The Things They Don't Teach You in School
Cops and money... The things they don't teach you in school... Dumb and dumber... An American story... Our collective debt nightmare... Always be learning...
The veteran Baltimore City cop started to talk about money...
We were sitting in the officer's makeshift office in West Baltimore's Pennsylvania Avenue Market. It's about a 10-minute drive from our Stansberry Research headquarters, but it might as well be an entire world away...
This is the part of Baltimore that was portrayed in the former HBO hit show The Wire... the blighted side. Most people would tell you not to come to this part of town at night, at least not without a police escort like I (Corey McLaughlin) had...
Robberies, assaults, drugs, murders, shootings... Evan Anderson, an 18-year Baltimore Police veteran, has seen all of it on a regular basis. For the fifth straight year, there have been more than 300 homicides in Baltimore... many in the district where he works.
In fact, as we talked – his now-standard-issue body camera pointed right at me – Anderson admitted people were probably dealing drugs on the street outside the building at that moment.
We were talking about something completely unrelated to regular Digest matters. But as so often happens, you'd be surprised at how much two ideas, or different worlds, are connected...
Across the country, a lot of folks try to offer solutions for the problems in low-income, high-crime areas like this one, Anderson said. They often suggest adding more cops or stiffer enforcement. But he went in a different direction with how to make things better...
'Schools don't teach people finance,' Anderson said...
"Most of us – not until we're adults, get credit, and mess up – we're not learning how to save or invest or anything like that," he said, alluding to his own experience in racking up consumer debt. "That's why a lot of people get in the situations they're in."
Finance should be a mandatory class in high school, according to Anderson. (I countered with middle school.) As he explained, maybe then people would find better ways to live, rather than taking a few bucks from a local drug dealer to go sell some products on the corner.
"We don't find out about finance and investing until we're already in trouble, then we go looking to learn, and you have so much ground to cover," he said. "My son is 16. I'm teaching him, breaking it down, that way he doesn't have to make the same mistakes I did."
This isn't just a Baltimore story, or even a low-income story. It's an American story...
Many Americans don't even know what "debt" or "interest" is. If you don't know what those terms mean, how would you know you should avoid it... much less, how to avoid it?
Regular Digest readers know we talk about debt a lot. In fact, we published an entire book about the country's astronomical levels of consumer, federal, and student-loan debt... which only a reset of our financial system – a so-called "debt jubilee" – will fix.
Our colleague, Stansberry NewsWire editor C. Scott Garliss, noted this morning in his daily market snapshot...
If you polled people across America, there's one thing that most of them would say they don't have enough of – cash.
After all, according to debt.org, by the end of 2018 Americans had a total of $13.2 trillion in debt. By the end of [the second quarter of] 2019, that number hit roughly $13.9 trillion, up $219 billion from the previous quarter.
It likely doesn't surprise many Digest readers that most of America is financially illiterate. But the degree to which many Americans are "financially dumb" might...
According to research from the FINRA Investor Education Foundation, only 34% of 27,000 adult respondents to a nationwide survey could answer at least four of five basic financial literacy questions on topics such as mortgages, interest, inflation, and risk. (Check out the questions here.) That's down from 42% who could answer four of five correct in 2009.
In other words, we're not only already financially dumb as a population, but we're getting dumber.
It doesn't take a certified sleuth to tie our collective financial literacy to our growing mound of debt. This isn't just a pie-in-the-sky discussion in a vacuum...
It has gotten to the point where Democratic presidential candidates Elizabeth Warren and Bernie Sanders now want to wipe the slate clean... as if $1.6 trillion in student loans were never approved. Would they wave a magic wand and eliminate all future debts, too?
Even the U.S. Treasury Department admits the role education plays in our collective debt nightmare...
Earlier this year, the Treasury Department recommended mandatory financial literacy classes to college students. You can read the 44-page report with the guidance right here.
In its recommendation, the department urged college kids to learn the basics of financial planning, and also pointed out that "the complex financial choices students must make are compounded by the fact that, for decades, the cost of college has been rising far faster than incomes."
For millennials – including those who graduated college during the financial crisis and the younger end who graduated a few years ago – this idea comes too late.
A Wall Street Journal article earlier this year about the country's largest generation was appropriately headlined, "Playing Catch-Up in the Game of Life." Here's an excerpt...
American millennials are approaching middle age in worse financial shape than every living generation ahead of them...
Hobbled by the financial crisis and recession that struck as they began their working life, Americans born between 1981 and 1996 have failed to match every other generation of young adults born since the Great Depression. They have less wealth, less property, lower marriage rates and fewer children, according to new data that compare generations at similar ages.
Meanwhile, the Baby Boomers – our country's next largest generation – are aging into retirement. By 2030, one in five Americans will be 65 or older.
That demographic shift will put unprecedented stress on health care and Social Security systems... the former of which is broken and the latter of which is going broke.
In fact, this year marks the last one that taxes will fully cover the cost of Social Security, meaning the government will need to tap into reserves that are projected to last only until 2035.
All the while, the Federal Reserve continues its "Goldilocks" economic policies – not too hot, not too cold... And we've seen bubbles in niches like cryptocurrencies, cannabis stocks, and even overvalued "banana art," as my colleague Dan Ferris discussed on Monday.
Now, if you're a regular Digest reader, we know you're one of the smart ones...
Our Dr. David "Doc" Eifrig touched on this in the December 9 Digest. It's well worth the read, if you haven't done so already. Doc wrote in part...
Think of all the time you've spent learning how to build your wealth...
Everything you learned to achieve what you have in your career... all the thought that has gone into spending wisely and saving as much as you can... and all the time you've spent learning how the world of finance works...
He continued...
Most people don't want to learn. I get it... Learning puts you face-to-face with something you don't know and makes you feel frustrated and inadequate.
We did it all the time as kids. But when we get to adulthood, we've got some sort of belief that we're supposed to already know everything. Not knowing something is seen as failure.
I can't imagine the opportunities – both financial and experiential – that get passed up by those folks who refuse to learn.
We see it in our financial-research business all the time... While we try to educate and explain in every issue, many readers just want a stock symbol they can go out and buy.
If you're in the select group of readers who actively pursue new knowledge... try to understand the markets... and have learned how to best manage your wealth... you deserve a pat on the back.
It's never too early or too late to learn – and keep learning...
Charlie Munger, Warren Buffett's longtime partner at holding company Berkshire Hathaway (BRK-B), once said, "Those who keep learning, will keep rising in life."
Munger also said, "Just because you like it does not mean that the world will necessarily give it to you."
In other words, nothing is guaranteed... but you have to be in the game to have any chance at all.
Maybe a parent, guardian, or great mentor in your town turned you on to finance and taught you the basics of investing as a kid.
Or maybe you taught yourself about money... with Lemonade stands... selling gum at school... or watching your grandfather write down stock tickers from the newspaper or television screen. Or maybe you worked your way through college.
I'm sure a good number of Digest readers might have their own fascinating stories about their investing origins (We'd love to hear them at feedback@stansberryresearch.com.) And you've no doubt learned a lot of things since then.
But the world is not static... Things change – and we must keep up with, or ahead of, the trends.
For a kid growing up in West Baltimore, that might mean learning the basics of savings, checking, and credit. For the child or grandchild in your life, that might mean learning about basic investment vehicles and the risk-reward ratio of going into debt to pay for college.
For experienced investors, it can mean a lot of different things...
What can you do to make yourself a better investor? What can you learn that will take your investing to the next level?
Maybe you want to learn how to use trailing stops to protect your gains during this record-setting bull market, or how to best allocate your portfolio.
Maybe you want to take Doc's advice from last week's Digest educational series and try using options safely to generate steady streams of income.
Whatever it is, just remember what I learned recently from the Baltimore Police veteran. And remember Charlie Munger's quotes...
If you're always willing to keep learning, you'll keep rising in life.
New 52-week highs (as of 12/17/19): American Financial (AFG), Alibaba (BABA), Bristol-Myers Squibb (BMY), Berkshire Hathaway (BRK-B), Blackstone Mortgage Trust (BXMT), WisdomTree Emerging Markets High Dividend Fund (DEM), iShares Select Dividend Fund (DVY), New Oriental Education & Technology (EDU), Equinox Gold (EQX), Intuitive Surgical (ISRG), iShares Russell 2000 Fund (IWM), JD.com (JD), JPMorgan Chase (JPM), Masco (MAS), Nuveen Municipal Value Fund (NUV), Nvidia (NVDA), Novo Nordisk (NVO), Invesco High Yield Equity Dividend Achievers Fund (PEY), ResMed (RMD), ALPS Medical Breakthroughs Fund (SBIO), Southern Copper (SCCO), ProShares Ultra S&P 500 Fund (SSO), TAL Education (TAL), ProShares Ultra Semiconductors Fund (USD), ProShares Ultra Russell 2000 Fund (UWM), ProShares Ultra Financials Fund (UYG), and Vanguard S&P 500 Fund (VOO).
In today's mailbag, we have another piece of feedback for Dan Ferris. And again, we'd love to hear how you got started as an investor. Please share your stories with us at feedback@stansberryresearch.com.
"Dan, you have truly found your writing 'voice'. Your Digests over the past six months have been nothing short of amazing. Bravo!" – Paid-up subscriber Ryan M.
Happy holidays,
Corey McLaughlin
Baltimore, Maryland
December 18, 2019