Treme!

Well Treme has started and it does not disappoint. Start watching.....

Book Report: The Undercover Economist

The 8th book I've read this year was The Undercover Economist by Tim Harford. I initially read Tim somewhere on the internet and liked his writing style enough to buy his book.

The Undercover Economist was thoroughly enjoyable although I wanted to understand it so I took my time reading it. In addition, some of it I had to take with a grain of salt. I don't know that any book will convince me that markets are inherently free and that taxes are simply inefficiencies in markets. Experience would dictate that markets are under constant flux because of both government and market participants and taxes can be ways of either correcting for inefficiencies of market structure, forcing participants to address externalities, and (yes) inefficient in and of themselves. He glosses over the example of how Singapore provides health care to its citizens but that seems to me the crux of the type of question his book can help to answer: requirements by governments that in effect create a market. How can this market be created so that consumers win and no monopoly rents can be generated?

That being said, this book was excellent at pointing out ways in which economics can be useful in explaining why prices are what they are (scarcity power driving up rents, barriers to entry, extracting information, and even auctions to name a few) and other such interesting economic phenomena (like congestion pricing - which is good!). It really gave me a lot to think about in how to think about a lot if that makes sense.

Book Report: The House of Mirth

Financial advice from Edith Wharton that Thomas J. Stanley and William D. Danko would be proud of:

"You asked me just now if I could understand why Ned Silverton spent so much money. Of course I understand-he spends it on living with the rich. You think we live on the rich, rather than with them: and so we do, in a sense-but it's a privilege we have to pay for! We eat their dinners, and drink their wine, and smoke their cigarettes, and use their carriages and their opera-boxes and their private cars-yes, bu there's a tax to pay on every one of those luxuries. The man pays it by big tips to the servants, by playing cards beyond his means, by flowers and presents-and-and-lots of other things that cost; the girl pays it by tips and cards too-oh, yes, I've had to take up bridge again-and by going to the best dress-makers, and having just the right dress for every occasion, and always keeping herself fresh and exquisite and amusing!"

Book Report: The Four Pillars of Investing

I just finished an excellent book on investing: The Four Pillars of Investing, by William J. Bernstein. His style is very engaging, especially for a subject that is inherently technical. There are a lot of ideas and I especially like learning about the theory of investing (pillar 1). Here's a brief synopsis of the pillars:

Pillar 1: The Theory of Investing

Risk and reward are inexorably linked no matter what the asset class (stocks, bonds, etc.) and it is relatively easy to determine long term expected returns. Results touted by money managers and mutual funds are almost all due to luck, not to skill. Portfolio theory and diversification are the names of the game.

Pillar 2: The History of Investing

Markets can become irrational with both optimism and pessimism. As recent events have shown, this boom/bust cycle has not ended (nor will it). And the counter intuitive point "is that at times of great optimism, future returns are the lowest; when things look bleakest, future returns are highest." Just like risk and return predict.

Pillar 3: The Psychology of Investing

The biggest obstacle to success in investing is you the investor, and our nature of of looking for the next Microsoft or lottery ticket. This leads to high trading churn (enriching traders rather than ourselves) and making poor buy/sell decisions.

Pillar 4: The Business of Investing

The incentives of most brokers and mutual fund companies are not aligned with the interests of the investor. They exist to make money - your money.

Investment Strategy: Assembling the Four Pillars

Most small investors are deficient in the areas of theory and psychology. As defined benefit plans (pensions) are being replaced by contribution plans (401k) it is increasingly important for 'average investors' to educate themselves on investing.

Health Rules

I read this article of Health Rules by Jane Brody in the New York Times. She quoted Michael Pollan, which I will recycle:

"Eat food. Not too much. Mostly plants."
"If it came from a plant, eat it; if it was made in a plant, don’t."
"Cook"
"Stop eating before you’re full"
"No snacks, no seconds, no sweets — except on days that begin with the letter S."

All good advice. But the last one is terrible. I do love Sthursdays though.