This is the 15th issue of The Renascence Review, which should probably be called The Muddled Musings, where we take a random walk down finance and whatever else I'm thinking about or consuming.
- Saving money 101
- China's sputtering economy
- A look at the 1947 partition of India
💰 Doses of Finance
This is a more practical follow-up to last week's issue about not needing a reason to save.
When we’re thinking about saving money, there’s three key things to understand. With a bit more reading and research, you can pretty much do this yourself, without the need of an adviser.
The first thing you need to think about is quite simple.
How much money do you have to save? How much do you spend every month? What's left? And how much will you need if you stopped working (or how long could you survive for for a certain lifestyle?).
It needs to be analysed and calculated properly. Because at the end of the day that is what’s going to provide you with freedom and security for years to come.
How to Save Well
The second thing you need to think about is how to save well.
Where should you put your money? When thinking about this, realise that the least risky investment, which is cash (holding cash in the bank, for example), is the worst investment over time. You can judge that by simply assessing the rate of inflation in relationship to the after-tax income that you're going to earn. Over time, you’ll lose money.
So, you need to put that money in assets that will do better than cash over time. When you do that, the most important thing to convey to anyone is to diversify, and diversify well. Because you can bet your bottom dollar that one of those assets will be disastrous in your lifetime and you’ll lose half (or more) of that saving. Nobody knows what the right asset will be, including the 'experts'. But those who know how to diversify, and diversify well, will be better off, and will probably have better sleep.
Be Prepared to Make Uncomfortable Decisions
Finally, you need to do the opposite of what your instincts are. The market reflects the crowd, so you want to do the opposite of what the crowd says.
You should buy when no one wants to buy. Sell when no one wants to sell.
That’s emotionally difficult and you’re probably going to fail at that, so don’t try to time the markets. Leave that to the people who spend millions every year on the resources to be able to do that (and who still fail - I'm looking at you U.S. large cap equity fund managers).
If you're going to play the game, then be prepared to make uncomfortable decisions. Compounding is counter-intuitive. But it works. And it could be responsible for the majority of successful investing attempts. So don't stop saving when the market dips. Buy, don't sell. In fact, the longer your time horizon, the more you should be piling in when everything is going to shit.
+ China's Recovery Weakens. While the rest of the world is living with Covid, China still isn't having any of it. All the new restrictions across the country led to a dent in consumer and business spending last month. And it's housing crisis continues to hurt. Despite the country's economic woes, there's little indication that the government is decisively trying to prop up growth. The small interest rate cut probably won't do much. The 5.5% economic growth target is looking out of reach. China doesn't seem to be worried about it though. The jury's still out (as it always is until the fact), but some conclude China will be an unreliable engine of global growth in the coming years. China's key stock index is down on the month, while the U.S. has been rallying as inflation eases. Just goes to show how its pandemic restrictions are setting it apart from other major economies. The world has opened up. China refuses. Almost every expat I speak to here is, or knows someone who is, leaving. My response...
...For now. Oh, and there's a new virus that comes from shrews. 🙂
An often overlooked part of world history. This week marked 75 years of Indian and Pakistani independence from British colonial rule.
But 1947 was no time to celebrate. The partition of India was made in blood.
It led to the biggest human migration in history, where between 12 and 18 million people were displaced and up to 3 million dead.
My own family fled by foot from Jammu, Kashmir to the new Dominion of Pakistan at the time. (My grandfather, a soldier in the British Army - who I never got the chance to meet - subsequently moved the family to London).
See part of the history of partition in photos here.
📖 Read. Zareer Masani's historical analysis of the partition is very much on point. "The historical evidence suggests that there was no inevitability about Partition and that the key decisions were rather finely balanced. It’s something of a myth that Indian independence was won by direct action and that Partition was the inevitable price exacted by a colonial power determined to divide and rule." [The Spectator]
👀 Watch. For those who prefer not to read historical analysis, Channel 4 recently produced a very watchable documentary - India 1947: Partition in Colour. You can also find it on Youtube [Part 1, Part 2]. It follows the three main players and the atrocities that unfolded around them. My snapshot on each of them:
- 🇬🇧 Lord Mountbatten, the last Viceroy of India, an incompetent, deceitful and arrogant man, he was tasked with governing the colony and was largely responsible for the mess and bloodshed. He had a clear agenda to underplay the horrific nature of the events that unfolded under his watch, oh so characteristic of British imperial mindset of neglect and denial.
- 🇮🇳 Jawaharlal Nehru, leader of the Indian Nationalist movement and first PM of independent India, a great orator who in part lifted India from colonial darkness, in part responsible for the partition. He later admitted that he acted wrongly after it led to so many deaths. He was also having an affair with Lord Mountbatten's wife, Edwina. Mountbatten's daughter saw it as a 'happy threesome'.
- 🇵🇰 Muhammad Ali Jinnah, the father of Pakistan, a liberal minded, whiskey-drinking, pork-eating lawyer (an unlikely founder of a theocratic state). However, he was a true ambassador of unity and never actually wanted partition. Unfortunately, the lines drawn to split up India had been fiddled with by Mountbatten and Nehru to satisfy their own personal and ideological ambitions, cheating Pakistan out of territory. Jinnah died an untimely death.
Nehru's historic speech "Tryst with Destiny" delivered on the eve of India's Independence, towards midnight on 14 August 1947. Like many of those whose actions and beliefs I don't always agree with, I can still be in awe of their talents. His oratory is up there with Churchill. It's a shame, he would probably despair at the state of Indian politics today, much like Churchill would at Her Majesty's Government, and Jinnah at Pakistan.
One of many hilarious videos of President Biden acting like he's taken something he shouldn't have. (Click to watch).
One of the key things to investing is to be aware when you hear a voice in your head that says it doesn’t make sense. That’s where the gold mine is — things that don’t make sense.
I hope that some of these passages gave you something to think about or wallow in. Let me know which links or comments resonate with you, what you think of the newsletter, and if there's anything I can support you with.