Economics Investing

Time Preferance and Actuary Tables

Recently, from several different sources, I have become aware of a flaw in my thinking. Ultimately, this flaw comes down to something economists call ‘Time Preference’. My own revelation came about through coversations with family and friends, watching the action of news and technology and culture on the stock and cryptocurrency markets, and then the final blow came from The Bitcoin Standard (read my review here – the book is worth reading but has some issues).

So, what is time preference?

It can be called a variety of things such as time discounting or long term vs short term world view. Ultimately, it is how much you value the present versus the future. A high time preference means you value the now most of all and a low time preference means that you value the future more than the  present.

I have ALWAYS been a high time preference individual. Not just high time, but highest time. I’ve always been a grasshopper that worries about tomorrow when it comes and enjoys the present as fully as possible when it is here. As a result, I’ve spent my life hearing other people say “How have you done all you’ve done and you’re only X years old?” And all of that is pretty cool. I’m glad I’ve done the things I’ve done but lately, I find myself regretting that I didn’t have at least a little bit of low time preference. I didn’t invest, I didn’t work for the future, I didn’t save. Ultimately, I’ve been living for the now for thirty years (My adult life).

I’ll turn 47 in a few months and the funny thing is that it was right around my 46th birthday that I started investing a little bit. Since then, I’ve started a couple of IRAs, a college fund for my daughter, I have a small portfolio of stocks, and a few minor investments. The problem before was always that something would come up and I would discount the future to pay for the present. I did it with jobs. I did it with a bunch of gold coins I was buying back in the 1990s (which I sold for a loss – ouch), I did it with my education, I did it with my relationships, I did it with just about everything in my life.

My high time preference (hehe High Times) came from an early awareness of my own mortality, an early reading of Ram Dass classic Be Here Now, and a sense that was imbued in me that the destruction of the  world and our civilization was imminent. Let me give an example of a high, low, and average time preference person so that you will understand.

Low Time Preference: Doesn’t go to prom because he has to study for SATs

Average Time Preference: Goes to prom and studies for SATs

High Time Preference: Doesn’t even bother going to school because they might get hit by a bus tomorrow anyway.

So…here I am. Assuming I was 16 when I began my high time preference lifestyle – I spent thirty years living like there was no tomorrow. It makes sense (now) that my worldview didn’t make sense to the women I was involved with, my family, my teachers, my employers, my friends, my co-workers. My life was seriously like this for thirty years: ‘that girl is interesting and attractive, I better fall in love now before one of us dies’, ‘I better cash in these savings bonds now because the government will probably collapse before they mature’ ‘I’d better tell this jackass boss to go fuck himself or else I may not get another chance’ ‘I’d better get rid of all my shit and travel the world before world war III happens’  “I want to learn how to do this fun thing instead of focusing on something else until I’m really good at it’ and it goes on. If it doesn’t make sense to you, that’s okay, it probably means your normal.

Anyway, at 46 it finally makes sense to me to slow down a little bit. The reason is – I can see my future and suddenly it’s becoming pretty clear what it cost me to live such an amazing life for thirty years. While other people were working towards retirement, I was trying out new careers almost yearly. While other people were buying houses, I was moving around the world. While other people were investing for retirement, I was spending my retirement. That’s what it is. My retirement might have been in the millions of dollars right now, but instead, I’m $100,000 in debt with no real material assets.

However, what I lack in assets – I feel like I make up for in experience and understanding. I’ve developed a broad understanding of this world, the cultures in it, the economic and political forces that shape it, and the interpersonal relationships that make it run. And…as a result, I’ve seen the light in regards to a lower time preference than I was running on.

Now, moving on to actuary tables. I found myself recently thinking I was getting old. A big part of that is because I am older than most people who are at this building stage of life where I find myself.  I’m economically sitting where recent college graduates sit but I’ve got a wife and young child so family wise, I’m where people in the mid to late thirties are. These are the people around me who I relate to – people in their late twenties to early forties. I’m not officially in my mid-forties and usually one of the older people in the room when I attend conferences about cryptocurrency, go to school functions, or apply for jobs at start-ups (which does not work in my favor at all). So there I was, feeling old.

I began thinking about how much time I actually had left before I can’t work anymore. Before illness and death come knocking. How much time I have to prepare for retirement – since I’ve done nothing. So, having worked in insurance, I decided to look at some actuary tables. According to the Social Security Actuary Tables….I can expect to live to be 82 years old as an American. That leaves 36 years. Now here’s the thing…that means, I can actually live the same amount of time I lived high preference (30 years) an still have six years to be retired, old, or what have you.

The actuary table I used though, is flawed. I live in Hawaii, so my life expectancy is actually higher. On my father’s side upper 90’s is the norm. So, I probably (barring accidents, disease, or disaster) have closer to 46-50 years and since technology is helping people to live longer – it might be longer.

Chances are though – I probably won’t get the opportunity to try out a third time preference. So, I’d better get this right. Here is what I am going with. High time preference for letting the people I care about know that they are important to me. Low time preference for spending the money I earn. I’m loving for the moment and saving for the future. I recommend it, but not having tried it yet – you may have to experiment to find a balance which works for you.

Cryptocurrency Investing

Bitcoin Ultimate Jumping On Point- Buy $BTC Right Now in JULY 2018!

While it would have been great if all of you reading this had bought Bitcoin back in 2013 or even in early 2017 – that didn’t happen. Most of you still don’t own any Bitcoin. Now, you are faced with a choice…are you going to look back and wish that you had bought Bitcoin in July 2018? I believe that unless you buy it right now, the answer is yes.

The death of Bitcoin has been called out far too many times in the past.  And it isn’t going to happen. The decentralized nature of bitcoin, the limitied supply, and the massive investment that has been made into developing the infrastructure for it have gone way too far. Over the past two days, I’ve watched while the long awaited institutional money has begun moving into the space. Don’t get me wrong, institutional investment in Bitcoin already dwarfs private investment.

However, for some time now, the institutional money has been quietly paving the way to protect and exploit their resources in bitcoin. The coming creation of an ETF (now with approval pushed back to mid-september) and the preparation of safe custody solutions by the likes of Coinbase have opened the door to investment on a scale that has never been seen. While it’s not likely that we will see the 20,000% growth that OG Bitcoin investors experienced…there will be fortunes made based on investments made today. Parabolic growth is coming soon.

It’s worth repeating. There will only ever be 21 million bitcoins. Ever. And yet, already there are more bitcoin being sold than exist because some exchanges and platforms like Abra are operating on a basis of fractional reserves – that means that unless you have the private keys to your bitcoin – you don’t actually have your bitcoin and you might lose your bitcoin if that institution fails for whatever reason. Fractional reserve is happening in bitcoin, but it’s not as widespread or pervasive as it is in fiat currencies and the normie banking world.

Want to see why I recommend that you buy Bitcoin right now? Look at this chart…as I write, from the time I took the sreenshot to now. The price of Bitcoin jumped from $8161 to $8185 – that’s in seconds.

Now, look at the blue horizontal line and trace it back to November 2017. Look what followed from the point we are at right now. A lot of that was driven by Korean money flooding in – well, guess what? Korean regulators have re-opened the floodgates of that Korean money over the past few days.

The ETF is coming. Chaos is ruling the financial systems of the world. The dollar is being weakened, the Yen is getting stronger. The supply of bitcoin is not getting larger. And volume is rising.

Buy Bitcoin today with a Coinbase Account and a Binance Account.

You can also trade stocks and Crypto on your phone with a Robninhood Trading Account

Economics Investing

Diversifying Cryptocurrency Investments with Stocks

I am, without apology, a so-called Bitcoin Maximalist. I believe that within a few years Bitcoin will be the most used currency on planet earth. That being said – I don’t believe in putting all of my eggs in one basket. There are many places where you can put your money, if you choose – you can buy municipal bonds that have high risk but pay only moderate interest, US bonds that do the same, a high yield savings account – but none of these investments keep pace with inflation. The good old stock market is one place where you can beat the devaluation of your money – mainly because prices reflect the value of your dollars. Take for instance, shares of Amazon – they are far too overbought for my tastes and it seems likely that at some point they are going to plunge – Amazon is ripe for an anti-trust suit from the government – the only reason it isn’t happening right now is because it would plunge the US economy into a spiral of death from which the investment banks, the commercial banks, and the government would probably never recover.

Still, there are stocks worth buying out there. Traditionally there are three types of stocks that I prefer to look at.

1) Dividend stocks like IBM which pay you a quarterly dividend. Owning a share of IBM (currently at about $143) pays you about $3.50 per quarter so in a year you are earning $14 which means that over 10 years the stock has paid for itself and is pure profit. Good dividend stocks are hard to find and generally expensive. The P/E or price to earnings ratio gives you most of what you need to know.

2) Growth stocks. These are stocks like Amazon which ideally you buy when the company is young and fresh for $10 per share and which grow over time to be worth $1840 (like Amazon today). Obviously that growth is profitable. Good growth stocks (like Amazon) often also pay a dividend.

3) Value stocks. Someone once told me that the stock market is like a crazy uncle. Over time, he is just fine, but once in a while he wakes up and comes out of his bedroom in his underwear offering his gold coins for pennies. That’s a value stock – the stocks that are being beat up over news, events, or presidential tweets. Again, Amazon was a great value stock when President Dumbfuck was making empty threats at it because he drove the price down – the danger was that he might follow through.

Typically, I think a combination of the three stocks is a good way to go. You can go through a broker (and pay fees every time you buy and sell), you can have a 401k or IRA which manages your buying and selling for you but limits your ability to be involved in decisions, or you can download the RobinHood App and buy and sell without paying commission, have full control, and (like me) let the most obsessive parts of your personality go completely hog wild.

Get the Robinhood App here – and as a bonus for using my affiliate link, both of us will get a free stock out of the deal.