Tag Archives: savings

January 20, 2012 · 8:00 am

Savings and reports

Yesterday I had a hilarious conversation with 3 work colleagues on the cost of several things: ranging from the cost of having 30 people enclosed in a day-long meeting to the cost impact of having the toilets of a whole office building not working for two days (cost measured by the extra time needed for fulfilling physiological needs).

This reminded me of the US Department of Defense’s “Defense Efficiencies Initiative” launched in 2010 by former Secretary of Defense Robert Gates.

One of the initiatives was to:

“[…] publish the actual cost of the preparation of each report and study prepared by DOD in the front of each document. “

See the implementation in the picture below:

Cost of DoD Strategic Management Plan FY 2012 - FY 2013: $169,010 (FY 11 dollars).

The cost of preparing the Department of Defense Strategic Management Plan FY 2012 – FY 2013 was $169,010. You may see the document here [PDF, 1.6MB] and judge by yourself whether you find it worthy of those 169k$.

Now, imagine if in the next crowded meeting you are attending the first slide of the first presentation said “Gentlemen, with this meeting today we’re consuming: xxk€”. The same applies for IT systems down, facilities not operating as they should, etc.

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NOTE: Researching and writing this post took me about an hour. The cost of that hour? You name it 🙂

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October 10, 2011 · 10:00 am

Invest in real assets (pencils if need be)

My previous post discussed why it is better to be invested in real assets vs. cash or bonds in order to protect your savings in case of a recession.

Even though all the references were to stocks, I kept the word “assets” instead of “stocks” in the title and conclusion of the previous post in order to come back to it a later time, in this post.

Bestinver fund managers, in their conferences, have often given examples of assets to be invested in to protect your wealth such as pencils, chairs, and, this year, books.

If by the time a recession came and inflation started to build up, you had all your fortune invested in pencils, the same discussion that was made in the previous post with stocks would hold true for pencils.

For example, say that Southern Europe (Greece, Portugal, Italy…) in a near future needs to kick Germany out of the Euro due to its fiscal irresponsibility. Germany would then have to use another currency, e.g. the Deutsche Mark. Say that at day one the mark would be worth 2DM = 1 Euro, as it was more or less 10 years ago.

Due to the inevitable capital runaway from Germany, Germany would most probably undergo a period of hyperinflation and mark devaluation that could very well end with 1 Euro being worth ~ 2.000 DM. Obviously, the prudent Bavarian who had all her savings in cash would have nearly lost all of them.

However, if this Bavarian had instead purchased pencils in order to protect her wealth, she would have seen a different outcome. Say a pencil cost 0.5€ at the beginning, or 1DM. After all the hyperinflationary period, and if German students still needed pencils for their classes a pencil would sell for ~1,000DM. Thus, as the theory goes, the Bavarian investor would have protected her wealth just by being invested in real assets, i.e. pencils.

Of course, if you wanted to see your wealth grow pencils wouldn’t be the best assets to be invested in, as they do not reproduce, or any other assets are taken out of them, but to protect your savings they would work just fine.

 

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