TFB Invitational Update – March 2010
Back in January I created a virtual trading game on Investopedia called TFB Invitational. 13 other people joined me in this game.
Two months into the game, I’m surprised to see that I’m currently in first place. My virtual portfolio is up 3%. I made two purchases, both profitable (so far), one for a US stock ETF, another for an international stock ETF. Right now I’m 50% in stocks, 50% in cash.
PSA: Beware of Job Scams
This is a public service announcement from the FTC.
"It’s hard to believe someone would steal money from a person looking for a job. But unfortunately, no matter how bad the situation, scammers see opportunity. Many people looking for work have been ripped off by scam artists who promise a job, access to special job listings, interviews, or a way to make a big income working from home – that is, if they just pay a fee or turn over their credit or debit card information. In the end, they’re left with no job…and some are robbed of hundreds of dollars."
Hiding in the Long Tail
I wanted to get the new book Free by Chris Anderson, but there’s a long wait at my public library. So I got his previous book The Long Tail.
[Links to Amazon.com are affiliate links. Amazon will pay me 4% to 6.5% of the purchase price if you make a purchase within 24 hours.]
Anderson says with the lower cost of inventory and distribution, businesses can successfully sell a large number of niche products in small quantity and still make a good profit, because the small quantities across so many items add up to a huge volume collectively.
It’s Not 529’s (Or 401k’s) Fault
Ever since I switched from reading Financial Times to Wall Street Journal (FT subscription ran out; no option to use airline miles), I started encountering more and more sob stories. If this continues, I’ll be like Frank at Bad Money Advice.
On Tuesday I mentioned the story about laid-off employees burning through their severance and turning down job offers. On Wednesday I read this article about people stopping using 529 plans because of market losses:
Burning Through Severance, Turning Down Job Offers
While on the commute train this morning, I read this article on Wall Street Journal:
* Link goes to Google. WSJ will display full article if you come from a link through Google.
It tells us stories about how some people coped with unemployment while on severance pay. The subjects in the article spent just like before, burning through their severance. They also turned down job offers because they didn’t like the job description.
How Much Should Unbiased Financial Advice Cost?
How many times have you heard "before you make any big money decisions, check with your own financial advisor"? NPR’s Marketplace Money program says that all the time. It can’t be taken at face value because it assumes that everyone has a financial advisor.
I’ve never had a financial advisor. I’m guessing the percentage of the population who have a financial advisor isn’t that high. If they all say people should check with their financial advisor, why don’t most people have one?
1. Too many sharks. For those who have a financial advisor, I’m guessing again that most are not working with a fee-only advisor who acts as a fiduciary and only gives advice in the best interest of the client.
Austin Frakt on NPR
Remember The Incidental Economist (TIE) who used to co-blog with me here? His real name is Austin Frakt. He’s famous now. His blog posts, which I still help host under his own domain name, have been cited in Washington Post, Mother Jones, The Atlantic, and many other high profile places. He’s been quoted in Business Week twice. He got a 15-second sound byte on NPR today.
Lesson from the Recession: Keep Your Job
In The Right Lessons and The Wrong Lessons, I said the right lessons from the recession and the bear market are “so simple they don’t need any further explanation.” A reader Mark suggested that I shouldn’t be so dismissive.
“If you tell him/her it’s so simple that he should be ashamed of himself for failing to grasp your full meaning, then your are negating that investors desire to learn – in effect saying ‘do it because I said so.’”
After thinking about it for a little longer, I agree with Mark. So I decided to write down what exactly I learned personally from the recession. These will serve as notes to myself in the future. I apologize if the lessons look so obvious. I hope there is enough personal flavor to make them more interesting.
Financial Times Business Book of the Year 2009 Shortlists
Every year, Financial Times newspaper gives out a Business Book of the Year award. It’s officially known as the Financial Times and Goldman Sachs Business Book of Year Award. Last year’s winner was When Markets Collide by Mohamed El-Erian of PIMCO.
The shortlist of candidates for the 2009 award includes:
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Animal Spirits by George Akerlof and Robert Shiller, economics professors at Berkeley and Yale, about how human psychology affects macroeconomics. |
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Good Value by Stephen Green, CEO of HSBC, about money and morality. |
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Imagining India by Nandan Nilekani, co-chairman of InfoSys, a large IT outsourcing company in India, about India and globalization. |
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In Fed We Trust by David Wessel about the recent financial crisis. |
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Lords of Finance by Liaquat Ahamed, an investment manager, about the Great Depression. |
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The Match King by Frank Partnoy about a fraud in 1920s. |
Feel-Good Retirement Savings Initiatives
Over the Labor Day weekend, the Obama administration announced some new retirement savings initiatives that are supposed to help Americans save money for their retirement. Although they are all well intentioned, I doubt they will have a material impact on the overall picture of retirement savings in America. I call them feel-good measures because the new initiatives merely clarify existing laws and regulations. Let’s look at them one by one.
1. Sample language for 401k plan auto-enrollment. The IRS gave employers some sample language for adding auto-enrollment to their 401k or SIMPLE IRA plans. The IRS also made it clear it’s legal to automatically increase the employees’ contribution percentages.
Half of the workforce does not have a retirement savings plan at work. Auto-enrollment can’t help if you don’t have a plan to begin with. For the other half, the employers will still have to take the trouble to add auto-enrollment. After that, auto-enrollment usually only covers new employees. Employers very rarely re-auto-enroll existing employees if they are not already enrolled. So we are only talking about a low single digit percent of the workforce here.
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