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Recommended reading, economic debates, predictions and opinions.

Postby Maciek » 12 Dec 2006 22:31



Regarding the Google anecdote at the beginning of the article, you could probably re-read that title as The best investment advice you'll ever get. They assembled the most legendary line up any newbie could possibly ever hope to get.

It's probably all downhill after those three :) ...
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Postby Bylo Selhi » 15 Dec 2006 10:15

If these investment vehicles were ice cream, I'd take vanilla
I've been in the investment business since 1983 and I find that with each passing year simplicity becomes more and more appealing. And I don't think I'm alone; it's my observation that the more experienced investors become, the more they gravitate back to the basics. Unfortunately, the market for investment products is steaming ahead in the opposite direction. There are new investment products coming at us daily -- each one more complicated and with more features than the previous one. Increasingly, I feel like the guy who goes into Baskin Robbins and orders vanilla in a cup...

The packagers who construct these products -- investment bankers and marketing departments mostly -- have not found a new source of investment return. Indeed, developing innovative packaging costs money and involves more people, invariably leading to lower long-term returns...

Structured and managed products are designed to make life simpler for the investor, but I think the opposite it true. In my opinion, there is a greater likelihood that the buyers will fail to get what they needed, what they wanted and/or what they thought they were getting.
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Postby tidal » 21 Dec 2006 11:33

Mutual funds: obsolete?
High MERs Driving Investors to ETFs
Jonathan Chevreau, Financial Post
Published: Wednesday, December 20, 2006
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Postby Bylo Selhi » 21 Dec 2006 11:50

Mutual funds: obsolete? wrote:However, the proliferation of new ETFs means they will start to take on the bad habits of the mutual fund industry, predicts David Swensen in his must-read book Unconventional Success.

Jack Bogle makes the same point in What’s Happened to the Mutual Fund Industry? [PDF]. Only his isn't a prediction. It's a proof. And his criticism isn't only of the industry but of the customers who fall for its marketing.
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Postby tidal » 21 Dec 2006 14:16

Bylo Selhi wrote:
Mutual funds: obsolete? wrote:However, the proliferation of new ETFs means they will start to take on the bad habits of the mutual fund industry, predicts David Swensen in his must-read book Unconventional Success.

Jack Bogle makes the same point in What’s Happened to the Mutual Fund Industry? [PDF]. Only his isn't a prediction. It's a proof. And his criticism isn't only of the industry but of the customers who fall for its marketing.
I can't see how the proliferation of ETF's is going to make VTI or IVV or XIC or XIU start to take on the "bad habits" of the mutual fund industry... I understand that Bogle and Swensen have issues with the product proliferation, per se, and some of the new products in particular, but I do not see how that will negatively impact the core products... If any, the new products are somewhat a response to rock-bottom-pricing, first-mover-and-scale-advantages that some of the core products have staked out... I don't see that changing...
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Postby Bylo Selhi » 21 Dec 2006 14:42

Bogle's talking about the effect on investors of the proliferation of specialized ETFs. He argues that they (investors) will fall into the same bad habits (e.g. chasing hot sectors and/or new paradigms) with ETFs as with open-end funds as the sponsors roll out new "products" on carpets of marketing hype.

As for existing broad-based ETFs like VTI etc. he provides ample evidence that bad habits are already occurring, e.g. the high daily turnover in existing ETFs and the net flows out of broad-based ETFs and into the new ones.
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Postby big easy » 22 Dec 2006 16:24

The best source of personal finance info on the web:

http://www.financialwisdomforum.org/forum

Thanks for all the great information. Although I don't post much, I am a frequent browser of this site. There is some phenomenal information here. Wish I'd had access to this 20 years ago! Happy Holidays to all.
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Postby lystgl » 22 Dec 2006 21:02

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Postby patriot1 » 24 Dec 2006 02:02

Seductively Easy, Payday Loans Often Snowball

Guess what: borrowing money makes you poorer.
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wealth gap widens

Postby randomwalker » 26 Dec 2006 09:37

THE WEALTH GAP WIDENS

December 24, 2006

During this season of giving, it is worth taking note of the vast disparity in wealth that continues to plague Canada and reflecting on the less fortunate in our midst. By David Crane

http://www.thestar.com/Business/article/164866
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Postby WishingWealth » 26 Dec 2006 15:01

Why you can't get iPods at a discount.

In Slate.

Last week, USA Today reported that online sales in November increased 25 percent over those from 2005. If you've shopped for gadgets online this holiday season, you almost certainly found that the camcorder or DVD player you wanted was selling at a wide range of prices. Why is there so much price variation for the same product? And how come some gadgets, like the iPod, cost the same no matter where you shop?
...


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Postby Norbert Schlenker » 02 Jan 2007 13:50

My daughter gave me a copy of The Undercover Economist by Tim Harford for Christmas. Definitely worth reading.
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Postby Bylo Selhi » 02 Jan 2007 17:16

Norbert Schlenker wrote:My daughter gave me a copy of The Undercover Economist by Tim Harford for Christmas. Definitely worth reading.
Also worth watching (if you can find it) is his Beeb series, Trust me, I'm an Economist (video trailer and some clips via YouTube if you can't.)

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Take the time to tinker with your finances
I am not much of a believer in New Year's resolutions. Lord knows they've never worked for me. If you're like me, self-discipline and a commitment to change don't magically appear at the stroke of midnight on New Year's. Still, the beginning of the new year is an ideal time to take a look at your finances and make at least a few low-pain changes that can pay huge dividends over time. Here are 10 suggestions humbly offered to help improve your personal finances...
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Postby Bylo Selhi » 03 Jan 2007 11:01

Don't Get Hit by the Pitch: How Advisers Manipulate You
We are all, I regret, under the influence. Unscrupulous financial salespeople can often persuade even well-educated folks to sink huge sums into rotten or fraudulent investments. Indeed, over a quarter of adults have fallen prey to a scam -- investment or otherwise -- at some point in their lives, estimates AARP, the seniors' advocacy group. How do these salespeople pull it off? Below are seven common tactics. But here's what is striking: Even ethical financial advisers use these tricks...
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Postby NormR » 03 Jan 2007 12:19

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Postby investormac » 05 Jan 2007 20:34

Here is a guide (link below) to U.S. financial journalists in regards the active portion of your portfolio. It's a ranking of over 35 media-based stock-market forecasters. Ken Fisher is No. 1 with a 71% accuracy rate. Nasser and Navellier at MarketWatch.com and Oberwese at zacks.com are next best. Altogether, the accuracy rate of the group is 49.6% (coin flipping would be slightly better). Jim Cramer has a 47% accuracy rate.
http://www.cxoadvisory.com/gurus
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Postby Norbert Schlenker » 07 Jan 2007 03:26

John De Goey's The Professional Financial Advisor II.

Much better written (edited?) than the first edition, to which it bears almost no resemblance.
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Postby Bylo Selhi » 07 Jan 2007 11:04

Jonathan Clements wrote:Some Financial Lingo Redefined
You've got to talk the talk. Taking a walk down Wall Street is a lot like taking a vacation abroad. You come home with less money and you haven't a clue what half the people said. Baffled by financial lingo? So you are better prepared for the investment year ahead, and you have a fighting chance of making at least a little money, here's a guide to 41 key Wall Street phrases...
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Postby Bylo Selhi » 07 Jan 2007 11:19

[Still] Worth [Re]Reading: Common Sense, 34 Years Later
IF one of your New Year’s resolutions is to improve your personal finances, here’s a suggestion: Instead of picking up one of the scores of new works now flooding into bookstores, reread an old one: “A Random Walk Down Wall Street” (Norton, $29.95) which has just been updated. This time around, the author, Burton G. Malkiel, an economics professor at Princeton, has added a more detailed discussion of investment strategies for retirement and a discussion of research in behavioral finance, but his core message is still the same: you can’t predict the market, no matter what approach you use...
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Postby Bylo Selhi » 11 Jan 2007 11:43

It's checkup time for your portfolio -- and adviser
The biggest financial mistake you make in 2007 could be to assume everything's great in your portfolio just because you have an investment adviser and the markets are coming off a great four-year run. If you can find a spare 30 minutes or so, grab some of your account statements from the past year and do a quick review to make sure both your portfolio and your relationship with your adviser are in good shape. What should you be thinking about? Here are 10 potential points of contention.
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Postby Norbert Schlenker » 11 Jan 2007 13:16

2005 report for Yale's endowment

There is something for every investor to learn in that report.

(H/T to yobria at M*)
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Postby WishingWealth » 04 Feb 2007 12:42

Will drop that tidbit here.
Paul Krugman* in the NYRB (New York Review of Books)

Who Was Milton Friedman?

...
But classical economics offered neither explanations nor solutions for the Great Depression. By the middle of the 1930s, the challenges to orthodoxy could no longer be contained. Keynes played the role of Martin Luther, providing the intellectual rigor needed to make heresy respectable. Although Keynes was by no means a leftist—he came to save capitalism, not to bury it—his theory said that free markets could not be counted on to provide full employment, creating a new rationale for large-scale government intervention in the economy.

Keynesianism was a great reformation of economic thought. It was followed, inevitably, by a counter-reformation. A number of economists played important roles in the great revival of classical economics between 1950 and 2000, but none was as influential as Milton Friedman. If Keynes was Luther, Friedman was Ignatius of Loyola, founder of the Jesuits. And like the Jesuits, Friedman's followers have acted as a sort of disciplined army of the faithful, spearheading a broad, but incomplete, rollback of Keynesian heresy. By the century's end, classical economics had regained much though by no means all of its former dominion, and Friedman deserves much of the credit.
I don't want to push the religious analogy too far. Economic theory at least aspires to be science, not theology; it is concerned with earth, not heaven. Keynesian theory initially prevailed because it did a far better job than classical orthodoxy of making sense of the world around us, and Friedman's critique of Keynes became so influential largely because he correctly identified Keynesianism's weak points. And just to be clear: although this essay argues that Friedman was wrong on some issues, and sometimes seemed less than honest with his readers, I regard him as a great economist and a great man
...



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* If you can't stand the guy, don't read any further; just sail on to the next thread.
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Postby Bylo Selhi » 09 Feb 2007 14:22

In the Land of the Euro, Small Towns Adopt Alternative Currencies
The currencies are inspired by a German theoretician, Silvio Gesell, a socialist activist who died in 1930. He argued that money that sat in a bank was like dead weight on an economy, because it was accruing interest rather than being spent to fire consumption and production. Mr. Gesell proposed that money automatically depreciate over time — essentially hard-wiring inflation into the currency to generate an incentive to spend quickly....
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Postby atchgwb » 10 Feb 2007 12:17

This sounds very like my recollection of the orginal thesis behind the Social Credit/Creditiste political parties in Canada 1930-~1960s?
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Postby FrostedGlass » 13 Feb 2007 15:46

FP likes to harvest stories from Bloomberg and Dorfman in particular. Look for this in the paper in the next couple of days or weeks.

Nine Lessons I Learned in the Past Nine Years: John Dorfman

Lesson One: Out-of-favor stocks are the best road to capital gains.
Two: Don't be swayed by what Wall Street analysts say.
Three: High portfolio turnover is not necessary for good results.
Four: The investment value of a stock is independent of whether it has been moving up or down.
Five: Predicting the market with consistency is extremely difficult.
Six: Predicting the economy is probably even harder.
Seven: High valuations alone aren't a good reason to sell a stock short.
Eight: High profits alone are no reason to invest in a stock.
Nine: Dialog with readers was one of the best parts of my experience as a columnist.
Beer is best served in a ... FrostedGlass
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