Most Durable Form of Wealth for the 2020s
By May 8, 2022– Published on
The only asset that matters in the 2020s
Our Vancouver Resource Conference is one week away. I am doing an abundance of media as we lead up to the show, (promoting, of course) and answering a lot of questions about why investors should come to an investment conference. Every interview I get asked the same question - what do I think will be the most valuable asset of the 2020s - Gold? Bitcoin? USD?
It is a fun exercise - because there is no right answer. We pretend to know - and often believe our own conviction, but if financial media is the best in the world at forecasting with confidence, our track records are not amazing.
We get some things right - but never the events that truly matter. If we think back through the last 50 years, the most consequential and transformative events - Black Monday, the Fall of the Soviet Bloc, 9/11, the Great Financial Crisis, COVID… you never saw these events discussed in mainstream media before they occurred.
Hindsight bias (I knew it all along…!) is powerful, but don’t let it, (or your history teacher) fool you.
If on September 10th, we knew the plot for September 11th, it never would have happened. By definition, the most consequential events must be unknowable, otherwise, they would not be the most consequential events.
So we busy ourselves with things that we can know, which once known, can’t really hurt us. And if everybody knows, can’t really benefit us.
Non-events can be just as disastrous. I had a handful of friends who bet large on shorting the “dead cat market bounce” in April of 2020… ouch. The market should have crashed... But it didn’t.
Sure, there are outliers - Michael Bury called the GFC years before it happened - but here is my take on crash predictions…
When a financial pundit calls for a crash and it doesn’t happen, the prediction is quickly forgotten. When a pundit calls for a crash and it does happen, they are immortalized, forever an oracle to be revered… The risk profile is heavily in favour of chicken little.
Michael Burry has been calling for similar crashes for the last 12 years. Eventually, he will be right again. I know many analysts who have successfully called seventeen of the last two market crashes…
“We produce thirty-year projections of social security deficits and oil prices without realizing that we cannot even predict these for next summer… What is surprising is not the magnitude of our forecast errors, but our absence of awareness of it.”
So what do we do? How do we ensure ourselves against an unknowable event? The ultimate asset as a store of value needs to weather any storm, survive any black swan, and provide me with what I consider to be the ultimate form of wealth - a great night's sleep.
I make a habit of breaking concepts down to the most simple and primal possibility. So the ultimate black swan is not a market crash, it is not a pandemic, it is not even a war. The ultimate black swan is when your world goes dark - When we depart this life. When whoever we are on this earth, whoever we know and care for are left behind and we step into whatever happens next.
It may seem dramatic - but bear with me. If you knew the market would crash tomorrow morning, you would sell your positions today and sleep like a baby. If you knew you would depart this life tomorrow morning, how would you sleep tonight?
I can’t sleep if I have a long and incomplete to-do list. I hate loose ends left untied. If today was my last day, what would be on my list?
I know that I would not stress about incomplete bucket list items, and I wouldn’t worry about personal goals that have yet to be checked off. I still haven’t made it to the Galapagos… but to be honest with you, I bet the afterlife has it beat. Insignificant.
But would there be people in my life who would be left holding the bag? And what is in the bag?
Is my house in order?
Would dozens of people be spun into fix-it mode? Aside from personal grieving (hopefully), would family, friends, partners, employees, or clients be compromised by my sudden disappearance?
So the focus, therefore, is on cleaning up my house. A clean house is a peaceful night's sleep.
My answer is not gold, bitcoin, US Dollars or real estate. There is no asset like peace of mind. And there is no peace of mind if I can’t walk away tomorrow, leaving the keys in the door. Knowing that my wife and kids are taken care of - not in an abundance of luxury - but in a realistic, modest, comfortable and stable situation. Knowing that my parents want for nothing.
What about unspoken conversations? Have I left anything unsaid? If I knew I departed tomorrow, who would I call today? Why haven't I made the call? That bus could come any minute…
Am I in debt? How is my balance sheet? How much of my family's strategic plan requires me to be around in 5 years?
And if my house is in order - then what is the asset that I value above all else? What is the most valuable investment that I am forced to make every single day of my life?
My most finite resource. They are depleting (by the minute), but every day I have 144 of them to invest.
Every minute has the potential to generate a return - but the utility is diverse. Rest and recovery are investments. Fun is a valuable purchase. Undisturbed family time is the acquisition I cherish the most.
Growth is a thrill. Reading, writing, solving problems. Building things with people I enjoy.
More of what I love, less of what I don’t. That is the business plan.
Sitting quietly and thinking is a productive use of time - but the mind can be tricky. I need to be careful who is getting my thoughts. I have a limited supply… Not everyone deserves an allocation.
I think critically about the return on my investment. Thinking about my wife and kids returns me gratitude and fulfilment. Thinking about an adversary can return preparedness.
But be wary of those who only return frustration and anger. I have spent too much time having a fictitious argument in my mind that I gain nothing from.
More of what I love, less of what I don’t.
So sure - buy gold. Hold cash. Bitcoin. Real estate. Tulips. Who knows.
I don’t write this to say give up hope on making financial decisions. Not at all. Regular readers know that my core focus is building a moat (not a castle) - my bulletproof insurance policy against the unknown - as best as I can - against something unknown.
And the best I can do is go for overkill. Getting punched in the face sucks. But it sucks way more if you don’t see it coming. Knowing that we can’t know the most impactful events of our life in advance should lead us to build a far deeper and wider moat than we think we need.
Preparing for the risks we know about is rarely sufficient. Have you ever felt reckless about an investment decision? Maybe you went bigger than was reasonable into something high risk - telling yourself that in order to win big, you ended to bet big, or something like that. Fortune favours the bold type of thing.
Or maybe you took on a bit more debt than was prudent - betting on your ability to leverage it effectively?
I understand. I get it. I do that stuff the time. Hard way learner over here.
But have you ever felt reckless about how much savings you have? Have you experienced that emotion? Have you ever felt vulnerable about your liquidity?
It's worth pursuing. If only for the contrarian principals.
If you succeed, you may find yourself walking slowly down the sidewalk. Or investing a minute of your life taking some very deep and pleasant breaths. Just to do it.
It’s Mother’s Day. Grant me the allowance of sentimentalism.
Or wait - did I just ask your permission to write what I wanted? Probably not a valuable investment of minutes… ;)
More of what I want.
Have an awesome day.