Knowledge Source

Your freedom to create wealth...

You are here: Home / Blog

NO B.S. FRIDAY: Why I’m awesome like the Dalai Lama

by 5 Comments

 

Australian culture is toxic.

What if I told you I’m one of the most dangerous players in the senior soccer league?

(Totally true.)

What would you say that says about my ego? What about my self-esteem?

Somehow we’ve developed a culture where we go out of our way to help people keep their egos deflated. If someone is celebrating their success a little too much, we feel we have total license to go and let the air out of their balloon.

We actually think we’re doing them a service.

I don’t know where that comes from. Maybe we’re all just products of a ruthless Western Civilisation.

Don’t get too attached to your possessions. It’s only a matter of time before some landed lord confiscates them and uses you and your sons as cannon fodder. If you keep a lid on things now, it will lessen the disappointment later.

And whether it’s raising our children or keeping our mates in check, we feel everyone needs someone to “keep their feet on the ground.” It’s what mates do. We stop our mates’ successes going to their head.

“Nah Giaan. You’re not that good. Maybe you’re in the top ten, but definitely not the MOST dangerous…. You’re welcome.”

I can’t tell you how frustrating I find this.

Often it’s because the people offering you that public service of keeping your feet on the ground actually have no idea what’s going on with your ego. They have a need to preserve their own fragile image of themselves and the only way they can do that is by putting down the people around them…

… and then dressing it up as an act of charity after the fact.

Total garbage.

So there’s often dishonesty there. But even the intention is rubbish. Why on earth would you need to keep someone’s feet on the ground? I want people around me who want me to fly, like the glorious seagull of awesomeness that I am.

Why wouldn’t you want to give energy to your own and other’s successes? Unpack them, build confidence in them, make them part of who you are…

The trap here is that we have all these half-baked pop psychologists going around bastardising the idea of ego.

The ego is your sense of self. It’s the mental construct of who you are. It’s the story you tell about yourself.

So everyone has one.

But the idea that an ego can be ‘big’ is total nonsense. What does that even mean?

If anything, a “small” ego, if there even is such a thing, would reflect a lack of self-awareness.

And people with limited self-awareness give me the shits far more than people with a nuanced and conscious awareness of themselves.

But no, big, small, it’s ridiculous.

But where ego comes into play for me is around fragility.

That is, the story that they’re telling about themselves is so fragile that they constantly need to defend it and build it up.

These are the people that are difficult to be around.

They’re the ones cutting people down so they can keep telling a story about how awesome they are.

They’re the ones constantly inventing excuses for why they’ve never succeeded, and enviously resenting others successes.

They’re the ones bragging about their soccer skills in nationally distributed blogs, and then dressing it up as profound life lessons to make it seem less pretentious.

So it’s not whether it’s big or small, it’s what you do with it.

(Right, babe?)

And that’s about fragility.

But if that’s true and it’s about fragility, why aren’t we out there celebrating each other’s successes? Taking the time to go, look at what you did. How awesome is that? You are a successful person. You are someone who works hard and gets results. Good on you.

Why aren’t we out there helping each other build robust and durable egos, built on successes that are regularly recognised and celebrated?

But no, we go out of the way to make sure that each other’s egos are constantly under attack as if we wanted to ensure that our egos were as fragile as possible and that we were all as painful to be around as possible.

And we make this a national pastime.

Toxic flipping culture.

Let me ask you another question. What would you say about the Dalai Lama’s ego? What would you say about his self-esteem?

I’m not really sure what relationship the Dalai Lama has with his ego. He’s probably transcended it or transmuted it into a radiant lotus flower or something.

But I’m willing to bet that whatever he’s done with it, his ego is fairly robust. It’s not fragile.

And I’m also willing to bet that he has solid, or high, self-esteem.

He probably has a good sense of who he is, his strengths and limitations, and his role in the world.

(By all accounts he’s a lovely man to be around – not at all painful.)

And as aware of his awesomeness as he probably is, I doubt that he ever gets into dick measuring contests about who is better than who.

It probably never occurs to him to even think about it in that way. That’s the terrain of a fragile ego – needing to prove yourself relative to others.

So I would feel pretty confident saying that the Dalai Lama has a robust ego and a high self-esteem.

We’re both awesome like that.

So if that’s true, can all you people trying to ‘help me keep my feet on the ground’ so I can be more like the Dalai flippin’ Lama just go and get stuffed?

If you want to help people, help them build a strong sense of self-worth – an inherent self-worth that comes from within, not from measuring your wing-wang against others.

Recognise, celebrate, support.

That’s the culture I want to live in.

It’s not that hard.

Anyone trying to keep your feet on the ground? What comes up for you when you notice you’re celebrating your success too hard?

Bankrupt hedge fund guru wishes he bought property

by 1 Comment

If a bear dies in the woods, is anybody listening?

This week, the world lost a great bear. Hedge Fund guru Hugh Hendry is closing his fund.

Hugh Hendry is a bit of a legend in managed fund circles. With a name like Hugh Hendry, he was always destined for funds management, politics or porn. He chose the lesser of three evils.

In 2002 he launched Eclectica – a contrarian fund for people with more money than all of us combined. At the time, the fund attracted a lot of attention… and a lot of money.

And in the early years, it made good money. It made great money. And the contrarian strategy saw Hendry and co. well positioned to ride out the GFC.

But since the GFC, its returns have been disappointing to say the least. 2011 was its best year, but even then it only posted 8.6%, only slightly bettering the market.

Every other year, however, it underperformed the market substantially.

And 8 months into this year, already down 10%, Hendry decided to throw in the towel. The great bear howled its last howl, rolled over and died.

Essentially Hendry’s bet – that the radical money-printing experiment that followed the GFC was only going to end in tears – turned out to be wrong.

The theory was impeccable. The case was well argued. The mechanisms were obvious. It was just never true.

And ultimately, in his farewell letter, Hendry capitulates completely. The nightmare scenarios of the GFC just never came true, and right now, the economy looks pretty good.

Right now, Hendry “is not bearish on anything.”

In fact, the outlook is positively sunny.

“If anything we feel more convinced that our thesis of a healing global economy is understated: for the first time in an age all parts of the world are enjoying synchronised economic momentum and I can’t see it ending for some time…

… The implications of a sustained bout of economic growth are good for you. It’s good because it should continue to underwrite a continuation in the positive performance of global equities. I would stay long. It’s also good because I can’t see interest rates rising abruptly to interrupt the upward path of equities. And commodities have already acknowledged the upturn in the fortunes of the global economy and are likely to trend higher still. That’s a lot of good news.”

Oh, how the mighty have fallen.

For the record, Hendry still maintains that the markets are broken. Quantitative Easing created massive disruptions and misallocations of capital. However, the fallout from these misallocations has been largely contained, and the real economy is recovering and gathering steam.

And if the economy keeps doing well, time, ultimately, heals all wounds.

The GFC might still get a rehash at some point, but to Hendry, it doesn’t look like it will be soon.

I find this all fascinating because it still feels like the contrarian mindset is the dominant mindset.. (I know. Ironic)

Most people still don’t trust the economic recovery – we’re still calling it a recovery. It all feels fragile. The ghosts of the GFC still linger and are now rubbing shoulders with Trump and Kim Jong Un.

It can’t end well.

But how long does it take for confidence to take hold?

How many years of “recovery” do we have to see? How low does the unemployment rate have to go? How many contrarian hedge funds have to keel over and die?

More and more the tone of commentary is brightening. More and more people are saying, you know what, maybe things aren’t that bad. Maybe the economy has got legs.

Given this emerging shift in sentiment, I would actually say that the worst is probably behind us. The global economy is gearing up for a solid spell.

This is all great news for Australia – as a small open economy, our fortunes flow with the world. And if it’s true as Hendry thinks that, “commodities… are likely to trend higher still,” then it is fantastic news for Australia.

These past five years have been a bit of a battle for Australia, mostly because our major trading partners, apart from China, have been struggling.

But what happens if they all start finding form?

What happens to Australian growth rates – rates that are already the envy of the world? What happens to the unemployment rate? What happens to wages?

And what happens to property prices?

Just look at how well property has done with all the headwinds under the sun being thrown at it.

Now imagine what happens if it starts getting some tailwinds. Imagine what happens if incomes start gathering speed again.

In my mind, if Hendry’s thesis plays out and the global economy continues to go from strength to strength, it is very hard to see property prices decelerating.

In that scenario, the only way is up.

Mark my words.

The other point I’d make is that sentiment always flows this way. At first, there’s only a few dissenting voices, like Hendry. In time, the herd capitulates and the contrarian view becomes the dominant view.

And by then, your opportunity to make real money has passed you by.

There are no guarantees in this game, but my bet is that Hendry won’t be the last bear to cop it in the neck this cycle.

The mood is shifting.

Mark my words.

Where do you think we’re heading (globally speaking)? It’s it’s black clouds and storms ahead or bright skys and tailwinds?

No B.S. FRIDAY: Train Your 70%

by 5 Comments


Don’t’ stress about operating at your ‘full capacity’.

I remember listening to a golf pro talk about the ideal swing at some point.

I’m not going to tell you it was when I was having lessons. It was one Sunday morning, watching TV, feeling too dusty to even change the channel.

Anyway, the point that stuck with me was his idea that you should never be swinging above 70%.

So if 0% is where you’re not even moving, and 100% is when you’re summoning every last ounce of physical strength you have, you should never be throwing more than 70% at the ball.

He reckons that once you get above 70% – especially as you get closer to 100%, you just start introducing error into your swing. All that force and effort needs to be perfectly balanced. If not, one muscle pulls a little tighter than the others, and your swing gets thrown out of wack.

What’s worse, if your swing is out of wack and you’re throwing all your effort at the ball, you can end up sending it way into the trees. Small errors in your swing become big deviations in trajectory when you’re giving it everything you’ve got.

But if you keep it below 70% (and look, I’ve got no idea how you measure something like that. But it’s the idea that counts) – if you keep it below 70% then you’re operating in a comfortable zone. You’re not locking things up. The elements of your swing are moving freely, almost effortlessly.

In that range, you’re able to hold all the elements in harmony. Your arms are in balance with your hips.

As a result, you’ll hit the ball cleaner and with more control. You’ll have better line and you’ll probably get more distance too.

So while it feels counter-intuitive, if you want a consistent, good, long drive, you need to keep a lid on things. You need to stop yourself from getting excited, and keep your swing down around 70%.

(This, and many other reasons, is why I get frustrated with golf, and why my set of clubs tends to end up in the water more often than not. Funny game.)

The thing that stuck with me though was the way he thought about training. For him, training was all about shifting where your 70% is at.

So on any given day, there isn’t much you can do about where your 70% is at – how far you’re able to hit the ball. But over time, there is. You can do strength exercises to build greater capacity in your muscles. You can practice on your swing to make it more fluid and clean. Repetition also improves your hand-eye coordination and determines how well you strike the ball.

With practice and training, your capacity expands. And the reason we train is not so that we improve our 100% – what we can do when we’re giving it everything we’ve got. It’s so we can improve our 70% – how much we can achieve when we’re taking it easy.

This is quite profound I think.

For the investment journey, it has profound implications. And for most endeavours in life really.

This “70% rule” is quite powerful.

But let’s think about it in the context of investment. I totally agree that you want to be operating at 70% capacity. You want to be swinging at deals that don’t demand every last ounce of strength that you have. You want to be swinging at deals that are well inside your comfort zone.

Why? Pretty much the exact same reasons this golf pro pointed out.

When you’re swinging full tilt you’re adding a lot of effort and tension into it. When you’re on your edge you’re not going to be making the best decisions. You’re going to be ‘forcing it’.

You’ll probably make mistakes.

And small mistakes with big money can result in big losses.

Also, it’s not sustainable. Some deals can take over a year to pull off. You can’t be operating at 100% for 18 months. You’ll burn yourself out.

And, it’s just not fun. Every deal should be enjoyable, if you’re planning a career in deal making. Each deal should give you more energy that it takes from you.

It’s supposed to be fun.

So come back to where you’re swinging in your comfort zone.

The other point I’d make is that I see a lot of people trying to keep themselves operating at 100%.

They go the full colonic-irrigation juice fast retreat in Bali, to keep themselves operating at full capacity. To keep themselves operating at their full potential.

But their full-potential is wasted on booking colonic irrigation juice fast retreats in Bali.

I know I’m going to anger every god in the new age cosmos when I say this, but life is not meant to be lived at 100%.

I can count on one hand the number of days I’ve felt like I’m operating at 100%. There’s always something. The baby is teething so you’re not sleeping well. The inlaws are visiting so there’s lots of distractions. You’ve got this flu that just won’t clear up. The computer needs an upgrade.

100% just never happens.

So don’t make it something to aspire to. You’re chasing a dream.

Aspire to 70%. Aspire to be doing the best you can with whatever crap is going on in your life in the moment. Be content with that, remembering that this is where you’re power actually lies.

And do something!

Because the best way to expand your 70% is through experience – experience supported by self-education and development.

It’s through doing stuff.

And the 70% of someone with 10 years of experience is worth an infinite amount more than the 100% of someone with no experience.

That’s my thoughts. Next week, we’ll talk about putting.

What capacity do you run best at? What level do you wish you were running at?

New opportunities everywhere.

by 14 Comments

Should you be getting into marijuana stocks?

There’s a big market here, but one big swing factor.

There are two new big-dogs in the world today and I’m talking about emerging (hype-driven) opportunities.

One of them is Bitcoin, I’m researching everything to do with that market and will be reporting back my finding within the next two weeks.

The other is marijuana. Let’s begin…

In Japan, the Emperor wears hemp.

He has done for centuries. The hemp plant – of which ‘marijuana’ (the plant you smoke to get you ‘high’) is just one strain – has had a long and fruitful connection with humanity.

Hemp oil was being used by the ancient Egyptians as a medicine.

NASA was using marijuana to help astronauts unwind from a tough day on the space station.

(No, I just made that last bit up.)

But then marijuana (and with it hemp) went out of favour. It became a prohibited substance. The hemp industry got shut down.

(Many people say it was Dupont and the cotton industry that got hemp shut down – mounting a massive scare campaign about the dangers of marijuana.)

Whatever the case, it’s been illegal for about a century.

But now, it seems, the tide has turned. In America, there are now more states where marijuana is legalised to some degree or another than there are where it isn’t.

It’s a radical social experiment, but one that is creating a billion dollar industry in the process.

And for people in the right place at the right time, a small fortune.

This chart here has some of the big success stories. If you put just $100 into some of these companies just three years ago, you could be banking some incredible returns.

One company turned $100 into $35,500 for you! Nice!

Of course, not everyone’s a winner. The alcohol industry for example. They’re not stoked about it. Alcohol and marijuana seem to be in competition with each other.

In states where marijuana is legal, pot sales are growing exponentially, while booze sales are flat or falling.

Take this chart from Washington state.

Quarterly marijuana sales have boomed from $23.6m just a few years ago to over $300m today.

Some people are saying that the marijuana industry is going to be bigger than the manufacturing industry in the US by 2020. It’s pretty huge.

And the stereotype is that marijuana is for teenage boys with their X-box and Dominos pizza.

But if you break it down and look at who is actually using legal weed shops in the US, it’s a surprisingly broad cross section of the community.

It’s only very slightly tilted towards males, and it’s tilted towards younger cohorts (25-34) but not massively.

To me, that looks like an industry that’s got legs.

Ultimately the American experiment is a case study in how governments can make or break a market.

Sometimes government regulation is a good thing. I personally prefer to live in a world where there isn’t an open market for personal nuclear weapons. I support government regulation in that industry.

However, and I know this will come as a surprise to many of my readers, the government isn’t always perfect.

It doesn’t always make great decisions. Often, it actually makes very bad decisions in order to protect the interests of the rich and powerful.

(I know! It was a shock to me too. I’m sorry. I really should have made sure you were sitting down first.)

So is all hell going to break loose if we legalise marijuana? It seems unlikely. Marijuana has been down the priority list for the police for a while. It has never been particularly expensive or difficult to get.

And we’ve got by.

And some argue that there’s a signalling effect here. That if we legalise marijuana we’re telling kids that it’s ok to get off your face.

That’s kind of the message we started sending when we legalised alcohol again if you’re using that logic. And if you’re taking moral guidance from the government you probably need to have a good long chat with your priest.

So personally, I see this having a very small impact on the fabric of society.

So if you’re ok with the moral dimensions, and I more or less am, then the question is, where is the money?

This is a tricky one. We’re really looking for the government to make a market here. There are a number of Australian companies getting ready to launch when Australia finally starts down the path towards legalisation.

But the government is sending mixed messages here. Some days it looks like their stance is softening. Other days, it looks like it could be years down the track.

As I’m sure you know, it’s cash-flow that kills most start-ups. For marijuana stocks in Australia that could mean a whole lot of stranded companies with state of the art infrastructure and nowhere to deploy it.

And the longer the Australian government drags it out, the more opportunity there is for foreign companies to fully gear up and get ready to expand.

I mean, let’s say Australia doesn’t open the door until well after 2020. By that stage, the American marijuana industry will be starting to consolidate. Large players will start to emerge. They’ll have developed all the tools they need – technology, business models, finance partners.

They’ll come into the market full guns blazing, just as our little Aussie battlers are trying to get off the ground.

They’ll probably get slaughtered.

And right now, it seems that the government is going the wrong way for people interested in backing Aussie companies. I know a hemp farmer up in Northern NSW. They’d been gearing up production of low-THC (the stuff that gets you high), high-CBD (the stuff that has medicinal properties) crops.

The government had been moving towards making CBDs legal.

But then the Therapeutic Goods Association surprised everyone and said, actually, no, CBDs will remain illegal. You have until October to wrap things up.

It looks like they’re stuffed.

So this is the danger here. If you’re investing strategy relies on the stroke of some bureaucrat’s pen, your strategy is built on an institution that has been corrupted time and time again.

So there’s a substantial amount of risk there.

And that’s one of the reasons why the returns are so high. Can you predict what the government’s going to do in two or three years? Sometimes it’s a coin toss.

So look, yes, there are potentially some huge returns to be made out of the marijuana industry. I’m looking at some options myself.

But be aware of the risks. The government was happy to hang a whole bunch of hemp growers out to dry. They’re not going to give a toss about your investments.

That’s not to say it’s not worth it. But marijuana stocks belong in the risky tail of your portfolio, I reckon.

Have you made money from the marijuana hype? Are you sold on it, or are you staying well clear?
Do you think it’s a bubble about to burst, similar to techwreck2000?

NO B.S. FRIDAY: Great investors don’t learn from their mistakes

by

Do you take the time to unpack your wins?

There’s an old adage investing that I really like:

“A good investor learns from their mistakes. A great investor learns from their successes.”

I think this is a really good one to remember.

In a way, it’s much easier to learn from our mistakes. When things go wrong, we’re much more interested in deconstructing what actually happened and what went wrong.

We’re primed to learn. We’re eager to avoid the embarrassment and setbacks that come with failure.

But when things go well… When a deal goes perfectly and we end up with a lot more cream than we were anticipating, we get on a high.

We’re full of juice and go. We just want to launch into another deal as soon as we can.

And the human biology is programmed to unquestioningly repeat successes. If eating those berries turned out well for us in the past, well then lets do it again.

But the modern world is more complex than our evolution ever imagined.

And there’s a real danger here if you’re not critically evaluating your successes.

I mean say you buy a site for development. You get a few months into planning and the numbers aren’t really adding up. But then the land gets rezoned, and you flip the site on to developers for a very tidy profit.

Win, right?

You made money because you made a smart buy.

But actually no. You made a mistake. You didn’t buy well. If you bought well, then the development numbers would have added up.

You made a mistake. But you got bailed out of your mistake by the re-zoning.

So this should be a big red stop sign saying, I need to take a look at my method here, because I’m buying lemons.

But that’s going to be hard to do if you just double or tripled your money. You’re going to be thinking. Let me at ‘em. I want to buy again.

In this situation, even with the best intentions and critical self-awareness, it is actually hard to hold your horses and take the time to analyse just how the deal went down.

And that’s when it’s actually fairly easy to unpack.

What about when you’re buying and developing in a market that’s got a run on?

How much of your profit margin is due to buying well and putting in a quality development? How much is just due to the market? How do you even know?

And right now, across Australia, there are 1,000s of property experts. People who’ve made lots of money and have sure-fire strategies for success.

At least they think they do. But the truth is most just got lucky. They bought at the right time and made their money off the market.

They just don’t realise it. In their minds, they’re geniuses. The results speak for themselves. If I wasn’t a genius I wouldn’t be making all this money, would I?

This is also one of the reasons why we see this bubble and bust dynamic play out in markets the world over.

On the way up, every one thinks they have the secret formula. They have some insight and strategy that 99% of people don’t have, and they’re turning that into coin.

They all do.

But at some point, the fundamentals bite, and the emperor realises that they’re naked. People realise that they’ve been buying junk, and there’s no way off a sinking ship.

Does this sound familiar? Dot-com bubble anyone?

Crypto-currency?

Now, I know I’ve been sitting on the fence a little bit over crypto’s, but now I’m calling bubble.

Why?

For exactly this reason. I’ve got all sorts of people in my ear about buying into crypto-currencies, and most have no idea what they’re talking about.

And we are well and truly into LaLa land.

Take “Fuck Token” (seriously, I’m not making that up.) That was up 370% in 24 hours last week.

I don’t even know where to start with that one. But it’s actually chump change compared to some of the numbers getting round…

There are now thousands of companies issuing coins. Rather than selling shares, they’re selling investors digital tokens (to people who mostly pay in Bitcoin or Ether).

So rather than IPOs we now have ICOs – Initial coin offering. It’s pretty much the same, just more ‘crypto’.

And some of the stories there are ridiculous.

There’s a token issued by Stratis that is up 101,168%. And that’s in a single year!

The NXT token is up 672,989%

They’re not typos. They’re actually results. In case your head isn’t spinning already, if you put $1 into a NXT token a year ago, you could now cash out $672,989.00.

(oh for a time machine.)

But what’s going on in the underlying business?

Maybe they’re doing great things, but is there any conceivable way that the business is 672,989% better than it was a year ago?

Short of discovering cold fusion, perpetual motion (or a time machine), there’s no conceivable way we can justify these results.

We’re in LaLa land.

And look, I know crypto has substance. There are multiple uses that have profound implications.

But then so did the internet in 1999. That didn’t mean that Pets.com was the billion dollar unicorn people thought it was.

Having a kernel of substance doesn’t protect you from hype and irrational exuberance.

But I am now being told to ‘get into cryptos’ by people who really don’t know what they’re doing.

I ask them what a crypto currency is and they say it’s like digital money. And I say, yeah, I’m aware of digital money. I do my banking in the 21st century.

“But it’s so easy, Jon.”

“Yeah, it’s easy until it isn’t.”

And look, that’s not to say there isn’t still money to be made. You might make another 670,000% before the whole thing topples over.

But if you’re going to do that, just be aware that you’re gambling now. The herd is on the stampede, and all the supposed ‘fundamentals’ in the world won’t save you when the herd turns.

There’s value in cryptos for sure, but now, more than ever, you need to know what you’re doing.

Don’t say I didn’t warn you.

What’s your shoe-shine boy telling you?