1) There is some very sound advice in this New York Times article, which addresses one of the most difficult problems nearly every elderly person faces: How to Enjoy Retirement Without Going Broke. Excerpt:
Accumulating money for retirement is hard, but decumulating it is tricky, too. Even the experts have trouble saying how to pace your spending so you can enjoy retirement without exhausting your savings before you die. You can't know for sure how long you'll live, whether you'll suffer a costly illness or how markets will perform.
"It's really nasty. It's the nastiest, hardest problem I've ever looked at," William Sharpe, who won a Nobel Memorial Prize in Economic Sciences in 1990 for his work on financial economics theory, told Barry Ritholtz, a Bloomberg View columnist, in a 2017 podcast. Sharpe added, "I can't say I've found some magic solution, because I haven't." (His solution is posted, free, on the Stanford University website. Beware: It's mathy.)
Decumulation isn't just a tough financial problem. It can be an emotional strain to flip a switch from saving to dissaving.
I can't do this topic justice in one newsletter, but for starters, here are three choices that everyone who's retired or thinking about retiring has to make:
Do you keep your spending steady and allow the assets in your portfolio to fluctuate, or do you do the opposite – keep your portfolio steady and allow your spending to fluctuate?...
Do you keep a big nest egg, or do you convert your savings into a stream of monthly checks?...
How much risk do you take?
2) Another key to not outliving your savings is to avoid investing in crappy companies like Uber (UBER) and Lyft (LYFT), which I wrote about most recently on August 5 and shared readers' comments on in my August 10 and August 11 e-mails.
I'll add one more that underscores how overpriced they've become: I was at the U.S. Open tennis tournament yesterday until after midnight. In past years, when I'm there that late, I'll take an Uber or Lyft home to get some extra sleep, as it's only a 20-minute ride versus an hour on the subway. But when I checked pricing, it was more than $100 – normally, it would be around $40 – so I took the subway...
My colleague Berna Barshay also wrote about these companies in her Empire Financial Daily e-letter on August 10 (Making Money in Food Delivery Just Got Even More Complicated) and August 25 (Bad News for Uber, Lyft, and DoorDash).
For more on why investors should avoid these stocks, I recommend this series of posts on the Naked Capitalism blog by Hubert Horan. Here are the most recent ones:
- Can Uber Ever Deliver? Part Twenty-Five: Didi's IPO Illustrates Why Uber's Business Model Was Always Hopeless
- Can Uber Ever Deliver? Part Twenty-Six: With No Hope of Real Profits, Uber and Lyft Double Down on Fake Profit Metrics
- Can Uber Ever Deliver? Part Twenty-Seven: Despite Staggering Losses, the Uber Propaganda Train Keeps Rolling
Here's an excerpt from Part Twenty-Six:
Uber's accounting practices make it extremely difficult for investors to understand current financial performance and profitability trends.
Uber abandoned several overseas markets that had been financial disasters, including China, Russia, India and Southeast Asia. More recently it has also ditched all efforts to develop autonomous vehicles, and various other speculative longer-term business development opportunities. In each case, a larger market player benefitting from reduced competition gave Uber a consolation prize: some non-marketable debt and equity instruments.
Prior to 2017, Uber carefully segregated financial data about ongoing and discontinued operations. But when Uber was desperate to show strong profit improvements in its IPO [initial public offering] prospectus, it inflated its 2018 P&L results by $5 billion based on its claim that the equity received from Didi Chuxing (DIDI) in 2016 in return for shutting down Uber China had massively increased in value. This claim was unverifiable since there was no market for Didi stock and Didi (like Uber) was massively unprofitable and Uber wrote off much of the claimed appreciation after the IPO.
While it is extremely difficult to identify the separate financial results of Uber's failed and continuing operations from the data in its SEC filings, this series has documented the accounting issues in detail and has restated its 2017, 2018, 2020, and now 2021 reports so that the results of continuing operations can be identified.
Uber had a negative 38% profit margin in the first half of 2021
To make sense of Uber's 2021 results, it is necessary to split out huge ($3.7 billion) claimed gains from securities from discontinued markets from its marketplace performance in continuing markets. The table below incorporates that restatement of 2021 results with previously published restatements of 2016-2020 results.
Uber's published financials suggest that its business is subject to multi-billion dollar up and down swings that have no relationship to any observable market changes. In reality, its business has produced huge negative margins over the last five and a half years that have declined somewhat but have been largely steady.
In the first half of 2021, Uber's continuing operations had a negative 38% net margin, restoring loss levels Uber had experienced in 2019 prior to the pandemic. As discussed in Part Twenty-Four, Uber massively cut costs and eliminated activities not directly supporting their core taxi and food delivery businesses in 2020, but could not cut enough costs to match the pandemic driven revenue collapse.
3) The trial of Elizabeth Holmes, the once-celebrated-now-disgraced founder of blood diagnostic company Theranos and the architect of one of the most brazen frauds in Silicon Valley history, begins today.
It's an incredible story that rivals WeWork and the Fyre Festival – and, like these other two frauds, I became obsessed with it, reading a book about it, Bad Blood: Secrets and Lies in a Silicon Valley Startup, listening to an eight-part podcast, The Dropout: Elizabeth Holmes on Trial, and watching the HBO documentary The Inventor: Out for Blood in Silicon Valley.
Here's the Wall Street Journal's summary of the trial (The Theranos Trial: Elizabeth Holmes, the Charges and What Else to Know) and a history of the paper's outstanding coverage of the company (it was a WSJ reporter, John Carreyrou, who first exposed the fraud in 2015): Theranos and Elizabeth Holmes: History of the WSJ Investigation.
Holmes' lawyers are – to their credit, I suppose – coming up with all sorts of creative defenses (here's the latest: Elizabeth Holmes Might Claim Abusive Relationship in Theranos Fraud Trial), but I'm not buying any of it. She's rotten to the core, guilty as sin, and I hope she is sentenced to a long prison term.
That said, she didn't kill anyone... so she's nowhere near as evil as the nearly-genocidal Sackler family, owners of opioid maker Purdue Pharma, which I discussed recently in my August 19 e-mail.
4) Comedian Bill Maher raises valid privacy questions about Apple (AAPL) going through all its users' photos in search of child porn, and how our phone addiction is causing all sorts of deleterious consequences: New Rule: Your Phone is Turning You into an A**hole.
P.S. I welcome your feedback at [email protected].