I had faced a problem.
For the first time in a while, the ole Captain had enough money saved up that he could start thinking about throwing some money in the ole IRA.
You might at first think this is not a problem. But it is, young aspiring economist. It is. For the problem facing anybody under 65 who still has a bit of life expectancy left is:
Precisely what do you invest your money in?
All of you know my general concern that money coming from:
1. Retirement dollars of baby boomers and Gen X
2. Quantitative easing money being injected into the financial markets and
3. Low interest rates prompting a trillion dollars worth of buy backs
is jacking up stock and other asset prices that there's effectively no good deals out there.
The PE ratio shows the stock market overvalued by almost half:
This results in a dividend yield of LESS THAN 2%
Housing only pays a whopping 4% today (and that's if you don't consider repairs and expenses)
And even an investment like education increasingly fails to generate the returns necessary to validate it.
Alas, today's investor is faced with the following effective REAL rates of return:
Real Estate 2-3%
Education - HA HA HA HA HA!!!!!
Now naturally, many of you are saying,
"Wait! 0%??? The stock market has been booming!!! How do you get 0%?"
Well, inquiring young mind, I'll tell you.
You see, there is no such thing as capital gains. The real rate of return stocks (or any other investment for that matter) provides is the income or profit is generates.
Housing generates rents
Bond generate interest
And stocks generate dividends
However, ever since we thought it'd be a grand idea to designate stocks, bonds and other marketable securities as the default investments for our IRA's and 401k's back in 1978, stocks have gone up NOT based on their profitability, but by simply how many trillions of dollars-worth of mindless sheeple's money they throw into their 401k's accounts every paycheck.
Microsoft hasn't paid a dividend since it's existence?
Screw it, buy more. The price might go up!
The S&P pays less than a Kaazaa account?
Screw it, buy more! The price might go up!
Tinder or Twitter don't generate income at all!!!???
Screw it, buy more! The price might go up! IT'S AN IPO!!!
And so why we see the above ABYSMAL and PETTY REAL rates of return for the various asset classes.
So where precisely is somebody who demands an adequate rate of return to invest their money?
Sadly, it looks like entrepreneurship may be the only place to go.
It wasn't until I was having a conversation with my dad while running did I notice that even with all the tax benefits and government incentives to invest in IRA's and 401k's, the best use of my money is sadly to reinvest it in my various ventures.
If I drop $500 advertising my books on the Tom Leykis Show, I on average double my money.
If I drop $100 advertising Asshole Consulting on Viva la Manosphere, I get about a 60% rate of return.
And if I drop $200 running ads on Marginal Revolution for my books, I get about a 70% rate of return.
Naturally of course, I don't enjoy any of the tax benefits on these investments that come with the government ordained IRA's and 401k's.
But so what? Even adjusting for taxes, investing in your own private ventures generates MUCH higher rates of return than the government approved investments for your retirement account.
Tom Leykis post tax rate of return = 75%
Stocks (still) = 0%
Viva La Manosphere post tax rate of return = 45%
Bonds = 1.2%
Marginal Revolution post tax rate of return = 50%
Real estate = (post property taxes, repairs, insurance, etc.) -5%
Now naturally key to all of this is to get a product or a business in place where expending such money on advertising, equipment, etc., would generate such returns. And I will be the first to admit that that is not easy. For every successful business I have, I have at least 2-3 that have failed, and that says nothing of the labor put into researching, trying and deploying these ideas. But all those drawbacks aside, returns are so non-existent in today's financial markets, you may not have a choice. It is a mathematical impossibility to rely on today's conventional retirement planning tenet of "compounding rates of return" when those rates are effectively at or near 0%. Ergo, it practically behooves you to have your hand at entrepreneurship and see if you can't make up your retirement from scratch.
Of course, most people will point out and say, "Not everybody can be entrepreneurs! If we all became entrepreneurs there'd be no workers or economy!"
Thankfully, nowhere near "everybody" reads Captain Capitalism.
Now if you'll excuse me, I'm going to go and work on my next business idea.