Monday, June 29, 2009

Tour de France Starts 4 July, 2009

With less than a week to go to the start of the 2009 Tour de France here is a look back at the 2008 Tour from SBS...

Music: "One Day Like This" by Elbow from album "The Seldom Seen Kid" (2008)

Sunday, June 28, 2009

Popcorn Finance

From "Outside the Flags" by Jim Parker, DFA Australia (June 2009)

It's not often appreciated, but financial television is designed first and foremost as an entertainment medium. And that wouldn't matter so much hadn't real investors used its content to guide their own strategies.

Anyone who has worked as a presenter on network financial television (and this writer is one of them) knows the standard modus operandi is to treat investment like sports news — lots of colour, movement and volume.

That is why when you watch CNBC or one of the other business networks, you see multiple talking heads all yelling over the top of each other while animated line charts criss-cross the screen in a smorgasbord of colour.

But while there is nothing wrong with making entertainment the priority insports, producers who seek to turn investment into a circus could be accused of playing games with the hard-earned wealth of ordinary people.

Fortunately for investors, the networks' game is finally up. The global financial crisis has exposed the failure of many of the self-proclaimed journalists of financial television to represent the interests of the viewing audience.

What changed? Well, as revealed by comedian John Stewart in his much linked interview with CNBC host Jim Cramer [see video below], the business networks started to see themselves as a kind of cheer squad for Wall Street's worst excesses.

Essentially, the finance anchors were so busy throwing soft ball questions to options-driven investment bankers and characterising speculation as investment that they neglected to do the job that they prided themselves on — helping ordinary investors making informed decisions about their money.

Now there are calls for reform of financial television to steer it back onto the path of placing a priority on providing viewers with good, accurate information devoid of sales spin. Making it entertaining should be secondary.

Among the would-be reformers is Barry Ritholtz, a prominent blogger, financial commentator and frequent guest on the business shows.

Ritholtz has drawn up a 16-point menu for change, which includes such sensible suggestions as stopping the yelling, reinforcing the risk-reward trade-off, separating the long-term signal from the short-term noise, checking facts, insisting on accountability and respecting the audience.

This is a menu that Dimensional has been recommending for years. In dietary terms, it is admittedly an approach to investment that is more akin to fresh fruit and vegetables than to popcorn. But it's better for you.


Time Wastes Too Fast

June posting by Maira Kalman at her New York Times blog, And the Pursuit of Happiness...

...Thomas Jefferson, Monticello and a passage from "Tristram Shandy."

Saturday, June 27, 2009

The End of Overeating: Taking Control of the Insatiable American Appetite

Interesting new book by David Kessler, former Food and Drug Association commissioner under presidents Bush and Clinton.

Amazon link

Monday, June 22, 2009

Calculate Your Financial Comeback

This calculator, developed, and first published in January 2009, by the New York Times...

Has your portfolio plummeted? ... Use our Comeback CalculatorSM to calculate when your investments could return to their peak levels.

For Older Investors, Old Rules May Not Apply

This article from Your Money section of New York Times, 19 June 2009

Published: June 19, 2009

The stock market’s damage has already been done. And if you’re one of those people near or already in retirement, you already know you’re going to have to work longer, save more or spend less...

...This economic downturn has been steep enough and frightening enough to undermine the idea that the stock market, over time, will always deliver. So a lot of investors have retreated to a more conservative stance.

The wisdom of that move is debatable. The investment industry warns that becoming too defensive is costly in the long run. Its argument goes something like this: People are living longer, retirement may last 25 or 30 years and stocks are supposed to protect you from the ravages of inflation. And since stocks tend to outpace most investments over long periods of time, the industry says, your savings will do all right in the end.

But some people are no longer comfortable with that logic...

...So what should retirees and pre-retirees make of all of this?

“If another decline in the market is going to bankrupt you or put you out of business or destroy your retirement account, you should not go back into the stock market,” said John C. Bogle, the founder of Vanguard and viewed by many as the father of index investing. “It’s not complicated. The stock market can go up and down a lot and nobody really knows how much and when.”

What’s worked for Mr. Bogle may not work for you, but his method isn’t a bad place to start. “I have this threadbare rule that has worked very well for me,” he said in an interview this week. “Your bond position should equal your age.” Mr. Bogle, by the way, is 80 years old.


Saturday, June 13, 2009

Global House Prices - Still Going Down

From the Economist:

Bottom fishing

Jun 4th 2009

Lower prices are tempting bargain-hunters back into the most depressed markets

FEARS of a general deflation may be receding but in the rich world’s housing markets at least, falling prices are still the norm....

Purpose of an MBA - Simple Politeness, Common Sense, Problem Solving

There has been a lot of discussion in the media in recent months regarding the MBA qualification. An interesting piece in The Economist last week discussed the point in terms of Management not being a profession like Medicine and Law:

MBA students lead a campaign to turn management into a formal profession...

...400 students graduating from Harvard Business School... At an unofficial ceremony the day before they received their MBAs, the students promised they would, among other things, “serve the greater good”, “act with the utmost integrity” and guard against “decisions and behaviour that advance my own narrow ambitions, but harm the enterprise and the societies it serves.”

...When the business school was founded in 1908, the goal was to create something along the lines of Harvard’s medical and law schools. But the mission was soon abandoned, not least because there was no agreement about how managers should behave...
For me the MBA at Melbourne Business School was an three-pronged exercise in trying to teach some common-sense, team-work skills and decision-making to a group that seemed to be lacking in all three.

Reading an article in today's Australian it was noted that John Malkovich "once described himself as a midwesterner", not meaning small-town family values but as he reflected:
"To me midwesterner means (long pause) some degree of politeness, simple politeness. Some degree of common sense, an education towards problem solving, rather than problem dramatising or inventing."
Maybe the MBA, as taught in leading business schools, could be the "Midwestern Business Approach" contrasting with the east-coast of the USA (New York), where politeness and common sense seem to be lacking, and the west-coast (LA), where problem dramatising or inventing seems to prevail.

I like the idea. Management education could not go too wrong by focussing on simple politeness, common sense and problem solving.

Saturday, June 06, 2009

Why We Invest In America - Amazon, Google, Blogger, Wikipedia, Craigslist, TiVo, Netflix, eBay, the iPod and iPhone, Xbox, Facebook and Twitter

While on the plane to Albury this morning I read a very interesting article in Time. The title was How Twitter Will Change the Way We Live, but most interesting part for me was the reminder about how many truly innovative businesses come out of America:

...The speed with which users have extended Twitter's platform points to a larger truth about modern innovation. When we talk about innovation and global competitiveness, we tend to fall back on the easy metric of patents and Ph.D.s. It turns out the U.S. share of both has been in steady decline since peaking in the early '70s. (In 1970, more than 50% of the world's graduate degrees in science and engineering were issued by U.S. universities.) Since the mid-'80s, a long progression of doomsayers have warned that our declining market share in the patents-and-Ph.D.s business augurs dark times for American innovation. The specific threats have changed. It was the Japanese who would destroy us in the '80s; now it's China and India.

But what actually happened to American innovation during that period? We came up with America Online, Netscape, Amazon, Google, Blogger, Wikipedia, Craigslist, TiVo, Netflix, eBay, the iPod and iPhone, Xbox, Facebook and Twitter itself. Sure, we didn't build the Prius or the Wii, but if you measure global innovation in terms of actual lifestyle-changing hit products and not just grad students, the U.S. has been lapping the field for the past 20 years.

How could the forecasts have been so wrong? The answer is that we've been tracking only part of the innovation story. If I go to grad school and invent a better mousetrap, I've created value, which I can protect with a patent and capitalize on by selling my invention to consumers. But if someone else figures out a way to use my mousetrap to replace his much more expensive washing machine, he's created value as well. We tend to put the emphasis on the first kind of value creation because there are a small number of inventors who earn giant paydays from their mousetraps and thus become celebrities. But there are hundreds of millions of consumers and small businesses that find value in these innovations by figuring out new ways to put them to use...

The plane never actually made it to Albury this morning... We turned around because of fog in Albury and landed back in Sydney at 11:30AM... Will try again tomorrow morning... And yes, I will start using my new Twitter account soon --- it will probably take over from this blog in the next couple of months.

Wednesday, June 03, 2009

Warren Buffett's Investment Advice

From a recent interview on 

In response to the request for advice for the average investor...

"They should just consistantly buy very low-cost index funds... and the last thing in the world they should do is to try buy and sell stocks..."