Life is the Adventure

I volunteer for Habitat for Humanity on the weekends. I may not enjoy painting my own house, but I like doing it for others.

What words would you use to describe a short-term mission trip? Perhaps not fun, but worthwhile? Difficult? Significant? Memorable? Exciting?

Adventure

The word adventure sums it up for me. We team up and face challenges, overcome them, and come out the other side having achieved a memorable goal. We rescue people. Maybe someone even gets the girl.

Why do we compartmentalize life? Painting is a chore, but Habitat for Humanity is fun. Preparing a lesson is boring, but a short-term mission trip is a thrill. Playing with the kids is tiresome, but soccer is real football.

It's tempting to grind through life waiting for the next great thing. Besides being tedious, the problem with this is that life today may be a preparation for that great thing, but you're not enjoying it.

Some of us may even find that life itself is that great thing, that it was right in front of us all along, and that we can change the world right where we are.

Whistle While You Wait

Time produces compound growth, both for money and for wisdom. If you save money and wait long enough, you'll eventually be able to fund a great adventure.

In the meantime, think about what makes adventures fun. What can you do to make painting the living room more like Habitat for Humanity? Maybe you can bring in a big group, serve them lunch, and let them debate philosophy while splashing paint on each other.

How can playing with your kids become more like a soccer game for you, not just for them?

What if life is the adventure?

Book: Mr. China

Those of us who thirst for adventure get more than we bargain for. Such was the case for Tim Clissold, who moved to China in 1990 in the wake of Tiananmen Square, learned Mandarin, and raised more than $100 million of Wall Street's money with the intent to profitably transform Chinese businesses.

He discovered that the Chinese weren't numbers on a spreadsheet. They were real people, full of guile and greed. Successful business in China meant breaking contracts, speaking in half-truths, secretly moving money around, and staying one step ahead of a controlling but disorganized Communist government.

Chinese businessmen took Wall Street's money and then drove their factories into the ground, moving the capital to other bank accounts so they could start their new, competing factories. They had learned to live by their wits in a Communist world. Why treat these American foreigners any differently?

In the end, Clissold got taken, but so did all the American efforts to invest in China. The fund he helped manage lost money, but it was the only China fund to survive the 1990's intact. Meanwhile, local Chinese companies went public, China's stock market soared, and the standard of living rose rapidly in the coastal cities.

What Can We Learn From This?

As an investor, stick to what you understand. Clissold had a thesis that China was on the verge of a capitalist transformation. He was right, but he lost money. Buying private businesses in a foreign country and trying to improve the management is a venture fraught with difficulties, since there are so many variables to control and even more that we can't see.

If you have an investment thesis but not extensive expertise, it can make more sense to express that thesis by trading liquid markets (stocks, funds, and futures) than to start a business. Managing a business also concentrates your risk. Unless you have a high net worth, it ends up concentrating all your risk in one place, and you can't get out easily if you decide it's not working out.

I used to romanticize the idea of going overseas, as I'm sure many others do. After years of working in China, Clissold's fund lost money, but he learned to appreciate the Chinese as a people rather than just an investment. If this is the main lesson you learn while overseas, will you be satisfied with your life? Yes is a good answer but not an easy one.

I'll leave you with an excerpt from the inside flap:

The idea of China has always exerted a pull on the adventurous type. There is a kind of entrepreneurial Westerner who just can't resist it: red flags, a billion bicycles, and the largest untapped market on earth. What more could they want? After the first few visits, they start to feel more in tune and experience the first stirrings of a fatal ambition: the secret hope of becoming the Mr. China of their time.

In the 1990s, China went through a miraculous transformation from a closed backwater to the workshop of the world. Many smart young men saw this transformation coming and mistook it for their destiny. Not a few rushed East to gain strategic footholds, plant their flags, and prosper. After all, the Chinese had numbers on their side: a seemingly endless population, a thirst for resources, and the tide of history. What they needed was Western knowledge and lots of capital. Or so it seemed...

Mr. China tells the rollicking story of one man's encounter with the Chinese. Armed with hundreds of millions of dollars and a strong sense that he and his partners were -- like missionaries of capitalism -- descending into the industrial past to bring the Chinese into the modern world, Clissold got the education of a lifetime.

The ordinary Chinese workers, business owners, local bureaucrats, and party cadres Clissold encountered were some of the most committed, resourceful, and creative operators he would ever meet. They were happy to take the foreigner's money but resisted just about anything else. At every turn, the locals seemed one step ahead of Clissold's crew threatening to take the Westerners for all they were worth.

In the end, Mr. China isn't a tale of business or an expatriate's love for his adopted land. It's one man's coming-of-age story where he learns to respect and admire the nation he sought to conquer.

Book Review: How Women Help Men Find God

Jesus wasn't a nice guy. And neither should you be.

Few of us have heard the above sentiment expressed in church, let alone explored. Yet, after reading the gospels, it's hard to come away with the impression that Jesus was a safe, predictable person who would have made a good churchgoer.

Can you imagine one of your church's deacons grabbing a flesh-eating whip and creating instant pandemonium in God's house of worship, driving out money changers and overturning their tables?

What Would Jesus Do?

Here's a selection of Jesus' "nice guy" stories from Mark 11 alone: 

He curses a fig tree and says, “May no one ever eat fruit from you again.” Peter notices later that the fig tree has withered.

After driving the money changers from the temple, he says “Is it not written: ‘My house will be called a house of prayer for all nations’? But you have made it ‘a den of robbers.’ ” This definitely isn't perceived as a nice saying, as it prompts the religious authorities to fear Jesus and begin looking for a way to kill Him.

Instead of answering a question, Jesus shoots back more questions. When His questioners fail to answer, Jesus ends the conversation on His own terms (vv. 27-33).

What Have We Done?

According to David Murrow's book How Women Help Men Find God, we've spent the past half century making church a safe, predictable place where families can gather and children can be protected from a cruel world. The unintended consequence is that men now perceive church as a place where women can be safe and successful, and they've shifted their lives to center around things that are culturally perceived as manly, such as work, hobbies, and sporting events.

Murrow thinks that women can help bring men back by being gentle witnesses and by making sacrifices to make church more appealing to men. We can change the decor, create volunteer opportunities men can feel fulfilled in, make our churches more theologically oriented (and make arguing about theology okay), and intentionally encourage discipleship between men.

While all this is important, it dances around something more central, which is the what that is passed down by good theology and man-to-man discipleship. That something is what it means to live the Christian life as a man.

The Art of Manliness

I've written about this before: for example, check out How to Trade Like Zorro. When I step back, though, I think we are rushing to catch up with what those outside of the church have realized for a while now. We no longer live in a culture that understands what it means to be a gentleman, an honorable guy who defends others but has the strength to stand up for the interests of his own family.

We're happy to tell our sons to be nice like Jesus was (whatever that means). Then they get married and feel they have to bend over for that life insurance salesman who pushes the most expensive policies so he can get a big commission up front. We teach our men to be nice, but they're suddenly supposed to summon supernatural courage to share their faith at work or do the right thing at a great cost.

Dave Murrow's books are a great start, but they're also a late start, as the case usually is when the church tries to address a contemporary problem. Non-Christian sites like the Art of Manliness provide a wealth of insight about being men in this relativistic culture. The effort we put into taking every thought captive to the obedience of Christ will be worth it.

If you're really brave, take a look at this parody of our Christian-ized view of masculinity:

Mad Markets

Growing in masculine maturity has a side benefit: It will make you a more effective trader and investor. Markets are driven by fear, greed, and crowd behavior. This creates profit opportunities for us, but only if we're willing to go against the crowd at turning points in the market.

In the moments when we're most tempted to buy or sell, it takes a lot of internal strength to do the opposite. If you're a people-pleaser, you'll always face the strong temptation to do what others tell you to do, even if your trading systems tell you otherwise. Markets are rough on nice guys: just ask Sir Isaac Newton.

Like Zorro, you can follow the crowd when it suits you and buck the trend at the right time. The less other people are able to manipulate your beliefs, the more control you'll have over how you respond to the markets.

I'll leave you with an excerpt from the back cover of How Women Help Men Find God:

Millions of married women worship alone every Sunday. Mothers grieve as their teenage sons abandon the faith. Single women search in vain for godly men.

In this dynamic follow-up to his best-selling Why Men Hate Going to Church, David Murrow speaks directly to women to help them understand the real reasons men resist Christianity. It's the first book of its kind - written to help women reach all the men in their lives - not just their husbands. With straight talk, personal stories, and a dose of good humor, David shows women how to draw men to Christ - without guilt, manipulation, or pushy evangelism.

Volatility Does Matter

On the whole "volatility doesn't matter" thing: Yes, it does.

Imagine if you had a guarantee that your stocks or silver or whatever would be worth in ten years at least what they are worth today. They can't go down.

This Is Indexed: Learning Curves
on Winding Roads

You'd probably feel more comfortable increasing your risk somewhere else. You might start a business, buy a rental property, or take a vacation.

Lower market risk makes you feel more comfortable about taking risk in other areas, and rightly so. People even pay for this privilege: it's called a put option, a form of financial insurance.

If you had a strategy that could keep you out of high-volatility periods of the market, would you use it?

That's what trend-following, a form of momentum trading, does. The market tends to have high volatility when it's going down. Momentum strategies avoid being in the market during those times.

What Happens After the Market Goes Down?

When the stock market has upward momentum, it tends to keep going up. However, downward momentum, like we've had since August, tends to be followed by sideways movement with high volatility, as this post from the MarketSci blog shows. 

It's better to be in Treasury bills than in the market when there's negative momentum. This is both for the lower volatility and to earn interest.

For small investors, this could mean moving to a money market fund until the stock market starts going up again. 

To learn more about momentum, start here.

Great Reads: Should You Buy When the Market's Up or When It's Down?

Trading and Investing

Should you buy when the market's up or when it's down? (CXO Advisory)
A two-year mean reversion effect. (CXO Advisory)
More on mean reversion. (Mebane Faber)

Option selling doubles volatility-adjusted returns. (Mebane Faber)

Do financial firms sell to your rationality or your psychology? (CXO Advisory)

Strategies that short battle the rest of the financial universe. (Slope of Hope)

Old methods of diversification are becoming less effective. (Reformed Broker)
On performance chasing. (Reformed Broker)
The market is becoming more volatile. (Reformed Broker)

The Greek one-year yield was triple digits last week. (Zero Hedge)

Free finance and commodity widgets to put on your Web site. (Oil Price)

Career

On effective promotional marketing. (Internet Marketing Fire)

Twenty-five quotes from Margaret Thatcher. (ListVerse)

"The best writing advice I've ever received." (Donald Miller)

Affordable Living

"How can I afford to stay home with my baby?" (Baby Center)

How to shop for your own health care. (CNBC)

The student loan bubble, illustrated. (Reformed Broker)

Edmond, OK tops CNBC's "Best Suburbs" list. (Edmond Sun)

Walking with God

Dealing with the death of a parent. (Fabs Harford)
Tired of being 'gospel-ed'. (Fabs Harford)

LOL

A postman's revenge. (YouTube)

Abstruse Goose: Get it?

Book Review: The Total Money Makeover

In this book, Dave Ramsey lays out a brilliant plan for getting out of debt.  It's brilliant because any rational human being would see it as sub-optimal, but Ramsey realizes something important about human nature. We're not rational.

A rational plan for paying down debt would be to tackle the highest-interest debt first, keeping only what you need for one month in a savings account. An emergency fund would make little sense, as you could borrow from credit cards for that purpose.

Ramsey, on the other hand, realizes that most of us don't have the discipline to follow that plan. If we did, we wouldn't be heavily indebted in the first place. A cash emergency fund meets our psychological desire for security. Paying down the smallest loan first, regardless of interest rate, gives us the chemical rush that comes from successfully getting rid of the first loan payment.

Total commitment to the plan is necessary to override our cultural desire to keep up with the Joneses. The Joneses borrow to maintain their lifestyle. Getting rid of debt requires that we do the opposite. The key phrase in the book is, "If you will learn to live like no one else [frugally], later you can live like no one else [wealthily]."

Beef

My one quibble with the book, and it's a major one, is his investing methodology. Ramsey claims that you can make a 12% annual return by buying and holding mutual funds with the best long-term track records. He recommends this asset allocation (p. 157, 2007 edition):

25% Large cap stocks
25% Mid cap stocks
25% International stocks
25% Small cap/emerging market stocks

It's not the 12% that I disagree with. There are simple trading methodologies, such as momentum, that achieve compound annual returns in that neighborhood with low volatility. A market with a high return (momentum) over the past 12 months tends to produce a high return in the following 12 months.

The kicker is that the momentum effect disappears if you look back more than a year. Markets that had strong returns two years ago tend to underperform going forward. This is called mean reversion.

What if a large-cap manager got his track record by investing in a sector that happened to outperform large-cap stocks in general? If that sector mean-reverts, his outperformance will turn into underperformance. Think about home prices, which moved steadily upward from World War II until 2005. Those who bought real estate based on that track record suffered large losses from 2006 to 2009.

If a fund manager uses trading strategies, mean reversion might not apply. Strategies like value (buying "cheap") and momentum (following trends) don't disappear permanently the way the railroad, utility, and communications booms did. But these strategies aren't part of Ramsey's asset allocation.

A long-term track record is only an asset if you have a good reason to think that the manager's outperformance will continue.

Recommended, with Caveats

If you're in debt right now, Ramsey's approach is psychologically tailored to get you financially free. I recommend the book for that purpose. Borrow it for free at the public library.

Once you're out of debt, you can use the income that used to go to debt payments toward self-funding a ministry dream. For this, Mebane Faber's book on momentum investing, The Ivy Portfolio, is a good read. I've also written a post on how momentum works. 

I'll leave you with some excerpts from Dave Ramsey's book The Total Money Makeover:

Having been a millionaire and gone broke, I dug my way out by making a decision about looking good versus being good. Looking good is when your broke friends are impressed by what you drive, and being good is having more money than they have.

Are you starting to realize that The Total Money makeover is also in your heart? You have to reach the point that what people think is not your primary motivator. Reaching the goal is the motivator. Do you remember the circus game where you swing the large hammer over your head to hit the hit the lever to send a weight up to a pole to ring the bell? You reach the point that you want to ring the bell! Who cares if you are a ninety-eight pound weaking with gawky form? The girls are still impressed when the bell is rung. When the goal, not how you look, begins to matter, you are on your way to a Total Money Makeover. (p. 33, 2007 edition)

 Here's a quote from the inside jacket:

Instead of promising the normal dose of quick fixes, Ramsey offers a bold, no-nonsense approach to money matters, providing not only the how-to but also a grounded and uplifting hope for getting out of debt and achieving total financial health.

Ramsey debunks the many myths of money (exposing the dangers of cash advance, rent-to-own, debt consolidation) and attacks the illusions and downright deceptions of the American dream, which encourages nothing but overspending and massive amounts of debt. "Don't even consider keeping up with the Joneses," Ramsey declares in his typically candid style. "They're broke!"

He gives sure-fire ways to build up savings for emergency funds, for your kids' college, and for your retirement, and he supplements this wisdom with heartfelt stories from real people just like you - people who were once languishing in debt but are now flexing their strong fiscal physique.

The Total Money Makeover is all about "renewing your mind," using God's ways of handling money (over 800 scriptures deal with money) to be "transformed" (made over). It's a plan to stop being "conformed" to the ways of the world and as ridiculously broke as the rest of our culture.

And this isn't theory. It works every single time. It works because it is simple. It works because it gets to the heart of the money problems: you.