Worth reading
Nations get 'wake-up' call about aging workers
http://www.theglobeandmail.com/servlet/ ... iness/home
Buy those 30-year GoC bonds with confidence They're having an ad nauseum debate south of the border about allowing Social Security funds to be invested in non-government debt assets, while Canada just went right ahead and did that years ago, with excellent results.
Aging populations are set to make a mess of the world's public finances in the decades ahead, and could cause government debt to hit speculative grades everywhere except Denmark, Austria and Canada, Standard & Poor's Corp. says.
Its always great to receive kudos from a bond rating agency, but to be rated as the top long-term prospect in the world in terms of low long-term credit risk is amazing.The study looked at the impact of current trends in state pension and health care spending on creditworthiness of 32 industrialized nations. It found that, without changes in their fiscal stance or policies, most of the countries' ratings would sink to speculative grade by 2050."
Buy those 30-year GoC bonds with confidence They're having an ad nauseum debate south of the border about allowing Social Security funds to be invested in non-government debt assets, while Canada just went right ahead and did that years ago, with excellent results.
Another quarter of Canadian ETF outperformance
http://www2.standardandpoors.com/spf/pd ... recard.pdf
Now that the crash of Nortel is mostly out of the 5-year comparisons of active vs. passive, the results are shocking, even on a pre-tax basis:
For instance, the average Cdn Equity fund had a 5-year return of 8.91%. The TSX Composite, a return of 11.74%. Thats 283 bp lost, which is even higher than the MER of a typical Canadian Equity mutual fund.
So not only do the active managers underperform due to the fees, but they can't even match the market if they were to agree to work for absolutely nothing.
Now that the crash of Nortel is mostly out of the 5-year comparisons of active vs. passive, the results are shocking, even on a pre-tax basis:
For instance, the average Cdn Equity fund had a 5-year return of 8.91%. The TSX Composite, a return of 11.74%. Thats 283 bp lost, which is even higher than the MER of a typical Canadian Equity mutual fund.
So not only do the active managers underperform due to the fees, but they can't even match the market if they were to agree to work for absolutely nothing.
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How Accurate Are Your Pet Pundits?
In Project Syndicate...
The evidence falls into two categories. First, as the skeptics warned, when hordes of pundits are jostling for the limelight, many are tempted to claim that they know more than they do. Boom and doom pundits are the most reliable over-claimers.
Between 1985 and 2005, boomsters made 10-year forecasts that exaggerated the chances of big positive changes in both financial markets (e.g., a Dow Jones Industrial Average of 36,000) and world politics (e.g., tranquility in the Middle East and dynamic growth in sub-Saharan Africa). They assigned probabilities of 65% to rosy scenarios that materialized only 15% of the time.
In the same period, doomsters performed even more poorly, exaggerating the chances of negative changes in all the same places where boomsters accentuated the positive, plus several more (I still await the impending disintegration of Canada, Nigeria, India, Indonesia, South Africa, Belgium, and Sudan). They assigned probabilities of 70% to bleak scenarios that materialized only 12% of the time.
Second, again as the skeptics warned, over-claimers rarely pay penalties for being wrong. Indeed, the media shower lavish attention on over-claimers while neglecting their humbler colleagues.
We can see this process in sharp relief when, following the philosopher Sir Isaiah Berlin, we classify experts as “hedgehogs” or “foxes.” Hedgehogs are big-idea thinkers in love with grand theories: libertarianism, Marxism, environmentalism, etc. Their self-confidence can be infectious. They know how to stoke momentum in an argument by multiplying reasons why they are right and others are wrong.
That wins them media acclaim. But they don’t know when to slam the mental brakes by making concessions to other points of view. They take their theories too seriously. The result: hedgehogs make more mistakes, but they pile up more hits on Google.
Eclectic foxes are better at curbing their ideological enthusiasms. They are comfortable with protracted uncertainty about who is right even in bitter debates, conceding gaps in their knowledge and granting legitimacy to opposing views. They sprinkle their conversations with linguistic qualifiers that limit the reach of their arguments: ‘but,’ ‘however,’ ‘although.’
Because they avoid over-simplification, foxes make fewer mistakes. Foxes will often agree with hedgehogs up to a point, before complicating things: “Yes, my colleague is right that the Saudi monarchy is vulnerable, but remember that coups are rare and that the government commands many means of squelching opposition.”
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Catching up on my reading (Now at May 19).
Thoroughly Modern Mill- In WSJ's Opinion Journal
Thoroughly Modern Mill- In WSJ's Opinion Journal
WW...
May 20 sees the 200th anniversary of the birth of John Stuart Mill, the greatest exponent of 19th-century liberalism, whose philosophy still dominates jurisprudence in the English-speaking world. Mill was a many-faceted intellectual who wrote on all aspects of philosophy, on law and morals, on political economy, and on poetry and the arts. His home-schooling at the hands of his father, the economist and historian James Mill, was a model of rigor, causing him to read and write Greek aged 6, to master Latin aged 9, and to have acquired a thorough grounding in history and mathematics aged 10, when he began work on a history of Roman government. Mill later developed a taste for poetry, acquired a perfect knowledge of French, and, despite his agnostic upbringing, read deeply in the Bible, which he believed to be one of the two Great Books, the other being Homer.
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Wake up: the American Dream is over
'If class warfare is being waged in America, my class is clearly winning.' - Warren Buffet
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For those who get it, the May/June 2006 issue of the Financial Analysts Journal has two articles that will be of interest to folks around these parts. The first is William Bernstein's "Corporate Finance and Original Sin". The second is "Dividend Payout and Future Earnings Growth" by Zhou and Ruland.
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Digging Into the Ethanol Debate
In the WSJ. The Number's Guy
WW
In the WSJ. The Number's Guy
As the good professor in need of a grant would say: More studies are needed....... President Bush announced in his State of the Union address in January that he backed funding for research into producing ethanol from corn and other farm products, with the goal of making a viable fuel alternative to gasoline for automobiles. Since then, Congress has wrangled over how to implement the idea.
Critics, meanwhile, have blasted the viability of ethanol. A central argument is that corn-based ethanol, the most-common form today, is literally a waste of energy. Detractors say that it takes more fuel to make ethanol -- growing the corn, bringing it to a processing plant and converting it to fuel -- than would be saved by using it.
That criticism has received attention in articles in the Washington Post, the Louisville Courier-Journal and Cox News Service (all of which also included the pro-ethanol side). In April, Larry Kudlow said on his CNBC show, "So many experts believe it costs more energy to turn corn into ethanol-related gasoline than [is] actually produced."
Two prominent researchers are chiefly responsible for the energy-efficiency claim: Cornell University's David Pimentel and Tad Patzek of the University of California, Berkeley. In a co-written paper published last year in Natural Resources Research, Profs. Pimentel and Patzek wrote, "Ethanol production using corn grain required 29% more fossil energy than the ethanol fuel produced." By comparison, production of gasoline or diesel uses about 20% more fossil energy than the fuels produce. (For automobiles, ethanol is generally blended with gasoline in either 90-10 or 85-15 proportions, but the studies focused on the energy content of the ethanol itself.)
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WW
- Bylo Selhi
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Ah, but the assumption is that one has to use corn grain in order to produce ethanol. What if you can produce ethanol from the remainder of the corn plant, i.e. what's left after you've used the grain to feed livestock? What if you can produce ethanol from other common sources of "garbage"? (But I digress...)"Ethanol production using corn grain required 29% more fossil energy than the ethanol fuel produced."
Sedulously eschew obfuscatory hyperverbosity and prolixity.
There is a simple test. Remove ethanol subsidies (and barriers to Brazil's cheap ethanol) and let the market decide.Bylo Selhi wrote:Ah, but the assumption is that one has to use corn grain in order to produce ethanol. What if you can produce ethanol from the remainder of the corn plant, i.e. what's left after you've used the grain to feed livestock? What if you can produce ethanol from other common sources of "garbage"? (But I digress...)"Ethanol production using corn grain required 29% more fossil energy than the ethanol fuel produced."
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If anyone is interested in the merits of ethanol (or the lack thereof), Robert Rapier's web site might be worth a visit. He's a chemical engineer, did graduate work in biomass conversion, and blogs about alternative energy.
In part one and part two of this essay, he discusses the subsidies mentioned by NormR above, and how they skew the numbers:
In part one and part two of this essay, he discusses the subsidies mentioned by NormR above, and how they skew the numbers:
And hello everyone. I've lurked for a while, but thought it was time to register and come out of the shadows.I consider [grain derived ethanol] to be a kind of fool’s gold that looks nice and shiny to the general public. Considering the magnitude of the subsidies as I showed in the previous essay, the industry is nowhere close to being able to compete on a level playing field. If the industry is to survive, you can count on multibillion dollar handouts – or mandates - as far as the eye can see.
- Norbert Schlenker
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Know any recent or soon-to-be graduates? You might want to point them to http://www.nytimes.com/2006/06/10/business/10money.html or print it out for them.
This is the season for giving advice to graduates as they enter the workplace. Instead of listening to yet another recitation of the usual admonishments to "change the world," "carpe diem," or "wear sunscreen," those graduates — unless they are already trapped on the nonpaying internship hamster wheel — need to hear how to manage their paychecks.
College graduates may thank mom and dad, top left, for helping with tuition, but they still need advice on how to handle a paycheck. Small steps — packing your own lunch, for example — can make a big difference over the first 10 years of a working life.
Parents may have tried this. And many will undoubtedly send this article to their children.
But, dear graduate, before you wad this up and toss it next to the keg still sitting there from last week's party, consider this: ...
Nothing can protect people who want to buy the Brooklyn Bridge.
- Norbert Schlenker
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Why Men Don't Know Jack About Retirement
Stanley Bing's Secrets to a Happy Retirement
Hat tip to http://early-retirement.org/forums/index.php
Stanley Bing's Secrets to a Happy Retirement
Hat tip to http://early-retirement.org/forums/index.php
Nothing can protect people who want to buy the Brooklyn Bridge.
- Bylo Selhi
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'Plasma needle' could replace the dentist's drill
MANY of us would go to great lengths to avoid the dentist's drill. Sticking a needle with a flaming plasma tip into your mouth may not at first strike you as much of an improvement on conventional dentistry. However, the plasma needle, which is cold and painless to the touch, could be just the panacea we have been waiting for. The needle's creator, physicist Eva Stoffels-Adamowicz, who is based at the Eindhoven University of Technology in the Netherlands, says it could also be used to painlessly remove cancerous tissue...
Nitric oxide is also involved in cell messaging, so it can be used to trigger programmed cell death. Using higher-energy doses of plasma, in longer bursts, the team was able to target certain living cells and cauterise the tissue while leaving surrounding cells undamaged. "The plasma needle could be used to excise tumours or skin cancers," says Stoffels-Adamowicz. "It's surgery without cutting."...
Stoffels-Adamowicz's team are already working on a method to generate a plasma that can be sent down blood vessels via a catheter. They think that plasma therapy could one day be used to help clear blocked arteries, although it is likely to be used in dentistry much sooner.
Sedulously eschew obfuscatory hyperverbosity and prolixity.
- Norbert Schlenker
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What the Naïve Consumers Don’t Know, Can Help YouThe two economics professors — Mr. Laibson at Harvard and Mr. Gabaix at the Massachusetts Institute of Technology and Princeton — have looked at how companies hide fees and costs. They found that sophisticated consumers have somehow learned how to game the system by having enough naïve consumers around to subsidize them.
The smartest strategy, they say, is for the sophisticated consumer to choose the service with the most hidden charges and highest add-on prices, but then avoid paying those added costs. “The sophisticated consumer takes advantage of that,” Mr. Gabaix said. “The naïve pay all the fees.” ...
Nothing can protect people who want to buy the Brooklyn Bridge.
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From the Globe & Mail:
Georges
Companies should stop providing quarterly earnings guidance because it puts too much emphasis on short-term results and moves management away from concentrating on long-term performance, says a new report by two major U.S.-based business groups.
The report, titled "Breaking the Short-Term Cycle," was based on recommendations by a 20-member panel that included business leaders, analysts and fund managers.
The "obsession with short-term results by investors, asset management firms and corporate managers collectively leads to the unintended consequences of destroying long-term value, decreasing market efficiency, reducing investment returns, and impeding efforts to strengthen corporate governance," the report found.
It added that analysts, fund managers and shareholders should also stop demanding short-term results. "This is a two-way relationship. Investors should expect greater influence but must exhibit true ownership behaviour and generally commit to acting like owners (e.g. holding longer, trading less)," the report said. "Similarly, companies should expect longer capital commitments -- but only if they provide investors with high-quality communications and a fair voice in governance."
Georges
The juice is worth the squeeze
Very much agree to the above.
I've started my investing career in South Africa. Companies there report annually, pay the dividend annually, don't usually provide "guidance" and somehow the sky hasn't fallen. The stock quotes in the newspaper are grouped by sector and each row includes dividend yield, earnings yield and P/E - makes it easier to compare similar companies.
I've started my investing career in South Africa. Companies there report annually, pay the dividend annually, don't usually provide "guidance" and somehow the sky hasn't fallen. The stock quotes in the newspaper are grouped by sector and each row includes dividend yield, earnings yield and P/E - makes it easier to compare similar companies.
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This looks worth at least skimming.
Baby Boomer Women: Secure Futures or Not?
http://www.genpolicy.com/2006_journal/p ... rement.pdf
http://www.genpolicy.com/2006_journal/p ... kplace.pdf
http://www.genpolicy.com/2006_journal/p ... oomers.pdf
http://www.genpolicy.com/2006_journal/p ... ership.pdf
http://www.genpolicy.com/2006_journal/p ... curity.pdf
http://www.genpolicy.com/2006_journal/p ... _by_65.pdf
http://www.genpolicy.com/2006_journal/p ... policy.pdf
http://www.genpolicy.com/2006_journal/p ... rement.pdf
http://www.genpolicy.com/2006_journal/p ... counts.pdf
http://www.genpolicy.com/2006_journal/p ... _women.pdf
http://www.genpolicy.com/2006_journal/p ... ycheck.pdf
Baby Boomer Women: Secure Futures or Not?
http://www.genpolicy.com/2006_journal/p ... rement.pdf
http://www.genpolicy.com/2006_journal/p ... kplace.pdf
http://www.genpolicy.com/2006_journal/p ... oomers.pdf
http://www.genpolicy.com/2006_journal/p ... ership.pdf
http://www.genpolicy.com/2006_journal/p ... curity.pdf
http://www.genpolicy.com/2006_journal/p ... _by_65.pdf
http://www.genpolicy.com/2006_journal/p ... policy.pdf
http://www.genpolicy.com/2006_journal/p ... rement.pdf
http://www.genpolicy.com/2006_journal/p ... counts.pdf
http://www.genpolicy.com/2006_journal/p ... _women.pdf
http://www.genpolicy.com/2006_journal/p ... ycheck.pdf
Nothing can protect people who want to buy the Brooklyn Bridge.
- Bylo Selhi
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A fountain of financial wisdom
That daily latte habit may be draining your retirement funds. 'If you save the $5 every day you spend at Starbucks and let it compound slowly, you could have $500,000 by the time you retire,' explained Paul Farrell. Through his regular columns for MarketWatch and his nine books on personal finance and investment psychology, the Arroyo Grande resident is hoping to demystify investing with several simple strategies...
Sedulously eschew obfuscatory hyperverbosity and prolixity.
I like Bylo's link just above, but I find this bit unfortunate.
If someone thinks that $1800 a year in small luxuries is worth it, then go for it.
(Disclosure: I have two grande's a day, about four days a week, about 45 weeks a year. That's $1.96 x 2 x 4 x 45 = $720 a year.)
Georges
To which I say: Good for them.People also want instant gratification. They want to meet their needs today. They go to Starbucks and spend $5 a day on a coffee and a muffin, which adds up to $150 a month. That’s an IRA contribution. They’re members of the Starbucks retire-now club. They are enjoying their retirement now.
If someone thinks that $1800 a year in small luxuries is worth it, then go for it.
(Disclosure: I have two grande's a day, about four days a week, about 45 weeks a year. That's $1.96 x 2 x 4 x 45 = $720 a year.)
Georges
The juice is worth the squeeze