This week a (stereotype alert) gapped-toothed hillbilly from Missouri won a $250 million lottery jackpot. I've got nothing against bad teeth, hillbillies, Missouri, or jackpots, but let's take a closer look at how this happened.....
The GTH (gapped-toothed hillbilly) bought his $5 ticket at the end of his shift at the convenience store where he worked. In the same purchase he also bought himself some cigarettes, so let's just say that was another 10 bucks.
Seems innocent enough - until you factor in the GTH 1) was also way behind on his electric and gas bills; 2) had less than $30 in his bank account; 3) owed $1,000 to a friend on a truck he recently bought, and 4) apparently has three children to support, along with his girlfriend's two children.
A quick analysis - the GTH had no money to pay bills or to care for his kids, and was deeply in debt to a friend, but still figured he'd spend half his life savings on a lottery ticket and cancer sticks. ARE YOU SERIOUS!?!
The moral of the story is, even if you are a deadbeat GTH who should be paying bills instead of gambling, you could still win the lottery. Also, lending practices in this country are even more lax than we thought, since this GTH found someone dumb enough to loan him $1,000 he could never repay - unless he won the lottery.
I can only think of one good thing to come of this - we've got one less person/family who will be using the social services saftey net. As the GTH might say, "Yippee!"
Friday, April 23, 2010
Thursday, April 15, 2010
Managing The Madness
The NCAA men’s basketball tournament recently gave us many exciting moments, with unexpected wins by some teams and unexpected losses by others. It truly was March Madness.
In many ways, the NCAA tournament parallels my view of the stock market. It’s clear the tournament as a whole has been a solid and successful venture for college basketball for decades, regardless of the teams involved. The same is true of the broad stock market, which has also been a successful venture for investors for decades, regardless of the stocks that comprise it.
However, as with individual stocks, the success of individual teams in the NCAA tournament cannot be so easily predicted. Each year, many ‘experts’ predict that higher-seeded teams will be winners based on recent past performance…..but each year unforeseen events occur that result in those teams losing, ‘busting brackets’ across the country. Similarly, each year many ‘experts’ predict which stocks or mutual funds will be winners based on recent past performance…..but each year unforeseen events occur that cause those stocks/funds to be losers, busting investment portfolios across the country.
Despite this proven randomness, many investors still try to follow the trends, outfox everyone else, and beat the market. The truth is, no one can actually pull that off over a long period of time. Some may get lucky with a few picks. Some may even enjoy a sustained run. But in the end, the market tends to be a bust for investors who misjudge its fickle swings.
Much like the NCAA tournament, the market is a creature that defies predictions. While it may seem logical to buy into a team (Stock A) that has better recent results, there is no guarantee it will be a better choice going forward than another team (Stock B) with recent losses. Put another way, “Has done” is no guarantee of “Going to do.”
The better way to invest is to recognize the market’s unpredictability, and use that knowledge to increase the likelihood of higher long-term performance. To that end, my investment philosophy takes an extraordinarily broad-based and low-cost approach, thereby avoiding any built-in biases toward the current ‘favorite’ stock or market sector. In essence, I invest in the tournament, not the teams!
When it comes to the NCAA tournament, people should enjoy the Madness. When it comes to investing, however, people should stop the Madness, and get the predictability, performance, and peace of mind that comes from a more certain approach.
In many ways, the NCAA tournament parallels my view of the stock market. It’s clear the tournament as a whole has been a solid and successful venture for college basketball for decades, regardless of the teams involved. The same is true of the broad stock market, which has also been a successful venture for investors for decades, regardless of the stocks that comprise it.
However, as with individual stocks, the success of individual teams in the NCAA tournament cannot be so easily predicted. Each year, many ‘experts’ predict that higher-seeded teams will be winners based on recent past performance…..but each year unforeseen events occur that result in those teams losing, ‘busting brackets’ across the country. Similarly, each year many ‘experts’ predict which stocks or mutual funds will be winners based on recent past performance…..but each year unforeseen events occur that cause those stocks/funds to be losers, busting investment portfolios across the country.
Despite this proven randomness, many investors still try to follow the trends, outfox everyone else, and beat the market. The truth is, no one can actually pull that off over a long period of time. Some may get lucky with a few picks. Some may even enjoy a sustained run. But in the end, the market tends to be a bust for investors who misjudge its fickle swings.
Much like the NCAA tournament, the market is a creature that defies predictions. While it may seem logical to buy into a team (Stock A) that has better recent results, there is no guarantee it will be a better choice going forward than another team (Stock B) with recent losses. Put another way, “Has done” is no guarantee of “Going to do.”
The better way to invest is to recognize the market’s unpredictability, and use that knowledge to increase the likelihood of higher long-term performance. To that end, my investment philosophy takes an extraordinarily broad-based and low-cost approach, thereby avoiding any built-in biases toward the current ‘favorite’ stock or market sector. In essence, I invest in the tournament, not the teams!
When it comes to the NCAA tournament, people should enjoy the Madness. When it comes to investing, however, people should stop the Madness, and get the predictability, performance, and peace of mind that comes from a more certain approach.
Thursday, April 8, 2010
The Masters.....Of Hypocrisy
There are many words one might associate with what is possibly the most famous tournament in golf, The Masters: Golf, green, jacket, Augusta, patrons, Jones, magnolia, etc etc. But now we a have new one - hypocrite.
The day before this year's tournament started, August National Chairman Billy Payne decided to call out Tiger Woods for generally being a bad role model. There would be little disagreement with that from anyone, but consider the source - the chairman of an exclusive club that does not allow women as members, and only allowed its first minority member in the late 20th century.
I suppose a club (that doesn't get tax exemptions) is entitled to discriminate as it sees fit. To hear it preach to others about conduct, however, is a joke.
Really Billy Payne? Really, you are calling out others for not being role models, when your club has long-standing discriminatory practices? Really?
Leave it to The Masters - a tradition like no other.
The day before this year's tournament started, August National Chairman Billy Payne decided to call out Tiger Woods for generally being a bad role model. There would be little disagreement with that from anyone, but consider the source - the chairman of an exclusive club that does not allow women as members, and only allowed its first minority member in the late 20th century.
I suppose a club (that doesn't get tax exemptions) is entitled to discriminate as it sees fit. To hear it preach to others about conduct, however, is a joke.
Really Billy Payne? Really, you are calling out others for not being role models, when your club has long-standing discriminatory practices? Really?
Leave it to The Masters - a tradition like no other.
Tuesday, March 30, 2010
Indoor Tanning Gets Burned
One of the items jammed into the new health care reform law is a 10% tax on indoor tanning services starting July 1. I rarely say this about new taxes, but in this case, Bravo!
I've stated many times before that taxes are generally bad, and should be opposed unless they are used to establish justice, ensure domestic tranquility, provide for the common defense, or promote the general welfare. Granted, that last one is way too flexible, but I take "promote the general welfare" to mean good roads, schools, water, etc, AND that we should not be encouraging people to voluntarily harm themselves in a way that requires society to pick up the tab.
That's exactly what tanning salons do. They drill a body with harmful UV rays that promote skin cancer, which eventually leads to increased medical care, the costs of which eventually will be borne directly or indirectly by society through higher private medical premiums and/or indigent medical care from taxpayers.
The con argument is the same crazy one that smokers use to complain about the cigarette tax. Instead of "I have a right to smoke," it's "I have a right to tan." Well then, society has a right to tax you because it will be paying for your dumb decisions later.
Another con argument out there sounds more logical, but is actaully even more ridiculous. That's the idea that we don't tax people who don't wear helmets when riding motorcycles, which is a lot riskier. But the thing is, when motorcylists crash without helmets, they usually die, and society bears no ongoing medical cost.
To be fair, I think we should slap the same tax on some other things. Fast food restaurants come to mind. If we're keeping it real, the fatty foods and soft drinks they sell are enablers for everything from diabetes to heart disease. Ingesting that stuff is a choice to have an unhealthy lifestyle, just like smoking and tanning, and choices have consequences that should not be socialized.
So for all you indoor tanners out there who feel like it is better to look good than to feel good, thank you for your vanity, and thank you for the new source of federal tax revenue!
I've stated many times before that taxes are generally bad, and should be opposed unless they are used to establish justice, ensure domestic tranquility, provide for the common defense, or promote the general welfare. Granted, that last one is way too flexible, but I take "promote the general welfare" to mean good roads, schools, water, etc, AND that we should not be encouraging people to voluntarily harm themselves in a way that requires society to pick up the tab.
That's exactly what tanning salons do. They drill a body with harmful UV rays that promote skin cancer, which eventually leads to increased medical care, the costs of which eventually will be borne directly or indirectly by society through higher private medical premiums and/or indigent medical care from taxpayers.
The con argument is the same crazy one that smokers use to complain about the cigarette tax. Instead of "I have a right to smoke," it's "I have a right to tan." Well then, society has a right to tax you because it will be paying for your dumb decisions later.
Another con argument out there sounds more logical, but is actaully even more ridiculous. That's the idea that we don't tax people who don't wear helmets when riding motorcycles, which is a lot riskier. But the thing is, when motorcylists crash without helmets, they usually die, and society bears no ongoing medical cost.
To be fair, I think we should slap the same tax on some other things. Fast food restaurants come to mind. If we're keeping it real, the fatty foods and soft drinks they sell are enablers for everything from diabetes to heart disease. Ingesting that stuff is a choice to have an unhealthy lifestyle, just like smoking and tanning, and choices have consequences that should not be socialized.
So for all you indoor tanners out there who feel like it is better to look good than to feel good, thank you for your vanity, and thank you for the new source of federal tax revenue!
Thursday, March 25, 2010
Obligatory UNI Post
This week the United States reformed its health care system. Here is my analysis: I think....
Waaahhh! Wait a minute! The University of Northern Iowa (UNI) Panthers made the NCAA Men's Basketball Tournament Sweet 16 by beating heavily favored Kansas. Gotta mention that.
Not much in sports is going to top seeing an underdog Iowa group beat down one of the best teams in the country, and get all kinds of attention for it. I suppose it would have been better if they had beaten a more hated team, a team known for cheating coaches and/or players.
I happened to watch the game at a bar with friends and family, and it was possibly the most fun I've ever had watching any sporting event on TV. Loud cheering, drinks, and a gratifying outcome is a great combination. Factor in the pathetic state of the other D-I men's basketball programs in Iowa, and you suddenly have the biggest group of bandwaggoning fans in Iowa history.
But not me. I'm focusing my attention on health care reform.
After the game.
Waaahhh! Wait a minute! The University of Northern Iowa (UNI) Panthers made the NCAA Men's Basketball Tournament Sweet 16 by beating heavily favored Kansas. Gotta mention that.
Not much in sports is going to top seeing an underdog Iowa group beat down one of the best teams in the country, and get all kinds of attention for it. I suppose it would have been better if they had beaten a more hated team, a team known for cheating coaches and/or players.
I happened to watch the game at a bar with friends and family, and it was possibly the most fun I've ever had watching any sporting event on TV. Loud cheering, drinks, and a gratifying outcome is a great combination. Factor in the pathetic state of the other D-I men's basketball programs in Iowa, and you suddenly have the biggest group of bandwaggoning fans in Iowa history.
But not me. I'm focusing my attention on health care reform.
After the game.
Wednesday, March 10, 2010
It's Not Wellmark, Chester, It's You
Many Iowans are up in arms over a proposed health insurance increase from the dominant insurer in the state, Wellmark Blue Cross and Blue Shield. The average 18 percent increase in premiums would affect roughly 80,000 Iowans with individual policies.
One thing we've learned over the past 3 years is that when bad news comes knocking at Iowa's door, Governor Chester Chet Culver is going to lurch (not leap) into action. In this case he sent a letter to Insurance Commissioner Susan Voss, expressing concern about the increase, and asked Voss to hire an independent actuary to review Wellmark's proposed increase. Wellmark has agreed to delay the increase for 30 days. Yea.
Let me interpret: We are going to spend tax dollars on a study to do work that we already spend tax dollars for within the department of insurance. Genius! Is it no wonder that when he was introduced to the crowd at the boys state basketball tournament game I attended last week, he was lustily booed.
To be sure, there is plenty of bipartisan brow-furrowing at Wellmark, including by republican Senator Chuck 'Don't Turn Off the Switch on Grandma' Grassley, who accepts plenty of insurance PAC money. It's all an act, and no study or hissy fit it going to help. They know that health care is basically a zero sum game that doesn't work out for most people. 20% of insureds are going to soak up 80% of the costs, which means 80% of the insureds are paying premiums to subsidize the other 20%.
However, there are some things that politicians could do to lower costs, like pass tort reform. An even better one is setting an example by living a healthy lifestyle, eating right and exercising..... which brings me back to Iowa's overweight governor, not to mention its cigarette-smoking first lady.
Dear Mr. & Mrs. Culver: If you want to improve health care costs and make Iowa a better state, how about you living a healthier lifestyle and being an exemplar for the state? That will do far more good than wasting our tax dollars on reactionary politics for a study that is going to do no good whatsoever. If you want to see why health care costs are rising, you need a mirror, not a study.
One thing we've learned over the past 3 years is that when bad news comes knocking at Iowa's door, Governor Chester Chet Culver is going to lurch (not leap) into action. In this case he sent a letter to Insurance Commissioner Susan Voss, expressing concern about the increase, and asked Voss to hire an independent actuary to review Wellmark's proposed increase. Wellmark has agreed to delay the increase for 30 days. Yea.
Let me interpret: We are going to spend tax dollars on a study to do work that we already spend tax dollars for within the department of insurance. Genius! Is it no wonder that when he was introduced to the crowd at the boys state basketball tournament game I attended last week, he was lustily booed.
To be sure, there is plenty of bipartisan brow-furrowing at Wellmark, including by republican Senator Chuck 'Don't Turn Off the Switch on Grandma' Grassley, who accepts plenty of insurance PAC money. It's all an act, and no study or hissy fit it going to help. They know that health care is basically a zero sum game that doesn't work out for most people. 20% of insureds are going to soak up 80% of the costs, which means 80% of the insureds are paying premiums to subsidize the other 20%.
However, there are some things that politicians could do to lower costs, like pass tort reform. An even better one is setting an example by living a healthy lifestyle, eating right and exercising..... which brings me back to Iowa's overweight governor, not to mention its cigarette-smoking first lady.
Dear Mr. & Mrs. Culver: If you want to improve health care costs and make Iowa a better state, how about you living a healthier lifestyle and being an exemplar for the state? That will do far more good than wasting our tax dollars on reactionary politics for a study that is going to do no good whatsoever. If you want to see why health care costs are rising, you need a mirror, not a study.
The Nonprofit World
If you follow the news closely enough, you're bound to read almost weekly about a case of financial scandal and/or embezzlement. And if you're keeping track, it doesn't usually involve the Enrons of the world. While the national media gives notoriety only to the biggest, the reality is that 4 out of 5 times these scandals invlove nonprofit institutions.
According to a 2008 New York Times report by Stephanie Strom, fraud and embezzlement in the non-profit charitiable sector account for a loss of $40 billion a year. It's an eye-opening read at:
http://www.nytimes.com/2008/03/29/us/29fraud.html?_r=1&scp=1&sq=strom+light&st=nyt
Before I get back to that article, let me say that I worked at a not for profit organization for 12 years. It was not a charitable organization, but it still relied on the kindness of strangers ('members') to provide the operational compensation and infrastructure. These 'members' were not individuals, but rather other organizations that banded together in the name of sharing services. Those other organizations, of course, got their funding from either end-use customers and/or taxpayers.
While this sounds like a great money-saving idea, in practice it doesn't work so well. Whether it's a nonprofit charittable entity, or a not for profit trade association, or (egads!) a governemntal entity, it lacks two things that matter the most to successful organizations: Competition and oversight. Without competition, no one has any external motivation to be above average, and eventually the organization will be run based on jumping over the lowest bar possible.
But to get back to the New York Times report mentioned earlier, it's oversight that's the real problem. Even though I was directly involved in more than one annual audit each year as a benefits/finance director, I could identify many instances where the wrong person in the right place could have misappropriated or embezzled funds. Even if that didn't happen, on many occasions I witnessed our executive director allow member dues to be used for questionable expenditures. The best example was always sending him or his favorite friends/employees to resorts for all-expense-paid conferences at which no one had any business attending. The board of directors either wasn't told or didn't care about this, after all, they got to go to some of those conferences, too. Take my word for it, this happens frequently at nonprofit/govermental institutions.
I was reminded of this again over the weekend when a financial scandal was revealed at the Iowa Association of School Boards. It's a classic case of lack of oversight in one of the most non-competitive worlds out there, public schooling. And it makes me ill, because it's another waste of my tax dollars. (Follow the trail....I pay property taxes, which go to my school district, which uses them to pays dues to the Iowa Association of School Boards, which misappropriates them.)
Anyone living in central Iowa will also remember the CIETC scandal of a few years ago, when a state jobs training agency was exposed to have misspent millions in Iowa taxpayer dollars. At least people went to jail for that, although I don't recall getting my tax money refunded.
Let's all wake up and smell the coffee. We don't need better oversight of nonprofits/associations/governments - we simply feed fewer of them and the noncompetitive, non-oversight world in which they exist.
According to a 2008 New York Times report by Stephanie Strom, fraud and embezzlement in the non-profit charitiable sector account for a loss of $40 billion a year. It's an eye-opening read at:
http://www.nytimes.com/2008/03/29/us/29fraud.html?_r=1&scp=1&sq=strom+light&st=nyt
Before I get back to that article, let me say that I worked at a not for profit organization for 12 years. It was not a charitable organization, but it still relied on the kindness of strangers ('members') to provide the operational compensation and infrastructure. These 'members' were not individuals, but rather other organizations that banded together in the name of sharing services. Those other organizations, of course, got their funding from either end-use customers and/or taxpayers.
While this sounds like a great money-saving idea, in practice it doesn't work so well. Whether it's a nonprofit charittable entity, or a not for profit trade association, or (egads!) a governemntal entity, it lacks two things that matter the most to successful organizations: Competition and oversight. Without competition, no one has any external motivation to be above average, and eventually the organization will be run based on jumping over the lowest bar possible.
But to get back to the New York Times report mentioned earlier, it's oversight that's the real problem. Even though I was directly involved in more than one annual audit each year as a benefits/finance director, I could identify many instances where the wrong person in the right place could have misappropriated or embezzled funds. Even if that didn't happen, on many occasions I witnessed our executive director allow member dues to be used for questionable expenditures. The best example was always sending him or his favorite friends/employees to resorts for all-expense-paid conferences at which no one had any business attending. The board of directors either wasn't told or didn't care about this, after all, they got to go to some of those conferences, too. Take my word for it, this happens frequently at nonprofit/govermental institutions.
I was reminded of this again over the weekend when a financial scandal was revealed at the Iowa Association of School Boards. It's a classic case of lack of oversight in one of the most non-competitive worlds out there, public schooling. And it makes me ill, because it's another waste of my tax dollars. (Follow the trail....I pay property taxes, which go to my school district, which uses them to pays dues to the Iowa Association of School Boards, which misappropriates them.)
Anyone living in central Iowa will also remember the CIETC scandal of a few years ago, when a state jobs training agency was exposed to have misspent millions in Iowa taxpayer dollars. At least people went to jail for that, although I don't recall getting my tax money refunded.
Let's all wake up and smell the coffee. We don't need better oversight of nonprofits/associations/governments - we simply feed fewer of them and the noncompetitive, non-oversight world in which they exist.
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