Buying US Debt?

Why not evaluate US government bonds like corporate bonds?  Take a look at the balance sheet, cash flow, and anticipated future cash flow.  Look at current management… where are the they taking the organization?

The data:

So the trend is not so good. Ever increasing debt implies more debt supply. Can the demand keep up. Not at current yields, no. Yields up, prices down.

Management? Fiscal discipline? Not anytime soon. Cash flow? The situation is not positive.

So I’m not very inspired to buy US Debt today. Maybe, maybe TIPS. But traditional US Bonds? Not with a credit report like this.

Gambling vs. Investing

I am in Las Vegas this week.   I am gambling and having fun.  So far I am down $280.

There are similarities between gambling and investing, however there are key differences.  Here are the big ones:

  • Expect to make money investing; expect to lose money gambling.
  • Investing returns are best measured over a year or decade.  Gambling results are almost instant.
  • The “best” gambling is exciting.  The “best” investments are boring.

Trading stocks and especially options can turn investing vehicles into gambling vehicles.  However the opposite process is virtually impossible: turning gambling into investing.  Playing poker (well) can do this, but it is more like working a job than investing.  The best way to turn gambling into investing is to buy gaming stocks.

Free your Mind and Bogle the Broker. A Zen Guide to Investing.

Zen is uncomplicated.  Investing is uncomplicated, until it isn’t.

I like the short Zen story about attention.  It starts out

There’s an old Zen story: a student said to Master Ichu, ‘Please write for me something of great wisdom.’

Master Ichu picked up his brush and wrote one word: ‘Attention.’

Simple. Right?

On some level the concepts are simple.  They are also profound.  On some level Zen is remarkable, stunning.  On another level unremarkable.

Investing concepts are similar.  Simple, profound.

Possibly the most difficult investing thoughts to grasp and put into action are the most simple.

  • Save.
  • Balance.
  • Own.
  • See.

I believe these simple words capture all you need to know to be a wise investor.  Like ‘attention’ these ideas benefit from lots of practice.

To ‘Save’ is easy for some, difficult for others.  Investing starts with savings.  For those not born into a great inheritance savings is crucial.  Savings is the art of spending less than you make.  The art of delayed gratification.   Keeping some of your income and keeping it safe.  For many the verb ‘save’ is easy in the way that the verb ‘diet’ is easy.  Simple concept, challenging action.

‘Balance’ is a deceptively simple term.  Martial arts train balance.  Speed skating, ice skating, and tight-rope walking showcase balance.  In the investing arena ‘balance’ refers to two key ideas: diversification and emotional equanimity.  Diversifying means balancing risks between different types of assets.  Emotional balance means “Caring about your investments, but not THAT much.”

To fully ‘own’ your investments you must understand, control, and value them.  In the same way that a stable master may own and value a prize horse without understanding veterinary medicine, a stock holder may own  and value a stock without being a financial comptroller.  An owner cuts out the middlemen and makes decisions.  An owner weighs decisions and responsibilities carefully because the financial buck stops with her and no one else.

Finally, to ‘see’ your investments you must see beneath the surface.  You see that all investments inevitably change.  You see that some good investments go bad.   You see the fog that shrouds some investments so thickly that you move on by.  You see that taxes are constantly changing and possibly that an accountant may see the ever-changing tax waters more clearly than you.

That’s it.  To invest with wisdom is to save, balance, own, and see.

Now for a curve ball.   If you have been shot by poison arrows, first carefully remove them.  Do not dwell on the cause of their intrusion into your flesh.   After you have recovered, you may be tempted to ask “Why was I shot?”.  It is the ‘why’ that takes most of the ‘attention’.  The same is true for investing.   The ‘why’ is the tricky, time-consuming, complicated part.

I believe that for the beginning investor the why can be unimportant.   For the enlightened investor the why is also unimportant.    The journey to investing enlightenment is about discovering the why and then letting it go.