Cycle of Family Wealth

The Chinese have an expression: 富不过三代 (fu bu guo san dai) Literally: Wealth does not pass three generations.

Meaning: It's rare the wealth of a family can last for three generations (the 2nd may see the value of hard work, the 3rd, forget it).

Year zero: First generation: Wealth creation

Starting capital: Zero. The family income generators (2 parents) are hard-working and manage to invest 10% of their after-tax income equating to RMB150/month into the Chinese stock market.

Year 45: Second generation: Wealth preservation

The parents ensured that their three children didn't have to experience hard times. The children attended decent enough schools and were fortunate enough to mix with similarly privileged friends. There is general unease in the family however, as the second generation gain independence.

The pressures of wanting to keep up with the lifestyles of their wealthier friends, coupled with an unfortunate down-turn in the economy, results in a halt in savings and as a result the RMB 50.5m family wealth no longer enjoys any debit order increases. In addition, the capital base is required to maintain an income for the folks who have now retired.

Year 75: Third generation: Wealth destruction

The second generation finally inherit the family wealth and it is split three ways. By this time the RMB 45,000/month comfortable family living has ballooned to RMB 600,000/month as a result of inflation. Each family now only enjoys income from a capital base of RMB 110m and, because they themselves are approaching retirement they opt to de-risk their portfolios, which results in the capital invested unfortunately realising a more sedate 3% real rate of return.

After a torturous revelation later on in life, one of the 3rd generation children decided to carve out a career as a financial advisor. She made the following insightful observations:

1. Her grandparents did a fantastic job of consistently placing 10% of their monthly income into an equity investment over a 45 year period.

2. As they had generated sufficient capital to live off the dividend income there from, her grandparents had stuck with their equity investment throughout their retirement.

3. Unfortunately, her parents had failed to adopt a savings ethic and they had relied optimistically on their inheritances to generate their own retirement income.

4. The 3rd generation children (herself included) failed to comprehend the importance of generating an income and as a result were unable to adopt a savings plan or meet their own costs.

Time to start again.

How About We Just Let The Economy Go Completely Down The Tubes?

After a Congressman recently said on C-SPAN that the TARP was only passed after warnings of national collapse and martial law, a blogger at DailyKos came to the conclusion that this is just what the dr. ordered. That what we really need is for everything to be wiped out:

REALLY? I believe 'em, and I get why Dodd & Co. weren't about to let it happen. But... REALLY... wouldn't that have been the best thing for everyone? ight now, we have a Republican party devoid of credibility playing politics with what tiny percentage of the GDP can actually be spent to help people. What would have happened if the system simply, fully collapsed?

I seriously doubt they would institute "martial law"- maybe an "economic martial law" as in freezing all assets valued over x amount. Most companies in the U.S. and the world would be, on paper, insolvent. And, suddenly, all this wealth that has been transferred to the top 1 percent, is completely meaningless. You and I, with our sub-$100,000 accounts, would be fine. But the massively wealthy, it would all come crashing down. It would be yet another in a series of illustrations beginning with the robber-barons of the late 19th century, that this kind of greed-based-crony-capitalism DOES NOT WORK.

It would also have been the END of the unelected Fed presiding over the U.S. monetary system. Remove monetary policy from the Fed, and place it back in the hands of the people (through the House and Senate), and suddenly when main street suffers, politicians suffer. It changes everything.

It would also be the end of the IMF, etc. as there would be no money left to help deploy crony capitalism to the third world.

We wonder. Are there a lot of folks out there who feel this way? That we'd be better if everything went to all-out crap?

(via Nate Silver)

On Sale? Really? Prove it.

Fantastic article I found, On Sale? Really? Prove it, discussing the pricing inequities found in the world today.

With major companies now trading on the Market for the price of a hamburger, you’ve got to wonder what a SALE! sign means when you see it in every retailer’s window. I don’t think their idea of a SALE! is my idea of a sale. Like, before this whole depression works its way through the system, I think the idea of pricing is going to need a good hard look.

I’ll give you a few examples.

I eat a restaurant that business people frequent in order to a) have lunch and b) feel they’re important. It’s been a hot spot for quite a while, and its prices never really mattered because everyone there conducted their lives on plastic. That of course is changing. The big dudes who are doing all right still go, but the mid-level and borderline players no longer throng. I want you to guess the price of their cheeseburger. Give up? $35. That’s right. I asked the maitre d’ the other day whether they were planning a Recession Special to keep the seats somewhat more filled. He got very offended and went off on a screed about how expensive it is to maintain a restaurant in midtown Manhattan. Of course it is. But unless they moderate the prices, I’m guessing the grand institution will be out of business soon. Which is better? Selling five cheeseburgers for $35 or fifteen cheeseburgers for $20? You do the math.

In my little California town, there is a furniture store. It’s always had ridiculous prices, but their stuff is nice. There was, in particular, a bedroom dresser that we had our eye on. It was, I think, worth about $400 in real American dollars, so naturally, throughout the Fall, they had it in their window for $2500. No, I’m not kidding you. The store catered to people with too much money, and people with too much money don’t want to pay a little bit for the things they like, they want to pay a lot. Except there aren’t so many of those people around anymore. So last weekend there was a big SALE! sign in their window, as there is right now in virtually every window of every store in the United States, from Madison Avenue to Wilshire Boulevard. And we went in to look at the dresser and indeed, yes, it was ON SALE! For $2000. Come on, man. Give me a break. That is not a SALE. That is not even a recognition of reality. I’m positive that, just as my restaurant paid $1.29 for the meat with which they make their $35 cheeseburger, this place paid $300 at some yard sale for that dresser. When it’s ON SALE for $400 or $500, let me know. Because I like it.

I’ll tell you two places that know what a SALE means. The first is Wal-Mart (WMT). Today I heard an ad on the radio promoting greeting cards that start at 44-cents. Okay. That’s an amount I haven’t heard mentioned in a while. Their numbers beat analysts’ expectations last week. The other is McDonald’s (MCD), where sales were recently up 7.1%. I can assure you that a very good Big Mac in that establishment tops out at well under $35, and is probably a better buy at that price than most bank stocks that come to mind.

Two Cows Go to Wall Street

Best explanation that I have seen describing the economic fiasco in the US, from Clusterstock:

You have two cows.

John Paulson borrows one cow so he can sell it for $100. He gives you $10 as collateral.

You buy your neighbors cow for $100, which you finance by taking out a $90 loan from the bank and use John's $10 to make up the rest.

You brag to everyone about your financial health. You have assets--two cows you own, plus one Paulson owes you--worth $300, and liabilities of just $100.

A third of the country goes vegetarian.

You thought your two cows were worth $200 and now they are worth $140.

You express confidence in your financial health. Your assets are now worth only $200--your two cows plus the one John owes you--but your liabilities are still only $100. If necessary, you could sell the assets at this distressed price and pay off all your loans.

You hold onto your cows because you are sure the market is "dislocated." Some day someone will want to eat beef again.

The rest of the country goes vegetarian. Your two cows are now worth $2 each to guys who want to make dog food.

John Paulson buys a cow in the market for $2 and he gives it to you as repayment of the loan. You now have three cows worth six bucks.

John wants his $10 back.

The bank calls. It wants its $90 back.

You call the Federal Reserve and ask for a bailout.

28cm drill bit removed from worker's brain

Dai Longquan, a 19-year-old man from Jiangxi Province is currently recuperating at Renji Hospital after having a 28cm drill bit removed from his brain by surgeons. He was adjusting the drill when a tiny little accident happened — the bit shot into his right eye socket and was embedded 18 centimetres into his brain. By the time Dai was rushed to the hospital, he was already in a critical condition and was lapsing into a coma. Doctors made two small openings on each side of his brain and not only removed the bit (three centimetres of which had been bent into a right angle), but also saved his eye.

Shanghaiist

25 Stupid Facts List

My girlfriend joined Facebook recently and has been asked to post ”25 Things About Me”. It seems harmless enough; people write 25 facts about themselves and post the list on their Facebook pages, just as they do with videos, status updates and photos of last weekend’s party. An estimated 5 million of these notes — that’s 125 million facts — have appeared on the website within the past week. Assuming it takes someone 10 minutes to come up with their list, this recent bout of viral narcissism has sent roughly 800,000 hours of work time productivity down the drain.

Image via Wikipedia

She has been asking me for help in writing her list. I found this list of 25 stupidest facts. BSPCN

1. I eat tacos with a fork.

2. I was fat in middle school. The wake of that horror has yet to subside.

3. I keep forgetting that Barack Obama is our President.

4. I have been pooped on by a monkey.

5. I am addicted to the ass-slap dance move. Sometimes I don’t even notice I’m doing it.

6. When I finally told my now fiancé that I liked him (as in, liked him liked him), I drunkenly gave him the Anchorman line, “I want to be on you.” He had only seen the movie once and had no idea what it was from.

7. Just because I realize that Asian women are smarter, more attractive, and have about themselves a generally superior level of class does not mean I have a fetish. Just that I’m racist.

8. I eat gummy bears by tearing them limb from limb and eating their heads last.

9. I can’t grow hair on my arms.

10. Two of my best friends are under five feet tall and I have an intense fear of midgets.

11. I think yoga is incredibly spiritual. I know the Lord is with me in my downward dog.

12. I was born with jaundice.

13. I was born pigeon-toed.

14. I was born with an extra kidney. I wish I could have sold it on the black market and made some money, but it was underdeveloped and did nothing but cause me to wet the bed until the third grade.

15. I like to tape my thumbs to my hands to see what it would be like to be a dinosaur.

16. A horse once fell over while I was riding it.

17. I don’t believe in democracy.

18. I cried when Spock died in Star Trek II.

19. I drink two glasses of wine every night before bed. Wait, did I just admit to alcoholism?

20. If you asked me to tell you my favorite movie, I would have a hard time not saying Titanic.

21. I once sent a teacher into early retirement by pretending to be a cheetah and swiping at her from under a desk.

22. I once ran into New Kids On the Block’s Joey McIntyre in the lobby of an off-Broadway show. I told him he was the first boy I ever loved. He laughed and kind of smiled. This was the most gratifying moment of my life.

23. My friends say that when they shave my back, I purr like a walrus.

24. I don’t understand what people see in the Godfather trilogy.

25. Sometimes I think pee smells like Cheerios.

Cellphone explosion kills man in Guangzhou

Shanghaiist

A man in a Guangzhou Lenovo store died after the cellphone in his chest pocket exploded. The explosion severed a major artery in his neck and caused massive blood loss, almost immediately killing him. Though the make and model of the mobile phone are still under investigation, a member of the staff said the man had just changed his cellphone battery to a new one. This is the 9th recorded cellphone explosion in China since 2002, so maybe it's best to make sure your cellphone's in a bag or something, rather than on your physical person.