Juggling Dynamite

In finance theory, expected returns presume a closed universe of compound growth where the income received on assets is continually reinvested without any fees, withdrawals, taxes or principal losses to reduce net gains.  In reality, all of these are regularly recurring facts of life for most.

As I explain (ad nauseum?) money is like a snowball.  To keep it growing, we need to roll very carefully.  When we roll carelessly or too quickly, we are at high risk of breaking off big chunks that not only wipe out years of previous progress but then require time and effort to rebuild what we had in the beginning.  In the process, full-cycle compound returns can easily morph into compound losses that undermine financial hopes and dreams.

After a decade working to grow back their 2007-09 losses, would-be investors are due for their next capital reset.  Once the next bear market has run its course, it’s quite likely most will have netted zero or even negative investment gains since the late 1990s.  Believe it or not.  This is typical of how secular bear markets (that start from periods of extreme asset overvaluation) move.

Those holding corporate securities today are picking up pennies in front of an oncoming steamroller. The unprecedented advent of negative yields makes the math even more dangerous.  See more in Negative is the new subprime:

Compounding wealth is the most important and most difficult financial concept for investors to grasp. Over the last ten years, many investors spent significant time recouping losses from the financial crisis, and they assumed great risk in doing so. Having recovered some or all of those losses, many are back in a position of compounding wealth. At this point, they can continue to look backward and believe that irrational policies will ensure that the past is prologue, or they can exercise some independent thought and recognize that the risk of another serious drawdown is not negligible. Prudent risk management is very generous to those who elect patience over expedience. Most financial advisors will not volunteer a fee-reducing, conservative approach even though it would be in their own best interest to do so at critical times.

This segment is an excellent primer on many of the world-changing technologies now unfolding.  Not mentioned however, is that investing in this theme is an extremely wild ride full of high volatility and above average capital loss prospects.  The best odds for success are to add diversified baskets of companies that will benefit, but only after prices have been oversold in the depths of a bear market.  Wait for it.

Catherine Wood, CEO of Ark Invest, helps us peer into the future of genome sequencing, robotics, artificial intelligence, energy storage and blockchain technology. Plus, hear why she feels Tesla, as led by Elon Musk, is way ahead in the electric vehicle game, why electric vehicles are here to stay — and why banks are in trouble. Here is a direct audio link.

Great cooks have always known that the best ingredients are fresh and locally grown. Putting health and sustainability back at the center of food systems, and growing pesticide-free produce where people live, are key to reducing waste, pollution and sickness.  Large scale urban farms have been cropping up (quite literally) all over.  A new one in Paris with 14,000 sq metres growing 30 different plant species will produce some 1,000kg of fruit and vegetables every day in high season.  See World’s largest urban farm is to open on a rooftop in Paris in 2020 :

“The farm will also offer a range of services related to urban agriculture, including educational tours, team-building workshops and special events. Last but not least, there will be the opportunity for local residents to lease small vegetable plots of their own – in specially-devised wooden crates – helping to reconnect city-dwellers with their food source.

…Not only will it be the largest rooftop farm in the world but they will also be pioneering their own technique in aeroponic ‘vertical’ farming.

Apart from not requiring pesticides, this method uses a closed water system and no soil – therefore minimising the risk of any pollutants. Furthermore, by supplying people right on the doorstep, the farm will have an exceptionally low carbon footprint.”