I often write on Quora.com, where I am the most viewed writer on financial matters, with over 331.2 million views in recent years.
In the answers below I focused on the following topics and issues:
- Why is Warren Buffett so rich and famous? Perhaps it is for different reasons to what you assume!
- Is the current stock market in bubble territory? I look at both US and non-US markets, which haven’t performed as well as American stocks in recent years.
- Our of the major East and South East Asian cities, do I have a preference?
- How will stocks react if inflation keeps rising?
- What is the most disturbing fact about money?
- How can non-Americans open up a bank account?
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Why is Warren Buffett so much rich and famous?
Here is the ironic thing. If he would have retired early in his 40s, nobody would probably know who he is today.
He wasn’t worth $1billion until his 50s:
Since this graph was made, he has reached $100billion and has consistently been inside the world’s top five richest people.
He has therefore taken advantage of compounding to a larger extent than most other billionaires.
This leads us to another thing – longevity. Plenty of people have become wealthier than him.
Look at somebody like Musk who has come out of nowhere to become very wealthy.
This graph was made just a few months ago. Due to the incredible rise in Tesla’s shares, he is now worth about $300billion.
The point is, few, if any, have been consistently at the top table like Buffett and Gates have.
Therefore, he has partly got famous because so many generations have heard his wisdom.
Buffett made his first million by running a hedge fund. He made most of his money by running an insurance firm and buying businesses.
His firm indirectly owns more stocks than exist in the Dow:
So, he probably has created something as unique as Amazon or Microsoft. He probably isn’t as smart as Musk or Gates either.
Yet his patience has set him apart.
Is the stock market in a bubble?
Below is a list of the Nasdaq’s best-performing stocks of 1999:
What was significant about the tech bubble was that, by the end of it, almost every stock in the sector was going up.
Even stocks without any real profitability or decent revenue were doing well as investors were convinced that the internet, and tech more broadly, was the future.
It was the future, and somebody who would have invested one day before the Nasdaq started its bear market period in early 2000 (the market fell by about 76%), would have made a lot of money if they had held on until today.
The market didn’t fully recover for about 14 years though, because:
- Valuations, under any metric, were overvalued
- Many of the stocks weren’t even profitable
- By the end of it, it became a speculation about the future – yet you wouldn’t buy a house today on the premise that it will be worth more in 2030. You buy based on today’s information.
The difference between then and now is
- All stocks aren’t going up. If you look at the S&P500, or even the Nasdaq, it isn’t the case that every stock or sector is performing very well. A broader sign of a bubble is when almost every stock goes up continuously.
- Technology is a bigger part of our lives than before
- Interest rates are 0%. Bonds pay hardly anything. In 2000, an investor could sell their tech stocks and get 6% in bonds or 3% in cash
- European and emerging market stocks look undervalued and even quite cheap. On some measures, US stocks have only been this cheap twice in the last thirty years.
So, no, I don’t think the whole market is in a bubble at all. Certain individual stocks might be.
Outside the US, few individual stocks look to be in bubbles, and valuations look very cheap on a market basis.
The FTSE100, for example, is barely above where it was in 1999–2000, even though dividends change the picture, the FTSE250 has done better.
What is more, speculating about bubbles never works. There are two types of people:
- Those who know bubbles will come and go. They stay the course. They diversify across markets.
- Those who try to time the markets by predicting when bubbles will burst. Or maybe they buy and sell ETFs around the world based on analyzing how undervalued a market looks. So, they are selling US markets now, and buying say a UK ETF.
The latter group never wins long-term. In March 2020, they felt very smug when the bubble they had been calling for about a decade burst in their eyes.
Then there was a massive and quick rebound, and most never got back in.
Which city do you like most: Tokyo, Seoul, Taipei, Hong Kong, Bangkok, Beijing, Shanghai, or Singapore?
That is a difficult one. I have lived in about half of these places, and visited them all.
Let’s have a process of elimination.
Shanghai is an amazing city in some ways but it is run by a one party state which has various restrictions on daily life, including the internet, and is sowing nationalistic sentiment. It is out, as is Beijing.
Hong Kong used to be a great city until the CCP messed it up. So, that is out as well. It would have came out on top a few years ago.
Bangkok is better than both for the long-term expat. It attracts loads of retirees, digital nomads etc.
However, Thailand still isn’t a fully developed country by any means, even though some parts of Bangkok are very developed.
That means bureaucracy doesn’t work that well. I would pick Kuala Lumpur over Bangkok as the English is better, and it is actually more developed.
None of the two are as developed and efficient as Singapore, but it isn’t easy to get into Singapore to begin with.
Unless you are married to a Singaporean, you often need to spend a lot even to get in.
What is more, whilst Singapore is more benign than China, it isn’t a fully democratic nation, unlike Taiwan.
Taiwan has all of the positives associated with both Chinese and Japanese culture, without most of the negatives.
I would therefore pick Taiwan or South Korea. For tax, Singapore, Hong Kong or Thailand, as all three are countries which don’t tax most forms of overseas income.
That means it is legally possible to live tax-free, if your money isn’t earned locally – albeit with some caveats.
In comparison, Mainland China and Taiwan both tax most forms of overseas income, meaning that it can actually cost a high-net-worth investor more to live in Taiwan than Singapore.
How will the stock market react if there is an abrupt surge in inflation?
Firstly, I doubt there will be an “abrupt” surge in inflation. The same people worried about inflation today got overexcited after the transitory inflation in 2010.
There are also as many deflationary pressures in the world, as Cathy Woods said, as inflationary pressures.
AI and technology more broadly could result in deflation in more sectors than ever before in the coming decade.
Second, we can’t look at historical data to make predictions. There is some misleading data, like the chart below, which shows that stocks have performed badly during inflationary periods:
There is a problem with that analysis though. When inflation was high in the 1970s and 1980s, the investing landscape was different.
Most importantly, there were more realistic alternatives to the stock markets. Cash paid more.
Even “super safe” government bonds paid well. Bonds beat stocks, on average, in the 1965–1982 period.
These days, cash and bonds pay less – much lower than inflation. Now that might change, of course, if central banks increase interest rates to combat inflation.
There is no guarantee, however, that interest rates would surge to such a point that cash becomes a realistic alternative to the stock market.
Inflation, therefore, could actually be good for stocks if more people want to get rid of cash, which is eroding to inflation, and invest in companies that pay a good dividend yield and can appreciate in value.
What is more likely to happen is that firms that depend on low-interest rates to expand, like real estate firms and some big-tech companies, might suffer more than firms that don’t.
Either way, it is difficult to know if stocks will outperform, or underperform, their historical averages because there are so many other variables other than the inflation rate.
What is the most disturbing truth about money?
Half of the people who went on this march probably used Amazon in the subsequent days.
You see, many people criticize “the rich” but often take no concrete actions, and typically (secretly) want to get rich themselves.
This is the height of hypocrisy. Watch people’s actions, not their words.
Beyond that, money doesn’t
- Care about fairness, our ethnicity, our qualifications, and so on. Some of those things, like qualifications, might help you obtain money though, in certain situations.
- Automatically buy us happiness. It can help if people use it in the right way though.
- Always replicate. Money buys more money, right? Yes, if you play your cards rights. But close to 80% of former professional, elite, athletes go broke within a few years of retirement. Most third-generation rich also go broke, unless the money is in a trust so they can’t just spend it all.
- Guarantee that you will attract the right people. It will buy you access, but it will also attract hangers-on.
- Ensure that people close to you will be happy for you. Some people, like real friends, will be. Almost everybody will be happy for you if you start earning half decent money after being unemployed. Far fewer people will be happy if you make loads of money.
- Always buy you an easier life. Now sure, it gives you an easier life than being poor. However, once you get much wealthier, you might have more problems than the average middle or upper-middle-wealth person. Want to buy loads of holiday homes when you are “rich”? That means more things will go wrong – more calls about light bulbs going out. If you make the right decisions, you can reduce this stress of course.
- Always reward those who do the right thing. Some of the best, most ethical, real estate agents in the world probably earn close to nothing. The market cares more about perceived value than the value itself. If you can’t communicate well in business, then everything else is much more difficult
- Come easily in many situations, and yet becoming wealthy slowly on a middle-income is relatively easy.
How can I open a US bank account if I’m not American?
There are many options for that. Firstly, services like Wise allow you to open up a USD-bank account domiciled in the US:
Let’s say you live in the UK and open up a Wise GBP account. If you open up a Wise USD account, you can have essentially a US bank account.
It is technically an electronic money institution, but it does everything you need it to do.
Many traditional US banks will also accept you, but there are no benefits for non-American citizens and residents because:
- Banks and financial institutions in some other places are just as safe
- There is always a small risk of US death taxes, and over-compliance when you are living. Yes, technically speaking the bank will ask you to fill out one or two forms, and these forms should, in theory, stop you needing to pay US taxes, including death taxes. Risks still exist though.
- As a follow-up to the last point, let’s put this another way. Currently, 6,000 American expats living overseas give up their citizenship due to tax compliance. Once they succeeded, they move their assets outside of the US. Almost every non-American I know that is married to an American wants to avoid the spider’s web of US financial systems for as long as possible. Therefore, as a non-citizen, you should avoid this as much as possible.
- You can get USD and multi-currency bank accounts globally
- If you are moving around and you are an expat, it makes sense to ban offshore
- If you are invested in investing, it usually doesn’t make sense to invest in the same institution you do your banking in.
Therefore, I would just stick to having a USD-bank account, domiciled outside the US for the aforementioned reasons, plus a Wise bank account.
In terms of the how, you need to give you proof of address and ID and complete an online application form.
That is another benefit to something like Wise. The compliance to open it up in the first place will be better than the traditional banks.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 404.4 million answers views on Quora.com and a widely sold book on Amazon
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