Tuesday, November 17, 2009

Public Option

We already have a public option. It's called Medicaid. Why do we need another government program?  To expand participation, simply index the income limit to the local cost of living.

Friday, October 02, 2009

Some kind of end point

Failure to make the hard choices. Flat world. Ignorance.

Have to switch gears.

Saturday, August 29, 2009

Another chance for me to be wrong...

More on the inheritance of education ... I think there is still room for parental difference making...but it is hard to tell from the limited data we have that doesn't control for the adoption age.  In any case, Mankiw's point is pretty clear from the graph- genes matter.

Friday, August 28, 2009

Mankiw misses one?

"It would be interesting to see the above graph reproduced for adopted children only. I bet that the curve would be a lot flatter."

I think so too, but maybe not too much flatter. A lot of being a good teacher for your kids works, even if you have a couple of little troublemakers. You can still figure out how to teach them- if you're smart enough.

Is it time to drop your 529 plan? Yes.

Fidelity asks if it's time to change your 529-plan portfolio. A 529 plan is the most over-managed money option out there. You are literally paying fees on fees. How about this- let me invest in something other than mutual funds. Until you do that, it is clear that this is just another free benefit for ... Fidelity.

Tuesday, July 28, 2009

Take an artificial sweetener pill

I just read this WSJ article that said: "Obese people spent 42% more than people of normal weight on medical costs in 2006, a difference of $1,429, the study found. Prescription drugs accounted for much of the increase." I therefore applaud and encourage everyone's efforts to keep their weight down. Maybe we need more exercise for people...

When people compare health care between countries, the costs per American always seem high. Why is that? Here are some behavioral observations, in addition to the usually cited factors and our general chubbiness.

1) Americans demand more expensive, patented, brand name medicines. Many studies have shown that placebos are equally effective, for mental disorders in particular. Generics often get the job done for a fraction of the cost- often for less than the co-pay offered by my insurance.

2) Americans go to the doctor more. We visit the doctor more frequently than people in other countries, with the exception of Japan. A lot of this is because doctors control access to medicines we want (see #1). Moving more medicine to non-prescription status (like allergy medication) and making more medicine available via a visit to a nurse practitioner would save on the number of visits.

3) Third party payers- we buy medical services with no concern for their cost, because we don't directly pay for them. People spend more time trying to save 50c in the grocery store than they do saving $200 on an MRI, which should be a commodity service. We need a market where you get some benefit by choosing a less expensive treatment. This will incentivize providers to actually compete on price, like they do for LASIK and cosmetic surgery.

Wednesday, July 22, 2009


Long time no post, but this track just was such a classlessic, it required action!!

Go Ke$ha.


Monday, June 01, 2009


Read an annoying Scott Adams piece this morning, where he makes a simple metaphysical linguistic error.

"Given that science can't find evidence for either God or time, it takes a leap of faith to assume either one exists. Therefore, anything in our daily life that depends on either God or time is built on a foundation of faith and not science."

The simple error is three separate applications of the word "exists". It is obvious that the normal meaning is to say whether something physically exists or not. My computer exists. My yacht does not exist. Time is obviously different from a physical thing. Time is not something that exists in the same way. "Time" is a term that describes an aspect of the way the physical things that do exist change. Therefore, no leap of faith exists in believing in time, because no one ever said time "exists" in the same way as my computer.

Adams furthers the equivocation by suggesting that belief in gods is of a similar nature. However, most people suggest that gods exist in some way that is different than describing a property of the arrangement of physical things. Neither term applies, so there must be some third meaning of exists, if it were to be true.

So what? A Wittgenstein-style diagnosis of equivocal statements, which attempt to fuzzy the use of terms is quite productive in exposing most philosophical blatherings as pure nonsense.

Tuesday, May 26, 2009

Typical Healthcare Nonsense


"As a freelancer, Tolliver could work from wherever she and take playground breaks with her daughters. But a $1,200 monthly healthcare bill ultimately led her to take a job where insurance only costs her $200 per month."

It does not only cost her $200 per month, her employer is including the extra $1000 in her total compensation. I pay about $1200 per month for family healthcare- and I am taxed on it as income, as the owner of an S Corporation. If there was a government healthcare system that was similarly efficient, she would be paying $1200 in taxes per month for the healthcare. There is no magic fairy dust available from rearranging who pays whom.  And, offering luxurious benefits to more people only makes this problem worse.

My five point plan for saving money now still stands:
1) Introduce malpractice liability limits to get malpractice insurance costs under control. (Fight ABA)
2) Increase the number of doctors by increasing the number of medical schools. (Fight AMA)
3) Negotiate Medicare/Medicaid drug prices with manufacturers. (Fight PhRMA)
4) Providing sliding scale premiums based on patient efforts at healthiness (smoking, exercise, diet), like life insurance does.
5) Limit over-treatment.

Tuesday, May 12, 2009

The Education Bubble

The education bubble is the number of people willing to borrow nearly $200,000 for a BA (or PhD) in Anthropology or whatever subject that exceeds the number of positions available that require that degree at that price. I read an article yesterday that mentioned a detective with a PhD in Anthropology. While it seems to be working for him, I just don't see it as economically efficient. If we look at the causes of this inefficiency and bubble, we see similar government incentives and payouts to those that drive up the price of houses and medical care.  

At some point, maybe soon, all of that money being borrowed to pay for college education is going to be hard to get.  If we keep expanding grants and loan programs supported by the taxpayer, the government will distort the market and prevent costs from dropping to match demand.

So how should the government spend its money? If public universities were run in a lean fashion, with a passion for getting rid of wasteful spending, without a distasteful focus on athletics and other distractions, they would provide more than adequate competition for private universities at fair prices. By focusing on subjects that are in demand in the economy, they could support the progress of humanity.  By virtue of selective admissions, they could continue to avoid the fate of bland ineffectiveness that has befallen public primary and secondary education. 

Monday, April 20, 2009

Low interest rates

It seems that a fundamental problem with our economy is the Federal Reserve driving the interest rate environment.

The current interest rate on Bank of America savings accounts is... 0.20%. I just don't get it. If I am a bank, I make fundamentally make money by loaning people money at a rate higher than what I pay other people for giving it to me (and charging a few fees). But who's going to give me their money at 0.2%?

This rate is extraordinarily low, but interest rates have been really low for years now. The fiscal policy behind this was pushed by Greenspan. We know now it had some weird side effects, like most government fiscal policy, that have basically crushed our economy.

On 60 Minutes last night they had a piece about people "losing" half of their 401k balance. This would mean they were 100% in equities, with maybe some in corporate bonds. Why were they 100% in equities? Especially when they were approaching retirement age?

Maybe it had something to do with the low interest rates. Even with a CD yielding 2%, your money is growing slower than the inflation rate. So, people poured their money into equities, creating a bubble. To make it worse, a lot of prominent companies haven't been paying dividends lately, so they weren't even getting any income from these investments. Stock price to earnings ratios still seem high when you look at all of the companies where the investors don't see any of the earnings, and have to speculate by selling the stock to take advantage of the price.

Lower interest rates drove the price of houses up. Government backed loans drove the price of houses up. Since the price of houses were so high, the government started buying risky loans from banks so that people could keep buying houses.

So, low interest rates may help companies grow, but most large companies sell bonds, they don't borrow from banks like I do. Who exactly are these low interest rates helping? Is there someone out there who just loves bubbles?

Wednesday, April 15, 2009

The sad state of...

It almost seems that people are starting to realize what's happened, but still aren't accepting it. The money's gone. We have a an unbelievably large debt. We're about to go into an inflationary period. So, the paradox of savings is upon us. We need to spend less, which means the GDP shrinks. Good- it was based on leveraged consumerism. I like to think of the shrinkage as a return to realism.

Orszag says the budget shrinks the deficit by half over 4 years, but John Stewart fails to call him on it, just pretends not to get it. That was painful to watch. All of the planned budgets have deficits, which means the total amount borrowed continues to increase. We're still making it worse.

I really didn't mind paying taxes this year. I wish I made more money so we could pay this debt down faster. But then, these guys want to spend more and more and more. Maybe everyone should pay taxes. Maybe they need to make more things to sell to China...that's where the money is.

Monday, March 23, 2009

529 Plans Suck

From the first time I heard about College Savings 529 plans, they seemed awful.  I heard these hucksters on the radio peddling them and they just sounded like a way for them to grab fees. Now people that invested in them are f-ed.


Let's just say...any plan that doesn't let you put close to 100% in cash within a year of having to use it is criminal. Yet: "Last April, Oregon doubled the stock exposure in its "1-3 Years to College" portfolio to 40%. In 2004, an in-college student in Rhode Island's aggressive age-based portfolio would have had 40% stocks, 31% bonds and 29% cash. By 2008, the equivalent was 40% stocks (including real estate), 55% bonds and a measly 5% cash."

In these plans, the flexibility to do the right thing was taken away by bureaucrats.  My plan is simple- give the kids their own money.

Why don't all government savings accounts include some kind of commodities choices?

Wednesday, March 18, 2009

Private Mortgage Insurance

What the heck is private mortgage insurance for? Shouldn't that insulate banks from foreclosure losses? Every loan under with less than 20% should have been paying that... Did that many people really get piggy back loans to avoid it?

Sunday, March 08, 2009

Quick portfolio update

I think the market has dropped to the point that I can start looking for dividends again.

I don't know what's going on with TNP, but I might be getting a greater than 10% dividend off of that stock. They are trading well below book value, and I don't know why. I guess no one is going to be shipping oil? Come on, there is some inelasticity of demand there.

Looking at the financials, there is probably no reason to go there. They should move the trading desk of these stocks down to Atlantic City. That said, I jumped into TD Bank. They're Canadian, but they are running a tight operation and took over Commerce Bank, which was a really good acquisition. I am hoping for a steady value and a 7% dividend.

As far as the macroeconomy goes, we are completely screwed. I wish we could let housing prices drop faster without a total disaster.

Thursday, February 05, 2009

A small sip of water

A tip from Carl- invest in water. It's getting hot out there (well, not here, but in

the Al Gore PANIC! sense) and people are thirsty. It seems logical. I think there will be a simple desalination solution soon, but it will take a big company to connect it to the infrastructure.

There isn't an easy way to directly invest in water itself, unless you build a resevoir or something, and that's not that easy. So, I bought 250 shares of a global "water industrial complex" ETF today. (CGW). A small sip of water, but the fund seems to be a fairly close proxy for the global stock index, it's not really performing as a sector. Still, the chance of one of the major holdings have a big up year soon seems pretty good.

We'll see how it goes.

Wednesday, February 04, 2009

Why not give Markopolos a job?

Bloomberg Story on Madoff Proceedings in Congress

"The officials, in joint testimony, said the regulator may stiffen audit requirements for money managers and inspect firms more frequently. The SEC is also examining how it evaluates risk and may require investment advisers to provide more information than it currently requires, according to the testimony."

This ignores the fundamental problem with Markopolos/Madoff. Markopolos gave them everything they needed, they did the investigation, and they still didn't admit that anything was wrong. They don't understand the global financial system. (Really, who does?) They don't understand hedge funds and other complex strategies.  Why don't they just hire Markopolos? Well, for one, he doesn't want to move to DC and they don't pay enough. However, with current financial industry salaries going downward ($500k salary limits!), they could meet in the middle geographically and financially. Pay $300k for SEC employees to live in New Jersey.  I'd move to NJ for $300k.

Monday, February 02, 2009

Odd afternoon

My investment strategy is looking bad today...tech stocks up. Oil way down. Gold down. Agricultural commodities down. Really confusing- most news today was pretty bad, and most of the stuff that I sold because it became overvalued continues to go up.  The long term outlook for the US dollar is still really scary. We could end up losing reserve currency status if we inflate too quickly. The hard question remains, what is going to go up?

I think I need to start making more stuff so I can sell it to people to buy in other currencies. I just don't know if any of them will be worth anything. Is there a PayPal for gold?

Friday, January 30, 2009

The Amazon and the Outback

Amazon rose so much in share price, to over 40x earnings at the moment.  How much are they going to grow?  People are willing to pay $25 billion dollars to get access to a revenue stream in the $600 million range with very thin profit margins (~3%).  Typical market overreaction, amplified by the fact that there is very little other good news to invest in.

On the other hand, Australia is considering a drop in interest rates, so I am taking a hit on the Australian dollar. I still think it's a good longer term currency play, even though I am losing in the short run.  Where are those Australian dollars going? The yen is still off of its high against the US dollar.

Gold keeps trawling upward as the stimulus grows and Russia and China are making a lot of noise at Davos about the insufficiency of the US dollar to serve as the world's reserve currency due to irresponsible spending and lending.  It's going to be amazing if they can avoid a serious drop in the US dollar.  I don't know if owning gold really makes logical sense, but I still feel like it's worth holding onto just because the possibility of a quick gain is worth the risk of the modest drop it might take.

Friday, January 23, 2009

Wither the Yuan?

Now that Geithner is going combative on the Yuan, will the Chinese let it float?  It's really hard to predict what effect that will have on the world. The real purchasing power of most currencies will drop pretty hard for Chinese made goods. Which is just about everything at the moment.

There are a couple of funds that track the Yuan. Currencyshares notably does not have an ETF that tracks the Yuan. The Dreyfus Wisdom Tree fund is out there (CYB). I held it for a little while in 2008 but it didn't really trade very much (note the stepwise like graphs), so I got worried about it and dropped it.  I also thought it should pay some sort of yield like the Currencyshares funds.  Anyway, the latest prospectus showed up again today and I am thinking about jumping in again. 

Wednesday, January 21, 2009

Consider the Aussie

The Australian dollar is trading about 10% over its 5 year low versus the dollar. It's had a serious drop over the last 12 months as many hedge funds have unwound their positions in the Yen carry trade (borrowing Yen at low interest rates to buy Aussies and invest those at high interest rates).

I hopped in this morning. I am hoping the kanagroos have gold in those pouches, as I dumped some of my AU to buy the AUDs. I was hoping to end with a more painful "g'day" style joke, but I just can't bring myself to do it. This is a family blog, after all.


First day that Obama's in charge and it sucks about the economy. I liked Obama especially for his foreign policy approach, aka get the heck out of Iraq. I am not such of big fan of his Keynesian madness. It may get us out of this hole, but it's a huge risk. If it doesn't work, we are going to have a crushing debt that is only going to be solved by inflation. A lot of people that don't save money don't care about inflation. I want people to save more money so that they do care about it. I don't even think this recession is a bad thing. If I were spending twice as much money as I had, and then I stopped, I think that would be a good thing. Yeah, it's less than I was spending before, but all of that spending I was doing before was deficit spending, so it was hurting my future ability to spend. People get too focused on the metrics, like the GDP, which is a total bullshit number anyway. Our job is not to protect the GDP number that counts things like me borrowing money. The government needs to be creating the climate for jobs to be created and the country to actually produce things.

I remember when Walmart became the largest company in the US. My uncle cried. He worked for Walmart (as a contractor), but he said there is something incredibly wrong with the economy when the largest company is just a distributor of stuff that isn't made here. Wealth is just flowing out of the country. Now the Keynesians want to borrow more money from overseas (where people still save money) so that all of that interest we pay (currently a huge part of the taxes we pay) will continue to float overseas. This is insane.

I hope the one thing that this recession brings is the fall of Keynesianism. People still think that massive government spending got us out of the great depression. It didn't. It made it longer, because it took longer for the market to correct itself. All Keynesianism is good for is for preventing social unrest when the economy is weak. That is a worthwhile goal, to add some buffer to the drops, so that we don't get shocked into a revolution. However, to think that it actually has some positive effect on the economy as a whole is wrong. If you want to invest in the economy, you should spend the stimulus money on things that are going to make money. Factories, research, education, etc.

The simple fact of the economy is that real wages in the US and Europe have to drop to get closer to those in the rest of the world. We can't artificially pay people here more by borrowing money from overseas to drive up asset prices. It just doesn't work. That the solution to it is somehow to borrow more money from overseas...no way.

I'm wondering if I'll all be more productive after I read the new David Allen book.

I have to finish that one before "What Would Google Do?" is delivered.

I wonder how many more blogs I need to start making money? :-)

Tuesday, January 20, 2009

Portfolio Analysis

Wow, markets are being crushed today. GLD and NEM are good hedges today, even my oil holdings took a huge hit. I bought some more oil today...I think we'll make it back to $50/barrel in a year or so. The real question is when is the dollar going to drop? It's going up relative to the Euro, but I think it will ultimately suffer in comparison to commodities (inflation). That simply has to be the consequence of printing more money (aka, having the Fed buy T-bills). I plan to sell gold as it rises and buy more commodities in general (that's why the portfolio seems really gold heavy at the moment). I am not going to be buying any individual US equities for a while. For growth stocks I'd look at Amazon again if it goes back down to $35. For everything else, I am looking to see who can keep the dividends up and evaluating utilities.

Current non-retirement account holdings:
Tax free money market: 14.2% (Seven day yield at a pitiful 0.14%)
BKF (Brazil Russia India China ETF): 6.4%
DBA (Agricultural Commodity ETF): 7.7%
DBO (Oil ETF): 12.7%
EWY (SKorea ETF): 11.6%
GLD (Gold): 19.2%
NEM (Newmont Mining): 16.5%
TNP (Tsakos Energy Nav): 11.7%