I often write on Quora.com, where I am the most viewed writer on financial matters, with over 661.5 million views in recent years.
In the answers below I focused on the following topics and issues:
- What are the first steps when looking for investment?
- Are there any benefits of being an expat in countries with lower taxes than where you live currently?
- How can I become an outlier in life?
- What are some key factors that contribute to the widening wealth gap in society?
- What is the €3.5 billion Wirecard scam?
- What do you think of Michael Burry’s prediction about hyperinflation?
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Are there any benefits of being an expat in countries with lower taxes than where you live currently?
Of course, there is.
If you pay fewer taxes, you have more to save and invest, assuming the cost of living doesn’t outweigh the benefit.
That means:
- Retiring or semi-retiring earlier
- Having more income and personal freedom
- Having more interesting experiences. If your disposable income is higher due to lower taxes, you might be able to do more and still save and invest a more significant amount of money.
Of course, it doesn’t work out if you can’t earn a decent amount, or the cost of living is too high relative to your income.
There is no point in relocating to, say, Monaco or Cayman Islands for lower taxes if you are earning an average wage, unless accommodation and other benefits are included.
Ultimately, people forget an important point.
How much you earn isn’t that important. How much you keep is.
I don’t agree with everything Kiyosaki says, but he is right here (source AZ Quotes)
Suppose you live in Manhattan earning $ 1 million from earned income before tax. In that case, you won’t be able to save as much as somebody living tax and rent-free in Dubai, earning an executive salary of 600k + accommodation benefits.
I know some people living in cheap (and low-tax) places in Eastern Europe earning 1/10 of what many people make in London or New York, and yet they often save and invest more.
That is because half isn’t getting taken in tax, and at least half of the other half isn’t being taken in living costs.
What are the first steps when looking for investment?
It depends if you mean investing by yourself or finding somebody to invest in you or your business.
For personal investments I would decide if you want to do-it-yourself (DIY) or use an advisor.
That takes research.
It is easy to focus on fees, and very easy to forget why many DIY investors fail.
We only have to look at the crazy 2020–2021 market, during Covid, to see why countless people fail when investing by themselves.
The number of people who panicked during the 2020 crash, and then got greedy with Gamestop, Tesla, Cathy Woods’ fund, and others was astonishing.
This resulted in people buying high and selling low, as I explained here.
Then, I would focus on what you want to achieve beyond investing.
Do you want to give money to your kids in a trust?
Or perhaps you are looking for income and not beating the stock market?
Once you know that, you can focus on actually having a plan.
To find investors for your business, if that is what you meant, I would:
- Demonstrate a good track record
- Know how to pitch
- Show you have delivered growth organically before
- Network (offline and online) in communities where buying businesses is the name of the game.
What are some key factors that contribute to the widening wealth gap in society?
There is one factor that is the biggest by far.
Long-term, asset prices beat:
- Inflation
- Average wage increases
- Cash in the bank
- Even government bonds
They are just more volatile.
Therefore, if you have wages going up by 0%-2% per year after inflation, cash in the bank giving you the same return as inflation and stocks giving 5%-6% per year after inflation, you can see the general trend.
That was the economist Piketty’s central theme for his famous book Capital:
He looked at data going back hundreds of years and summarized that asset inflation tends to outperform wage growth.
Unless there is a global war or Great Depression, it is unlikely that those trends will reverse.
Like me, you might not agree with his idea that a wealth tax is needed.
However, his point is factually accurate.
The more you own in assets, the better, as certain assets tend to increase above the inflation rate, wage growth and cash in the bank.
That isn’t to mention technology.
Some people have global opportunities, like online business owners (owners of digital assets), while others are still dependent on their local economy.
What do you think of Michael Burry’s prediction about hyperinflation?
It is a timely question.
That is because Burry is again in the news today.
He has placed a significant bet against the US stock market this time.
Here is the reality:
- Most of Burry’s predictions have been inaccurate
- He is correct in a small number of cases. Occasionally, he wins big, like in 2007, when he bet against the US housing market.
- Past predictions are no indication of future right ones
- He predicts 1,000 of the last 2 crises. So, by definition, he will be proved right again…..someday.
Some examples
In January, he tweeted sell. In March, he said, “I was wrong to say sell.”
In 2019, he warned against an index fund/passive investing bubble. It hasn’t happened, and there is no indication that it will do anytime soon.
He has warned against market crashes so many times, that other people have also seen the trend:5 Times Michael Burry’s Market Crash, Other Predictions were WrongIn this article, we discuss the 5 times Michael Burryhttps://www.insidermonkey.com/blog/5-times-michael-burrys-market-crash-other-predictions-were-wrong-962912/
He is excellent at marketing and getting media attention.
Whenever he makes a big prediction, he gets media attention; as the press can say, “the Big SHort’s Michael Burry, who got the 2007 subprime crisis correct, has said……”.
By definition, if he had gotten any major bearish prediction right since 2007, the media wouldn’t have to keep referencing his successful bet almost two decades ago.
Moreover, even if he is proved right this time, it won’t help you beat the market.
A lot of academic evidence says you can’t time the stock markets.
Keeping money in cash, waiting for a crash, doesn’t work.
If it did work, then why don’t most amateur investors beat the stock market, when there have been numerous crashes over the years and decades?
One of the major reasons it doesn’t work is that those who predict market crashes tend to get the next move wrong.
Two recent examples are the 2008 and 2020 crashes. Few predicted them. From those that did predict them, hardly anybody saw the markets recovering so quickly.
Therefore, they would have been better off not having predicted the crash.
2020 was a great example of that. The US stock markets went up by close to 20% as per this graph from dqydj – the capital value increase was around 17% which doesn’t account for dividends paid eitehr.
There was no point in predicting that crash and making 0.1% in the bank (which was the average interest rate in 2020), if you missed out on 17%-20%.
I am sure that the next crash will show a similar pattern.
Those few who predict the proper timing of the crash will think markets will go even lower, and hence would have been better off just staying on the rollercoaster.
This quote from Peter Lynch summarizes it (Source: AZ quotes).
How can I become an outlier in life?
Everybody is an outlier to a certain extent.
People are individuals who have their own quirks and eccentricities.
If you mean outlier financial, academic or other success, then it is a complicated question.
You need the following:
- Luck/chance/randomness
I once watched an interview with Bill Gates and Buffett, and they both admitted that had they been born hundreds of years earlier, they wouldn’t be who they are today.
Physical strength was more important than capital allocation or business skills in those days.
Even if they were born during the time when they needed to serve in World War 1 and 2, getting that outlier success would have been more difficult.
The chance of death or just not being able to focus on your business is greater if you were forced to fight in a war.
2.Being willing to do what others aren’t
Many people are willing to work hard. But few are willing to take massive risks consistently.
What you are wiling to do that others won’t, or at least your direct competitors won’t, is a more sustainable unique selling point than work ethic alone.
3. Playing the long game
Outlier success is much easier if you play the wrong game because:
- You only have to be right once
- Compounding isn’t just about compounded investment returns. The more knowledge you gain, and the more risks you take, also compounds.
That isn’t to mention hard work, skill and natural talent.
Basically, moderate outlier success isn’t the same thing as being a one in a billion.
Being a decamillionaire through patient investing, and getting good at your day job/business, isn’t the same thing as having billions.
What is the €3.5 billion Wirecard scam?
The company faked billions in revenue.
Anybody who wants to know more about it should watch the Netflix show on the scandal:
The Financial Times has been investigating them for years.
Nobody wanted to listen.
The regulators banned short-selling of the stocks, and took actions against some of them, with the FT journalist being investigated:Germany bans Wirecard ‘shorting’ as prosecutors probe FT journalistGermany’s financial watchdog has banned “short” selling of Wirecard shares due to volatility in the payments firm’s stock following reports in the Financial Times which are now the subject of an investigation by German authorities.https://www.reuters.com/article/us-wirecard-stocks-idUSKCN1Q70GZ
Angela Merkel lobbied the Chinese government to allow Wirecard into the country.
Nobody wanted to listen to dissenting voices, as everybody wanted to believe that Germany finally had a fintech company that could compete globally.
It is a lesson for those reassured by regulators, regulations and governments.
Compare their case to Euro Pacific Bank.
They were based in Puerto Rico. Loosely regulated in some ways compared to EU companies.
No government support.
The regulators closed them down, but nobody lost money, because they were a no-debt bank.
Yet in 2018–2019, most people would have been more reassured by the “highly regulated” Wirecard, with associated government “protections” and compensation/insurance schemes.
When doing due diligence on firms, size and government protections aren’t the most important thing, as Lehman also showed.
¿Le duele la indecisión financiera?
Adam es un autor reconocido internacionalmente en temas financieros, con más de 830 millones de respuestas en Quora, un libro muy vendido en Amazon y colaborador de Forbes.
