by Alexander Green, Chief Investment Strategist, The Oxford Club
Thursday, December 12, 2013: Issue #2184
Last month a winning Florida Lotto ticket bought in May at a suburban Tampa convenience store expired. The $16 million uncollected prize was the state’s largest since 2003, when someone – with apparently more important things to do – didn’t collect a $53 million prize.
Winning lottery tickets both large and small often go unclaimed, of course. In 2011 there were nearly $40 billion in prizes awarded in the United States – and $800 million went uncollected.
Chuck Strutt, executive director of the Multi-State Lottery Association, notes, “It’s important to check your numbers.”
Indeed. When was the last time you checked yours?
The Numbers That Matter
I’m not talking about lottery tickets. In my view, state lotteries are a tax on the innumerate. The odds of winning the Florida jackpot (a pick-6 lotto game) are more than 175 million to 1.
Neither am I talking about checking the numbers at the bottom of your brokerage account, income statement or balance sheet.
I’m talking about counting your lucky stars. Although you may not realize it, you’ve already beaten longer odds than any lotto winner. If that seems unlikely, let’s check your numbers…
The current world population makes up approximately 7% of all the human beings who have ever lived. The fact that you are sitting here breathing comfortably puts you in a distinct minority. The dead outnumber the living 14-to-1.
Of course, the odds against your ever having been born are far longer. If one particular sperm – of hundreds of millions of sperm – from one particular male had not connected with one particular egg from one particular female – and so on back through countless generations – you would not be here today.
The number of people who could have been here in your place but who will in fact never see the light of day outnumber all the grains of sand on all the beaches in the world. We know this because the set of people allowed by our DNA so massively outnumbers the people who have been born.
(A friend heard this and said, “Who’s to say that if a different sperm had hit a different egg, I wouldn’t still be here?” I told him to go ask his sibling.)
How It Used to Be
You also had the exceptional good fortune of being born into the modern era. After all, 95% of human history was pre-agricultural, a time when we hunted and scavenged to survive.
Folks didn’t worry about having enough for retirement because almost nobody lived to old age and those who did never enjoyed anything like “retirement.”
Even after the advent of agriculture, people labored hard for a subsistence living. There was no social safety net and hunger was often terrible. Political freedoms were nonexistent.
In Europe a few hundred years ago, murders were twice as common as accidents. Outlaws were seldom pursued. And anyone intrepid enough to travel between towns alone was on their own.
In A World Lit Only by Fire, historian William Manchester wrote that, “honest travelers carried well-honed daggers, knowing they might have to kill and hoping they would have the stomach for it.”
They didn’t call it the Dark Ages for nothing. Sanitation was primitive. Plumbing was unknown. Rat and flea infestations bred deadly pandemics, leveling entire populations.
Ignorance and superstition were commonplace. To the average person, the Earth was flat, the population beset by demons and the lands beyond the horizon a total mystery.
Today we have a great bias, a widely accepted belief in the steady nature of progress. Yet for most of human history there was none.
How Far We’ve Come
However, you were born into the prosperous West in the modern era.
Your ancestors four generations removed would marvel at contemporary life: Unlimited food at affordable prices… plagues that killed millions – polio, smallpox, measles, rickets – all but eradicated… the end of backbreaking physical toil for most wage earners… the advent of instantaneous global communication and same-day travel to distant cities… senior citizens cared for financially and medically, ending the fear of impoverished old age.
And thanks largely to advances in nutrition and medicine, we have enjoyed the greatest human accomplishment of all time – the near doubling of the average life span over the last hundred years. At the beginning of the 20th century, the average American lived just 42 years.
Living standards today are the highest they have ever been, including for the middle class and poor. And while we just came through a nasty financial crisis, the economy is bouncing back. The Federal Reserve reported this week that U.S. household net worth hit an all-time record high in the third quarter: $77.3 trillion.
Most of these gains went to holders of equities and real estate, of course. But the four most basic human economic needs – food, clothing, fuel and shelter – have for years been getting steadily cheaper as a percentage of disposable income.
The average person living under the poverty line in the United States lives in larger accommodations than the average European. (Not the average European in poverty, the average European.) The vast majority of the poor in the U.S. have a telephone, toilet, television, central heat and air, and a car. A hundred and fifty years ago, the richest robber barons could not have dreamed of such wealth.
In 1956 it took 16 weeks to earn the price of 100 square feet of housing. Today it takes 14 weeks and the housing is better quality. Plus, our homes are filled with all sorts of modern conveniences: dishwashers, ovens, microwaves, coffee makers, and lounge chairs that give massages.
Technology and electronics are revolutionizing our lives. Right now all information-based technologies are on exponential growth curves. They’re doubling in power for the same price every 12 to 24 months. That’s why an $8 million supercomputer from two decades ago sits in your pocket and costs less than $200. The same rate of change is showing up in networks, sensors, cloud computing, 3-D printing, genetics, artificial intelligence, robotics and dozens more industries.
Miraculous advances are taking place in medicine too. For most of human history, if you had a kidney stone or needed a root canal, you simply gutted it out. If you had appendicitis, a clogged artery or a bacterial infection, you were a goner.
When John Adams was president of the United States, his daughter underwent a double mastectomy at home without anesthesia. (She succumbed to cancer anyway, of course.) For the pain, the doctors gave her a piece of rawhide to bite down on.
Today you are far better fed, sheltered, entertained and protected against disease than your grandparents or your other ancestors. Education levels have never been higher. Human violence – from crime to warfare – has never been lower. With the exception of greenhouse gases, all forms of pollution are in decline.
Most people – even scientists and sociologists – fail to recognize the incredible power of inventors, entrepreneurs and investors to solve problems and improve our lives. They don’t see the big picture… or realize how truly fortunate they are.
That’s why I wrote my new book An Embarrassment of Riches. It’s less about accumulating wealth than about appreciating the wealth you already have.
The idea is to cultivate a sense of gratitude and an optimistic outlook on the future. Why is this important? Read the book.
Psychologists say it is impossible to feel grateful and unhappy at the same time. Pessimism prevents people from seeing the future clearly. It diminishes your sense of well-being. It fosters needless negativity. It causes you to miss life-changing investment opportunities.
Your outlook encompasses your personality, character traits, disposition and attitude toward risk-taking. It affects not just your mental state but your behavior.
It even impacts your health. Science shows that those with a pessimistic mindset are more likely to develop depression or cardiovascular risks and even increases the risk of stroke or cancer. Optimists live longer, healthier and far richer lives than pessimists.
If you or someone on your Christmas list could use a bit of cheering up, I encourage you to pick up An Embarrassment of Riches.
Amazon is currently offering the book for 40% off the cover price. To reserve your copy, click here.
The truth is you have already beaten far longer odds than any Powerball winner. Isn’t it time you collected your prize?
Collect Your Unclaimed Lottery Prize Here
Last month a winning Florida Lotto ticket bought in May at a suburban Tampa convenience store expired. The $16 million uncollected prize was the state’s largest since 2003, when someone – with apparently more important things to do – didn’t collect a $53 million prize. Winning lottery tickets both large and small often go unclaimed, of course.
Worst. Advice. Ever.
Last week, I spoke at The Oxford Club’s Private Wealth Seminar at the beautiful Ojai Valley Inn and Spa. After going for a run, I was in line at the café waiting to order breakfast when a headline in the Los Angeles Times caught my eye. It said, “Crisis for the very old: Many outlive their nest eggs.” According to the article, 46% of Americans outlive their assets and die with no money.
Are Diamonds an Investor’s Best Friend?
All that glitters isn’t gold… but can still be worth a fortune to investors. For example, I have my eye on a sparkling commodity that’s taken its licks this year but looks like it could have a stellar 2014. It’s not gold. I’m talking about diamonds. And diamonds have been selling cheap.
The Next Big Shale Plays
Of all the rigs drilling for oil in the world, about half are operating in the United States – and half of those are in Texas. In fact, for all the attention given to the Bakken shale play in North Dakota, the most activity is occurring in the Permian Basin in West Texas.
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Last month, movie buffs flocked to theaters around the U.S. to catch the much-anticipated premiere of the newest Hunger Games movie, Catching Fire. Over opening weekend, the cinematic production – based on the second book of Suzanne Collins’ best-selling young adult series – garnered $142.8 million. That puts it in fourth place for the most profitable U.S. movie opening…
Banks are supposed to be a financial safe haven: a place to store money and valuables. People trust their banks to secure their checking and savings accounts, handle their loans, and offer reliable investment opportunities such as CDs. That trust usually extends to the stock market too.
On March 5, 2013, the S&P 500 hit an all-time new high of 1,539.79. By May 20, it was up to 1,666.29. Then in July, it set another new high. The same thing happened in August… and in September… and again in October… and yet again on November 18. Judging by its track record since early 2009, this market seems unstoppable.
Like it or not, the holiday shopping season has already begun. Christmas music is playing over speakers, holiday-themed paraphernalia is lining store shelves… and the markets are wondering how retailers are going to fare over the next six weeks.
Move over, BRIC countries. There’s a new investing acronym in town. And there are plenty of experts out there preaching how it could make you a mint. Whereas BRIC is the term economist Terence James O’Neill coined back in 2001 when he headed up the Goldman Sachs global economics research department, MINT came about much more recently thanks to Fidelity International. Yet it’s only catching on now with some help from O’Neill.