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Week 16: Making money

By Sam Instone - April 22, 2021

This week, the infamous Bernie Madoff passed away…

Mastermind of the biggest investment fraud in U.S. history.

The scandal at Bernard L. Madoff Investment Securities led to sweeping changes at the Securities and Exchange Commission.

And made many investors more cautious about their wealth.

Here’s what I’d like to share with you this week.

Bernie Madoff’s story reads like a Hollywood script – no wonder it was turned into one, with Robert DeNiro and Michelle Pfeiffer playing the power couple.

For more than 50 years, Bernie Madoff was renowned on Wall Street, a big money manager who founded his own firm at age 22 and became Non-Executive Chairman of the Nasdaq in 1990. He was credited with helping develop some of the systems and market structures that moved the stock market beyond the trading floor and gave rise to modern, electronic trading. But it seems the sudden fame and fortune led to greed and the eventual downfall of his multi-billion-dollar empire.

With new wealth comes new emotions. Abnormal Returns says the acquisition of wealth seems to be occurring at a more rapid pace and has a lot to do with the changing nature of the American, and global, economy. Modern technology, when it works, generates sales (and wealth) faster than it did in the past. And this wealth is captured along the way by individuals.

The same article links to Paul Graham’s post on “How people get rich now”. In it, Paul talks about the most common source of wealth among the world’s richest. In 1982, it was inheritance. By 2020, the number of heirs had been cut in half – only accounting for 27 of the 100 biggest fortunes. Why? Because more people are making their own fortunes than inheriting them.

A very recent example of this is the story of a woman who became an overnight tech millionaire. She shares her experiences and emotions in New York Magazine to shed light on how stressful sudden wealth can be. It can change your perspective on life, make you question every financial decision (since there is more money at stake) and alter relationships. She also talks about the ways her new wealth hasn’t changed her life and why she has become more cautious than ever about her money.

We’ve all read articles looking back on the past year. Some take it from a slightly different perspective, diving into the characteristics of the last bear market. Nothing comes close in terms of how quickly it started and how quickly it ended. This entire bear market ended in under 200 days. The market peaked in February, and by November, it was at new all-time highs. So what does this teach us about the markets? What can we expect in the future?

Whether you know it or not, the way you work with your money is shaped by your emotions. Behavior Gap’s latest piece is especially for those who feel a constant nagging anxiety around money – even when they’re doing all the right things. Carl Richards says “anxiety” is the most common theme he encounters from people he speaks to all over the world. For those who grapple with uncertainty, there are two powerful points Carl suggests you consider.

You’ll also find more insights around what we can and can’t control in this podcast. Behavioural finance geek, Neil Bage, talks about how people maintain their composure in life, what it takes to be a courageous investor and how advisers deal with the emotional aspects of their clients’ journeys.

From anxiety and uncertainty to happiness…

Arthur C. Brooks discusses the joys of wealth being nothing without other people. Research shows that how the wealthier among us spend their money makes all the difference for their well-being - specifically, spending money to have experiences, buying time, and giving money away to help others. If you buy an experience, whether it be a holiday or just a dinner out, you can raise your happiness if you share it with someone you love. Friends and family are two key ingredients in well-being.


A question for you:

Where do you want your wealth to take you? And who do you want to have with you along the way?


This week's meditations

"Be thankful for what you have; you'll end up having more. If you concentrate on what you don't have, you will never, ever have enough."
Oprah Winfrey

"There are a million ways to get wealthy, and plenty of books on how to do so. But there’s only one way to stay wealthy: some combination of frugality and paranoia."
Morgan Housel in The Psychology of Money

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Have a great weekend and enjoy the ‘light’ reading! 


CNBC's news story 'Bernie Madoff, mastermind of the nation’s biggest investment fraud, dies at 82'

Abnormal Returns' 'New wealth comes along with new emotions'

Paul Graham's 'How People Get Rich Now'

New York Magazine's 'Confessions of an Overnight Millionaire'

Michael Batnick for The Irrelevant Investor 'Have Bear Markets Changed Forever?'

Carl Richard's 'The magic certainty button…'

Standard Deviations podcast episode 'Daniel Crosby & Neil Bage - The Laws of Wealth'

Arthur C. Brooks in The Atlantic 'How to Buy Happiness: The joys of money are nothing without other people'

High performance professional, email community - Sam