July 23, 2012

How To Suck At Your Religion - The Oatmeal

This, because we're in political windbaggery season, when there's no shortage of pontification. Is there ever?

July 20, 2012

The Dark Knight Rises

Manohla Dargis, film critic for The New York Times:

"as Gotham rages and all seems lost, the action shifts from a lone figure to a group, and hope springs not from one but many"

Unintentional metaphor for today's news.

The Batman, apparently, does not disappoint. Sign me up.

July 13, 2012

Abuse Scandal Inquiry Damns Paterno and Penn State


"The NCAA should shut down Penn State’s football program, and the surviving leaders of the university should be charged with crimes."

Agreed. Five year suspension at the very least.

No-one attending Penn State as a freshman next year should have the opportunity to play NCAA football through their senior year. Football cannot be a lure for that school until everyone associated with the Paterno years is long gone.

Lenny Dykstra Pleads Guilty to Bankruptcy Fraud


"Smoldering MLB train wreck Lenny Dykstra just pled guilty to three federal crimes -- and now faces an additional 20 years in prison ... on top of what he's ALREADY serving for grand theft auto."

The final stroke? Nope. Len's still facing a charge of indecent exposure for exposing himself to women he "hired" through Craigslist.

You're a long way from 1986 World Series champ, Len.

July 7, 2012

A Conversation With My 12 Year Old Self


(Via Wil Wheaton dot Tumblr.)

Top 10 Investor Errors: Cognitive Error

Eighth of 10 short articles by Barry RItholtz.

This nugget from today's article leads directly to my comments on a previous article:

"These are the errors that are inherent in our wetware – namely, the way your brain has evolved over the millenia. Suffice it to say that capital risk decision-making was not a big issue on the Serengeti plains. On the other hand, avoiding getting eaten by lions was."

In other words, we're risk-averse beasties who don't inherently know how to navigate long-term financial planning without help from those who think long and hard about these things. Yet we need to do this very thing we aren't wired to handle. What to do?

Read up, find an investment company that offers automatically diversified mutual funds, and set up automatic deposits. Then take your hand off the wheel and let the markets do their thing. Re-visit once a year.

July 5, 2012

Top 10 Investor Errors: Mutual Fund vs ETFs

Sixth of 10 articles by Barry Ritholtz.

Think of ETFs as mutual funds that trade on a stock exchange, through a broker. Regular mutual funds are only available through their parent company or registered investment advisors, all of whom take a fee for managing, handling or promoting them. ETFs have few such fees.

There are two sides to this argument, however. Remember that any broker will charge a commission on shares bought and sold, including ETF shares. If you're planning on buying ETF shares monthly as part of an IRA investment plan, expect to pay commission on each purchase. That can add up to a higher percentage of your annual investment sum than simply paying management fees on a regular mutual fund.

A $10 commission on a $416.66 monthly investment ($416.66 x 12 = $5000 maximum annual IRA contribution) amounts to 2.4%. Do that every month and the investment is robbed of 2.4% before it buys any shares.

Compare that to any mutual fund with annual management fees under 1%, considered the threshold of "reasonable," or any of the more aggressively managed funds, where fees often run well over 1%.

ETFs work best if you plan to make one or two large purchases per year, rather than several smaller buys.

Final Air France Crash Report Says Pilots Failed To React Swiftly


"A series of errors by pilots and a failure to react effectively to technical problems led to the crash of Air France Flight 447, France's Bureau of Investigation and Analysis said Thursday in its final report on the disaster."

The final word on the crash of AFR447 puts the blame squarely on the pilots, who flew a perfectly good airplane into the ocean. Given the darkness of night and buffeting from surrounding storms the passengers likely didn't know what was coming.

There's been speculation that Boeing jets, which have direct feedback from one pilot's control yolk on the other's, would have allowed the non-flying pilot to become aware that the aircraft wing was stalled by the flying pilot's control inputs.

July 4, 2012

Hackett: Overthinking

Stephen Hackett, writing about the prospect of a 7-inch iPad "mini" for 512 Pixels:

"Yet, I can’t stop overthinking it. I’m just not sold on where a product like this would fit. Who is it for? What makes it better than the iPod touch or 9.7-inch iPad?"

Didn't we all ask the same question about the first iPad? Somehow we all figured out what uses we had for the iPad, and it became the fastest growing computer product in recent memory.

Top 10 Investor Errors: Passive vs Active Management

Fifth of ten articles by Barry Ritholtz.

Index investing, the practice of only buying shares in mutual funds that mimic market indexes such as the S&P 500, is a great way to keep management fees low while defeating the urge to "beat the market." Indexes are the market that everyone else is trying to beat.

Happily, even the least-varied 401(k) plan offers at least one or two index funds if they offer mutual funds at all. (Some only offer purchase of company stock, which is a big red flag for employee investors.)

July 3, 2012

Top 10 Investor Errors: Asset Allocation vs Stock Picking

Fourth of ten articles by Barry Ritholtz.

This is critical one, because it speaks directly to an aspect that needlessly turns off would-be retirement investors.

Asset allocation is simply where your money is invested across all markets: Stocks vs. bonds, foreign companies vs. domestic, large vs. small, gold and currencies vs. paper.

All of the investment advice I've ever read agrees that for long-haul investing (i.e. retirement), diversification is key. In other words, spreading the money around. Yet effective diversification used to require research: investors had to know where the could put their money before they decided where they should, which informed where they would.

Investment companies, in an effort to lure reluctant investors into the fold have since created targeted mutual funds incorporating a mix of assets in proportion to an investor's planned retirement year. It's now common to find companies promoting families of funds named "retirement 2025," "retirement 2030," etc.

By simply depositing to a fund named for the year nearest the planned retirement date, an investor's funds are fully diversified across markets, sectors and classes. What's more, the fund manager periodically rebalances the mix of assets, drawing the fund more conservative as the retirement year approaches. It's legitimate hands-off investing, which can help protect the investor from one market's melt-down.

July 2, 2012

Top 10 Investor Errors: You Are Your Own Worst Enemy

Third of ten short articles by Barry Ritholtz.

This one bites a lot of investors. Whether through panic selling when the market is tanking or impulse buying after a hot stock has peaked, trading on emotion is a quick way to loss.

The buy-and-hold strategy with deposits allocated among many investment types (called diversification), coupled with payroll withholding or automatic deposits leads to long-term, hands-off gains.

Check back on how your retirement investments have performed and re-balance once a year, or look into targeted retirement mutual funds that handle allocating and rebalancing holdings for you. The latter is a smart option for reluctant investors who don't enjoy the challenge of managing their accounts. Avoid tweaking your holdings throughout the year.

Unless you're a well-disciplined financial news junkie, avoid CNBC like the plague. You are not Jim Cramer. Rapid moves in and out of stock positions will only make your broker wealthy, not you.

Remember, retirement investing is not about getting rich, it's about preserving the income level from your final year of work through the succeeding years of part-time work, volunteerism or whatever you choose to do with the rest of your life.

Lego Calculator Can Do Anything Your Macbook Can (In Theory)

John Pavlus, writing for Fast Company.Design:

"Everyone reading this post can thank Alan Turing for the privilege. Turing is widely considered the father of computer science: he cracked Nazi crypto-codes during World War II and helped design the first working computer. But before all that, at the tender age of 24, Turing had the central theoretical insight behind every shiny gadget you know and love: a hypothetical, idealized computer called a Turing Machine."

Click through for a working demo Turing Machine, built from Lego pieces. It takes about five minutes for it to add 2 + 2, but demonstrates what your own computer is doing all day, every day.

July 1, 2012

Top 10 Investor Errors: Reaching for Yield

Second of ten short articles by Barry Ritholtz.

Top 10 Investor Errors: Excess Fees

First of ten short articles by Barry Ritholtz.

Errors and Checklist for Investors

Barry Ritholtz has compiled a list of the top ten errors investors make. Since today's employment benefits rarely include a defined, annuity-based pension benefit, most of us are depending upon 401ks and IRAs that put us at the mercy of the market. Committing any of these ten investing errors can have deleterious effect on when, if, and for how long we can afford to retire from full-time employment.

Each is a short read, presented daily. I'm going to post a link as they appear, but you'll have to click through for the articles.