communism) the government can allow wealth men to indulge their greed and invest, start businesses, and employ workers. This allows the government to collect more revenue through various taxes, e.g. company tax, land tax, transaction taxes, etc. It also allows government to harness the greed of these wealthy people (or capitalists) to increase levels of employment. In the same way that men exploit prostitutes, capitalists exploit workers. The benefit of exploitation is that jobs are created. As one economist famously said, the misery of being exploited by a capitalist is nothing compared to the misery of not being exploited by a capitalist. In other words, we are all prostitutes. We sell our talents for money, but that is what puts food on the table and that is what drives global GDP and improves standards of living.


In the same way that government cannot control men's desire for sex, gambling, or liquor, so too government are nothing compared to the power of the international capitalist class. As a result of natural greed, corruption, and so forth, there will always be an elite group of people who control nearly all the wealth. Government do put up a fight, but the existence of tax havens and loopholes make this fight quite futile. The ruling capitalist class will always exist just as men will always desire sex. It is better then for government to accept this and do what it can to sell its people to the capitalists. In other words, if capitalists are like men who are willing to pay for sex, governments are pimps, and workers are prostitutes.

Prostitutes can go it alone and try to get business but there is danger in this. There can be beaten up by customers. If the prostitute has a pimp, the pimp will protect the prostitute but the prostitute must give a certain percentage of her earnings to the pimp. Government is no different. Workers are prostitutes but governments build roads, build utilities, and ports. They build these things to make country to more attractive to capitalists. In the same way, pimps or brothel owners will build buildings, provide condoms, and so forth. These are the essential infrastructure necessary to attract customers and facilitate trade. In the same way that prostitutes pay a proportion of their earnings to the pimp or brothel owner, so too the worker pays a proportion of his or her earning to the government in the form of taxation. In the same way that some pimps treat their prostitutes better than other pimps so too different government treat their citizens in different ways, from the cruel dictatorships to the benevolent dictatorships to the democracies and republics.

What is the take-home message from all this? Communism is prohibition and capitalism is prostitution. If we want higher standards or living economic progress, we must prostitute ourselves and allow ourselves to be exploited.

Using GST to force Victorian tax reform

According to an article in The Age titled State could be big loser in tax plan, the Commonwealth government is thinking of forcing states to get rid of inefficient taxes such as car registration and land transfer duty. It will achieve this by tying GST payments to the states' progress on tax reform. The launch of the GST was supposed to remove inefficient taxes, but what eventually happened was the states simply kept these taxes. By linking GST payments to progress on tax reform, the Commonwealth can effectively force the states to reform their tax systems or suffer the consequences.

Most taxes on transactions are inefficient because they distort economic action. For example, land transfer duty prevents a company from moving its business to better location because of the costs. For an employee who works full time, land transfer duty puts a huge cost on relocation, which means that if he has to travel for two hours everyday to get to work he may choose not to move closer to work due to land transfer duties.

A tax like car registration is completely unfair because you pay approximately $600 regardless of whether you do a lot of driving or do very little driving. The amount you pay should be based on how much damage you do to the road, which is why I think getting rid of car registration and making up for the lost revenue with an increase in fuel tax would be great. The problem is that the states cannot tax fuel, only the Commonwealth can.

Government failure is not an excuse for more privatization

According to the Institute of Public Affairs's article Behavioural Economics: An Excuse to Tax and Regulate, claiming that free markets are inefficient because people are irrational does not give an excuse for government to intervene because bureaucrats are also irrational people. According to IPA, there may be market failure, but there is also government failure. IPA states the following:

Cooper and Kovacic argue that the bureaucrats who regulate those decisions are likely to have biases that undermine the effectiveness of government intervention.

Regulators are like the rest of us. They are over-confident, thinking they can understand complex behaviour. Hindsight bias leads them to believe events are more predictable than they are. And, unsurprisingly, they are driven by action bias - a tendency to favour interventionist solutions when faced with a problem.

In fact, regulatory biases could be worse than market ones. Behavioural economics tells us that irrationality is everywhere. But the marketplace provides firms and consumers with instant or near-instant feedback. In a competitive market, psychological bias can lead to failure or loss of market-share. With such feedback, market participants will change their actions. Make a mistake, lose money... do better next time.

This is a fair argument. It is true that bureaucrats are far from perfect. But government failure is not really the product of irrational behaviour. Rather, government failure is usually the product of rational behaviour. In a free market capitalist system, what tends to happen is that a very wealthy class or merchants or capitalists emerge. This is what happened during the Industrial Revolution in Britain when a class of merchants started to challenge the power of the aristocracy or gentry. When a powerful class of capitalists emerge, they tend to influence government. Given that bureaucrats and politicians are rational self-interested people, they are also corrupt and accept benefits from wealthy capitalists. Hence free markets are not really the answer to government failure. Free markets only exacerbate government failure as free markets lead to wealth concentration in the hands of capitalists and this in turn leads to corruption and government failure.

The answer to government failure is democracy. The way to make sure that governments don't always give in to the demands of capitalists is to try to force them to give in to the demands of the people, e.g. by members of the public demanding action from their representatives and voting according to what they want. It may be true that the demands of the people can lead to economic inefficiency, e.g. trade unions, welfare, and so forth are all economically inefficient according to mainstream economic textbooks, but these policies protect the people and if the people do not demand it then the government will simply give in to the demands of capitalists and what capitalists want (i.e. a monopoly for their businesses) is also inefficient. In other words, economic inefficiency will always exist because government officials are rational. They will auction off their position to the highest bidder. The best fairest outcome occurs when what government can give (i.e. the funds from taxation revenue) is distributed more or less equally.

$75,000 is Enough

They say that freedom from poverty is the ability to walk into a public square and feel no shame. I remember on Friday having lunch with friends from work and feeling ashamed because I earned less than they did. They also spoke about how inadequate they felt because they did not earn as much as others, but when these people reminded themselves that I earned less, they suddenly felt better about themselves.
The problem is that there is no objective definition of how much income is enough--until now. According to a Wall Street Journal article that cites a study by Daniel Kahneman, a Nobel prize winning economist, the perfect income is $75,000 per year.

My goal is to earn $75,000 by age 30 and $100,000 by 35. I am currently 27 and earn $60,000, consisting of approximately $55,000 salary and $5,000 investment income. It would be nice if I could get a promotion and earn more, but I am finding that I am just not good enough to get a promotion, which is disappointing. They say you should never give up on yourself, so I will keep trying to get a promotion, but my experience of modern capitalism is that hard work is not always rewarded in the workplace. In my opinion, this is a strong argument as to why you should aim to just have fun in life. If you work really hard and put off leisure, there is a risk that you will throw away your whole youth all for a higher salary that your employer may not even give you. Keeping this in mind, I believe it is essential that you diversify your sources of income. I have come to rely less on work to increase my income, now relying almost exclusively on my investments. My goal to getting $75,000 by 30 and $100,000 by 35 is entirely based on the pessimistic assumption that my employer will give me no promotions and I will remain on the same payscale forever.

If the Rich Steal, We Should Too

I spoke to an Occupy Wall Street protester in the city yesterday, who told me the following:

"If we don't steal from the rich, they will use government to steal from us just because they can. Who wouldn't steal a million dollars if he could get away with it?"

When I thought about his comment, it made sense. In America, the bailout of the banking sector shows how the rich steal from the poor due to their influence on government. The problem with capitalism is that once it is implemented, capitalists become socialists and use government to steal from taxpayers. Hence capitalism simply doesn't work in practice as it assumes that the capitalist class have the altruism and self-control to not loot the public purse when it would be so easy for them to do so (because they are by definition rich and powerful).

Macrolending - An Alternative to Microlending

Above is a trailer for a documentary titled The Micro Debt, which seems to criticize microlending as a tool for alleviating poverty.

I've had a Kiva account for a while. Kiva allows any of us to lend money to entrepreneurs in developing countries. But I've always been unsure about how effective this is because when the money is lent to the entrepreneur in developing countries, it is at extremely high interest rates (around 30 to 40 per cent). Most businesses in developed countries struggle to even produce 10 per cent, so to expect people in the developing world to earn 30 or 40 per cent is highly optimistic.

The answer to poverty, in my opinion, can be found in Asia, especially in China. Institutions need to be in place to create labor-intensive low-skilled jobs. The products are then normally exported to developed countries.

Kiva must change. Instead of lending money to microfinance institutes at zero per cent interest who then relend that money to poor entrepreneur for 40 per cent interest, Kiva should take lenders' money and instead lend it at zero interest rate to large labor-intensive companies like Nike, Adidas, Foxxcon, or HTC on the condition that in return for receiving zero interest loans, these companies must hire people from poor countries. Kiva can then pay auditors like Ernst and Young or PricewaterhouseCoopers to audit these firms to provide to Kiva and microlenders assurance that a certain number of workers are being hired and paid a certain amount and that basic labor rights are maintained, e.g. the right for workers to go to the toilet.

If the venture does not work, the lenders lose money. If the venture works and profits are made, it can be split in half between Kiva and e.g. Nike (or any other proportion the two organizations negotiated). Either way, for labor-intensive companies there is a no-risk venture as all the risk is absorbed by the lenders and all the gains are for the company.

The 99% Movement

A growing number of people are protesting against corporate greed and the inequality of wealth. They seem to be calling themselves "The 99% Movement" in reference to the growing gap between the rich and the poor. To many of them, the government structures policies that benefit the top 1 per cent of society.

Are you a 99 percenter?

Do you earn less than US$506,553?

If the answer is yes to the question above, you are in the bottom 99 per cent. The New York Times' piece About That 99 Percent... has the following startling facts about the gap between rich and poor in America:

American households right at the 99th percentile (that is, the cut-off for the top 1 percent) will earn about $506,553 in cash income this year, according to a Tax Policy Center analysis. The income curve is very steep at the high end, meaning that people just a few tenths of a percentile point above that make much, much more. A family at the 99.5th percentile, for example, makes $815,868; its neighbor at the 99.9th percentile makes more than double that, at $2,075,574 a year.

Don't these lazy people just want money without having to work?

Many critics of the 99% movement claim that the protesters simply want to make money without working hard for it.

This statement suggests that if you earn less than half a million dollars a year, it is your own fault that you are not rich, and the top 1 per cent who earn more than half a million a year who expect no handout from the government are successful because of they are hardworking. This seems to be a major theme from the 53% movement.

However, a key part of the 99% movement is its focus on Wall Street bankers who on average earn more than half a million a year and are truly in the top 1 per cent. The problem is that the banking sector in America has very close ties with the government, to the point where it seems as if the government is controlled by the banking sector. The left versus right political spectrum is misleading. People on the left of politics blame rich bankers whereas people on the right of politics blame the government. No one seems to notice that rich bankers and the government are one and the same. Here is what the New York Times piece The Guys from "Government Sachs" says on the issue:

Indeed, Goldman’s presence in the department and around the federal response to the financial crisis is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.

The power and influence that Goldman wields at the nexus of politics and finance is no accident. Long regarded as the savviest and most admired firm among the ranks — now decimated — of Wall Street investment banks, it has a history and culture of encouraging its partners to take leadership roles in public service.

It is a widely held view within the bank that no matter how much money you pile up, you are not a true Goldman star until you make your mark in the political sphere.

In the aftermath of the GFC in 2009, the US government bailed out mainly the banking sector. As a result, the U.S. taxpayers now owes as much as $23.7 trillion to fund the bailouts. In other words, the bankers mismanaged their business, the government cleans up the mess, and you pay for it.

If you or I were to start up a business (e.g. a cafe or a restaurant) and we failed because the food was bad or the location was bad or whatever reason, do you think the government will save us? Hardly. The government will tell us that we live in a capitalist society and hence we should not expect any help from the government. But the bankers on the other hand -- if they fail, the government pours trillions of dollars of public money into their pockets.

It's not just the banking sector. After 9/11 (a tragic event) the Republicans led by George W. Bush used the crisis to siphon off public money for the benefit of their friends in not only the banking sector but also the defense sector. Bush then proceeded to cut taxes for the rich. As of 2011, Bush's tax cuts for the top 1 per cent of America have cost U.S. taxpayers more than US$700 billion.

Divide and conquer

If you visit the We Are the 53% site, you will notice that most of these people like to show off that they come from humble backgrounds, they work hard, expect no help from the government, and do not whine.

As I have already explained, the bankers and other members of the top 1 per cent have effectively stolen all the money. To use an analogy, the top 1 per cent have taken the entire cake and have thrown a few crumbs towards the other 99 per cent.

The 99 per cent then proceed to fight among themselves for the crumbs. Those who get the bigger crumbs accuse those who get the smaller crumbs of being lazy and stupid. Sexism, racism, left versus right, differences in religion--all this further divides the 99 per cent, leading to greater conflict and division.

Divide and conquer (or divide and rule) is an old military strategy that has been successful employed since ancient times. Here is what Wikipedia has to say:

In politics and sociology, divide and rule (derived from Latin: divide et impera) (also known as divide and conquer) is a combination of political, military and economic strategy of gaining and maintaining power by breaking up larger concentrations of power into chunks that individually have less power than the one implementing the strategy. The concept refers to a strategy that breaks up existing power structures and prevents smaller power groups from linking up....

In modern times, Traiano Boccalini cites "divide et impera" in La bilancia politica... as a common principle in politics. The use of this technique is meant to empower the sovereign to control subjects, populations, or factions of different interests, who collectively might be able to oppose his rule. Machiavelli identifies a similar application to military strategy, advising in Book VI of The Art of War (Dell'arte della guerra), that a Captain should endeavor with every art to divide the forces of the enemy, either by making him suspicious of his men in whom he trusted, or by giving him cause that he has to separate his forces, and, because of this, become weaker.

How do we lessen the gap between rich and poor?

The answer to this problem is to encourage unity (not conflict) among those who earn less than half a million a year and to use the democratic processes to redistribute wealth from rich to poor.

The rebellion by the Libyan people against their dictator Muammar Gaddafi shows how difficult it is for the people of a country to demand their fair share in a non-democratic country.

But many Americans are lucky to live in a democracy where they can use democratic processes to vote for their fair share of the cake by taxing the rich. The problem is that most Americans, as discussed, are too busy arguing about other issues like race, sexism, abortion, and gay marriage, that they are distracted and do not vote as a united unit for the redistribution of wealth.

We Are All to Blame for GFC

There are some documentaries you watch that are so brilliant that you need to tell others about it. This is one of them. This documentary, part one of four, details the history of today's global financial crisis. The GFC hit in 2009 but was fixed with bailouts and other policy measures designed to provide fiscal stimulus to the economy. But now what we are witnessing is the reality that these policies have uncovered massive debt in the balance sheets of sovereign governments.

While many are quick to point their fingers to bankers, I would like to add that many of us are guilty. Many people I talk to hate bankers. They tell me over and over again how bankers are greedy and evil. However, these same people, although they talk bad about bankers, their actions reveal otherwise. These people invest their money into savings accounts with these bankers. These people borrow money from these bankers to buy houses and cars. If you don't like bankers, don't do business with them. As soon as your salary is deposited into your bank account, withdraw it and put it in under your mattress, or covert it into physical gold and bury it. But nobody does that. Modern banking has become mainstream and normal. The people who detach themselves from the banking system are seen as weird and crazy. Our actions suggest we love the banks, we trust the banks wholeheartedly, yet when things go wrong we want to blame someone else.

I do believe the major bankers are at fault for plundering the public purse when the GFC hit, but what else could the government do when so many people's money was tied up in these banks? People shouldn't have trusted these banks in the first place and shouldn't have put too much money in them.

Ultimately it was greed that led us to where we are now. It was greed from people who in partnership with banks and government tried to extract as much cash as possible from residential real estate. We had too much faith in real estate. This is a good old fashioned bubble just like the bubbles of the old days, such as tulip mania. It does not matter whether debt is transferred from banks to government to taxpayers. Regardless of where the debt goes, there are three options: (1) the debt needs to be paid off (2) the debt needs to be defaulted on, and (3) the debt needs to be inflated away with money printing. The prices of stocks and other assets will go up and down depending which the relative magnitudes of these actions. Because it is difficult to know what direction government will take with regards to how much money it will print, how much spending it will cut, etc, the best we can do to protect our wealth is to diversify.

Equity Index Fund Investors Being Plundered

A friend of mine told me that executives and directors in many publicly listed companies sell shares and accept money from index investors. Then they plunder this money by accepting bribes from unions to lift wages of workers. They also accept bribes from corrupt politicians to raise company taxes to help fund election campaigns to keep them in power. The union leaders are able to "negotiate" a higher wage and get performance pay bonuses. The politicians too raise tax revenue to use to help them stay in power. The executives take bribes and pay themselves large bonuses and salaries. Everyone wins except the shareholders (including index fund investors).

So why then do people keep investing? Why do shareholders keep plowing money into the company only to see it being plundered? Because they are sold a dream. By telling investors to invest for the long term, there is no accountability. Index fund investors keep plowing money into stocks like lottery players keep plowing money into tickets.

Buying and holding in equity index funds worked in the past because we were living in an era when the size of government was small. Today, the size of government is large and, let's face it, government is controlled by a network of executives and directors of big corporations whose objective is to create wealth for themselves. Hence they use the power of government to seize the revenue of corporations and distribute it among themselves. They are looting shareholders and selling them the opiate of the investor masses (i.e. "in the long run everything will be okay").

If you don't believe me, look at the statistics on the size of government. It has increased massively. Furthermore, the dividend yield on S&P500 companies used to be high but has fallen to almost nothing.