With the summer around the corner, I’m thrilled to have some good weather back here, it was a bit of a brutal week but it’s now over, I’ll go rest a bit outside, I hope you all had a great time:) If you feel like reading some interesting stuff, here are a few suggestions:)

-The Case For Raising Top Rate Taxes @ New York Times
-Should You Buy The S&P500 Or Include More Large Caps? @ BuildYourETFPortfolio
-Vanguard life strategy funds @ Long Term Returns
-SkyNet Wars: How A Nasdaq Algo Destroyed BATS @ ZeroHedge
-What if You Could Only Work 1 Hour Per Day? @ Passive Income Now
-Avoiding hedge funds is a benefit for the 99% @ Curious Cat
-The is the time to shine – Nail your CFA exam @ SmartFinancialAnalyst

Dividend News

-You are thinking about retiring? Read this first @ TheDividendGuyBlog
-Why dividends beat buybacks @ Fortune
-Buy a Coke or the company @ GetRichSlowly
-Retirement Planning & Paycheck Issues @ Do Not Wait
-4 dividend growers with almost zero credit risk @ Dividend Monk

Tech Stock News

-Online Empires – Rise & Fall @ The Big Picture
-A Modest proposal @ The Big Picture
-Mobile Ad Network Millennial Media Prices IPO At $13 Per Share @ TechCrunch
-Apple bashing- since when is a 60 work week abuse? @ Darwins Money
-It’s time to believe in RIM and the blackberry again @ TechCrunch

Muppets vs. Goldman Sachs Funny Video:)

It’s always interesting to see how some like to minimize the importance of money. I would not say that money buys happiness. It doesn’t get you quite that far. That being said, it can certainly help in many different ways. What I always find interesting is how money can help solve almost any problem. Global warning, recovering from natural disasters, helping a loved one, being able to discover the world, etc. It just seems like everything has a price these days. Is that a good thing? Or a bad thing? Hard to say I guess.

Any sport fan would tell you that things have changed a great deal in the past 2 decades as now all involved parties consider it as a business and make moves that make sense from a business perspective. Loyalty to a team, a company or even organisation seems gone.

One very interesting thing that I read the other day was how some endangered animals are being saved. You may have heard about the Black Rhino, one of the rarest species on earth that is in clear danger of becoming extinct. What you probably do not know is that in order to try to save the animal, some governments have now made it legal to charge for killing it. For example, a ranch could allow hunters to pay an amount to go hunting for a black rhino. The price tag comes to a rather expensive $250,000…..!!

How Could Allowing Black Rhino Hunting Help Them Survive?

Black Rhinos are extremely rare for a few reasons. One of them is of course that they are being illegally hunted because of their high resell market. An even more important one is that it is very difficult and expensive to care for them, they also need a very specific environment to be able to reproduce. Who would have a big enough incentive to take on this very expensive mission?

You might think that groups like the World Wildlife Federation (WWF) would be up to the task and they do try their best but it is incredibly expensive to do and they have limited resources.

The Money Alternative

Why not give land owners an incentive to breed Black Rhinos? By telling them that thye will be able to sell hunting rights later on, it gives incentives to protect the animals, help them breed, keep illegal hunters away, etc.

Could It Work?

It’s difficult to say but there are some circumstances when it has. In Texas, they have been able to grow in spectacular ways the populations of many endangered species by giving that exact right. Ranch owners make sure they are able to have several of them and let hunters take down 5-10% of the group every year. The proceeds make it possible for them to keep growing the herds thus also improving the long term perspectives of these animals.

It’s An Outside The Box Solution

Obviously, it took a lot of failed experiments to finally reach this point. Still to this day, many believe this is the wrong way to do it. I think it’s fair but only if a better way is proposed. Many more of the problems could probably solved through unconventional methods…

What are your thoughts on this?

If you think about all of the big debates of the last few months or years, you’ll think of the Wall Street Bailouts, the 1% vs. 99% and a different set of other heated discussions. One common element in recent years has been Goldman Sachs being in the middle of the discussions. It’s nothing new. A few years ago, one of the very interesting authors that I enjoy reading, Matt Tabibi wrote about Goldman Sachs basically being the root of all evil. I’m barely exagerating. In fact, he said that Goldman had been a major player in both creating financial bubbles (profiting on the way up) and then making even more money when the bubble ended up bursting.

That article and many others also pointed out how Goldman employees seem to be running the US government in many different ways. If you look at the top guys that manage institutions such as the US Treasury you will see that the majority of them did spend a considerable amount of time working for Goldman. Was it by chance then that the Treasury came out to rescue Goldman and others but also AIG which owed a tremendous amount of money to Goldman? Many find that difficult to believe….

The Testimony

As if public opinion wasn’t bad enough, CEO Lloyd Blankfein ended up testifying regarding the role of Goldman Sachs in the selling of toxic securities. I personally thought it got a bit ridiculous. He was mostly blamed for selling products that his firm had judged to be “crap” to its clients. We could probably discuss this for a while but the main point is that it certainly did not help Goldman’s image.

The Departing Employee

Then, Goldman Sachs saw one of its executives, Greg Smith, leave the firm in a very public manner as he wrote a piece in the NY Times explaining why he was leaving. The summary would be that he felt the culture of GS was compromised, that it was no longer about helping clients but about crewing them. It made enough of a story for Goldman to have to react as it GS said:

“In our view, we will only be successful if our clients are successful,”

Even the fact that Goldman felt the need to reply to Mr Smith was sign of how bad things have become. Of course, many others such as Andrew Ross Sorkin have been very public about how GS is screwing its clients,

@GSElevator

For the past few months, what is almost certainly a fake twitter account has been posting as a Goldman employee with all kinds of remarks that do not help the GS image. It’s not that anyone thinks those are actual quotes. It’s rather that few believe that they are that far outside of what is really happening.

My Thoughts

Clearly, Goldman is to blame for a lot of what is going on. Its main problem though is that it continues to act in an arrogant way. That being said, I don’t think Goldman is evil. What I feel even stronger about is that it’s not more evil than its competitors. Goldman is the biggest and has been the best in its industry for a few decades now so in this era where attacking the rich and successful, it is such an easy target (as is attacking the top 1% or fortune 500 CEO’s). What I would say though is that having firms like Goldman that are considered too big too fail is certainly an issue and if there isn’t enough control on how much risk the firm can take, then it should not be allowed to “bet the house” knowing that taxpayers will pay back if needed.

What are your thoughts on Goldman Sachs (GS) ?

It’s an interesting question. Feeling rich has a different meaning to each person of course. Personally I feel as though it’s mostly about being free to live the lifestyle that I wish, to avoid feeling stress or anxiety about losing my job or having an unexpected expense. At some point in time, I would love to be able to live off of passive income which I consider to be the ultimate sign of being rich. I do however know that every person answering that question would probably have a different answer, especially as you start to get into details (what kind of lifestyle, vacations, car, etc).

Do You Feel Rich?

Chances are that you answer this question with an unequivocal “NO”. Don’t feel bad. Almost everyone does. The more interesting question is the follow up:

“How much would you need to own/make in order to feel rich?“

Why? Because it seems as though

-those making 20-30K/year will often answer this question by saying that they’d feel rich if they made 50K/year
-those making 50-60K/year will often answer this question by saying that they’d feel rich if they made 100K/year
-those making 100K/year will often answer this question by saying that they’d feel rich if they made 200K/year
-etc… you get the idea

Sometimes, it feels as though we are each climbing the same mountain and we always feel like we’re near the top. Once we get there, we’ll feel happy, free to do whatever we want, etc. We’ll feel like we’ve accomplished a great feat, like we can enjoy things a bit before taking on a new challenge.

I should know, I’m the 1st in line….

Chances Are That You Are Making More Money Than 5 Years Ago

Perhaps, it is significantly more. Try to put yourself back in your shoes from 5 years ago. If someone had told that you could potentially make $X, would you have said that it would be enough to live off, to feel rich, etc? Personally, there is no doubt that I would have said so. Yet here I am, making more money than those objectives but still not feeling “rich”.

It’s As If There Is No Top To This Mountain

Every time we reach a new level, we suddenly realize that there is a higher level that we can reach and that we would surely feel rich if we got to that level. Unfortunately, every new level reached makes us see the next one…

Perspective…

If today you decided to wake up and instead of looking at how much more you could/should be making, you looked at all of those that are climbing, trying to reach the place where you are, wouldn’t that make you feel rich in some way? It’s so easy to get caught up in trying to make more in order to sustain a lifestyle that might be much more than what we truly need.

Maybe I’m a bit reflective today, travel/vacations can do that to you:)

I have written about gold several times on this blog and despite the investment being so simple, I’m still unable to get my head around it. Think about it, when I am buying a stock I feel like I’m buying a stake in a company that will be earning money for decades. Some of those earnings are usually eventually paid out as dividends. Thus, the value of those stocks is quite simply the future value of those dividends and earnings (for companies that are too stubborn to pay out dividends.. Apple AAPL anyone?). What can influence the stock is extremely large, it can be growth, competition, costs, technology changes, etc. Some analysts work full time on researching a handful of companies.

Bonds have different characteristics and certainly have fewer components but the future value of cash flows can certainly become complex as is the ability of companies/governments to pay back bondholders.

Then there is Gold

Gold has became much more popular in recent years. Why? Because it’s seen as so many as the best (hardly perfect, but the best one available) hedge for inflation and as governments such as the US and European ones continue to lack the urgency to fix their growing levels of debt, it’s the belief of many that gold should be part of any long term portfolio of investments. I’m not there yet. I know of so many that are putting significant amounts of money into gold. Others are simply buying a few % of their holdings, every year into physical gold. Why? It’s their belief that if the system collapses in some way, and that assets such as US dollars end up losing a lot of value, the value of gold will hold up. To be fair, that has been largely true throughout history.

Hence The Growing Appeal Of Gold

I would imagine that at any period in time where the value of other assets becomes more questionable, gold’s value would rise and with everything going wrong in the world right now, many are starting to worry about the assets that had been seen as safest, such as US dollars, bonds issues by the biggest countries of the world, etc.  Could we be at risk of losing much more than is possible to imagine? What if the end of Europe is near and that could bring massive issues to the US and others? Of course, these are very pessimistic scenarios and I would not consider them anywhere near likely but would not trying to protect against such a scenario be irresponsible?

Gold, Really???

There is one big problem with gold though and I had trouble putting it into words but Warren Buffett said it well recently when he said that gold had little to no value to him. Why? First it has no “inherent” value, it does not produce anything. Sure there is some jewelry made of gold but that is responsible for such a small portion of gold’s value. Why is gold worth close to $2000? Its value is mostly driven by perception. That creates huge issues for me. See, that “perception” can change so quickly, and it could just as easily drop down to $1000 as it could rise to $5000 as some predict it will. I’m not nearly smart enough to have a strong opinion on the direction of gold prices. Thus, it becomes very difficult for me to pull the trigger. Having decent protection in case all goes to hell? Yes! But buying gold today at these prices? I’m just having trouble with the concept.

That being said, I will likely be buying some gold in the next decades, as a very small percentage of my portfolio, just “in case”. Crazy? I guess time will tell.

What are your thoughts on gold?

Yesterday, if you were anywhere near planet Earth, you heard about the Goldman Sachs exec who very publicly decided to leave the company while at the same time voicing his opinion that Goldman was more than happy to screw its clients and sell it poor products in order to enhance its numbers. On the face of it, those are not shocking revelations. What is however is to see this guy write a piece in the NY Times about it. Even more surprising to me is how quickly things happened after that. Within a few hours, it seemed to be all over the news even forcing Goldman Sachs and CEO Lloyd Blankfein to react to the news:

“We disagree with the views expressed, which we don’t think reflect the way we run our business. In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves.”

All of this happened within a morning.

A few days ago, when Apple finally launched its much anticipated iPad, in a matter of seconds, everyone in the Western world seemed to know exactly what had been launched, how it was different, etc.

Don’t get me wrong, I know that things have changed, that information is going at the speed of light. But it still surprises me every time. The social networks have only made this even more evident. You are probably on Facebook, Twitter, LinkedIn or some other network. If you are not, I would bet a lot that many of your closer connections are. That means good and bad news can reach a record number of people within a few minutes. Reputations, customer bases, all of that can come and go so quickly.

When Bank of America (BAC) announced its new $5 fee, the backlash was so severe that it finally decided to backtrack, looking like a bit of a fool in the process but avoiding what was quickly turning into a disaster. Then there is Netflix (NFLX), which I’ve also discussed which made a terrible PR move which it continues to suffer consequences from.

What Does All Of This Mean?

I personally think that more than ever, the fate of a product, a company, or even an industry can change within a day. Every company is one bad move, one bad decision or one bad press release from suffering big losses. This reinforces my view that:

-I want to hold innovative companies: Apple is a prime example but so would Google, LinkedIn, Amazon, etc. Companies that are unable to come up with the best products will increasingly be left behind

-I want to hold companies that treat their customers as kings: With social media, word of mouth’s power has exploded making companies such as Apple that surprise their users every time they release a product rewarded for doing so.

-Passive Investing Remains King for most investors: If you’re not able to spend time every week or every month looking at your investments, you should be going for passive investments. There is just so much happening every single day now that I believe less in less in “permanent portfolios” that can be bought and left alone.

What are your thoughts? Doesn’t it feel like the speed of everything keeps getting faster and faster?