Why money can't buy you love
Super reform; Tech arms race; PE's virtues; Don Sanders tribute; Director IDs; Questioning sacred cows; Floating Rate Notes.
Here's a tweet from a financial commentator I thought worth exploring:
"There are 4 types of Wealth:
- Financial Wealth: Money
- Health Wealth: Physical
- Social Wealth: Network
- Time Wealth: Freedom
Most people think #1 buys you 2, 3 & 4.
But that order is incorrect.
#2 & #3 are free and are integral to achieving #1, which then buys you #4."
Let's first look at financial wealth. Almost everyone would agree that money is relatively important. It enables basic human needs to be met such as food and shelter. It also allows potential luxuries or human wants to be met too. Financial wealth helps fulfill the key building blocks of psychologist Abraham Maslow's famous hierarchy of human needs.
The amount of money needed to be financially wealthy is a matter of debate. For people in poorer countries, a few dollars can mean real wealth. In parts of Australia, a million dollars doesn't get you far. Therefore, financial wealth is important but relative.
Turning to health wealth, physical health is undoubtedly crucial. Without it, we can't live. And poor health can impair quality of life as well as the longevity of life.
I would add mental health to this category. Science is uncovering more evidence of how the body and mind are connected. Just the other day I went to the physiotherapist for lower back pain, and he diagnosed the cause to be not physical but stress from taking up a new job. In other words, Firstlinks has a lot to answer for!
The third category of social wealth is where my views start to diverge from the author. I suspect by 'network', the author means the creation of a network through networking. In other words, forming a network of people who will help you reach your work or business goals, and ultimately, your financial goals.
I've always thought networking, and the creation of a network, is overrated in the pursuit of goals. Many will disagree with this and provide evidence to the contrary. My view is that if you create value for people, your network will grow organically. Perhaps this is naive.
My idea of a network is different. It's principally the bedrock of family and friends. As well as that organic network of acquaintances who you've helped, or are helping, or vice versa.
Let's move on to the final category of wealth: time wealth. I hear this a lot in the financial community: time is the ultimate commodity. Is it though? I've had enough contact with my parents' generation, retirees in their 70s and 80s, to know that some retirees are financially secure and have all the time in the world but don't have a clue what to do with that time. Golf and bowling don't seem to provide a cure-all for their boredom. Taken to the extreme, you can have 365 free days each year, yet if you don't know how to fill them, they aren't so valuable anymore.
To the above template of wealth, I would be tempted to add a fifth type of wealth: purpose or purposeful wealth. Purpose or meaning may underlie all the other types of wealth mentioned here. As the philosopher, Friedrich Nietzsche, once said: "He who has a why to live for can bear almost any how."
For a vast span of human history, religion has provided purpose. For Christians, it's God and the afterlife. For Muslims, it's the five pillars of Islam, with belief in God and obligations of prayer, charity, pilgrimage and fasting. For Hindus, it's belief in Brahman, and concepts such as Karma and Dharma. Interestingly, Dharma as outlined in the Hindu core text, the Bhagavad Gita, is about the quest to find one's true purpose in life.
With the decline in religion in recent times, many people have sought to find alternative beliefs to fill the void. They've certainly chased the four types of wealth mentioned already: money, physical health if not peak physical performance, networking and freedom.
Perhaps purposeful wealth can be added to the mix. What type of purpose, you may ask? I wish I knew the answer. My own observation of wise and happy people inside and outside the finance industry is that helping others, whether family, friends or strangers, seems to provide meaning. I'm sure there are many things that can provide purpose too.
What are your thoughts on the four types of wealth? I welcome any feedback and suggestions on the topic.
Also in this week's edition ...
Keiran Rooney of Evergreen Consulting looks at what reforms need to happen for unlisted asset valuations at superannuation funds to reflect real world valuations more accurately. Increased exposure to unlisted assets, such as private equity and venture capital, have helped hold up the returns of many super funds this year.
Where Kieran is somewhat critical of super funds for investing in private equity to smooth out returns over time, José Luis González Pastor sees this as a strength of private equity's rather than a liability. He makes the case for private equity offering lower volatility than public markets in turbulent times and attractive performance over time.
Tom Stevenson of Fidelity International believes it's time to question several investment tenets that may not stand the test of time. He puts the 60/40 portfolio, gold as an inflation hedge, growth investing and China's ascendancy under the microscope.
Meanwhile, Alison Savas at Antipodes Partners sees an underappreciated risk to markets: the global technology arms race between the US and China. She examines how the race may play out and what it means for investors.
And this week, we have the pleasure of welcoming Rob Ferguson as a guest contributor. Rob is widely known as the former boss of BT Australia and a finance industry doyen. In his article, he offers a touching tribute to Don Sanders, the former Commonwealth Bank CEO and Reserve Bank Deputy Governor. He has high praise for Sanders, calling him the most distinguished banker in Australia's history.
Firstlinks has previously written about the potential merits of high-yielding Floating Rate Notes (FRN) in a rising inflation environment. Matthew Macreadie from Income Asset Management is also a fan and makes the case for Ampol subordinated notes as being especially attractive.
Lastly, Julie Steed reminds us that registrations for director identification numbers (director IDs) are due at month-end. She offers a guide for what you need to know and what you need to do.
This week's White Paper from Capital Group suggests that, despite the challenges faced in 2022, attractive opportunities remain across four key credit markets.