“If this is left to stand, how can you trust any debt security issued in Switzerland, or for that matter wider Europe, if governments can just change laws after the fact.” -David Tepper
Slow slow slow fast.
I wrote a while back that things typically muddle along in life for a while and then bang, tragedy happens or perhaps you finally start that business that you’ve been dreaming of.
Slow slow slow fast.
This sequence is important to understand as investors, and well, as people too. We should never be surprised when tragedy hits or when good things happen. It’s just the way it is. Just look at the recent deal with Credit Suisse, the famed Swiss Bank that not that long ago was worth more than Microsoft, and its forced merger with UBS for a mere $3B. It was a slow grind lower for many years, attempts to recapitalize and cut business lines that were underperforming only prolonged the long decline, then just last weekend, it suddenly was over for the Swiss bank.
The moral of the story for us who strive to build better balance sheets is threefold.
First, as mentioned above, bad things and good things will happen to our money that is out of our control, it is up to us to build in the good times knowing at some point this will get worse. Example, you get a bonus every year at work. Invest 80% of the bonus and spend 20%, the opposite of what everyone else does.
Second, we have to know the weak points in our financial lives and seek to mitigate them. Let’s say you make $200,000, you struggle with saving, and you plan on retiring in 10 years. What’s the weak point? Spending too much. The fix, pay off non productive debt and invest the newly found cash flow.
Thirdly, we need to know what we are working to accomplish. What’s this mean? Unlike companies that have to grow in perpetuity, our financial lives typically have a peak and an endpoint. Your expenses peak in your 40s, your earnings peak in your 50s, and your assets in your 60/70s. This means, ideally, you’d be able to replace the income you reached in your 50s with your asset base in your 60s. This is what will happen and also what you ideally want to accomplish.
It’s just math and a lot of life in between. Slow slow slow fast.
This is how the world works and how your money works as well.
Take advantage of the good times, understand tragedy will strike, and know the game you are playing.
If I’ve learned anything from people who are financially free, it’s worth it.
Keep building, keep buying and stay nimble.
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