I don't read as many books as I should, but when I do, I stick with non-fiction things related to history or finance or humor. In the latter category, my favorite humorist has always been Dave Barry. In the 80s and 90s, Barry wrote a hilarious, weekly syndicated column for the Miami Herald, which I always read because it was printed by the Des Moines Register. At the same time, he authored many humor books that I read, some original and some a collection of his Miami Herald columns or essays.
Unfortunately, Barry dropped off my map in the late 90s when he gave up his weekly column, at which time he continued to write a variety of fictional books. In the past several years, he's been using social media more, and gone back to writing more non-fiction again. He's published a new humor book in each of the past two years.
With that as background, I recently took his newer books with me on a trip, and it was just like old times. It is very, very hard to write in a way that's laugh-out-loud funny, but Barry and his books will do it. It's impossible to fully describe his observational writing style, but he gets help from his "many alert readers" who send him crazy newspaper stories. Among his favorite topics are exploding or flaming items (including cows, toilets, Pop-Tarts, and Barbie dolls), and the emotional differences between men and women.
He also has a few common sayings. For example, when distinguishing fact from hyperbole, Barry frequently asserts, "I am not making this up." Also, "would be a good name for a rock band" is a statement Barry often applies to certain phrases. (This reminds me of a softball team I once coached, where the first name had to be a color and the nickname was an action. Our team drew the name 'Purple Riot' which I immediately said would be a good name for a rock band.)
If you have a chance, and you want a good laugh, read more Dave Barry!
Tuesday, March 24, 2015
Sunday, March 15, 2015
No Thanks Necessary
Your investments had a great 2014, or so it appears. Your portfolio went up over 15%, and now you want to go out of your way to thank your investment advisor.
Instead, you ought to be looking for a new advisor. If your portfolio went up that much last year, it means virtually all of your money was invested in U.S. stocks. In turn, that means your advisor did not focus on something that should have been of equal concern: Risk.
No doubt, U.S. stocks performed well last year -- but what if they hadn't? History has taught us that no one can accurately predict the short-term direction of the investment marketplace. No one, investment advisors included, knows exactly when the market will go up or down, or when to jump in or out.
So managed properly, your investment portfolio would include more than just U.S. equities. It would include other asset classes whose returns don't always move in the same direction, nor with the same volatility, as the overall domestic stock market. These risk-diversifying assets would include things like corporate bonds, international stocks, government bonds, and real estate.
Last year, most of these 'non-correlated' asset classes did not perform as well as the U.S. stock market, and if you had them in your portfolio, they reduced your overall return. However, those assets also substantially reduced your risk of having a horrible year, from which it could take many years to recover.
If your investment advisor had focused on risk as well as performance, then it was mathematically improbable to generate a 15% return in 2014. They deserve no thanks.
Good investment advisors, and you, should focus instead on risk-adjusted return. You may not have huge shorter-term investment gains, but more importantly, you'll likely avoid huge losses.
Instead, you ought to be looking for a new advisor. If your portfolio went up that much last year, it means virtually all of your money was invested in U.S. stocks. In turn, that means your advisor did not focus on something that should have been of equal concern: Risk.
No doubt, U.S. stocks performed well last year -- but what if they hadn't? History has taught us that no one can accurately predict the short-term direction of the investment marketplace. No one, investment advisors included, knows exactly when the market will go up or down, or when to jump in or out.
So managed properly, your investment portfolio would include more than just U.S. equities. It would include other asset classes whose returns don't always move in the same direction, nor with the same volatility, as the overall domestic stock market. These risk-diversifying assets would include things like corporate bonds, international stocks, government bonds, and real estate.
Last year, most of these 'non-correlated' asset classes did not perform as well as the U.S. stock market, and if you had them in your portfolio, they reduced your overall return. However, those assets also substantially reduced your risk of having a horrible year, from which it could take many years to recover.
If your investment advisor had focused on risk as well as performance, then it was mathematically improbable to generate a 15% return in 2014. They deserve no thanks.
Good investment advisors, and you, should focus instead on risk-adjusted return. You may not have huge shorter-term investment gains, but more importantly, you'll likely avoid huge losses.
Sunday, March 8, 2015
Life After High School Sports
We are right in the middle of the most recent edition of the girls and boys high school state basketball championships in Des Moines. As it's been the past several years, there are a number of players with whom we are acquainted as the children of friends or relatives.
Along with just about every sport these days, lots of these kids play basketball on a year-round basis, thanks to competitive (typically AAU) programs. The real thanks actually goes to their parents, who have made a great sacrifice of both time and money to allow it to happen.
The question is, what is the real benefit, and is it worth the price? In this case, the price isn't just monetary, it's also the price paid in missed events with family, and all of the missed school time.
If you make it to the state tournament, and even win a state title, does that once-in-a-lifetime memory make it worth spending the thousands of hours and dollars, also resulting in other missed memories? Maybe, maybe not.
What about getting a college athletic scholarship? Most would answer yes to that, including me. Still, that's a crapshoot, and regardless, how much of that success can be directly correlated to the extra effort?
In the end, the 'cost' of a kid playing competitive sports throughout the year probably can't be determined until five or so years after high school. From my perspective, it's all about what kind of person the kid turns out to be when high school and college years are over.
Assuming they aren't one of the less than 1% that becomes a professional in their chosen sport, it depends on whether the kid becomes a productive member of society. If they did, it doesn't mean the extra athletic time helped them, but at least it didn't hurt them.
Along with just about every sport these days, lots of these kids play basketball on a year-round basis, thanks to competitive (typically AAU) programs. The real thanks actually goes to their parents, who have made a great sacrifice of both time and money to allow it to happen.
The question is, what is the real benefit, and is it worth the price? In this case, the price isn't just monetary, it's also the price paid in missed events with family, and all of the missed school time.
If you make it to the state tournament, and even win a state title, does that once-in-a-lifetime memory make it worth spending the thousands of hours and dollars, also resulting in other missed memories? Maybe, maybe not.
What about getting a college athletic scholarship? Most would answer yes to that, including me. Still, that's a crapshoot, and regardless, how much of that success can be directly correlated to the extra effort?
In the end, the 'cost' of a kid playing competitive sports throughout the year probably can't be determined until five or so years after high school. From my perspective, it's all about what kind of person the kid turns out to be when high school and college years are over.
Assuming they aren't one of the less than 1% that becomes a professional in their chosen sport, it depends on whether the kid becomes a productive member of society. If they did, it doesn't mean the extra athletic time helped them, but at least it didn't hurt them.
Sunday, March 1, 2015
Non-representative Democracy
One of the reasons the United States is the greatest country in the world is our governing system of representative democracy. Too bad it doesn't always work that way.
When is a representative democracy not a representative democracy? In Iowa, the answer is when it comes to legalizing medicinal marijuana.
This week, a Des Moines Register Iowa Poll found that 70% of adult Iowans favor the legalization of marijuana for medicinal purposes. This is up from just 59% last year, and 58% the year before that.
It's over. It doesn't take a rocket scientist to figure out that this issue has been decided, and Iowans are ready to follow the rest of the country into making this rational, albeit long overdue choice.
Unfortunately, Iowa's elected state legislators don't seem to be any closer to legalizing marijuana for medical uses. Basically, we've elected a bunch of old, white, close-minded, and mostly Republican males (including the governor) who will always believe pot is evil, regardless of its proven therapeutic uses or the desire of their constituents. They continue to use the intellectually dishonest argument that the 'unintended consequences' of legalization will lead to serious drug abuse in Iowa. Simultaneously, they attend numerous political receptions where they, along with many others, can legally drink non-medicinal booze without a thought of the 'unintended consequences' of alcohol abuse.
Some Iowans seem to be buying that 'unintended consequences' argument, because the same Iowa Poll reports that only 30% of adults approve legalizing marijuana for recreational use, a number unchanged over the past two years. We are still years away, or more likely, one big fiscal deficit away, from joining the few other states that have done this.
Oh well. One thing we know about representative democracy it that it works, it's just a matter of time. So it will be with legalizing marijuana use in Iowa and in the U.S.
When is a representative democracy not a representative democracy? In Iowa, the answer is when it comes to legalizing medicinal marijuana.
This week, a Des Moines Register Iowa Poll found that 70% of adult Iowans favor the legalization of marijuana for medicinal purposes. This is up from just 59% last year, and 58% the year before that.
It's over. It doesn't take a rocket scientist to figure out that this issue has been decided, and Iowans are ready to follow the rest of the country into making this rational, albeit long overdue choice.
Unfortunately, Iowa's elected state legislators don't seem to be any closer to legalizing marijuana for medical uses. Basically, we've elected a bunch of old, white, close-minded, and mostly Republican males (including the governor) who will always believe pot is evil, regardless of its proven therapeutic uses or the desire of their constituents. They continue to use the intellectually dishonest argument that the 'unintended consequences' of legalization will lead to serious drug abuse in Iowa. Simultaneously, they attend numerous political receptions where they, along with many others, can legally drink non-medicinal booze without a thought of the 'unintended consequences' of alcohol abuse.
Some Iowans seem to be buying that 'unintended consequences' argument, because the same Iowa Poll reports that only 30% of adults approve legalizing marijuana for recreational use, a number unchanged over the past two years. We are still years away, or more likely, one big fiscal deficit away, from joining the few other states that have done this.
Oh well. One thing we know about representative democracy it that it works, it's just a matter of time. So it will be with legalizing marijuana use in Iowa and in the U.S.
Monday, February 23, 2015
Hard(ly) Work
I've posted entries in the past about people who don't work, and live of my taxes in the form of government payments. I'm not linking to them here; you can either assume it wasn't altogether flattering, or find the 'work' label on the blog and check it out for yourself.
In the past couple of years, I haven't changed my mind about that, but I'm more disgusted about another form of not working. By this, I mean people who talk a lot about how hard they work, but who don't really work that hard.
I started to notice this more after being self-employed for a while. Many people with whom I interact seem to believe the scheduling flexibility that comes with self-employment is also a ticket to working less than their mandated 40 hour work-week.
In truth, while the W-2 employee is working an 8 hour day, they generally aren't going farther than that over the course of a year. And as one who worked that life for many years, I also know that there is plenty of time for chit-chat, personal calls, and now more often, social media time. The 8 hour work day or 40 hour work week for most (not all) people is actually a lot less than that, and I'm not even counting the 3 weeks or more of annual paid time off.
Meanwhile, self-employed folks on the pathway to success are usually working at least several hours a week in the evening and/or the weekend. There may be time off every day, with no time off any day. I grew up on a livestock farm, and it's the same deal, except a that's a helluva lot more and harder work.
The only self-employed people I know who consistently work less than 40 hours a week are ones who are failing, or have already succeeded. There is no in-between -- you aren't going to be a success in self-employment unless you are working harder and smarter than the typical 40 hours a week.
The crux of all this is, when someone feels the need to mention how hard they've been working at their job, I don't really want to hear it. Chances are, they're embellishing to begin with. Chances are, they take more vacation than I do. Chance are, they aren't working at their occupation harder than I am at mine.
If they think they're working hard now, they should try running their own business.
In the past couple of years, I haven't changed my mind about that, but I'm more disgusted about another form of not working. By this, I mean people who talk a lot about how hard they work, but who don't really work that hard.
I started to notice this more after being self-employed for a while. Many people with whom I interact seem to believe the scheduling flexibility that comes with self-employment is also a ticket to working less than their mandated 40 hour work-week.
In truth, while the W-2 employee is working an 8 hour day, they generally aren't going farther than that over the course of a year. And as one who worked that life for many years, I also know that there is plenty of time for chit-chat, personal calls, and now more often, social media time. The 8 hour work day or 40 hour work week for most (not all) people is actually a lot less than that, and I'm not even counting the 3 weeks or more of annual paid time off.
Meanwhile, self-employed folks on the pathway to success are usually working at least several hours a week in the evening and/or the weekend. There may be time off every day, with no time off any day. I grew up on a livestock farm, and it's the same deal, except a that's a helluva lot more and harder work.
The only self-employed people I know who consistently work less than 40 hours a week are ones who are failing, or have already succeeded. There is no in-between -- you aren't going to be a success in self-employment unless you are working harder and smarter than the typical 40 hours a week.
The crux of all this is, when someone feels the need to mention how hard they've been working at their job, I don't really want to hear it. Chances are, they're embellishing to begin with. Chances are, they take more vacation than I do. Chance are, they aren't working at their occupation harder than I am at mine.
If they think they're working hard now, they should try running their own business.
Monday, February 16, 2015
The Circle Of Competence
Among the many profound investing philosophies of Warren Buffett and Charlie Munger are some that extend beyond the area of finance. Today I select one it seems I've cited a lot lately, that being the idea of staying within one's own "Circle of Competence."
The basic premise is simple: When you don't really know what you're doing, it's much riskier than when you do know what you're doing. This is one of those premises that everybody knows, but most still violate from time to time, even very smart people.
This concept is straightforward in finance, where another quote Buffett often refers to (not his) works as an explanation: "When a man with money meets a man with experience, the man with experience leaves with the money, and the man with money leaves with the experience."
Consider, however, the practical, non-financial life applications to the Circle or Competence. How often don't you hear from someone giving you unsolicited and unqualified advice on issues of relationships? What about on issues of fashion? Or how about my most recent favorite, those who have no medical or health training, but want you to accept their understandings and beliefs on all sorts of specific medical or health related issues?
Those offering opinions that are outside their Circle of Competence are doing even more than nothing to help you or themselves. They're actually going into negative territory, because you may be able to take advantage of their incompetence. Here again, this may be most readily apparent in the world of finance, but applies to other walks of life.
The most important part of all this is knowing one's own Circle of Competence. Munger was once quoted as saying, in a bit of a self-fulfilling prophetic way, "It isn't a competency if you don't know the edge of it."
The basic premise is simple: When you don't really know what you're doing, it's much riskier than when you do know what you're doing. This is one of those premises that everybody knows, but most still violate from time to time, even very smart people.
This concept is straightforward in finance, where another quote Buffett often refers to (not his) works as an explanation: "When a man with money meets a man with experience, the man with experience leaves with the money, and the man with money leaves with the experience."
Consider, however, the practical, non-financial life applications to the Circle or Competence. How often don't you hear from someone giving you unsolicited and unqualified advice on issues of relationships? What about on issues of fashion? Or how about my most recent favorite, those who have no medical or health training, but want you to accept their understandings and beliefs on all sorts of specific medical or health related issues?
Those offering opinions that are outside their Circle of Competence are doing even more than nothing to help you or themselves. They're actually going into negative territory, because you may be able to take advantage of their incompetence. Here again, this may be most readily apparent in the world of finance, but applies to other walks of life.
The most important part of all this is knowing one's own Circle of Competence. Munger was once quoted as saying, in a bit of a self-fulfilling prophetic way, "It isn't a competency if you don't know the edge of it."
Sunday, February 8, 2015
Insurance = Bad Investment, Redux
I've covered this before: Generally speaking, insurance is a bad investment.
Last week, I got into a prolonged, disagreeable phone conversation about a mutual client with what I consider to be the lowest form of 'financial advisor' on the planet: A career life insurance agent. Here's my open letter to him:
Last week, I got into a prolonged, disagreeable phone conversation about a mutual client with what I consider to be the lowest form of 'financial advisor' on the planet: A career life insurance agent. Here's my open letter to him:
What gives you the right to call yourself a financial advisor? You have one strategy -- convince everyone that their financial situation can be helped with some type of life insurance product, including (and especially) variable and indexed annuities. Isn't it interesting that these these products generate big commission payments to you? Never mind that your client pays well over 2% and probably closer to 3% of their 'invested' money every year in expenses to help pay those commissions, a fact you don't audibly disclose. Never mind that you have little or no expertise in retirement, investment, or tax planning. Never mind that you don't live by a fiduciary standard, you live by making your insurance company quotas. You either don't know, or don't care, that not everybody needs life insurance. In fact, you want people to believe that it's perfectly normal to buy enough life insurance to cover all the income they might make in the future -- a 'future value' approach that makes absolutely no sense, and profits nobody except you and your company. You are a self-serving loser, and you suck.
This letter doesn't apply to every career insurance agent, just most of them. As a certified financial planner, I do everything in my power not to be closely associated with them. Actually, that's a financial strategy that would help everyone!
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