In honor of golf season, I bring you more quotes from greenskeeper Carl Spackler:
"I have to laugh, because I've outfinessed myself. My foe, my enemy, is an animal. And in order to conquer an animal, I have to think like an animal, and, whenever possible, to look like one."
"This [grass] is a hybrid. This is a cross, ah, of Bluegrass, Kentucky Bluegrass, Featherbed Bent, and Northern California Sensemilia. The amazing stuff about this is, that you can play 36 holes on it in the afternoon, take it home and just get stoned to the bejeezus belt that night on this stuff."
Thursday, May 20, 2010
Friday, May 14, 2010
Dear Graduating Class of 2010
Among the great mysteries of our day is, how come I've never been invited to give a commencement address? I think I'd be very good at it.
Alas, it appears this will remain on my bucket list for another year. In the meantime, what follows is an excerpt from a commencement speech given by Stephen Colbert to Knox College in 2006. I couldn't have said it better myself, and besides, I didn't need to:
Today is about you — you who have worked so hard to pack your heads with learning until your skulls are all plump like a sausage of knowledge. It's an apt metaphor, don't question it. But now your time at college is at an end. Now you are leaving here. And this leads me to a question that just isn't asked enough at commencements. Why are you leaving here?
This seems like a very nice place. Besides, have you seen the world outside lately? They are playing for KEEPS out there, folks. My God, I couldn't wait to get here today just so I could take a breather from the real world. I don't know if they told you what's happened while you've matriculated here for the past four years. The world is waiting for you people with a club.
There are so many challenges facing this next generation, and I don't know if you're tough enough to handle this. You are the most coddled generation in history. I belong to the last generation that did not have to be in a car seat. You had to be in car seats. I did not have to wear a helmet when I rode my bike. You do. You have to wear helmets when you go swimming, right? In case you bump your head against the side of the pool?
But you seem nice enough, so I'll try to give you some advice. First of all, when you go to apply for your first job, don't wear those robes. Medieval garb does not instill confidence in future employers — unless you're applying to be a scrivener.
And if someone does offer you a job, say yes. You can always quit later. Then at least you'll be one of the unemployed as opposed to one of the never-employed. Nothing looks worse on a resume than nothing.
Alas, it appears this will remain on my bucket list for another year. In the meantime, what follows is an excerpt from a commencement speech given by Stephen Colbert to Knox College in 2006. I couldn't have said it better myself, and besides, I didn't need to:
Today is about you — you who have worked so hard to pack your heads with learning until your skulls are all plump like a sausage of knowledge. It's an apt metaphor, don't question it. But now your time at college is at an end. Now you are leaving here. And this leads me to a question that just isn't asked enough at commencements. Why are you leaving here?
This seems like a very nice place. Besides, have you seen the world outside lately? They are playing for KEEPS out there, folks. My God, I couldn't wait to get here today just so I could take a breather from the real world. I don't know if they told you what's happened while you've matriculated here for the past four years. The world is waiting for you people with a club.
There are so many challenges facing this next generation, and I don't know if you're tough enough to handle this. You are the most coddled generation in history. I belong to the last generation that did not have to be in a car seat. You had to be in car seats. I did not have to wear a helmet when I rode my bike. You do. You have to wear helmets when you go swimming, right? In case you bump your head against the side of the pool?
But you seem nice enough, so I'll try to give you some advice. First of all, when you go to apply for your first job, don't wear those robes. Medieval garb does not instill confidence in future employers — unless you're applying to be a scrivener.
And if someone does offer you a job, say yes. You can always quit later. Then at least you'll be one of the unemployed as opposed to one of the never-employed. Nothing looks worse on a resume than nothing.
Uncompensated Risk In Investing
With the market gyrating like it's 2008 again, now seems like a good time to re-visit the unbreakable relationship of risk and reward.
While market returns can be defined in many ways, most media outlets and investment shops have come to use the S&P 500 as their benchmark for return. Unfortunately, comparing the return of the 500 largest U.S. stocks against a diversified portfolio is a very poor, even unacceptable measurement of performance. After all, most portfolios are comprised of both U.S. and foreign stocks, plus corporate and government bonds, real estate or other commodities, and cash equivalents.
When discussing investment returns, you’ll typically hear me refer to “risk-adjusted return” as a measure of how well a fund or portfolio did over a specific time period. Simply put, if two different funds/portfolios had a 10% return, the less risky one – perhaps one that owns more bonds than stocks – would have a much better risk-adjusted return
So to fairly and accurately measure a diversified portfolio, it must be adjusted for style and risk. For example, a portfolio that has been established for an investor may have a target allocation of 60% stocks and 40% bonds. In that case, the stocks and bonds should be broken down by type, (e.g. U.S. or foreign, small or large, etc.) and the returns for each then compared to their applicable benchmark. In this light, no one would reasonably compare such a 60/40 portfolio’s returns with the S&P 500, much less draw rational conclusions from it.
One method to adjust for risk is through a fund’s standard deviation, which measures its volatility. A stock fund, which is more likely to have returns that yo-yo, will have a high standard deviation. In contrast, the standard deviation of a fixed income or bond fund will be lower, or more likely to be in line with its expected historical returns in any given period of time.
Generally speaking, the returns of more stock-based models come with higher standard deviations, and therefore, higher risk. In the 12-15 months ending in April 2010, investors were compensated for this risk through higher returns. As you might guess, however, risk was not so well compensated throughout the past decade (or even the past month), when much safer fixed income investments performed as well as – or even better than – stocks.
Understanding the basics of risk-adjusted return will make you a more successful investor. It follows, then, that successful investors - and successful people - avoid uncompensated risk.
While market returns can be defined in many ways, most media outlets and investment shops have come to use the S&P 500 as their benchmark for return. Unfortunately, comparing the return of the 500 largest U.S. stocks against a diversified portfolio is a very poor, even unacceptable measurement of performance. After all, most portfolios are comprised of both U.S. and foreign stocks, plus corporate and government bonds, real estate or other commodities, and cash equivalents.
When discussing investment returns, you’ll typically hear me refer to “risk-adjusted return” as a measure of how well a fund or portfolio did over a specific time period. Simply put, if two different funds/portfolios had a 10% return, the less risky one – perhaps one that owns more bonds than stocks – would have a much better risk-adjusted return
So to fairly and accurately measure a diversified portfolio, it must be adjusted for style and risk. For example, a portfolio that has been established for an investor may have a target allocation of 60% stocks and 40% bonds. In that case, the stocks and bonds should be broken down by type, (e.g. U.S. or foreign, small or large, etc.) and the returns for each then compared to their applicable benchmark. In this light, no one would reasonably compare such a 60/40 portfolio’s returns with the S&P 500, much less draw rational conclusions from it.
One method to adjust for risk is through a fund’s standard deviation, which measures its volatility. A stock fund, which is more likely to have returns that yo-yo, will have a high standard deviation. In contrast, the standard deviation of a fixed income or bond fund will be lower, or more likely to be in line with its expected historical returns in any given period of time.
Generally speaking, the returns of more stock-based models come with higher standard deviations, and therefore, higher risk. In the 12-15 months ending in April 2010, investors were compensated for this risk through higher returns. As you might guess, however, risk was not so well compensated throughout the past decade (or even the past month), when much safer fixed income investments performed as well as – or even better than – stocks.
Understanding the basics of risk-adjusted return will make you a more successful investor. It follows, then, that successful investors - and successful people - avoid uncompensated risk.
Tuesday, May 4, 2010
Cartoons Can Never Hurt Us
It's long been a fact that some of the best satire on TV doesn't even involve human interaction. Of course I'm talking about The Simpsons and South Park.
Not only do these long-running cartoons provide a visual entertainment that can't be done with people, and not only are they funny, but they are brilliantly written in a way that makes fun of society's ills.
I prefer The Simpsons and its lesser shock-value way of doing things, but today I'm focusing on South Park in light of the recent threats to its producers for their depictions of the prophet Muhammad. In short, for the second time in recent years, South Park has been edited to pander to Muslim extremists who think their prophet cannot be viewed, much less parodied. (To read more about this, simply type the words 'South Park Muhammad' into any search engine.)
Anyone who watches South Park knows that for years they've made fun of any and all things, including religions and religious leaders. There is no favoritism, they draw everyone, and all are potential targets. The only difference is, Muslim extremists apparently think depicting Muhammad in a cartoon today is a death sentence for those who dare do it.
It's worth noting that while the majority of Muslims might be insulted by South Park, they’re not calling for death to the show's creators. But it's also worth noting that this is a country that looks down on censorship. It’s not a crime to parody religion in America, but it is a crime to allow freedom of speech to be impacted by extremists who threaten death in the name of religion or politics.
Here's an idea for those extremists: Stop watching South Park. How do you get TV reception in that cave, anyway?
Not only do these long-running cartoons provide a visual entertainment that can't be done with people, and not only are they funny, but they are brilliantly written in a way that makes fun of society's ills.
I prefer The Simpsons and its lesser shock-value way of doing things, but today I'm focusing on South Park in light of the recent threats to its producers for their depictions of the prophet Muhammad. In short, for the second time in recent years, South Park has been edited to pander to Muslim extremists who think their prophet cannot be viewed, much less parodied. (To read more about this, simply type the words 'South Park Muhammad' into any search engine.)
Anyone who watches South Park knows that for years they've made fun of any and all things, including religions and religious leaders. There is no favoritism, they draw everyone, and all are potential targets. The only difference is, Muslim extremists apparently think depicting Muhammad in a cartoon today is a death sentence for those who dare do it.
It's worth noting that while the majority of Muslims might be insulted by South Park, they’re not calling for death to the show's creators. But it's also worth noting that this is a country that looks down on censorship. It’s not a crime to parody religion in America, but it is a crime to allow freedom of speech to be impacted by extremists who threaten death in the name of religion or politics.
Here's an idea for those extremists: Stop watching South Park. How do you get TV reception in that cave, anyway?
Friday, April 23, 2010
Deadbeat Lottery Winners Are Still Losers
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!"
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!"
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.
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