Casualties of Complexity

At the risk of sounding naïve, I believe that many of the problems we experience as investors and the institutions that regulate us are brought on by complexity. The book, A Demon of our Own Design, got me started thinking this way. Written by Richard Bookstaber in 2007, it gives an insider’s view of the 1987 Crash and the collapse of Long-Term Capital Management, the hedge fund that took down UBS when it collapsed in 1998. Each disaster, and several others described in the book, was caused by an attempt to use complex financial… [read more]
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You Need A Budget (.com)

Over the last several months, many of us have re-realized the importance of a good budget. This is normally a four-letter word at worst and, at best, something we periodically place on the to-do list between “clean out the gutters” and “wash the windows”. When we do get around to it, we spend a rainy weekend knee deep in piles of old bills, credit card statements and receipts trying to figure out where exactly all of our money went. Whether through Excel, Money or Quicken, we eventually produce some kind of budget that represents the… [read more]
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The New Rich

A financial crisis causes us to reevaluate every aspect of our lives. Many people have discovered that they have been so busy accumulating “stuff” to keep up with the Jones’ (not Jeannette and Gregg), that when this is no longer possible, the emptiness in their lives becomes apparent. For the past 19 years I have gotten a first-hand look at how people deal with the financial matters. The most important lesson I have learned is that money and happiness do not go hand- in-hand. Many times it’s the people who spend the most that never… [read more]
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In Defense of Food

Obama has been very focused on healthcare this week. On Monday, he met with insurers, drug manufacturers and other health-industry stakeholders, who pledged to slash spending by 1.5% a year. On Tuesday, he met with chief executives of corporations to discuss cost-saving programs they’re putting in place. Obama’s Wednesday meeting with House Democrats came in the wake of Medicare and Social Security trustees’ grim assessments of the programs’ finances. The trustees said Medicare’s hospital insurance trust fund will be insolvent in 2017, two years earlier than predicted last year. We know our country is in… [read more]
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Time for Drastic Changes?

As discussed in the last post, dealing with all the emotions involved with the recent market rollercoaster can be incredibly difficult. As volatility calms somewhat and talk of whether the market has turned the corner takes focus, our stomachs settle a little and reflection begins on how to avoid this the “next time”. There are many so called experts suggesting that everyone revise their asset allocation, revamp how you look at potential returns over the long term, and distrust any kind of planning technique that did not 100% forecast the recent downturn. While I would… [read more]
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