The Katana: A Week Long Celebration of Love

A Sliced Heard

A Sliced Heart

With Valentine’s Day coming up, I thought it’d be nice to dedicate some of this week’s posts to relationships.  Few things are as rewarding as finding the one you want to grow old with.  I can be stranded somewhere in Kabul, and so long as the one is beside me, I am happy.

That said, does true love have a price?  If a genie gave you the option of having $100 million dollars but never finding the love of your life, or finding that special someone but always living just above the poverty line, which would you choose?

Before answering the question, think about all the fun times you had in your prior relationships, some that could have been.  Not all bad right?  Now think carefully whether after a certain point, more money can really bring you more happiness.

My theory is that “love” will be the landslide victor, however, at the margin men will have a greater tendency to choose money over love, while women will gravitate towards love over money.

The Samurai Fund: -3.13% YTD vs. the S&P 500 -4.4%. Lenar +15%, Berkshire +11%, GE +4% and STE +6.15% continue to be stars. While MWW -18% and Toyota -11.3% are the biggest dogs.  If Toyoda-san didn’t apologize on Friday, I would have sold the stock in a heart beat.

Samurai’s Alexa Ranking Challenge: Is growing strong!  I’m very happy to see so many people progress and support each other.  Forget about all about SEO, link ratios, and yourself.  Keep up the content and the promoting of others!  If you would like to join, read the post, let us know in the comments section with your rank so Daniel-san and I can track.

HIGHLIGHT POSTS OF THE WEEK

* “Winners And Losers Of The Obama Tax Plan” over at Darwin’s.  I feel bad for the losers, especially charities.

* “Deliver Away Debt Joins The Millionaire Club” by Jeff shows his “Who Wants To Be A Millionaire” creativity.

Winners of Secrets of A Stingy Scoundrel: Ernest S., and Charlie!  Pls send over your mailing addresses for delivery.

Keiju,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Tracy says

    Ya know…even though I’m a girl…I had to give this love thing some serious thought. For instance, as an optimist I felt that real financial freedom would open a lot of doors to love, but if I listen to the parameters you set, I have to believe this was an either or proposition. So I chose love. It wasn’t easy though, as I like to imagine all the good I could accomplish for others with a big pile of money and that became something else to weigh when you consider that love is something you hope for yourself and giving, really giving, is something you do for others (and yourself).

    Too much caffeine this morning, I guess, with the result being a mind that races to all the possibilities and back again.
    .-= Tracy´s last blog ..Eco Fraud Friday: Energy, Food, Water =-.

  2. Investor Junkie says

    Sorry about the crappy returns.. I’ll try to do worse next time ;-)

    heh, I could always buy love (just kidding) :-)
    .-= Investor Junkie´s last blog ..A US Debt Limit that’s Unlmited?!? =-.

  3. David @ MBA briefs says

    Awesome Katana this week Sam, and I’m not just saying that because I made the list :-) I appreciate the link!

    Sorry about ABM, I had a talk with the board and told them to shape up or else. It’s down exactly one dollar since the start, but if you believe in technical analysis it’s looking like a bargain at $19.65 since it’s trading below the 50 day average and hovering around the 200 day average. The MACD is also trending up, and when it crosses the signal line that’s supposed to be the classic buy signal. The financials are solid and they’ve demonstrated an ability to generate earnings, so if I was the analyst I would rate it as a “hold”. As far as the price goes I think ABM has fallen victim to Mr. Market.

    As far as Toyota goes if they can follow Tylenol’s example and do the right thing they’ll demonstrate to investors their commitment to their customers and stakeholders and come out a winner. If we were a real hedge fund we’d be looking for the bottom so we could make a cool profit when it bounces back. Matter of fact, we may have missed the bottom – it’s up about 4% already.
    .-= David @ MBA briefs´s last blog ..How to analyze stocks like a pro – part 5 =-.

  4. LeanLifeCoach says

    That money sure looks good but my wife is not only my love but also my best friend. When I am on my death bed I’d rather hold her hand than the cash!

    TM sure deserves bad marks for their inability to manage the PR nightmare but the local dealer has opened service 24 hours a day until every car is repaired. That is commitment to the customers!

    Thanks for the link Samurai-san!
    .-= LeanLifeCoach´s last blog ..Money & Time, How Others Waste It =-.

  5. Charlie says

    I’d take love. I live a pretty simple life already and think I’d get too bored and lonely on my own. It’d be nice to have that much money to travel around the world but not too fun to go everywhere by myself.

    It’s pretty crazy about Toyota. Makes me appreciate older cars with minimal to no electronic parts that just did what they were supposed to. I don’t even use cruise control when I drive and plan to keep it that way.

  6. Roger says

    Wow, tough decision. I’d probably go with love and not money; although living just above the poverty line would be pretty tough, compared to not having the one I love, it would be a cake walk.

    (I suppose I could try to get all lawyerly, arguing that if I was with someone who wasn’t my ‘special someone’ but who was, to quote Weird Al Yankovic, ‘Good enough for now’, I could have a girl (perhaps not THE girl) and the cash, but I’ll take this more as a which do you value more type of question, instead.)
    .-= Roger´s last blog ..Financial Samurai’s Alexa Challenge =-.

  7. Rob Bennett says

    Rob discusses something impossible in the markets because of human nature.

    Thanks for the mention, Sam.

    It’s not impossible! It’s thought to be impossible by some today in the way that getting a plane to fly was once thought to be impossible and indoor plumbing was once thought to be impossible and the curing of many diseases was once thought to be impossible. It’s viewed as “impossible’” because it’s never been done before, that’s all. Once we do it, there won’t be people saying that it’s impossible anymore.

    Investing is like all other areas of human endeavor. We make mistakes and then, if we are smart, we learn from our mistakes. We’ve learned some amazing things over the course of the past 30 years. The problem has been that The Stock-Selling Industry has felt that it was better to keep pushing Buy-and-Hold because that brings in millions for The Stock-Selling Industry. Valuation-Informed Indexing takes away about 80 percent of the risk of stock investing while greatly increasing returns. And the internet gives us a way for us all to learn about it whether The Stock Selling Industry likes the idea or not!

    He mentions price changes don’t matter, which I don’t understand at all. Do you?

    If you own a broad index fund, price changes beyond those justified by the economic realities (which support an annual return of 6.5 percent real) are on net neither a good thing or a bad thing. A price increase makes your portfolio larger, which is a plus. But it also makes valuations higher, which causes your long-term future return to drop, which is a negative. It’s a wash.

    Investors should be marking their portfolios up or down to their real value (the value they would have if stocks were priced at fair value) so that they know the true value of their portfolios. Otherwise, you’re making financial plans based on the phony nominal values. That can get you in a lot of trouble.

    The nominal values were three times the fair values back in January 2000. If you had a nominal portfolio value of $300,000, the real (long-term) value was only $100,000. It’s the drop from $300,000 to $100,000 that all investors experienced that was the primary cause of the economic crisis. You can’t take $12 trillion (that’s the amount of overvaluation that applied at the top of the bubble) out of the economy without causing an economic crisis. If we let people know the realities of stock investing, stock price volatility could be reduced to a fraction of what it has been in the past. It’s emotional investing (Buy-and-Hold, or ignoring price) that causes volatility.

    Those interested in these ideas might want to check out a Google Knol that I wrote recently entitled “Why Buy-and-Hold Investing Can Never Work”:

    http://knol.google.com/k/rob-bennett/why-buy-and-hold-investing-can-never/1y5zzbysw7pgd/1

    That article sums up eight years of work developing a new model of how stock investing works that we’ve ben doing in the Retire Early and Indexing discussion-board communities for close to eight years now. I’m pretty darn proud of that one!

    Rob
    .-= Rob Bennett´s last blog ..My E-Mail to Yale Professor Robert Shiller, Author of Irrational Exuberance =-.

  8. admin says

    @Tracy
    I actually didn’t think much about using the $100 million to help others. Now that I am, shoot, I think I may have to choose the money! This is a really tough one. The money can be used for shelter and education for those who need it. A fund could be set up, where every year, $4 million in interest income can be used to keep the school or shelter operational. Hmmmm. tough one. Thanks for letting me think about this more.

    @David @ MBA briefs
    Maybe we’ll launch a hedge fund mid year? Or, introduce 5 short positions. It might get complicated though!

    @Charlie
    Well, I’m not saying you will never have a girlfriend, but if you choose money, you will NEVER find the one. You can find the person you like, but not your soul mate.

    I love old cars with no electronics. I especially love a 1956 Mustang!

    @Roger
    I tell ya, is it so bad to have $100 million and have a girlfriend you really like but do not love?

    @Rob Bennett
    Rob, what makes you think higher price securities means the security is more expensive? Their earnings could have more than increased by the increase in price change, making the security cheaper.

    i.e. Google goes from $500 to $600, a 20% rise, but earnings go from $100/share to $200/share, or 5X earnings to only 3X earnings, hence much cheaper.
    .-= admin´s last blog ..Someone Always Farts In A Crowd =-.

  9. Money Reasons says

    Wow, just above the poverty level really makes this decision a tough one. There are a lot of thing I want to do, and being poor won’t let me accomplish them. I would probably go with the money, (yeah I’m a heel…) but with one condition. My wife would have to given the same amount of the money too (but in her case she could find true love again…)

    Let’s say you put the entire amount into low risk investment that yields 4%
    Letls do math… $100,000,000 *.02 = $2,000,000 annually, and with another 2% going back in to keep it growing…

    I have to take the money elsewise I’d have to call my site AlmostMoneyReasons.com…
    .-= Money Reasons´s last blog ..Stop Waiting For Magical Moments To Happen =-.

  10. Rob Bennett says

    Rob, what makes you think higher price securities means the security is more expensive? Their earnings could have more than increased by the increase in price change, making the security cheaper.

    You’re looking at individual securities, Sam. I’m looking at broad indexes. It’s not possible to effectively predict the long-term return of an individual security (unless you’re Warren Buffett). With a broad index, it’s easy.

    Here’s what William Bernstein says about this in his book The Four Pillars of Investing: “Not infrequently, promising companies with large expected future dividend streams stumble and fall; nearly as often, companies given up for dead recover and provide shareholders with prodigious amount of future income. On the other hand, when you examine an entire market, consisting of hundreds of thousands of companies, these unexpected events average out. For this reason, the income stream of the market as a whole is a much more reliable calculation.”

    The implications here are huge for the typical middle-class investor. Now that index funds are available to us, we no longer need to worry about the risk of stock investing. If we just look at valuations before setting our stock allocations, we avoid 80 percent of the risk that was present in the old days (and that is still present today for those following a Buy-and-Hold strategy).

    I have a calculator at my site (“The Stock-Return Predictor”) that performs a regression analysis of the historical stock-return data to reveal the most likely 10-year annualized real return for stocks starting from any given valuation level. At the prices that applied in 1982, the most likely annualized 10-year return was 15 percent real. At the prices that applied in 2000, the most likely annualized 10-year return was a negative 1 percent real. Do you see why following a Buy-and-Hold strategy is going to delay your retirement by many years? There is no one stock allocation that makes sense both when your long-term return is 15 percent and when it is a negative 1 percent.

    In January 2000, the choice was between stocks paying a most likely return of a negative 1 percent real for 10 years running and Treasury Inflation-Protected Securities (TIPS) paying a guaranteed return of 4 percent real for 10 years running. The investor who started with $100,000 was $50,000 ahead at the end of 10 years if he went with TIPS. The investor with $500,000 was $250,000 ahead if he was willing to avoid a Buy-and-Hold strategy. It’s the losses that we all suffered by following Buy-and-Hold that caused the economic crisis — when $12 trillion of wealth disappears from a consumer economy, spending dries up and the economy collapses.

    I have spoken with numerous big-name experts, who have acknowledged that I am right about this (sometimes in direct words, sometimes in cagey language). The problem today is that The Stock Selling Industry made hundreds of millions promoting Buy-and-Hold. There is a feeling that it would “look bad” if these big-name millionaire “experts” were to acknowledge having caused the biggest loss of middle-class wealth in U.S. history. My thought is that it ends up looking worse when the continued promotion of Buy-and-Hold causes another crash, one that sends us into The Second Great Depression.

    The wonderful thing is that middle-class investors now have the internet available to us. The Stock Selling Industry is not able to prevent us from sharing the realities with each other. My strong sense is that there are many in The Stock Selling Industry who would love to be able to tell people the truth about stock investing if only we would help them get out of this corner that they have painted themselves into.

    We live in exciting times, eh, Sam?

    Rob
    .-= Rob Bennett´s last blog ..My E-Mail to Yale Professor Robert Shiller, Author of Irrational Exuberance =-.

  11. David @ MBA briefs says

    @ admin
    Yeah, that could get complicated. And probably too much like work.

    Your Samurai Challenge is going like gangbusters – you’re little cabal of blogs are really picking up traffic. This is really the best way for a lot of us to get ahead, way too much competition in the blogosphere to go it alone. Thanks again for the great idea.
    .-= David @ MBA briefs´s last blog ..5 Ways to be happier – guaranteed =-.

  12. Little House says

    Hands down…LOVE. I’ve constantly told my husband that I’d go anywhere, move anywhere, do anything, as long as he’s with me. Money can come and go, but love is a constant. It also helps that we really enjoy each others company!

    Congrats on your Alexa ranking. How do you do it?! Must be your controversial posts, always intriguing.
    .-= Little House´s last blog ..Cheap Motels =-.

  13. admin says

    @Money Reasons
    Nice, I like your “money” choice! The thing is, if you chose the money, the rule is you would never have met your wife. But, it may not be so bad b/c if you don’t know what you know, you don’t lose anything.

    @Little House
    You sound like me. Each other’s company is so fun, and so priceless. But, we can do a lot of good for others with $100 million!

    Check out the original Alexa challenge post. Seems pretty straightforward. If one can help others, eventually that help will be reciprocated. You’re welcome to join! Just follow the directions from the post.
    .-= admin´s last blog ..Tax Refunds Are Good For Most People, Because Most People Can’t Save =-.

  14. Sandy L says

    Tough love riddle. If I choose love, why does the action make me destitude? Is it because they live in Hawaii and COL is high? Or does it mean the person I love squanders all the hard earned money we earn? If it’s the latter, then I choose money because I’m no masochist. If it’s the former, then you trade wealth for location and relationship and seems like a good trade. I guess my decision would really depend on why and how I’m poor.

    I’ve gone from poverty to having decent disposable income and it would take a lot to reverse all that effort. I have “loved” people who were dumb with money. It was very stressful and financial issues eventually overshadowed the positive aspects of the relationship.

  15. thriftygal says

    The poverty line is not somewhere I’d want to live or want my child (and future children) to live. While true love is great it doesn’t pay the bills (like the Bealtes sang), plus not everyone finds true love and even if they do, it might just be fleeting. So I think I’ll take the money. I can always diversify my love on children, siblings, parents and ‘almost-the-one’! Does that make me a ‘Material Girl’?
    .-= thriftygal´s last blog ..Thriftygal’s Top Ten Money Tunes =-.

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