Now that it’s available to stream on Netflix, I’ve heard a lot of people talking about the movie The Big Short, which came out late last year. If you haven’t watched it yet, you should.The movie is based on the true story of against-the-grain traders who bet against the housing market right before the housing collapse in 2008. At the time, everyone thought they were crazy.One great scene depicts trader Dr. Michael Burry, the founder of hedge fund Scion Capital, leaving a meeting with Goldman Sachs where he convinced them to sell $100 million in swaps against Goldman’s CDO holdings in the housing market. The Gold-man team members are laughing, hysterically, thinking they just took money from a baby. In the end, Dr. Burry had the last laugh. And so did the others betting against the hot air balloon that was the housing market in the mid-2000’sThose who spent their money betting against the housing market made billions of dol-lars. Those who saved money or believed that the value of their house would always go up, lost…and lost big.
All this illustrates an important concept that I’ve been teaching for many years: savers are losers.In an economy where almost everything is built to take your money, saving it is of little value. From inflation to taxes to hidden fees in your 401(k), the system is stacked against you.In today’s economy, spenders are winners. By this I mean people who know how to spend their money in the right places and in the right investments. Why is this?
Money is not backed by anything. It is a currency, which like a current of electricity, is always moving. Today, money flows from one sector to another. If it stops moving, like a current it dies. If your money isn’t moving, it is dying, slowly, losing value day by day.The rich know they must keep track of where money in the markets is moving, and they must move their money accordingly. This is why the traders who made the big short profited so spectacularly. They were paying attention and saw where money was moving. But more than that, they saw the assets it was moving into and understood the value of those assets was garbage. They knew that they could get ahead of the curve and move their money to where others eventually would. And in the world of money, the first always feast and the last always starve.
This is hard for the average person to wrap their mind around. For generations, we’ve been taught to save our money wisely. Today, that advice is no longer good or wise advice. Today, if you want to get ahead financially, you must know how to spend your money wisely.Spending money wisely, of course, takes financial intelligence. And that takes financial education. In order to see and understand the markets, you must teach yourself the language of money and the concepts that make the markets run. You must study, and hard.The good news is that information is plentiful. All you have to do is look. Today, start thinking less about saving your money and more about spending it. This subtle mind shift will make a huge difference in your financial future.
