Collectivism Vs Individualism

I decided to write about this topic because its one that gets little attention, yet it is the source of much heated debate and polarisation in our societies. I often hear those around me asking questions such as “why are we invading Syria” or “why do regulators allow glyphosate on our foods” or “why is Snowden a traitor when he simply shared with us constitutional individual rights being violated” .. but few seem to engage in a broader philosophical discussion at the epicentre of all these questions: Collectivism Vs Individualism, i.e. are we individuals a sovereign entity, living life as we see fit, acting on our judgment and keeping and using the product of our effort .. or are we just part of the group, with no rights, sacrificing our values & goals for the group’s greater good? Do we have irrevocable individual rights or only to the extent that society permits us to enjoy?


This conflict lies at the very core of  our political philosophical differences. The left leans towards the group, the right towards the individual. The difference may seem trivial, but its implications run deep. Focusing on the group legitimises for example the many wars we regularly engage in. Or Hitler’s holocaust extermination of millions of Jews, presumably for the greater good. Middle East invasions have also been justified for the greater good (to bring democracy).

But let’s stop and think for a second. Does it make sense killing millions of individuals in the Middle East for the “group”? What is actually a group? Can we touch it? Does it even exist or is it simply a social construct we made up? How can we prioritise a social construct versus actual human beings? What if you’re one day at the losing end .. can we simply take away your rights/property/life if the group deems appropriate? Where do we draw the line? Snowden and Assange exposed the many ways in which the “group” (i.e. Government) violated the individual rights of its citizens. Yet, they are largely perceived as traitors because the group seems to be all that matters, even if it means breaking constitutional laws.

Current situation:

Are we individuals prepared to sacrifice ourselves for the greater good? We all say yes, but that’s more aspirational than reality. At the end of the day ..the vast majority of us want to pay as little taxes as possible, no one wants to volunteer for the war .. or pay higher energy bills to save the planet. We all SAY we want the best for the group, but only to the extent that it does not interfere with our individual rights/preferences. The problem is .. if everyone’s individual rights were to be taken into account .. it would be impossible to form a group policy.

As a consequence, the group (i.e. government) is forced to build imaginary narratives to force us to give up individual rights and work for the collective .. without us noticing we’re doing so, or shaming us if we don’t. I should add that its not only Governments that manufacture reality, everyone at the top of any social construct (companies, nations, religions) does so in order to maintain power, instil confidence, maintain cohesion and give the illusion that all’s well. They say “power corrupts” and “absolute power corrupts absolutely”. There certainly is some truth to it .. but what we perceive as corruption may simply be measures that prioritise the collective. If only the leaders could tell us as it is… most of us have a hard time dealing with the truth anyway .. so they are forced to manufacture reality.

Lets look at the numerous current examples where this conflict takes place and what narratives the group built to convince the individual:

1. GMO foods: In order to feed the 7.4 billion people (and growing rapidly) and avoid social unrest / wars … we have no alternative but to engineer ever cheaper ways to feed the world. We can’t all eat organic or the same way our grandparents did 60 years ago (when we were 2.5 billion people). Its hard to imagine why would the group (i.e. Government) allow for pesticides and chemicals to be added to our foods .. but do we have a realistic alternative as a group (if we are to feed everyone)? If you don’t go along with the group .. you’ll be called an anti-science as a deterrent.

2. Mainstream media: The role of the mainstream media is NOT to inform the individual but to act in the best interest of the collective, and that often means manufacturing reality. As a society we can’t have everyone successful, healthy, vibrant, creative, rich. We need to have someone looking after the sewage, cleaning the houses, farming, preparing our foods, policing the streets,  etc. So the news (and reality) are manufactured to serve the larger group’s, not the individual. Imagine what would happen if Japan would inform its citizens the extent of the Fukushima nuclear radiation disaster. Millions of jobs from its fishing industry would disappear overnight, many coastal cities would be deserted, causing chaos. We have to understand why the Japanese Government lied for so long to its own citizens. Social cohesion and stability is the goal. If millions of people get radioactive contamination in the process…that’s collateral damage and the price to pay for social stability. If one wants information to help the individual, we’d have to watch alternative media or the so called “fake-news”. If you don’t go along with the group .. you’ll be called a conspiracy theorist as a deterrent.

3. War: Wars are part of human history and popular amongst politicians as they solve many of societal problems (inflate away the accumulated debts, unite the divided citizens, reset happiness levels, etc). So wars are necessary for greater good (its debatable, but lets just assume that for the sake of the argument!).. but no one wants to be the one scarifying itself. So we’re forced to manipulate the public opinion and appeal to patriotic feelings in order to get any individual to sacrifice. If you don’t go along with the group .. you’ll be called unpatriotic and a coward as a deterrent.

4. Education: Is the education system preparing individuals to thrive .. or is it standardising them to fit the group? Its obviously the latter and understandably so.  Not everyone can be entrepreneur, creative, rich. For every entrepreneur, there are hundreds of workers, for every rich, there are hundreds of poor. That’s the way it goes and it always will. We need armies of employees to work in our factories, banks, public services, etc. When we send kids to public schools, we are sacrificing our individual children for the benefit of the group (by suppressing their natural abilities, making them submissive, standardising them). This realisation helps explaining the emergence of the homeschool phenomena and other special schools that focus more on the individual (Montessori education for example). If you don’t go along with the group .. you’ll face social pressure from friends/family as a deterrent.

5. Immigration: Developed economies need the constant influx of immigrants/refugees to have functioning societies. If we want our pensions paid, our schools to work, our welfare monthly check .. we need an ever increasing taxpayer base (because somehow thats how we build our economic system, predicated on perpetual economic growth and perpetual population growth). With 1.4 fertility rate in the West .. we have no alternative but to cause instability in the Middle East to drive migrants and refugees to our countries. Of course, we can’t say this out bluntly we need to manufacture reality and appeal to our humanitarian instincts to help others in need. Individually no one wants to host a refugee or migrant in its own house/neighbourhood, but collectively we somehow accept otherwise you’ll be called a racist, bigot and a Nazi as a deterrent.

6. Medical advancements: In order to advance society (and the group) we need to constantly experiment new drugs / treatments on patients. Most of the times we experiment on other animals but it is also often conducted on fellow humans.

We know that ~35% of medical diagnosis today are wrong and 200-400k people die annually from medical mistakes. What we know for sure is a cure today .. tomorrow is likely to be proven totally wrong. Again, this is necessary if we are to advance the human species. Obviously no one wants our sons/daughters to be the chosen guinea pigs of medical industry but is there an alternative? Don’t expect your doctor to tell you you’ll be the subject of an experiment. Understand we all are to a certain extent when you visit a doctor.  If you don’t go along with the group .. its because you believe in bogus and quackery alternative medicine as a deterrent.

7. Consumerism: As Tyler Durden puts it in «Fight Club»: “we buy things we don’t need, with money we don’t have, to impress people we don’t like”. Its easy to criticise consumerism and everything that surrounds it (status-seeking, shallowness, planet destruction) but do we have an alternative? What would happen if we started buying things we need, with money we had, to impress people we like? Consumerism is the mantra underpinning our societies and we need it to sustain the “group”. Individually we would be better off consuming less and saving more .. but collectively we’re better off if everyone is constantly buying stuff and spending money .. at least within this economic system we built. Sooner or later we need to redesign the system (or migrate to Mars) given the level of ecological damage to our planet, but that’s another topic.  If you don’t go along with the group .. you’ll be seen as uncool, socially awkward.. as a deterrent.

8. Surveillance / cashless societies: Given today’s levels of income inequality, its inevitable that Governments take more from the rich to give to the poor. One of the ways to ensure it .. is to introduce cashless societies (well under way, particularly in the Nordic countries) whereby everything is traceable and the rich and the criminals can’t hide anymore in off-shores or illicit transactions. We lose as individuals (to the extent that we’re no longer anonymous when we transact) but we benefit as a group (to the extent that the Government passes on the additional government to those in need). But remember, the story needs to be sold as benefiting the individual, so what’s the narrative? Oh well, this is to tackle the terrorists and criminals. Same goes for surveillance, we need to spy on you otherwise we can’t protect you from the “terrorists”. Its easy to see how the group actually need criminals and terrorists in order to push for the best interests of the group. The day we have worldwide peace .. may be a worrisome day for the group. If you don’t go along with the group .. its because you have something to hide, you’re doing something illicit..


Whether you lean to the left or right politically .. one has to recognise being at the top is not easy. The balancing act between the group’s interests and the individual .. requires a level of fortitude not possessed by many. We also need to acknowledge there’s a lot of vested interests and those in power always choose the path of least resistance. Most often than not they need to choose for the lesser of two evils, not the optimal solution. The 2008 banking crisis was a good example of that. Probably the right thing to do would be to let the banks fail but our savings would have gone as well and a 20 or 30 years depression would ensue. And depressions are generally followed by wars. So the path of least resistance was to bail out the banks with taxpayers money. That’s incredible unfair, but the alternative was worse. These are the decisions leaders face regularly. And the people at the bottom are so caught up in the rat race trying to make ends meet .. that they’re happy to live in a manufactured reality and be fed bread and circus day after day.


Reflections on a sabbatical year

15 months ago I quit my job. It wasn’t an easy decision, it took me 1 year to find the courage to take the leap. My parents couldn’t grasp the idea of me not working willingly. No wonder, in today’s society your job is your identity, it becomes who you are. How could anyone in its mid-30s, 4 years after investing 6 figures in an MBA .. decide to quit with no idea what to do next?

Well, the idea was to pause, reflect on my career journey, upgrade my software…and hopefully find a passion or a cause worth fighting for. 15 months into my sabbatical, here’s some reflections:

Turbulent time: It depends very much what you do with your time, but assuming you take the opportunity to read books, cultivate your mind, re-learn history, watch documentaries, travel, will inevitably start challenging some of the dogmas and beliefs you were brought up with, which will make you look at the subjective reality in a different way. We all change throughout life but if you compress 20-30 years of information into 1 year .. it can be hard to assimilate and process everything, specially if you remain open minded and when many things run counter to your previous beliefs. Be prepared to feel agitated and with a permanent sense of discomfort. The journey to understand the complexity of the world is not an easy one and it becomes harder as your knowledge evolves. As Einstein famously said “The more I learn, the more I realise how much I don’t know.” So if one expects to get out of the sabbatical with answers about the world or about life .. it’s an illusion.

Purpose of life: Some will argue the purpose of life its to pass on the torch to our kids, others to leave a legacy, to seek happiness, to find a passion, to contribute to a better world, to make things happen, to disrupt the status-quo, to find what you’re really good at .. so that you contribute to society the best way possible. Either way, I struggled and still struggle with this one. I don’t think you will ever find a definitive purpose in life. We’re in a constant state of flow, we’re growing/changing every day and all the time. Your purpose yesterday may be meaningless today. My suggestion? Search for meaning, because happiness is inherently temporary. You can’t be happy all the time. But true and lasting happiness comes from meaning. Its worth thinking about “what is my meaning” on your next holidays. In the process, keep growing and learning, seek and accept truth, try to see the things the way they truly are, not the way you wish they were. Be in harmony with that.

Quantum physics: This is perhaps the most complex topic I studied. We are barely touching the surface on this field but the ramifications are far reaching. It makes you question the nature of reality and whether this is real or just a simulation. And each person will take its own conclusions from quantum theory. That said, my main take away was that the universe is neutral and its shaped by our consciousness, that our lives are a reflection of our beliefs. So be critical and mindful of what your beliefs are because the universe will organise itself to respond to what these beliefs are. If you believe you’ll be rich, chances are .. you’ll end up rich. If you believe you’ll die young .. you’ll probably die young without understanding why. If you believe you’re not good enough, chances are you’ll not succeed at whichever endeavour you’re involved (job, relationship, goal). You are ultimately responsible for your circumstances, no one’s to blame. Create your own reality by being very critical of what beliefs and thoughts you allow to enter your mind. We may not be the owners of our thoughts or beliefs, but we’re the owners of the decision to keep holding those beliefs.

Golden cage: Many of my friends find themselves in a golden cage situation – good salary, 2/3 kids to feed, a job with social status, etc. But below the surface, something is missing. They understand that “good is the enemy of great” and they may never reach greatness because they settled for good. They boxed themselves into corner and accept that many of their dreams will never come true. Fortunately throughout my life I met many people that escaped the golden cage. They inspired me and instilled in me the belief that life is not inevitable, that you make a decision every day of your life whether to continue working or quitting. If you stayed 5 years in a job, then you’ve made 1825 daily decisions to stay and work that day. My advice? It depends on personal circumstances and personality type. Many of us prefer missing out on being “great” but also not risking going broke (specially people with kids). Others prefer to live life to the fullest. Do what feels right for you but then own your decisions, take ownership of them and don’t moan about it.

Money and happiness: Its a cliche but money does not buy happiness. In my opinion what matters is the actual slope of the curve or the hope that the slope will be steeper than it is today. Its not necessarily your circumstances that will determine your happiness but the hope that the circumstances will be better. A 20 year old person is always much more full of dreams than a 40 year old. As you marry, buy a house/car, get kids, etc .. your liabilities rise and you loose the ability to be who you want to be, you relinquish your future freedom. My take on happiness is that it comes from inside regardless of material possessions. It comes from meaning, from being generous to others, from appreciation for what you have (air in your lungs, loving family members, a sense of community, good health) and from empowerment/freedom (working for a growing/exciting industry, having power over your future, being financially free), etc. When I was young my goal was to be rich, but as I became wealthier I started understanding that money is a means to something else. And its this “something else” that either makes you happy or unhappy.

History: Maybe the more influential book I read was “the lessons of history”. This book challenged many of my previously held beliefs. Its a book that helped me settling my anxiety levels by virtue of understanding why the world is as it is today. Main takeaways:

  1. Equality and freedom are incompatible – hence the need for (corrupt) Governments
  2. The world has always been about competition for resources – in the last 3500 years we’ve only had 200 years of global peace
  3. Out of 100 new ideas, 99 will probably be inferior to the one they propose to replace
  4. Sin has flourished in any age; Romans abused children and were phedophiles, men have been dishonest and governments corrupt. The higher you climb, the dirtier it gets.

Its nice to be romantic about the world but history shows brutality has plagued the world for thousands of years. It has and always will be a brutal place to live, at least until humans are humans (i.e, forever).

Free-will & determinism: Do we have free-will? Or are we simply deterministic apes following our instincts with no control over our decisions? The question has kept philosophers busy for centuries but the consensus seems to be the latter. This has been a remarkable personal realisation which changed the way I see the world. No more room for pride or guilt. No more blaming of people. If we want to change behaviours we have to change incentives and/or the environment around us. Much like we’d change the zoo configuration if we want animals to behave differently. We’re simple primates acting in pre-deterministic ways, looking for survival and reproduction and those 2 instincts guide all our behaviour, one way or another. It removes a lot of the fantasy and romanticism in life, but allows you to see reality as it is.

Conspiracies: I’ve been deep on this rabbit hole. My understanding is that it is another form of religion. As with any religion, it helps us solving the mysteries of the world and helps alleviating the pain of the uncertain nature of the universe. We can’t cope with not understanding many dimensions of life, so some people resort to religion, others to conspiracies. Its very tempting to think you finally got it .. that you finally understand the whole picture .. but believe me, the world is far too complex for the easy answers found in (most) conspiracies. And even if 50% of them are real (may well be the case), how does it help you living a more fulfilled life? Remember, your thoughts affect your reality, so sometimes may be best to naively ignore them, particularly those you can’t do much to change. I still read them as I find it a much better source of information than mainstream media (totally discredited by now after Brexit and Trump), but make sure you take it with a pinch of salt. Humanity is not the wonderland I’ve been told as a child/teenager .. but it may also not be as bad as some conspiracies paint it to be.

Final thoughts: There are no accidents in the universe. If you’re reading this blog then part of you is looking for answers that a sabbatical may give. But again, if you’re moving forward, if you’re excited about life, if you look forward to Monday and not to Friday .. then a sabbatical is not for you, at least not now. But realistically how many of us live for Mondays? Most of us are stuck in a job/industry whose best years are behind or adds little to the world (like me in Finance). If it no longer makes sense selling your precious time for a salary (however high it may be) ..then be bold, jump and trust things will be allright. We’re not plants, we have no roots sticking us to the ground, we’re free to move. Or if you have no savings, then reduce your liabilities and/or increase your assets so that you can get the option in a few years time. Our passage on this planet is ephemeral. We’re bacteria to this world. Nothing really matters that much, not even our legacy. We’re just here 70 odd years in 50 billion universe history. Take yourself and your life less serious and enjoy our short passage here.





Trump rate hype: Time to lock in mortgage rates?

With Trump’s election hype in interest rates (2.25% vs 1.7% before election on the US 10 year yield) many people are wondering if its a good time to lock-in long term rates ahead of a possible rate hiking cycle.

So far mortgage rates haven’t gone up and are still at historical lows but with Government yields going up worldwide, how long will it take for mortgage rates to follow? If the yield spike proves rates will inevitably follow. But I do not believe they will, and here’s why:

Let’s look at MoneyYou mortgage rates as of Nov 16th:


Why would fixing rates for 10 years be 25bps lower than floating? Wouldn’t you expect to see them higher? Floating rates have always been LOWER than fixed, not HIGHER. You ought to ask yourself, why would that be? Whats the catch?

If you actually go to a bank now, the sales person pushes hard for you to choose 10-year fixed and not the floating. Why? Because they’re told to do so by management in order to maximise the bank’s profits. Banks know the average person only does business with the bank every 10 years or so when’s time to re-mortgage the house. So there’s no recurrent business, there’s really no need to please or satisfy the customer. By the time you come back 10 years later, the mortgage broker is gone, the physical branch gone, the bank itself might be gone too. Pleasing a mortgage holder customer is really not the priority.

Psychology behind decision: 

When you lock in rates for 10 years it always feels you’ve got a great deal. You sleep better, have less anxiety, and genuinely think you got the better hand of the deal. But remember, this is a zero sum game, your profits are someone else’s losses and vice versa. And generally its the professionals (banks) that get the better hand, not the amateurs (clients). I’m sure if you ask the people that locked rates in 2006-07 they thought they were getting really good deals. Same with me when I locked in rates in 2014 @ 2.85% for 5 years. 2 years on and I already look pretty stupid.. And the same will happen today. Its tempting to lock 10 year rates at 1.65% because its already a pretty low rate .. but within 2-3 years there’s a high likelihood that rates will be 0.5-1% range and you’ll be paying 2/3 times more in interest costs.

But how do I know when rates might be reversing and turning higher?

The way I’ll do is to monitor closely the spread between 10 year fixed and floating rate (circled in red).


The moment this gap starts to narrow or it gets to zero .. is probably a good time to lock rates for 10+ years, but I expect that NOT to happen in the next few years/decades.

Interest rates will have to stay low and go down to keep the economic system alive and keep enormous debts serviceable. Rates could only go up sustainably if we’d have strong inflation or growth, in which case your salary/income should also increase proportionally. And if inflation really gets out of hand .. well, that’s even better because it would wipe out your debts. Also the establishment’s strategy to grow our way out of debt is financial repression, which essentially means rates will stay lower than inflation for decades to come. That means in the eventuality that rates rise and your debt costs rise .. they will rise less than inflation, meaning less than your income (assuming your income grows in line with inflation, of course).

Could mortgage rates go up temporarily for a few months? Sure they could. But they would resume the trend back down pretty soon again as they’ve done in the last 30 years. Nothing goes down in a straight line, there’s always bumps along the way .. and this is just another Trump bump.


The temporary rises in the long term downward trend in rates .. are nothing more than an opportunity to make money out of people’s fears. Many people jump the gun at the first signs that rates might reverse course .. and of course banks/investors love it as they “steal” money away from the mortgage holder.

Imagine this for a second: Japan already pays close to 50% of its entire Government budget to service its debts at close to zero rates. Imagine if rates would normalise and go up .. Japan (and the rest of the Western world) would collapse. Don’t get intimidated by this sudden Trump rise. Hold your ground, be brave and don’t look for immediate gratification by locking rates.

Final notes:

1. This strategy isn’t for everyone. If you can’t afford at all any sudden interest rate spike (i.e. if have high debt service costs relative to your income and little savings/liquidity) then you should NOT go for floating. You don’t want to end up having to sell your house/car/ business to keep up with interest payments.

2. If you’re really uncomfortable with the risk and you can’t sleep at night .. then lock in rates. In the end nothing is more important than your sleep, reducing your stress/anxiety levels and have a happy life.

My journey from bear to bull

I’ve been ultra-bearish on the economy since around 2010. I thought the measures undertaken by those in power were inappropriate and that a new crisis was imminent. Well, its been 8 years since the GFC and I have to admit I’ve been wrong. And my misjudgment cost me a lot of missed opportunities, while others were making money in financial assets, businesses, real estate, etc .. I was sitting on cash waiting for “blood on the street” and bargains that never came. And I was not alone, many smart people (much smarter than me) did the same.

In hindsight, I made 2 mistakes:

1. I did not fully grasp the mechanics of central banks money printing & Government in its entirety. Despite increasing GROSS debt levels, NET debt service costs are decreasing and Governments Debt/GDP ratios (net of central bank ownership) have not increased.

2. I surrounded myself by people/media thinking along the same bearish lines. Like most of us we read media and foster relationships based on affirmation, not information. We like people who think alike, we like blogs/media who tell us what we want to hear, not necessarily both sides of the coin. Lesson learned.

I’ve been a huge critic of central banks for kicking the can down the road and not addressing the fundamental flaws of the economy – excess levels of DEBT. But that didn’t bring me anywhere. Whilst I remain a critic, I softened my tone. Whether you agree or disagree with their money printing policies, they significantly brought down debt service costs for Governments, households and corporations. Our debt service levels are now at the lowest levels since 1980! (see graph below).


That means we all have more disposable income available for consuming and propelling the economy forward. Its true that debt levels have swallowed, so on one hand we only kicked the can down the road .. but on the other hand central banks now own a lot of Government debt, which essentially means Governments pay a lot less debt costs than ever before (despite >100% Debt/GDP ratios). Japan for example has 250% ratio, yet only pays net 1% of GDP to service this monstrous debt mountain. That’s because much of what it pays .. comes back to Government via central banks profits. The same goes for EU and US, though to a lesser extent.

That’s the path forward. Central banks will own more and more, rates will keep coming down, we’ll pay less and less to service our debts, hence we’ll all have more disposable income to spend and prop up the economy.

Additionally, money printing has also been a massive transfer of wealth from creditors (Germany, Netherlands… ) to debtors (Portugal, Spain ..) and from savers (old people) to debtors (young people). This wealth transfer was necessary and politically impossible to achieve otherwise. Central banks have achieved this silently and few people realise what’s happening.

Should a crisis occur in the meantime or markets lose trust in central banks, Governments still have an important card to play: Fiscal policy to spend on infrastructure, green energy projects, new technologies, etc. With rates so low and central banks owing most of the debt, why wouldn’t they run 5-10% annual deficits and have 200-300 debt/gdp ratios? I know this sounds insane but that’s the new world we live in. I can’t remain trapped in the old paradigm. Things changed and a new reality emerged. Had you told me 10 years ago this would occur .. I’d say its insane, but here we are and I can’t continue to ignore the new reality.

Another point is that despite globalisation and technology deflationary forces, it should be clear by now that central banks will not allow that to happen, so they’ll print as much money as necessary to get their inflation mandated targets. Sure, it could escalate quickly into high inflation but that’s another reason not to have cash and to be invested in real assets.

I’ve been expecting a crisis since 2010 and I thought of it as necessary to clean up the system, reduce debt levels worldwide, undertake structural reforms .. and essentially solve the unresolved 2008 GFC. Instead, we pulled the problem under de rug, did more of the same (more debt and money printing) and delayed the inevitable. But that’s how societies operate. I assumed we were collectively smarter and would do what needs to be done. But democracies don’t work like that, we always go for the path of least resistance until the problem is too large to ignore or until we hit the wall. Lesson learned.

Another point I missed is that this would be no ordinary crisis such are the debt levels we incurred. We’re way past the point of no return. If a crisis were to strike now, it would be global, banks would be insolvent and maybe our deposits gone. Or worse, it would lead to a war and no one would be here to tell. In short, the world economy is so fucked up that the establishment is willing to go to extraordinary lengths (negative rates, unlimited money printing) .. to keep this charade going.

A question remains: What’s the end game? Where is this leading to in the long run? Are central banks going to own everything (stock markets, bond market, real estate market…)? What would that entail exactly? We’d live in a very inflationary and socialistic world, but looking beyond 5-10 years out is a useless exercise, such is the pace of change of our society. There’s only the here and now and looking beyond the next 12-18 months doesn’t put food on the table. Despite all the gloom and doom, things look pretty rosy at the moment.

In summary: 

Rates will remain low for decades to come: there’s just no way around that. If they go up, its game over for everyone, including the powers that be. They would not allow that.

The old view that Governments shouldn’t run debt/gdp ratios >90% no longer apply. Japan is illustrative of that. You can ultimately run a 1000% debt/gdp ratio if your rates are zero/negative. Even if rates move up slightly, in so far as central banks own most of the debt .. that’s not a problem.

Buy real assets (businesses, property, land, precious metals). Inflation is the only way to grow out of the debt problems we have.

Final notes:

Generally when all the bears throw in the towel .. its s clear red-flag and a sign that things are about to turn sour. I’m cognisant of that. Yet, “this time is different” 🙂

Black swan risks remain (Brexit, Deutsche Bank, Trump, Russia/NATO conflict) but one way or another .. they’ll find a solution because the risks of not doing so.. are too great.

Why Dutch people pay 3 times more than Portuguese for their mortgages

When you buy a house or refinance an existing mortgage, you generally ponder: Floating or fixed? What maturity? Then you shop around with different banks.

Now let’s look at the current mortgage rates offered by MoneyYou (ABN affiliate) as of today, 24-April-2016.



Presented with the above options .. the intuitive thing to do is to choose 5, 10 or 20 year fixed rate. Why pay MORE for a floating rate (2.1%) than for 10-year fixed (1.99%)… Not to mention the additional benefit of certainty  and less anxiety about future rates. If anything you’d expect to see floating rates to be lower, not higher. No wonder that 95%+ of Dutch people do exactly that, lock-in long term mortgage rates. But are we making the right choice?

Ask yourself, what’s the catch here? Why are banks doing this? We know they’re not stupid. They generally build these tables so that it maximises profits, they use behavioural economists who understand how our brains work and how to trick us into selecting the option that maximises their profits. Not passing any judgment here, that’s just the way the world works. They also know we hate uncertainty and are willing to pay a premium to sleep better. That’s why insurance business exists, that’s why we accept selling our time for a fixed salary, etc.. so banks essentially sell us fear – and we can’t get enough of it.

So Dutch banks  artificially inflate the floating rate – making it less attractive – so that you think you’re getting a good deal by locking in rates for 10-20 years. Banks know full well rates will stay low for decades to come. As debt grows, rates have to come down to make debt serviceable. If you want to look at the future, look no further than Japan where 10 year yields are -0.14%, insane for a country with 250% debt/GDP. But there’s no alternative, its the only way to keep the system going.

That explains why Dutch people are paying on average 4% today for their mortgage – way above the current 2% rates. They locked in rates between 2006-2009 for 10+ years – when mortgage rates were sky high. Assuming a 300,000 EUR average mortgage, this means we’re throwing 500 EUR a month out of the window for the benefit of Dutch banks (some of this splurge is partially tax deductible, but still..). You see why banks make money? Because they understand how our brains deceive us.

What you did NOT know is that in Portugal the average mortgage rate is 1,163%. Yes, you read correctly, 1.163%… How is it possible that the citizens of a semi-bankrupt country pay 1.163% and those of the Netherlands pay 4%? If anything the Dutch citizens should pay far less than the Portuguese, not 3.5 times more!!

The reason is that Portuguese people choose floating rate whereas Dutch people keep preferring long term fixed rates. Not sure why that’s the case, probably has to do with some routed historical & cultural reasons. Portuguese/Spanish may be more ad-hoc, more “go with the flow” people whereas Dutch/German prefer certainty.

But why do Portuguese banks offer lower floating rates than Dutch banks? And how do Dutch banks actually calculate the floating rate? I asked Rabobank last year .. but they told me they couldn’t disclose that information ..  that it was proprietary information. Hum .. smart from them. Why would they give away a secret formula that hands them  free money – 500 EUR / month per mortgage holder?

Bottom line: Don’t be a fool by locking in rates for long periods. Understand life is a risk in itself and trying to protect the downside only impoverishes you and your family.




Where to put your money in this strange world?

When you look at investment alternatives .. everything is so expensive (stocks, real estate, bonds of semi-bankrupt governments & corporations) that the best alternative seems to be cash and do nothing. But that will depress even more money velocity which is precisely what central banks want to avoid at any cost (as it exacerbates deflation), hence their desperate move to ban cash, negative rates, helicopter money, etc.

So align your strategies with the powers that be (central banks). Saving used to be the prudent thing to do but savers will probably be the biggest losers when all of these non-sense policies eventually play out. So you either spend (and do what “they” want you to do) or you hold tight sitting in cash or precious metals. But bear in mind they might confiscate your wealth, so you may as well play their game and spend on things that are important to you. As an example, I spend on home improvements – as it really increases quality of life, on my own education and that of my kids, on good organic foods, travelling the world, etc. Our time is limited on this beautiful planet, make sure you enjoy it. Saving and delaying gratification doesn’t seem to hold anymore in this strange new world. And being the richest guy in the cemetery won’t do you any good either.

How to protect yourself from negative rates

With central banks going ever deeper into NIRP and with so much mainstream media noise out there, I thought it would be timely to write a post on how to protect yourself and come out on the winning side of these truly extraordinary times.


Physical Cash: Start withdrawing physical cash and store it somewhere safe. As we’ve seen in Greece recently, once the shit hits the fan .. banks will close for a “long weekend” or if open, only allow 60 EUR per day. Don’t wait until’s too late. And fear not Government’s intention to abolish cash because people will find creative ways to bypass them entirely (by trading goods and services directly with physical cash). Also old people are so used to using cash, that it will  take 5-10 years to phase it out. There’s also 20+ countries where you can use US dollars (Panama, Ecuador, Mexico, Canada, Cambodia, Liberia, Vietnam, Bahamas, Barbados, Bermuda, the Cayman Islands to name a few), so worse case you go on holidays and spend it there.


Gold / Silver: Buy as much as you can. Not only physical (my preferred choice) but also mining stocks. Gold and silver rallied 10-15% in the last 2 months alone. Mining stocks dropped 90% from 2011 to end of 2015, and are now up ~75% in the last 2 months. With negative rates at -3 or -5% where do you think people will go to? Gold and silver as its real money for 5000 years and they preserve value (unlike fiat paper). I urge you to put some money in solid mining companies, believe me you won’t regret it. All you need to do.. is to be willing to withstand short-term pain/volatility, the upside may be 500-1000%+ from here. I’ve done extensive research, give me a shout if you want to know some names you should invest.


Debt: Consider paying down debt, particularly if you have high interest rates. Why pay 4% debt when at the same time you get negative rates at your savings account? Your money might erode overtime but real estate doesn’t, it’s actually likely to rise (see below). But don’t pay it back, only the most expensive. In case we get QE4 and hyperinflation .. you want to have debt because it will be wiped out by inflation.


Real Estate: I can only see house prices go higher and higher. Look at Nordic countries, since they introduced negative rates .. house prices moved up 30-60% since 2012. When and if negative rates come to Europe or US .. you know where house prices will go.


Bonds: Might be a good idea to buy some long term AAA-AA bonds (Germany, Netherlands, US treasuries, Switzerland, etc). You may not get much coupon but they’ll appreciate in value as rates drop to negative territory. Or at the very least you’ll be protected from the annual -3 or -5% haircut from electronic money in your bank account.


Electronic money: Keep this to a minimum, 3-6 months of financial needs. There’s a good chance you’ll be taxed 3-5% a year in the next crisis (they’ll call it negative rates but in reality these are taxes). Not only that but you run a big risk that your savings will be used to fund a possible banks’ bail-in. Did you know that the laws changed recently so that derivatives rank higher than your deposits in case of a bank collapse? And if you trust your 100k government guarantee, think twice. Also bear in mind counterparty risk, I wouldn’t trust bankrupt governments (particularly from the PIIGS) to backstop banks going down.


Stocks: It may not be a bad idea to keep some money in stocks but only very specific companies/sectors. Mining companies (as explained above), gun and military manufacturers (though they already rallied 10X since 2012, SWHC for example), food companies, utilities, oil related stocks may also be good given today’s low oil price. But if you’re invested in index ETFs, this may be the last opportunity you have to sell close to the heights (with S&P500 trading around 2000 today). There’s also the possibility that the FED embarks on QE4 in which case stocks could rally in the short term. Ultimately they’ll revert to the mean and fall significantly, it’s just a question of better to miss out a potential 10-20% gain than get a 50-90% correction.


Bitcoin: Do yourself a favour and buy at least 1 bitcoin. When banks close doors and governments impose capital controls, guess what’s going to happen? I’d say there’s an 80% chance bitcoin will become obsolete and worthless in a few years time, but a 10-20% it will be worth anything between $1,000 to $1,000,000. As such, expected value is around 10-20k (vs $415 current price).


Final note:

There’s a good chance we won’t actually see negative rates. The system might  implode before that happens. Or we may have QE4 and consequently inflation (and stocks rallying again). Things change very quickly in this strange economic environment we’re in. But either way, the above recommendations should still hold. Also, if the tide changes and we get a Depression, Governments will probably be forced to confiscate your wealth, which will be made much easier if you hold electronic money. Think its far fetched? It wouldn’t be the first time, Franklin Roosevelt in 1933 issued one of the most controversial orders in U.S. history, Executive Order 6102 -whereby the US Government confiscated gold from its citizens. Desperate times require desperate measures, fasten your seat belts and try to be ahead of the curve.


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