I was chatting to a friend who reads this blog.
She told me that she reads every article…except “those stupid music ones”…please could I stop doing those?
Being a Nice Guy, I said I’d think about it.
So I thought about it…and here we are.
Yes, The Escape Artist is back to review more classic songs about financial independence in the guise of a music critic from the NME…armed with earnest prose, psycho-babble and increasingly tenuous metaphors.
Life During Wartime* (Talking Hedge)
The year is 2020. We are under attack, the Government has emergency powers and there’s been a run on toilet paper. You can almost hear the sound of gunfire (especially if like me you live near Bisley).
David Byrne, a geeky hedge fund manager, has positioned his portfolio for the end of the world. He’s long volatility, long the $, long duration and long out-of-the-money put options on the S&P 500. Meanwhile, he’s shorting the fuck out of VWRL…to hell with that buy and hold nonsense, that’s for sheep…and David is a tiger. Grrrrr. David is also a prepper: he’s got 3 passports, 0 friends, plenty of peanut butter, baked beans, some hydroxychloroquine and a bog roll stash like an Andrex warehouse.
The only thing that goes up in a crash is correlation. And
when if the hedges fail and the portfolio blows up…well, David can tell the fund’s investors that it was a 6 sigma event that won’t happen again until next time for another million years. David doesn’t care, he’s still collecting a fat salary and a 2% management fee. Heads he wins, tails the punters lose.
Another One Bites The Dust (Queen)
Talking of things that blow up in a crash…
…rookie investors may think that P2P Lending offers higher returns than a bank account plus a “promise” they’ll get their money back. But most P2P Lending is a form of sub-prime lending where borrowers who couldn’t get loans from banks go to fund lifestyles they can’t afford. This is a turkey strategy. When the economy turns down and unemployment turns up, credit losses don’t go up by 10%, they go up by 10x or 100x.
In a downturn, its all about the return of your capital rather than the return on your capital. In fixed income, its the credit losses that massacre your long term returns.
The Gambler (Kenny Rogers)
As someone smart once said: if you are at a poker table and you don’t know who the patsy is….well, its probably you.
Kenny Rogers is 56 and he is a pro. Pros know the odds of the game they’re playing and they have an edge.
Kenny has seen many market cycles and many Frankies come and go and he knows their bluster and their probability-blindness. After all, Kenny used to be young himself once.
The Sweet Escape (Gwen Stefani)
Years ago, I spoke to a partner at a big professional services firm who ruefully told me that his life was a “gilded cage”.
Yes, he was very well paid but he was still trapped. He travelled first class and his wife could buy lots of stuff but his time was not his own. He was constantly at the beck and call of his clients and the Firm. He had very little time for himself.
Power is the ability to control your own life. As Gwen Stefani illustrates, it may be glamorous but a gilded cage is still a cage.
Cool Kids (Echosmith)
If all the Kool Kidz have the latest gadgetphone / car / house / whatevs and we don’t, how will we possibly cope with the humiliation at skool / the office?
We all want validation. But you can’t spend your way to being cool. Just trying to do that smacks of desperation. People can sense neediness a mile off and it’s the opposite of cool.
Outside (Ellie Goulding and Calvin Harris)
So why do high spenders keep spending, creating their own self-imposed prisons of debt? Good question.
Everyone is different so there are lots of reasons. But I’m pretty sure that a lot of people are seeking validation. Perhaps trying to compensate for something that’s missing? As Ellie Goulding puts it:
Myself was never enough for me
Often people are buying stuff to cheer themselves up. That’s why it’s called retail therapy.
But what if you were enough already…without buying ever more stuff?
57 channels and nothing on (Bruce Springsteen)
Perhaps unsurprisingly for someone known as The Boss, Bruce Springsteen shows a keen appreciation here for the dynamics of The Prison Camp and how it brainwashes the inmates.
Watching (most) TV is the ultimate time-suck (although I will allow The Walking Dead and Game of Thrones for educational purposes). Whilst you zone out on the couch, your mind starts to atrophy and they slip the adverts, the product placement and the woke propaganda past the defences of your conscious mind.
Remember: its only paranoia if they’re not out to get you.
I’m coming out (Diana Ross)
At some point, every blogger faces a decision whether to stay anonymous or to put their name to their blog.
I started off blogging anonymous but came out a couple of years ago. Why should people take me seriously if I’m not prepared to stand up and put my name to my opinions?
Pull The Trigger (Flux Pavilion)
It would be wonderful if everyone reading this took action to get their compounding machine working.
In Getting Rich In The Military, an army officer observed that many people procrastinate and invent
excuses rationalisations why now may not be the right time. If you are dithering about whether perhaps it might be better if you did this, that, or the other, you are losing the initiative.
Meanwhile the enemy (debt interest, lifestyle creep, conformity etc) is creeping up on you as you lie dozing in The Duvet of Complacency.
Pull the trigger and get started quickly.
* Hat tip to JimJim for pointing out this classic in a comment on the Monevator site.
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