The high salaries of the Silicon Valley are not enough to send your children to college, buy a house, and retire when looked at alongside living expenses. You need to play the equity game. [more inside]
"We have little trouble recognizing that a chess grandmaster’s victory over a novice is skill, as well as assuming that Paul the octopus’s ability to predict World Cup games is due to chance. But what about everything else?" [Luck and Skill Untangled: The Science of Success
Analog, Warren Buffett and Digital Media
- Why Warren Buffett invests in newspapers: " You essentially have a business that will make a lot of money if you are terrific, it will make a lot of money if you're lousy," Buffett said, "...how good a newspaper is depends entirely on the wishes of its owner. There is no correlation between profits and excellence," Buffett added, "there's really nothing like that in American business." Enjoy nearly a full 60 minutes
of Warren Buffet's (all too rare) public teaching style in this recently uploaded video from 1992
Each sketch links to a post about investing. From a financial planner best known for losing his house
Market Capitalization-to-GDP is an indicator described by Warren Buffet as "probably the best single measure of where [stock market] valuations stand at any given moment." Here is a historical graph of this indicator
along with twenty other historical indicator charts
covering the US S&P, Japanese Tokyo Stock Exchange and Indian Sensex indices. The indicators include P/E ratios
and dividend yields
. Also of note: which currencies are under or overvalued according to purchasing power parity.
. [more inside]
Best known for the (exaggerated) tales of her miserliness, Hetty Green
was arguably the greatest female investor
in history. During the 1907 Bankers' Panic
, her loan of $1.1 million helped keep New York City solvent. Her estate - greater than that of J.P. Morgan's - was valued at more than $2 billion in today's money. [more inside]
Reivestments, surging prices for commodities yield tidy sums for farmers.
Midwest farmers seem to playing a system to their advantage. May be of worth to small farms being pushed out by encroaching growth.
It's not uncommon for celebrities
. Billionaire Warren Buffett
now joins their ranks with Secret Millionaire's Club
, a cartoon about Warren Buffet giving a group of kids advice on investing, business and life. [more inside]
Employed by a startup
? Working long hours for little pay but lots of stock options
? When your company goes public you can finally realise the value of your options but what if the IPO is delayed or never happens? [more inside]
What Good is Wall Street? Think of all the profits produced by businesses operating in the U.S. as a cake. Twenty-five years ago, the slice taken by financial firms was about a seventh of the whole. Last year, it was more than a quarter. (In 2006, at the peak of the boom, it was about a third.) In other words, during a period in which American companies have created iPhones, Home Depot, and Lipitor, the best place to work has been in an industry that doesn’t design, build, or sell a single tangible thing.
Afraid that Jobs' wild spending and Woz's recurrent "flights of fancy" would cause Apple to flop, Wayne decided to abdicate his role as adult-in-chief and bailed out after 12 days. Terrified to be the only one of the three founders with assets that creditors could seize, he sold back his shares for $800.
An interview with Apple Computer co-founder Ron Wayne
(he also designed Apple's first logo
). Had he held out, his shares today would be worth $22 billion.
Kjerstin Erickson is a 26-year-old Stanford graduate. Would you like to own 6% of her
Every year the Strategy Team at Saxo Bank
, a Danish virtual bank
, publishes a list of ten black swan class market events. Some of the more dramatic possibilities Saxo advance for 2009: crude trading down to $25 a barrel causing severe social unrest in Iran, the S&P 500 falling to 500, Chinese GDP approaching zero and several member states dropping the Euro. The complete 2009 list is here
and for completeness their 2008
[ .pdf ] , 2007
[ .pdf ] and 2006
lists [ .pdf ] are also available. [more inside]
Are funds calling a bottom to the US housing market? Even as house price declines are beginning to slow
, home sales may have stablised
and resales look healthy
, big money - $5B here
, $3B there
, over there $2B
and lots and lots
of smaller amounts
- is being deployed to take housing assets off
banks balance sheets.
Meanwhile, Fannie Mae and Freddie Mac are actually booking the biggest profits on new mortgages since 1998
. It ain't over 'til it's over, but in the markets you take what you can get.
Follow the money: for the past year, the big trade
was short bank stocks, and use the cash to go long oil. Massively profitable, but now that trade is unwinding. So where is the big money being invested now? Lots of places: diamonds
, fine art
, and Madonna
The simple phrase "it's different this time"
are the four most expensive words in the English language. Sir John Templeton
, we thank you for this lesson and countless others. [more inside]
From the diamond
to the street
) to your mailbox
, one thing is absolutely certain:
Nails never fails
Jewelers, engine parts manufacturers, and most of all, investors are watching as platinum hits an all time high
, topping $1800 per ounce. An electic supply crisis in South Africa
is to blame/thank for this unprecedented rise as mines are facing limits to the amount of electricity they can use. A mining analyst said it could eventually top $2000/oz
Sure, you can make your IRA contribution just before the deadline this year in plain old mutual funds, but did you know it is possible to put retirement money into Costa Rican hardwoods
? Or income properties
or perhaps even Chinese currency
(not much yield there)? You can set up a self-directed IRA, where you choose the investments, which opens up quite a range of possibilities
and perils. The dangers are obvious, and be sure watch the fees
, though, and, of course, consult with your legal, tax, and financial advisors first.
Want to learn about investing?
Morningstar, an independent investment researcher, is offering 172 free online "classes" on stocks, bonds, funds, and portfolio building. And there's nifty quizzes at the end of each lesson where you can earn points that can be used for Morningstar products.
Something wicked this way comes. There are a huge number of October 6th put options
for the big indexes, just like the massive put options that took place just prior to 911
. Fear the "October Surprise."
Get Rich Slowly,
a personal finance web site (created by our jdroth
), has been educational to someone who spent most of his life until now pretending financial matters don't exist. His blog is updated frequently, and contains insightful tips on living frugally, eliminating debt, saving and investing. Between his site, and another very educational site entitled I Will Teach You To Be Rich
), I've greatly expanded my knowledge about managing my money effectively. Perhaps most importantly, they're both consistently interesting and easy reads. [more inside]
Invest in truthiness.
John T. Reed’s analysis of Robert T. Kiyosaki’s book 'Rich Dad, Poor Dad'.
has spun a business empire off his book, including follow up publications, TV appearances and columns
that make suprisingly broad statements about what's worth doing.
Carl Icahn's Time Warner efforts
find a powerful ally in "white-shoe"
investment bank Lazard
. Wall Street M&A advisors have been hesitant to support efforts by Icahn and his hedge fund brethren in their share-holder activist efforts for fear of alienating fee-paying corporate clients (investment banking, legal and registration fees on the Time Warner/AOL deal
were approximately $300 million). By hiring Lazard
, which is led by banking legend Bruce Wasserstein (1
), Icahn is surely raising the intensity of his campaign against Time Warner management. Icahn has been successful in previous shareholder activist campaigns, most notably against Blockbuster (1
), and talks a pretty mean game
. Wall Street will be watching this closely - hedge fund activism is becoming a very real fear for company management/directors: Circuit City/Highfields Capital
, Bally's Fitness/Pardus Capital & Liberation Investment Group
, Axciom/ValueAct Capital
, MSC Software/ValueAct Capital (reg. required)
, Beazer Homes/Tontine Capital (second story on page)
An unexpected side effect of iTunes.
Remember Bowie Bonds
? Introduced in 1997, bonds tied to future profits of music artists (besides Bowie, James Brown and the Isley Brothers offered them) tanked with the advent of online filesharing. Thanks to iTunes, some on Wall Street are betting that the Bowie Bond is a concept with a future.
flash for investors.
The Watchful Investor
"Bringing you the underreported, the underappreciated, and the overlooked news from the markets.
Jim Waddell created this frequently updated journal providing economic news and commentary, as well as a newsletter which gives more detailed coverage of specific market events and issues. Accessible and interesting, yet not dumbed down.
Five Years After the Bubble
is a collection of ten links from the perspective of those who were neck deep in the whole thing.
I found the link while reading up on Andy Kessler
, who had an interesting piece
in today's WSJ, and is giving away his new book
Hans Hoppe is in trouble.
Why? In one of his lectures at UNLV
, the world-renowned economist stated that homosexuals plan less for the future than heterosexuals.
According to Hoppe, homosexuals tend not to have children, so they have little stake in the world beyond their own time. Other poor future planners include the very young (no concept of the future) and the very old (their time is almost up).
A student filed a compaint against Hoppe for his "anti-gay" remarks, and UNLV wants to issue a letter of reprimand and force Hoppe to give up his next pay increase.
So should an economics professor be forced to consider his students feelings prior to presenting economic theories? As Hoppe fights back
, the libertarian community voices its support
One man's retirement math: Social Security wins
At the heart of President Bush's plan to sell Social Security private accounts is a simple notion: You're always better off investing your retirement money than letting the government do it.
By doing it yourself, you can stow some money in the stock market, and over the long run will get a better return on that investment than today's Social Security system offers.
The idea is broadly accepted. That's why the administration's plan to partially privatize the system sounds appealing to many. But that better return won't always happen.
Just ask Stanley Logue of San Diego.
For 45 years, the defense-industry analyst paid into the system until his retirement in 1994. But with all the recent hoopla over reform, Mr. Logue, a Massachusetts Institute of Technology graduate, decided to go back and check his own records. Would he have done better investing his money than the bureaucrats at the Social Security Administration?
America's Black Budget - the Manipulation of Mortgage and Financial Markets
Investors benefit from understanding the federal budget, credit policies and covert intervention that drive markets -- often overriding fundamental economics. How has the US governmental apparatus become so powerful in the marketplace and what does it mean to the health of our economy? How unstable is the mortgage bubble and where are the opportunities for investors if the bubble bursts?
Is a Market Disaster Immement?
The Federal Reserve has confirmed [a] Stock Market Crash forecast by raising the Money Supply (M-3) by crisis proportions, up another 46.8 billion this past week. What awful calamity do they see? Something is up. This is unprecedented, unheard-of pre-catastrophe M-3 expansion. M-3 is up an amount that we've never seen before without a crisis
Why Stock Markets Crash : Critical Events in Complex Financial Systems.
Professor Didier Sornette
of UCLA has some very interesting things to say about stock markets
In his book, he explains how his
"theory of cooperative herding and imitation [...] has detected the existence of a clear signature of herding in the decay of the US S&P500 index since August 2000 with high statistical significance, in the form of strong log-periodic components."
Although his timing has been just a bit early, the theory, the predictions to date and the pictures are all pretty uncanny. This is easily the most interesting book on the stock market I have ever read and provides interesting and believable hypotheses about things I never imagined could have rigorous explanations. For an overview, here is an interview with the author
Warren Buffett's annual letter
to his shareholders is worth a read.
The Washington Post
has one of the better articles about nanotechnology that I've seen, providing both a view of the billions of dollars of investment in the technology, and the concerns of environmentalists and consumer health advocates. The article predicts upcoming regulatory battles over how and when this technology should be released.
Perhaps one of the brighter points of light is that concerns have shifted away from the superlative grey goo
(IMHO: if a grey goo was chemically possible, bacteria would have done it already) towards the possible risks of disease due to exposure. Rice University has a page devoted to current information
on research regarding nanotechnology and health.
"It's good policy and good business."
NYC's Employees Retirement System (5 funds managing $78.6 billion in holdings) is targeting Fortune 500 companies to adopt policies that specifically bar discrimination based on sexual orientation. One of them, CSX Corp., didn't even wait for their shareholder meeting, but immediately amended their policy in response.
These funds recently had great success
after a decade-long battle with Cracker Barrel Restaurants--infamous for firing gay and lesbian employees because they don't “demonstrate normal heterosexual values."
Here's wishing an especially happy holiday to employees of those companies that have stopped discriminating
and hopes for many more to join in. More info on this "shareholder activism" at The Equality Project.
Put your money where your black heart is.
Space-time continuum abused for financial gain
Federal investigators have arrested a Wall Street whizz who made $350 million from an initial investment of just $800 in two weeks. The man has confessed to insider dealing, explaining that he travelled back from the year 2256 in his 'time craft' specifically to make a killing on recorded past stock plunges. The kicker? There's no record of the man's existence prior to December 2002.
Tired of all those namby-pamby "socially responsible
" mutual funds out there? Me too. That's why I'm putting my money in the Vice Fund
, the first socially irresponsible
mutual fund. It started trading today, investing in companies that benefit from smoking, drinking, gambling and defense spending.
"It is our philosophy that although often considered politically incorrect, these and similar industries and products...will continue to experience significant capital appreciation during good and bad markets. We consider these industries to be nearly 'recession-proof.'"
"Morally Responsible" mutual fund firm blasts WalMart for displaying Cosmo
The Timothy Plan
is launching a national campaign to get WalMart to take "soft-core pornography" like Cosmopolitan
off its checkout shelves, or wrap them in opaque covers like Playboy.
The group alleges that Cosmo and magazines like it are part of a "slippery slope. It's the initiation to hard core
pornography, child molestation, bestiality and worse."
Malcom Gladwell's got a new one in the New Yorker about a guy whose investment strategy positions him to profit from unlikely and scary random catastrophes like 9/11. Its' not on newyorker.com, but the story's subject
was kind enough to scan it and post it
The SEC has created a fake website
to try and educate the naive. I can't decide if this is a good idea, or if someone has too much time on their hands and is wasting my tax dollars.
the Foolish Workshop at the Motley Fool and let the numbers decide which stocks to pick.
Buffett calls Internet investing "a big trap"
If only many investors would have listened to Mr. Buffett a few years ago. Today, in Omaha, Buffett said, "But I think the idea that you could take any business idea and turn it into wealth on the Internet is just wrong." Common sense strikes again.
who sent millions of e-mails around the world falsely stating shares in an American company would rise 900 per cent was today sentenced to two years in jail. The charges filed are believed among the first of their type made against anyone in the world.
Mr Hourmouzis had pleaded guilty to two charges of making a false statement on the Internet.