My name is Matt Henderson—I’m an entrepreneur living on the southern coast Spain. This is my blog, where I write about technology, business, investing and living abroad. You can learn more about me here.

Staying the course — Performance of the permanent portfolio since the launch of Money for Something

My book Money for Something, was released in August of 2012. While the intention of the book was to teach the simple fundamentals of investing, I decided to go one step further, and describe the specific asset allocation in which I personally invest—known as the Permanent Portfolio, that includes stocks, bonds, gold and cash.

As it happened, many of the book’s readers who subsequently got started in investing chose to invest in the Permanent Portfolio, rather than one of the alternative asset allocations such as the common “60/40″ portfolio of stocks and bonds.

While I think that’s a perfectly sensible choice (it’s what I would have done myself, and would choose today), it is a choice that has since tested one of the fundamental tenets of successful investing—the ability to stay the course.

Since the release of my book, here’s how the Permanent Portfolio has done compared to a typical 60/40 Stocks/Bonds portfolio:

That doesn’t look too inspiring! Imagine having invested on August 1, 2012, and over the next 1.5 years, watched your money first drop in value and only then slowly recover to just about break-even today.

But let’s now slide that 1.5 year window of time back a few years, beginning in 2007, and see what would have happened:

In this case, we see the opposite: the permanent portfolio performed well, while the 60/40 lost a quarter of its value! Ouch!

And now, let’s widen the window of time to 6.5 years, beginning in 2007, and see what happened:

Over a longer period of time, both portfolios grew positively (with the permanent portfolio doing twice as good). And this illustrates some critically important points:

As often stated by investing expert, William Bernstein,

Stay the course. It’s far more important in the long-term to stick with your allocation than to have picked the optimal one up front.

Investment returns of the average investor — What happens when you don’t stay the course.

In my book, Money for Something we discuss how important it is to “stay the course.” Most people, however, don’t stay the course, and this chart from the J.P. Morgan Guide to the Markets illustrates the astounding consequences:

Truly incredible—During the 20 years between 1993 and 2012, the annualized returns of the asset classes in which we typical invest varied between 6.3% and 11.2%. But the return actually realized by the average investor was a meager 2.3%—not even beating inflation.

Why does this happen? The reasons are many:

Success in long-term investing is easy, but you have to have discipline, and you have to stay the course.

Richard Feynman on knowing something

In the video The Pleasure of Finding Things Out I love this profound quote by Richard Feynman. He’s talking about pseudo-science, but it has broad applicability:

But I have an the advantage of having found out how hard it is to really get to know something. How careful you have to be about checking your experiments. How easy it is to make mistakes and fool yourself.

I know what it means to know something, and therefore I see how they get their information, and I can’t believe they claim to know something. They haven’t done the work necessary. They haven’t done the checks necessary. They have done the care necessary.

I think about this quote, when I see people making simple-minded, black-and-white statements on subjects like politics, economics, health and religion.

Fucking politicians—The consequences of having donated to the Ron Paul political campaign

Back in 2008, I made a terrible mistake—I donated to the Ron Paul political campaign. The Ron Paul campaign proceeded to sell or pass on my email address to a multitude of conservative politicians and causes, who in turn did the same—resulting in a snowballing, unstoppable, never-ending flood of conservative, donation-seeking, nearly-always-irrelevant political spam arriving in my email inbox.

During the six years since 2008, I’ve received several hundreds of these emails, the most recent arriving this morning from Walter Jones, a congressman representing North Carolina’s 3rd District.

Although the email contains four donation links, it contains no contact details for the originator—ostensibly, the Liberty for All Action Fund, whose website lists a PO Box mailing address. (The politicians themselves rarely send the emails, instead relying on opaque, “Super PAC” organizations like these.)

The footer of the email contains an unsubscribe link, but of course clicking that is futile; by the time you even see that link, your email address has already been passed on to other organizations.

And here’s what’s most insidious—The email footer actually contains a link to learn how your email address ended up on their mailing list. Clicking that link, I landed here:

These fuckers have the nerve to claim that I actually opted-in, signing up to their list less than 20 days ago on March 2.

Of course, it’s not the having to deal with these emails that makes me so angry. Rather, it’s that having donated my own money to some politician, the response—the “thank you”, if you will—has been utter disrespect and disregard for my privacy.

I wish so badly there was an economical way in which an individual such as myself could exact consequences on these organizations for their actions. Perhaps I could pay a lawyer to start a legal proceeding, ultimately forcing them to admit I didn’t sign up or otherwise opt-in. But what would be the consequences of that?—a lot of legal costs for me, and a “don’t do that again” statement to them?

Update: 2014-04-02

And here’s one from Chris Day:

Hilarious co-host rambling on the Cubed Podcast

Remember those funny videos of people like George Bush or Dan Quayle incoherently rambling on about something? You know, the ones that make you cry, “What the hell is he saying!?!” Well, I’m frequently reminded of those when I listen to the Cubed Podcast.

I listen to Cubed in order to hear Benedict Evans, a very clever analyst who focuses on technology. But he’s got this co-host on the show, whose name I can’t recall, with an amazing ability to speak at length—without actually saying anything at all.

Here’s a transcript of the co-host rambling on, without pause, for a full two minutes on Episode 19, beginning at the 52.12 mark:

So, you know, we have a few minutes left. Let’s spend a few minutes on, I guess, just Samsung, and to some degree Apple, and I say that because, what we’ve just talked about, I think, which is valid, and if you don’t remember, one of the things I talked about, I saw the same thing that you saw, Benedict, with the smartphones makers from China with TVs at CES. They had huge booths, um, crazy amounts of Chinese OEMs I’ve never heard before, with gigantic booths at CES showing off their TVs. And as an aside, I sorta wonder if these two strategies sorta go in parallel, sell displays into emerging markets, sell phones into emerging markets, because I know some of them are the same brands, TCL for example, is a huge smartphone maker in both China, from a brand standpoint, as well as TV. And one of the things I think might speak to kinda these other strategies, but that’s what we just talked about, sort of the possible chipping away of ecosystems, along with how good some of these competitors are getting. I mean, that’s really the competition that’s gonna, you know, keep Apple at bay in emerging markets. But what does that mean for developed markets? I mean you, I look at what’s the roadmap then, that Apple has to address, or even Samsung has to address, to continue competing in those markets if, again not that all those consumers are going to go low end, that’s certainly not going to happen, but I mean, the dynamics are changing. I mean, I’m a little less concerned about Apple than I am about Samsung, but again they’re not going to grow for some of these things we talked about unless they do something towards these other tiers, and I just don’t think that’s in Apple’s cards, for example, and Samsung seems, to me, to be almost saying, “We kinda have to give up a little on the low end because we just can’t make it there and we need to evolve and become more of a competitive player on the high end.” which means, software services, etc.

OMG. What on earth did he just say?! I think (unless I’m wrong) he just spent two full minutes to say, “Chinese companies are addressing the low end. And some are selling TVs and phones.”

Tracking LendingClub investment performance in Quicken or iBank

This article describes how I track and reconcile my LendingClub investments, using the iBank personal finance software. This method should be equally valid for people using Quicken.

In iBank, I set up my LendingClub account as if it were a brokerage account in which I’m purchasing securities; in this case, I’m purchasing a security I’ve named LendingClub (equivalent to a stock, e.g. AAPL). From there, tracking the investment simply involves mapping line items from the LendingClub statements to concepts normally involved in securities investment tracking, through the process of monthly reconciliation.

From the latest LendingClub statement, all values except one come from the Cash Details section of the statement, with the one additional needed value coming from the Earnings Summary section.

Cash Details Statement Section

Fields which are not relevant to me include Referral Bonus, Charity, FOLIOfn transfers and Trading fees.

Earnings Summary Statement Section

To reconcile the investment account each month, I enter all the relevant transactions from the statement as described above. I then make sure the Starting and Ending balances are correct, and that involves the special treatment of “In Funding Loans”.

The Starting Balance each month is the Ending Balance of the previous month, as recorded in iBank.

The Ending Balance is sum of the Ending Balance as reported on the LendingClub statement, PLUS any amount reported in “In Funding Loans”. Since “In Funding Loans” are funds that have not yet been lent, they remain for the purpose of reconciliation as cash in the account (even though it’s not cash available for immediate withdrawal.)


One the LendingClub account is tracked in the manner described above, I can then generate performance reports (including, in version 5.1 of iBank, Internal Rate of Return (IRR))

Does Erik Vorhees understand things better than Milton Friedman?

Speaking with people of different religious beliefs, I’ve always found it curious to hear a common viewpoint, that goes something along the lines of:

It’s quite obvious that all gods in which people around the world believe, and have believed, are false. In fact, it defies logic and common sense that people have actually believed in them. On the other hand, it should be intellectually obvious that the god I believe in, who happens to be the god relevant to the place and time in which I was born, actually does exist.

It seems so strange that these people never seem to question in themselves whether they just might suffer from the same blind-spot they find obvious in those who believe in gods other than their own. And it seems intellectually arrogant.

I thought of this analogously today when I read a comment by Bitcoin-proponent Erik Vorhees, about Milton Friedman:

As the most popular champion of free markets, it’s always surprised (and dismayed) me that Friedman seemed to have little issue with central planning when it came to money itself. He would abhor central planning in basically every good, except the good of money, which is arguably the most important.

Having studied Milton Friedman and his work for many years I’m left with the belief that he was a truly special and brilliant man. I consider him in the same class as people like Richard Feynman.

While I acknowledge the importance of independent and critical thinking, if I found myself in disagreement with these people on a particular issue, my first instinct would be to deeply question my own research, my own understanding, my own logic and assumptions and even my own intellectual limits long before I’d conclude myself as “being dismayed”.

Twenty dollars to the first person who solves my OS X firewall problem

Update 2014-03-06: SOLVED! (See below)

The OS X application firewall running on my Mac mini is preventing Daylite clients from remotely connecting to the Daylite server running on the machine. Unsuccessful at solving the problem myself, I’m offering $20 to the first person whose help results in resolving the issue.

To be more accurate, I’m actually observing two separate issues, and the resolution of either would solve the overall problem. So I’m offering the bounty to the first person who helps me solve either of them.


I have a Mac mini running OS X 10.9.2, along with Mavericks Server. The mini is co-located with one of the leading Mac mini hosting providers. In addition, I have the latest version of Daylite Server running on the machine, to which Daylite clients (OS X and iOS) need to connect.

Problem 1: Daylite can’t connect when the firewall is enabled

When the OS X firewall is enabled, Daylite clients are unable to connect to the server:

When I first installed Daylite Server on the machine, the OS popped up several notifications asking for permission for various Daylite-related processes to accept incoming connections. I accepted them all.

And, in fact, for quite some time, Daylite clients were successful in connecting to the machine. At some point, and I can’t remember precisely when, it just stopped working; as long as the firewall was enabled, Daylite clients were no longer able to connect.

I have tried removing all these processes from the firewall, and manually adding them back. Sometimes after doing that Daylite clients can connect, but after the next restart of the machine, they can no longer connect.

(I don’t know if it’s related, but for completeness, I believe this problem started around the time I tried installing, and later uninstalled, Ice Floor, a GUI to manage a separate OS X firewall called “pf”. Again, though, I did run the Ice Floor uninstaller, so I presume anything it installed/configured was undone upon uninstalling it.)

Problem 2: The firewall re-enables itself each night

One work-around to Problem 1 is to simply disable the firewall, and that’s what I’m willing to do in the absence of a real solution to Problem 1. But even that doesn’t solve my problem. Why? Because each night at midnight, something happens on the machine that re-enables the firewall! In the morning, I connect to the machine to find this:

So, I’ll connect to the machine during the day, unlock the Security & Privacy preference pane, disable the firewall and re-lock the preference pane. At that point, Daylite clients successfully connect to and sync with the server.

But then the very next morning, I find client connections again failing. I connect to the mini, to find that, as every day, the firewall has mysteriously been re-enabled!

I say that the re-enabling happens at midnight, but I’ve not actually connected to the machine to confirm it happens precisely at that time (because I’m in Europe, and the machine is in the United States). But I’m sure it happens around that time. I’ve checked the Console, however, and don’t find any messages posted around midnight that would seem related.

Bounty rules

As mentioned at the beginning, I’m offering $20 to the first person who successfully helps me resolve either of these two problems. (My preference is a permanent solution to the first, but either will do.) Please post your ideas/solutions as a comment on this blog post.

Only one person can receive the bounty—i.e. the first who provides me with the information that results in solving my problem. If two people post the same solution in the comments, the one arriving first will receive the bounty. If you need clarifying information, just ask in the comments, and I’ll try to clarify.

The bounty can be paid by PayPal if outside the United States, or ACH transfer if within the United States (via Capital One 360 P2P payment service).

Thanks so much, in advance!

Solved! (Problem 2, at least)

And the solution came from none other than Makalu’s own system administrator, Niall O Broin. (OK, with SSH access to the machine Niall has a slight advantage…)

What Niall discovered was the following entry in the crontab, set to disable and then re-start the firewall each night at 00:01 (i.e. midnight):

What we don’t know, is how that entry made its way into the crontab, which is a Unix scheduler that Apple recommends against, in favor of launched.

(What’s particularly funny, and ironic, is that after having unsuccessfully spent about two hours searching for the cause, Niall discovered it when we concluded that, at least for the moment, the best course of action would be to add a crontab entry at 00:30 to disable the firewall each day. We though, if we can’t find the problem, at least we can hack a solution!)

Thoughtful design — Comparing the user experiences at Basecamp and Atlassian

At Makalu, we’re longtime users of Basecamp, the online project management system created by the folks at Basecamp (formerly 37signals). 37signals care deeply about design, and this is evident pretty much everywhere in the user experience of their products.

Recently, we started using the Bitbucket git repository management system, by Atlassian. So far, it has not seemed evident that the people at Atlassian care as deeply about user experience.

For starters, simply upgrading from a free trial account to a paid account has been a nightmare—resulting in somehow accidentally upgrading a personal account I didn’t even know I had, and subsequently getting locked out of our team account. (Hopefully I can get a refund, once I determine which “Support Entitlement Number” corresponds to the personal invoice.)

This difference in design priority between Basecamp and Atlassian became really apparent this morning, when I clicked on links in transactional emails from both services, whilst not being logged in.

At Basecamp, I was redirected to a login screen. I immediately understand what the problem is.

At Bitbucket, well, just have a look for yourself.

Most likely this screen would have made a lot more sense, had I had DEBUG set to “True”.

Comparing the market valuations of Apple, Google, Facebook & Twitter

After reading about Facebook’s $19 billion purchase of WhatsApp, I started thinking about the revenue and public valuations of the giant advertising companies—Google, Facebook and Twitter—as compared to that of Apple:

Google, Facebook & Twitter are essentially advertising companies with a combined market capitalization of $612 billion. The total global advertising spend in 2012 was about $507 billion, of which $99 billion was spent on internet advertising (source). These three companies took in $69 billion in revenue in 20131. By comparison, Apple alone took in $170 billion.

Earning 60% less revenue than Apple, the stock market currently values the trio of advertisers at 30% more than Apple.

Assuming the trio of advertisers don’t discover other ways to earn money (they haven’t yet) and that the global ad spend at least remains the same, to match Apple in terms of revenue as a percentage of market capitalization, the percentage of global advertising spent on internet would have to more than double, and the trio would have to capture all of it.

Perhaps that’s why Facebook snaps up companies like Instagram and WhatsApp. If their market valuations depends on their ability to capture the bulk of a hopefully growing internet slice of global advertising, it’s in their interest to acquire large potential ad channels, while at the same time removing those with whom they might otherwise have to share the pie.

The current market is obviously very optimistic about the future of the advertisers, and very pessimistic about the future of Apple. Looking at the financial positions of these companies, and considering their business models and histories, I’m happy to be a Apple investor. I’m reminded of the (paraphrased) words of Benjamin Graham:

In the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine, i.e. a company’s true value will in the long run be reflected in its stock price.

  1. This is based on the 2013 earnings reports of Google and Facebook, and multiplying by four the single quarterly earnings of Twitter. At less than $0.25B for the quarter, Twitter’s earnings are anyway in the noise.