Money For the Rest of Us

Joshua Sheats, host of "Radical Personal Finance," engages in a lively debate about the U.S. national debt's sustainability and the alarming trajectory of fiscal policies. They dissect the complex interplay between government spending and economic productivity, while also considering the impact of income inequality. Optimism about innovation and entrepreneurship emerges as a counterpoint to concerns about tribalism. The discussion highlights the ethical dynamics of modern America and the privileges of freedom compared to struggles abroad.

#199 How a bank panic led to the creation of the Federal Reserve, and why having diversified sources of money can protect us in case we have a bank panic today and can't get access to our bank deposits. More information, including show notes, can be found here.Episode SummaryAsking the question “What kind of money is it?” may seem a bit unnecessary. Everyone knows what money is, what it does, and why it exists. However, on this episode of Money For The Rest Of Us, David explains the different types of currency, why the bank panics of the 19th and early 20th centuries defined American banking today, and why it is so important to diversify your types of money holdings.How the Panic of 1907 defined the American banking systems we see todayThousands of Americans sadly learned that grand architecture could not shore up failing banks during the Panic of 1907. Massive amounts of money were lost due to failing institutions, party because only 5% to 25% of all deposits were held in cash. When citizens caught wind of the failures and wanted to immediately withdraw their holdings, the banks and trust companies could not fulfill their requests. A similar situation happened during the financial crisis of 2008 when the liquidity for banks lending to Wall Street dried up. David takes these complex scenarios and breaks them down into manageable ideas.Why were bank panics so common in the 19th century?Events such as the Panic of 1907 were common in the 19th century because there was not a central bank that could provide liquidity in times of crisis. Each state and national bank had their own currency. This proved to be unstable. The U.S. central bank, the Federal Reserve, was created as a reaction to the original Panic of 1907, and the US dollar as issued by the Federal Reserve began in 1914. The original gold standard lasted until 1933 when Americans could no longer redeem their notes for physical gold at the Federal Reserve.The 7 main characteristics of money, no matter the typeThere are seven main characteristics of money that tie different forms of currency together. They include the issuer, the form, the accessibility, the transfer mechanism, the availability, interest-earning capabilities, and the level of anonymity. Different types of currencies have some or all of these characteristics and each has a varying level of liability attached to it. David weighs the pros and cons of bank deposits, cash, central bank reserves, cryptocurrencies, and gold.Diversification in your money is important for those “just in case” scenariosDavid and many other investors are strong proponents of diversifying the different types of money you hold. Understanding that no system is fail-proof, and having different types of money that you can access at different times, will ensure your financial survival in the event of a financial crisis. While a panic that approaches the level of severity of the 1907 crisis is uncommon, nothing is impossible. Smart investors have a backup plan that could support their livelihood in the event of a system disruption.Episode Chronology[0:14] David introduces his topic for this episode, “What kind of money is it?” and discusses the Panic of 1907[6:10] The financial crisis of 2008 as it relates to the 1907 crisis[8:25] Why were financial panics so common in the 19th century?[11:12] Hoarding gold resulted in a complete shift in how money is backed during the Great Depression[15:43] The main 7 characteristics of money[23:16] Using gold as a currency[23:53] Cryptocurrency and its taxonomies[25:12] What happened during the Panic of 1907?[26:00] Why diversification in your money is so important[29:13] What’s coming up on the 200th episode of Money For the Rest of UsSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

#198 Why save for retirement if capitalism is going to collapse and/or universal basic income will be available. How millennials can lead the next work transition. More information, including show notes, can be found here.Episode SummaryCapitalism, universal basic income, socialism, and artificial intelligence are all tied together in America’s current economy. Today’s millennials are asking big questions about the future of the national economy and what place AI has in the job market. On this episode of Money For the Rest of Us, David tackles these questions and contemplates the idea of a universal basic income. The keys to successful capitalism and fulfilling employment are also discussed.Why aren’t millennials saving for retirement?David explains on this episode of Money For the Rest of Us that 66% of millennials have nothing saved for retirement. Why aren’t millennials investing in their own future? Some aren’t committing to a savings plan for retirement because they don’t believe capitalism will exist by the time they retire. Some even think socialism could it be a great retirement plan. There are, of course, many different degrees of socialism, including some that emphasize a market economy. David shares some of the negative consequences of state controlled socialism as practiced in Venezuela and Cuba.Artificial intelligence is not going to take over the world, but it will lead to a cultural shift and a consideration of universal basic incomeWhy artificial intelligence is accelerating rapidly, AI is not going to take over the world as in some dystopian horror story. AI machines do not have the ability to be creative or complete multifaceted, complex tasks. So-called “weak” AI that is currently available can only complete one-track tasks, all of which must be pre-programmed. However, AI machines will eliminate the need for humans to complete repetitive and routine tasks. Since millennials are already shirking these factory-like positions, the only thing that will change in today’s economy once artificial intelligence becomes mainstream is the way we think about employment and entry-level positions. Since AI is set to potentially replace 50% of jobs over the next 20 years, significantly increasing the productivity of the economy in terms of the ability to produce goods and services with less resources, businesses, households and governments will need to grapple with how people will get income to pay for the ample supply of goods and services that will be available.State controlled economies should be feared, not something to look forward to in the American economyA top down, state controlled economy lacks the bottom up, creative dynamism of capitalism, although even capitalism has rough edges that need to be addressed in terms of an adequate social safety net. David explains what is currently occurring in Venezuela. The Venezuelan government has completely destroyed their nation’s economy, with 50% of the GDP collapsing since 2012. High-ranking politicians are using food vouchers as incentives for reelection votes and basic human needs are being preyed upon for political success.Capitalism occurs when passion, creativity, and market needs intersectCapitalism flourishes when people unite their creative passions with market needs. David explains that when people “have their soul in the game,” projects take off and success comes much easier. It starts small, often grows into a full-fledged business, and can grow exponentially from there. But creativity is often dampened in a state-controlled environment. Individuals need to feel fulfilled and excited by their work. While universal basic income could serve as a safety net within the broader scheme of capitalism, it cannot be the only option.Episode Chronology[0:42] David introduces his topic for this episode, “Capitalism is Creation”[1:55] Why aren’t millennials saving for retirement?[6:07] Why artificial intelligence is not going to take over the world[8:45] Massive job decimation due to artificial machines and the idea of universal basic income[11:34] How constrained capacity is eliminated through AI[12:27] Why state controlled socialism is something to fear and the Venezuela case study[16:04] Unique, fulfilling work often starts with an idea and a passion to create[22:40] Investing, just like capitalism, starts small and growsSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

#197 Why having less things and activities gives us more freedom and happiness. Why low probability risks are unacceptable if the consequences affect all of us. More information, including show notes, can be found here.Episode SummaryThe inspiration behind this episode came from the idea of the power of local and less, from Nassim Nicholas Taleb’s book Skin in the Game. David discusses the power behind experimenting at the local level in order to avoid systemic risk, as well as why less is more when it comes to happiness.Living in a via negativa mindset can set you freeTaleb writes extensively about “via negativa” in his book, which explains that “The act by removing is more powerful than acting by addition.” If having nice things means working long hours at a job you hate while sacrificing time with your loved ones, then perhaps having nice things shouldn’t be the end goal in life. If you’re not concerned with physical “stuff,” then you are free to live your life and pursue your greatest joys without the burden of material goods. David argues that if you’re not happy with less, then you certainly won’t be happy with more.By removing the negative aspects of your life, you can increase your level of overall happiness.A simple landscaping example illuminates this idea perfectly. If a wonderful hotel has impeccable landscaping, but the surrounding grounds are littered with trash and clutter, then the only thing one must do to improve the overall situation is to remove the clutter – not add more landscaping! Since via negativa states removing unnecessary or unwanted parts of your life will result in greater levels of happiness, it only makes sense to conclude that adding things will not give you the same result. People spend decades collecting items that they do not need or truly want. And the more they seek, the less happiness they find. For true happiness, one must appreciate all the good things in life and simply live day to day in a joy mindset.Why taking action against climate change is so critical, due to the precautionary principleWhile seemingly unrelated to via negativa, the second major principle discussed on this episode is just as critical. The precautionary principle is what drives Nassim Nicholas Taleb to take action against the global threat of climate change. Taleb argues that If an action could potentially destroy the planet, it is on those who pollute to show a lack of tail risk. So much of the controversy regarding climate change is about the accuracy of the scientific models, but what would the correct policy be if we had no reliable models? We only have one planet. Even a risk with a very low probability is unacceptable when it affects all of us – there is no reversing a mistake of that magnitude. If we don’t fully understand something, and it has a systemic effect, we should avoid it completely. This episode of Money For the Rest of Us makes an undeniable case for why every single person should care about climate change, and you need to hear it.How to change the world at the micro level, starting with a single businessChanging the world on the macro-scale sounds romantic, but it is simply not feasible for the vast majority of people. To truly do good in the world and make a difference, David urges his listeners to simply start at the local level. Start a business in your community and spend freely at other local businesses. Get to know your neighbors and care about their lives. Take bounded risks, don’t attempt to change the entire system, and tinker at the micro level until you see some good come from it. All this and more is covered on this encouraging episode of Money For the Rest of Us.In This Episode You’ll Learn[1:00] David introduces his topic for this episode, “the power of local and less”[2:12] The first main idea for the episode, via negativa, is discussed[6:47] So how do we solve this pursuit of unreachable happiness?[9:29] A second example of living through via negativa[12:45] David shares a third example of a via negativa lifestyle[15:51] Why David and author Nassim Nicholas Taleb believe in taking action against climate change, due to the precautionary principle[21:20] How to change the world by starting a businessSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

#196 Why relying on averages is dangerous given our fate is often determined by extreme events and how we react as financial markets, the economy and our own lives evolve. More information, including show notes, can be found here.Episode SummaryAs people age, one of the most common questions asked is “how can I survive financially?” The world is filled with unpredictable markets, unforeseen circumstances, and lifestyle events that may impact your ability to be financially secure. On this episode of Money For the Rest of Us, David explains some key concepts for fiscal survival long into old age. You don’t want to miss his insights, so be sure to give this episode your full attention.How you can survive financially even throughout a long lifespanDavid begins this episode by describing a man he met that is in his 101st year of life. This man has survived long past the median lifespan prediction for the United States and he is still living independently while being financially secure. In order to live happily into old age, you must first survive. You cannot begin to plan for retirement without first having your basic necessities taken care of. After you have secured the main pillars of survival, there are ways to have an investment portfolio last 40 to 50 years of retirement. David explains that “time removes the fragile and keeps the robust.” The longer your portfolio survives, the likelier it is to continue surviving.What truly matters is how you react to the unpredictable risks that enter your lifeEven the best financial consultants and investment specialists cannot predict the minutiae of life. Markets will rise and fall, family dynamics will shift, and your personal circumstances will always be ebbing and flowing as you age. Long-term financial success comes from understanding how much risk you are willing to take with your investments, evaluating the potential returns, and understanding that “the world cannot be solved, it must be lived.” David encourages his listeners on this episode to be self-aware and understand how to handle dramatic shifts in circumstances. Learning how to properly mitigate negative changes to ensure your financial security is also critically important.So how can you combat these unforeseen variables?In addition to being self-aware and knowing your own decision-making strengths and weaknesses, David explains that there are multiple ways to protect your financial future. You can mitigate the tail risks of stocks by investing in the following different areas: public securities, public entities, gold, land, and single premium immediate annuities. The added layer of Social Security is also a good thing to keep in mind, however, it should not be solely relied upon.The 4% spending rule and the importance of having multiple streams of incomePerhaps the biggest idea to take away from this episode of Money For the Rest of Us is the 4% spending rule, as explained by David after he read the article “Does The 4% Rule Work Around The World?” by Wade Pfau. Pfau explains that historically with a US-based portfolio, one could live comfortably financially by spending 4% of your portfolio for the first year of retirement and then adjusting that percentage for inflation in every subsequent year. However, given the high valuations for stocks and the low yields for bonds, a spending rule of less than 4% would be more appropriate, especially considering the possibility of a 50 year retirement. By combining the a conservative spending rule, multiple streams of income, and a high level of self-awareness regarding your tendencies, you can protect your financial future and survive well into retirement.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

#195 Why duties and other actions are necessary to address trade disputes, but across the board tariffs are a blunt instrument that can lead to a devastating trade war and global recession. More information, including show notes, can be found here.Episode SummaryWith President Trump recently unveiling new tariffs, many investors and economists are asking the question, “has a trade war begun?” On this episode of Money For the Rest of Us, David Stein explores this idea and explains the new tariff plans, the potential impacts on the steel and aluminum industries, and why there are better solutions to the complex trade system than just blanket tariffs.Why new tariff plans were created and the concern surrounding national securityWhen President Trump unveiled his new tariff plan and claimed via Twitter that “trade wars are good and easy to win,” the stock market fell 2% and people across the world began asking countless questions. Are these tariffs going to apply to every single country, even longstanding US trade partners? How will this impact the US economy? To answer these questions, David explains that trade investigations regarding steel, aluminum and oil imports have occurred several times in the past, and one of the main goals is to determine if competition from imports is having a negative impact on national security. National security goes beyond just national defense and include impacts on the overall domestic economy.Recent findings and insights on the 2018 aluminum reportThe January 2018 report on the aluminum industry found that there is a connection between the economic welfare of the US and national security because of the loss of skills, higher amounts of foreign investments, the unemployment rate of US forces, and many other reasons. Since the US aluminum industry is only operating at 43% of capacity, and aluminum imports comprise 90% of consumption and are up 60% from 2012, the Department of Commerce determined that aluminum imports are directly impacting national security. The report found domestic aluminum production was becoming unstable and nearing a point where US forces would be unable to respond to a national emergency that would require an increased level of production.How do the findings on the steel industry differ from those of the aluminum industry?When compared to the findings of the aluminum study, the US steel industry and the impact of foreign steel are not nearly as dramatic. While imports have increased due to foreign competition, there’s no shortage of domestic steel. Imported steel only makes up approximately 30% of US consumption, and the Department of Commerce recommendation for taking action was because steel imports were weakening the U.S. economy rather than there being insufficient steel to meet national defense needs.Additional solutions that could prevent a trade war and why trade needs to be viewed as a complex systemAfter reviewing the latest findings on steel and aluminum in the United States, David explains why there are more effective solutions to global trade and imports than just blanket tariffs. Even if tariffs are deemed to be the best solution, they should be addressed on a country-by-country basis. Existing legislation such as the Defense Production Act of 1950 and the Buy American Act of 1933 already address the issue of foreign imports. Across the board tariffs could negatively impact longstanding trade partners, and U.S. exports could be taxed at a much higher rate in the coming months. While it is normal to want to protect a nation’s workforce and industries, it cannot be done in such a way that jeopardizes a country’s ability to interact with other countries’ economies. Global trade is a complex system that must be viewed as a whole, rather than individual parts. The long-term impacts of these recent developments are sure to spark continuing conversations, but to hear a stellar synopsis of the trade issue today be sure to listen to this podcast episode of Money For the Rest of Us.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

#194 Four investment lessons from Berkshire Hathaway's fiscal year 2017 Shareholder Letter with additional insights from Howard Marks and Seth Klarman. More information, including show notes, can be found here.Episode SummaryEvery year, Berkshire Hathaway releases a letter written for their shareholders filled with information on their performance, portfolios, and investments. On this episode of Money For the Rest of Us, David digs into the 2017 letter and discusses four investment lessons Warren Buffet shares. It’s filled with great insights that any independent investor shouldn’t miss, so be sure to check out this informative episode.Investment Lesson #1 – Use debt prudentlyBuffett writes in this letter, “Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. ‘Risk’ is the possibility that this objective won’t be attained.” On this episode of Money For the Rest of Us, David encourages his listeners to utilize debt in such a way that maximizes future opportunities while also managing the risk that comes with taking on debt. He discusses the idea of “float” money, how one investor could have avoided losing half of his portfolio, how to manage margin calls, and why you have to be confident in your decisions as an independent investor.Investment Lesson #2 – Keep your eyes open and focus on a few fundamentalsIt takes patience, but independent investors can focus on the leading edge of the present and invest in ways that major corporations may not be able to do. One must simply be aware of the opportunities that are occurring right now as well as focus on a few fundamentals: valuations, economic trends, portfolio drivers, asset classes, etc. David quotes Buffet on this episode and explains that “Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.”Investment Lesson #3 – Stick with easy decisions and avoid excessive tradingUnfortunately, trying to outsmart the market can lead to short-term gains but longer-term mediocrity in investing. David outlines a bet that Warren Buffett made with Protégé Partners and how Buffett learned that sticking with the big, easy decisions often pays off more than getting caught up in the minutia of constantly buying and selling. By making infrequent, larger decisions an independent investor can make better progress in their portfolio.Investment Lesson #4 – Be willing to be early and look foolishInvesting is never a guaranteed game. All investors have a fear of looking foolish after making a decision, but Buffett explains that “A willingness to look unimaginative for a sustained period – or even to look foolish – is essential.” David talks about the importance of gaining experience, not becoming caught up in the crowd mentality, and understanding that the “dust never settles” when it comes to finances. There will always be risks to take, and timing can be unpredictable. But with considerable risk comes comfortable reward. For more great information on the 2017 Berkshire Hathaway Shareholder Letter, be sure to listen to this episode of Money For the Rest of Us.Episode Chronology[0:46] David introduces the topic for this episode, Four Investment Lessons from Warren Buffett[2:15] Lesson #1 – Use debt prudently[12:46] Lesson #2 – Keep your eyes open and focus on a few fundamentals[17:17] Lesson #3 – Stick with easy decisions and avoid excessive trading[24:00] Lesson #4 – Be willing to be early and look foolishSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

#193 How planning helps us avoid catastrophic errors while maintaining flexibility and margins of safety allow us to thrive even if our plans don't work out. More information, including show notes, can be found here.Episode SummaryThere are two sides to the “why plan if life is so unpredictable?” debate that David talks about in this episode of Money For the Rest of Us. Some individuals believe you should plan even though countless variables exist, and others insist on not planning for even the slightest event. David has found that in every aspect of life, the only predictable idea is the fact that nothing is 100% predictable. He also believes that there must be a healthy balance between planning for the future and living life day by day. To hear David’s solutions to this age-old dilemma, and to learn how to maintain a healthy level of financial flexibility, be sure to listen to this episode.Is failure an option? Or are minor mistakes irrelevant as long as the bigger picture is intact?David discusses two companies in this episode that perfectly illustrate the question “why plan?” NASA is famous for operating under the “failure is not an option” mindset. After the devastating loss of the Challenger Space Shuttle in 1986, redundancy and extra precautions were built into every level of operation. While avoiding catastrophic mistakes is certainly of great importance, NASA’s high level of caution often leads to inflated costs and drawn out construction timelines. In a recent article published by Financial Times, John Thornhill writes about another aerospace company called Planet. Planet has deployed the world’s largest fleet of private satellites that circle the globe taking photos of Earth’s every inch. These nanosatellites known as CubeSats are not high-resolution cameras and they can cost as little as $20,000 to create. If one (or even a handful) of Planet’s satellites fail, it may be considered a failure but it does not threaten the operation of the entire network. Planet operates within the idea of failure being acceptable, as long as the greater goal is still being accomplished.Determining the right timing for action is often the most challenging part of financial planningOnce you have decided that small failures are okay for your own financial decisions, you must then determine how to know when to act. When deciding when to sell, buy, or invest you should wait until the time is right, but understand that life happens and things will come up when you least expect them. For example, David explains how he used the tool Portfolio Visualizer to model retirement planning outcomes but the success depends on the assumptions used and the range of potential outcomes is wider than what we are typically comfortable with as individual investors. We are often taught that there is a single right answer to investment questions and not a range of correct answers that occur in actuality. It’s important to remember that there will not always be a clear path or “correct” decisions when planning for your financial future and that you often must simply go with your best guess and avoid catastrophic failures at all costs.Why there are no mathematical shortcuts for the variables of life and the importance of being flexible when planning for your futureUnfortunately, there is not a tool that allows us to peer into the future to see how decisions will play out. Richard Bookstaber has stated so thoughtfully that “The world cannot be solved, it must only be lived.” There are no concrete answers for financial planning, but one thing is certain – life always comes with a level of unpredictability. Being able to have multiple streams of income and having a healthy level of concern over decisions while still moving forward are all critically important concepts.Why plan for your financial future? To know how to survive another dayWe plan for our futures because it helps us avoid disastrous errors that threaten our ability to survive financially. We play the game of finances while selecting which moves allow us to “lose the slowest” and survive to see another day. We plan to avoid the fundamental mistakes, but we live day by day in order to be flexible.Episode Chronology[1:42] David introduces the topic for this episode, “Why plan if life is so unpredictable?”[5:27] The idea of disruptive innovation, and why balance is key when planning your life[8:38] David explains multiple portfolio simulations while planning for a variety of variables[13:49] Insights on return model expectations from a recent paper on the Occam’s Razor Redux[15:53] Getting our timing right can be the biggest part of the challenge[18:58] Why there are no mathematical shortcuts for the variables of life[22:18] You have to use flexibility and care when planning for your financial future[26:01] It’s impossible to live in such a way that you won’t get damaged at allSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

#192 In this episode we explore scarcity. Artificial scarcity created by laws and real scarcity created by our evolving lifestyles and economy. We'll see that most physical products, with drinking water being an exception, are becoming less scarce while trust and attention are becoming more scarce. More information, including show notes, can be found here.Episode Summary – Is Anything Scarce Anymore?Scarce goods and services have been a topic of debate since the original intellectual property (IP) laws were created. Products are getting cheaper to produce, but high-quality services are still in demand. On this episode of Money For the Rest of Us, David tackles the issue of scarcity with clear explanations and timely resources that are sure to help you understand this complex idea. You don’t want to miss his insights, so be sure to listen to this episode.The history of economics, scarcity, and why intellectual property laws are outdatedDavid explains on this episode that the original purpose for IP laws was to ensure people would continue to create quality ideas and content. While these laws worked in theory, they created a level of artificial scarcity. Mark Lemley of Stanford Law, explains that “IP rights are designed to artificially replicate scarcity where it would not otherwise exist. In its simplest form, IP law takes public goods that would otherwise be available to all and artificially restricts their distribution. It makes ideas scarce because then we can bring them into the economy and charge for them, and economics knows how to deal with scarce things.” While certain protections should be given to creators, scarcity needs to occur in an organic way in order for it to be effective. David illuminates this concept through the lens of TED talks and conferences. TED is able to publish all of their talks online – with full audio, video, and transcripts – because tickets to the physical conference cost hundreds or thousands of dollars.How free content can still be turned into a money-making ventureDavid features Cory Doctorow’s work on scarcity on this episode, and quotes him as saying “Although it’s hard to turn fame into money in the arts, it’s impossible to turn obscurity into money in the arts.” Essentially, even if a creator produces exceptional content, no one will know about it if they’re 100% obscure and protected. Technically speaking, this aversion to positive externalities permits the creator to live in fear of someone benefiting from their work for free. Without digital and word-of-mouth exposure, you won’t make money – period. Thus, the free content you produce and distribute can drive interested parties towards your other content, such as books or fee-for-service courses. There will always be paying customers for quality work, even if you have to get them to the door with free content.What elements are actually scarce in the 21st-century marketplace?While physical goods and products aren’t as scarce as they once were, scarcity is still widely prevalent in intangible elements such as trust, attention, and time. David features Seth Godin’s work on this episode of Money For the Rest of Us as he explains, “Trust is scarce because it’s not a simple instinct and it’s incredibly fragile, disappearing often in the face of greed, shortcuts or ignorance. And attention is scarce because it doesn’t scale. We can’t do more than one thing at a time, and the number of organizations and ideas that are competing for our attention grows daily.”The connections between automation, scarcity, and value in today’s societyIt’s much easier to automate a vehicle assembly line than it is teaching a child to read. This simple idea of product versus service connects to the broader idea of scarcity because even though it’s much easier to produce goods efficiently and cheaply, most services could never attain that level of automation. David explains that for each episode of Money For the Rest of Us, he spends 8 to 10 hours in pre-production, recording, and post-production work. For as long as he’s been podcasting, this timeframe has not considerably shrunk. This is because quality services and products that require human creativity cannot be automated. Scarcity is found in these areas, and it’s not going anywhere. The solution to true scarcity is simple: create something unique, it will earn attention and trust organically, and that’s how you grow your customer base and build a business in the 21st century.Episode Chronology[0:11] David introduces the topic for this episode, “Is anything scarce anymore?”[3:30] The history of economics and scarcity viewed through a TED talk lens[6:01] How “free stuff” can still be turned into a money-making venture[8:07] What elements are actually scarce in today’s market[10:43] Why there’s always an audience that’s willing to pay for quality content[13:20] How automation is determining scarcity and value in today’s society[21:08] The true scarce physical item – drinking water[22:30] The delicate dance between trust and attention[24:19] Net neutrality as it relates to scarcitySee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

#191 Why interest rates are rising and what could happen to bonds, stocks and the economy if rates returned to more normal levels. More information, including show notes, can be found here. Episode Summary – Has A Bond Bear Market Begun?On this episode of Money For the Rest of Us, David Stein walks you through the complex idea of a bond bear market. He explains that a market consisting of losses of 20% or more are considered a bear market type loss and that this type of loss is possible even in the bond market. David states that “It’s important to understand what drives interest rates, how high they could get, and what the ramifications of that are.” Be sure to listen to this full episode to fully understand this idea and to hear some of David’s suggestions for investing in a rising interest rate environment.When was the absolute low in interest rates and the beginning of the bond bear market?After the Brexit vote, in early July 2016, ten-year treasury bonds were yielding 1.37%. Today, they’re yielding 2.85% with an annualized return over that period of approximately negative 4.5% annualized. Ray Dalio, the founder of the hedge fund Bridgewater Associates and author of “Principles,” explains, “A 1% rise in bond yields will produce the largest bear market in bonds that we have seen since 1980-1981.” Investors around the globe are asking big questions about what these changes in interest rates mean, and David does a great job of explaining the issues on this episode of Money For the Rest of Us.The simplest way to dissect the complex idea of interest ratesWith a discussion of the bond bear market comes many moving parts. David seeks to explain the concepts while utilizing the analogy of cutting an apple. An apple can be cut in many different ways, and each method uncovers a new way of looking at the apple and its pieces – in this case, interest rates. There are two main interest components that are discussed in this episode of Money For the Rest of Us: inflation expectations and real rates (i.e. your return after inflation.)Analyzing how high interest rates could rise by decomposing the nominal yield into the expected path of future short-term interest rates and term premiumsNot only does David explain the idea behind a bear market on this episode of Money For the Rest of Us, he also examines nominal yields and how they can be dissected into the expected path of future short-term interest rates and term premiums. While the drivers behind climbing interest rates cannot always be observed directly, these two main factors shed light on just how high interest rates could climb in the coming years. Also, learn how the Federal Reserve estimates the path of short-term of interest rates and why term premiums are countercyclical and tend to rise when there is a great deal of investor uncertainty.How do supply and demand factors impact these interest rate scenarios within a global marketAs with many other industries, the reality of supply and demand impacts every aspect of the financial market. It is predicted that in 2018 the United States Treasury will have net new issue of $1.3 trillion in treasury bonds and the national debt will continue to rise. This new influx of debt will need to be purchased by the market, but the Federal Reserve is reducing the amount that it’s purchasing – their bond holdings will decrease by 10% over the next year. International buyers will become an even more important cog in the wheel, and David comprehensively explores the global supply and demand structure on this episode of Money For the Rest of Us. You also don’t want to miss his bear market investment suggestions, so be sure to listen.Episode Chronology[0:38] David poses the question for this episode, has the bond bear market begun?[3:59] When was the absolute bottom in interest rates and the beginning of the bond bear market?[5:29] The simplest way to dissect interest rates into their subcomponents.[7:41] How much higher could these rates get?[15:02] The question is, in a bond bear market, how high could interest rates go?[20:21] How global supply and demand could impact the bear market scenario[22:48] What do we do about all of this?[25:35] Why markets are becoming worried about these interest rate changesSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.