Monday, February 7, 2011

Cheap Chinese Junk Backlash

Have you noticed the latest social movement? A whole new industry is being formed. I call it The Cheap Chinese Junk Backlash. And it’s at the cottage industry stage now.

Dozens of new business’s are starting up: their goal is to help people simplify their lives. Some of these entrepreneurs call themselves “Organizing Experts.” They help people organize their living space by cleaning out old junk, installing shelves, filing and putting things in boxes; turning chaos into order. Others call themselves “stagers.” They reorganize your house when you are trying to sell it. They clean up the clutter, reorganize the furniture and engage in minor redecorating. It’s not a complete make-over like the television shows; it’s just a tweak here and a twiddle there to make a home simpler and more presentable.

They seem to have certain principles:
1. Go through all your stuff. If it isn’t useful, beautiful or sentimental, throw it out.
2. Go through your stuff again. Repeat #1… you still have too much stuff!
3. Every time you buy one new thing, you have to throw away two old things.
4. Clothes: if it doesn’t fit, donate it to a charity.
5. Clothes again: if you haven’t worn it for a year, donate it too.

Apparently there is big demand for these simplifying services. It started in Europe centuries ago. They called it “minimalism.” The minimalist’s goal is to live a simpler, more meaningful life, without stuff. They value learning and spirituality more than they value owning things. It reminds me of the ancient Greek city states: the Athenians lived a rich colourful life, with lots of stuff. The Spartans were the minimalists, living a simpler, more militaristic life style. Minimalists appeared in Christian Europe when St Francis of Assisi’s monks dressed in sack cloth and lived in materialistic poverty. And now we’re seeing the beginnings of this movement in North America. Today’s home office organizers and stagers herald the beginning of a wave of simplification that is swelling up in today’s over stocked society.

What’s causing this backlash? Is it a reaction to American advertising, where we were all told we should envy our neighbour's stuff? Is the same thing happening to the US consumer goods industry as happened to the US housing industry? Too much excess: they pushed it too far…
In my investment book Beyond the Bull, I suggest investors examine the actions of other people to help them decide how they themselves should behave. Maybe we should use the organizers’ and stagers’ principles to re-organize our portfolios. Let’s ponder these principles:
1. If the price of your investment is lower now than when you bought it, sell it. If it’s lower than it was a year ago, sell it. Two years ago? Sell that too? Investing is about making money, not hoping to make money.
2. What is the rate of return on a given investment over the past 10 years? Why am I keeping this investment?
3. Does this investment still fit? Does it still have a place in my overall financial plan? If I need 8% return and I’m only getting 3%, should I get rid of my portfolio and re-write my financial plan.
4. Who has made more money on my investment portfolio over the past 10 years: me or my financial planner? If it’s your financial planner, fire him. If you are your own financial planner and you are not making money, fire yourself.
5. What is higher – my mortgage rate or the rate of return on my mutual funds. If it’s the mortgage, sell the mutual funds and pay off the mortgage.

It’s time to simplify your investment life. Invest in fewer things and keep only the ones that make money for you.

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