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Building a new British and American Dream

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(excerpts for a 2006 blog):


How to reach the new American dream


American dream has changed. It used to be a college education, a steady job, a nice house (and a family to fill it), and a better financial picture than your parents. There is a new American Dream that is still about “doing better than your parents” but not in a financial sense. This dream is about fulfillment.


. . .

The boomers mistake a rejection of their American Dream as a rejection of reality. But here’s some news: Young people know that work is a reality for everyone. It’s just that everyone needs to work toward something; so young people have a new American Dream.


“The new American Dream is much more entrepreneurial,” says Kamenetz. “And it’s about shaping ones own destiny: mobility, flexibility to do your own work and the ability to have a career as an expression of who you are as a person.


Here are some things to keep in mind as you craft your own version of the new American Dream:


1. Cushion an entry-level salary with a move back home.

The first step in restructuring the American Dream is to save money to ensure flexibility. Moving back with your parents is smart if you can do it. Most jobs are in big cities, and starting salaries simply cannot pay the rent in those cities. People who are not able to get subsidized housing from parents are much more limited in terms of their early career choices.


2. Get comfortable with risk taking.

The new American Dream is for risk takers. This is actually not groundbreaking in terms of the American Dream. For immigrants, the American Dream has always meant risk-taking. But today young people are taking risks that parents would have never dreamed of, like playing contact sports without any health insurance and signing up for a mortgage with a freelance career.


3. Protect your time.

The American Dream of Baby Boomers came at the expense of personal time and family time. Success is not having more things than your parents. It’s having more time. More time for hobbies, for travel, for kids. “It’s not about how much money you have, it’s about living your life on your own terms,” says Barbara Stanny, financial coach and author of Overcoming Underearning.


4. Don’t assume personal fulfillment requires a small career.

Sure, the new American Dream has nothing to do with financial studliness. But don’t sell yourself short in the name of personal time. “Higher earners with balanced lives don’t work more hours, they are just more focused,” says Stanny. “To make more money you don’t have to work more hours. There is a difference between settling for a low income and taking a job to feed your soul.”


5. Buy as small a home as you can.

You preserve the most options for your future if you can buy a home on one income. “The advice used to be: always buy the most expensive house you can afford because it’s an investment. Today it’s different. Buy only the amount of house that you need so it doesn’t become an albatross around your neck.” says Phyllis Moen, author of Career Mystique: Cracks in the American Dream.


6. Make decisions by looking inside yourself.

Be aware of the tradeoffs you’re making. For example, big cities are exciting and filled with career opportunity, but you pay a high premium for living there.


/source: http://blog.penelopetrunk.com/2006/06/26/h...american-dream/

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Buffets 10 tips.



1. When you know you're the best, you can afford to tell it like it is. Buffett says: "Our insurance business had an excellent year... that party is over. It's a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008. So be prepared for lower insurance earnings during the next few years."


2. Only four things really count when making an investment (or buying whole companies if, like Buffett, you have $141bn to spend) - "a business you understand, favourable long-term economics, able and trustworthy management, and a sensible price tag". That's investment, everything else is speculation.


3. Invest this way and you don't need to constantly look for the next "new" thing, with all the risk that necessarily entails.


Buffett's biggest investments (companies he doesn't own in their entirety) include American Express, Wells Fargo, Procter & Gamble and Coca-Cola.


These four businesses, he notes, were founded in 1850, 1852, 1837 and 1886 respectively. "Start-ups are not our game".


4. Businesses are run by people and the best people are not necessarily the ones with the flashiest CVs. Buffett singles out Susan Jacques, chief executive of his jewellery retailer Borsheims. "Susan came to Borsheims 25 years ago as a $4-an-hour saleswoman. She's smart, she loves the business and she loves her associates. That beats having an MBA degree any time."


5. Even for a super-long-term investor like Buffett, there's always a time to sell. Berkshire Hathaway bought 1.3pc of PetroChina in 2002 and 2003 for $488m, valuing the Chinese oil company at $37bn when Buffett thought it was probably worth $100bn.


When the China share bubble took its value to $275bn last year, way above its fundamental value, Buffett cashed in his holding for $4bn, an eightfold rise in five years.


6. Buffett believes incentivisation of managers on the basis of earnings per share encourages disingenuous, if not downright dishonest, behaviour.


Take the assumptions about future investment returns in corporate pension schemes. The average in America is 8pc, despite the fact that a quarter of pension funds are in bonds and cash (for which a 5pc return would be a reasonable expectation) and the rest in equities, which rose by just 5.3pc a year on average over the 20th century as a whole (a remarkable period of growth for the US economy).


Managers don't really believe they'll get 8pc, but pretending they will means they can contribute less and so boost their reported profits. "If they are wrong, the chickens won't come home to roost until long after they retire."


7. Between 2002 and 2007, Buffett notes, the euro appreciated from 95 cents to $1.37, yet the US's trade deficit with Germany widened from $36bn to $45bn, the reverse of what should have happened.


As long as these imbalances continue, foreigners will continue to buy up America on the cheap. "This is our doing, not some nefarious plot by foreign governments."


8. Buffett has not lost his eye for witty one-liners which, as usual, make his letters a joy to read. Here he quotes John Stumpf, chief executive of Wells Fargo, on the behaviour of lenders: "It is interesting that the industry has invented new ways to lose money when the old ways seemed to work just fine."


9. He can see the joke, but Buffett also knows that there is something profoundly wrong at the heart of corporate America.


"As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out - and what we are witnessing at some of our largest financial institutions is an ugly sight."


10. Investors should be realists but the best are optimists too. Buffett has taken premiums worth $4.5bn from investors buying insurance from him against four major stock markets being lower in 15 to 20 years than they are today.



He's confident he'll hold on to those premiums and in the meantime he'll use the cash to make another small fortune. What a man.

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