10 Daily Observations

Today: Ray Dalio and how the economic machine works, how do we teach our kids about money, and Warren Buffet’s productivity tips.

Caleb Dismuke

Published in

SAM-

6 min readOct 11, 2017

QUOTE OF THE DAY

From very early on, whenever I took a position in the markets, I wrote down the criteria I used to make my decisions. Then, when I closed out a trade, I could reflect on how well these criteria had worked.
─ Ray Dalio

I have been applying this tactic for years and can attest to its effectiveness. For one, if you can’t clearly write down why you did something, you probably don’t have a good grasp of it.

Every investor I have studied had a writing habit. They said it helped them improve their thought process.

Second, if you take a trade for a certain reason and have 10 losses in a row, something could be wrong. If you have not written down why you took those trades, you will have no idea if it the randomness of your system or if your system is flawed.

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Speaking of Ray Dalio, I re-watched his video on “How the Economic Machine Works”. If you want a better understanding of how the economy works, I highly recommend watching this now. (30 min)

In Ray’s opinion, much of what drives our economy is credit. In fact, the amount of credit in our economy is ~ $63 trillion dollars(2015) and the amount of actual money is around ~$3 trillion dollars.

So keeping an eye on credit growth can offer a small window into future consumption because my spending is your income and your spending is someone else’s income. Sooner or later, those debts have to be settled.

The chart below is bank loan growth YoY.

WORRIED ABOUT MONEY?

Click here for the full story.

Some data from the article:

After analyzing data from high schools representing over 85% of all students, the main conclusions of the study were as follows:
•Only 16.4% of U.S. students are required to take a personal finance course to graduate high school.
•Five states do have a personal finance requirement: Alabama, Missouri, Tennessee, Utah and Virginia.
•But outside of these states, the proportion of students with a personal finance requirement drops to 8.6%.
•Meanwhile, only 5.5% of low-income schools (outside of mandate states) have personal finance as a requirement.

Why this is important.

From the article:

With $1.45 trillion in student debt, millennials find themselves in a tough spot to begin with — but 45% regret even taking out loans to that extent in the first place. At the same time, only 24% of the generation demonstrates “basic” financial knowledge, while 70% are already stressed about saving for retirement.

We can’t count on the educational system to educate our kids about money. As parents, my wife and I will start educating our kids early on.

For help getting started,

The Guardian lists 7 ways to teach your kids about money. I encourage you to check it out. If you have had success with any of them, let me know and I will share your story. For more, read the story below.

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Speaking of teaching our kids about money.

Stockpile is a new company that lets you buy fractional shares in certain companies and give them to people as gift cards. The WSJ has an article about the company(paywall).

From the article:

Max Shriver, a 10-year-old from Westchester County, New York, said he created a Stockpile account last year after receiving some gift cards for Christmas.
Max said he is invested in Microsoft, Tesla Inc., and Walt Disney Co., among other firms, although his favorite publicly traded company at the moment, he said, is probably Take-Two Interactive Software Inc. — the distributor of video games including “NBA 2K18,” “ Sid Meier’s Civilization VI” and “BioShock.” After expressing an interest in stock investing, Max started receiving fractional shares purchased online from Stockpile in return for helping his parents out with chores around the house.

I am rooting for this company. I love the idea of giving gift cards of stocks as gifts. 👏👏👏

PRODUCTIVITY

Warren Buffett’s 3 step strategy on how to maximize your focus and master your priorities

jamesclear.com

From the article:

STEP 1: Buffett started by asking Flint to write down his top 25 career goals. So, Flint took some time and wrote them down. (Note: you could also complete this exercise with goals for a shorter timeline. For example, write down the top 25 things you want to accomplish this week.)
STEP 2: Then, Buffett asked Flint to review his list and circle his top 5 goals. Again, Flint took some time, made his way through the list, and eventually decided on his 5 most important goals.
Note: If you’re following along at home, pause right now and do these first two steps before moving on to Step 3.
STEP 3: At this point, Flint had two lists. The 5 items he had circled were List A and the 20 items he had not circled were List B.
Flint confirmed that he would start working on his top 5 goals right away. And that’s when Buffett asked him about the second list, “And what about the ones you didn’t circle?”
Flint replied, “Well, the top 5 are my primary focus, but the other 20 come in a close second. They are still important so I’ll work on those intermittently as I see fit. They are not as urgent, but I still plan to give them a dedicated effort.”
To which Buffett replied, “No. You’ve got it wrong, Mike. Everything you didn’t circle just became your Avoid-At-All-Cost list. No matter what, these things get no attention from you until you’ve succeeded with your top 5.”