Category: Personal Finance

Here are some common questions I get asked as a financial adviser. What’s your system? What’s your investment strategy? Do you focus on market timing or relative value? How do you plan to outperform the market?

These questions are natural. Investors want to understand what advisers are doing with their money. But in a way, these questions demonstrate a lot of the misconceptions about what exactly counts as success in retirement saving.

You shouldn’t try to beat the market. Instead, investors should actually aspire to equaling the market return. Let’s take a look at why.

Two articles this week on how investing is hard– one about why rich people are bad at it and one about how everyone is bad it. Fun!

• Investing for the Elite. Barry Ritholtz. Wealthy people don’t always know how to invest either.
• Math Work. XKCD. I love this comic but this particular strip is a favorite. I’ve noticed many times in my life that “bad at math” people severely overestimate how easily math stuff comes to “good at math” people. Embrace the frustration!
• Abandoning a Cat. Haruki Murakami. New Yorker.
• Why Is Middle School So Hard for So Many People? The Atlantic.
• Day Trading for a Living? SSRN. If you think you can do it, you’re wrong.
• Looking back at the Snowden revelations. Matthew Green, Cryptography Engineering.

Really great post from Cliff Asness at AQR this week on bond valuations.

• The 1619 Project. NY Times.
• Are Health Administrators To Blame? Alex Tabarrok.
• Bonds Are Frickin’ Expensive. Cliff Asness.
• A Novel Concept: Silent Book Clubs Offer Introverts A Space To Socialize. NPR.
• Major book publishers sue Amazon’s Audible over new speech-to-text feature. The Verge
• The Poorest 20% of Americans Are Richer on Average Than Most Nations of Europe. justfacts.com. I have some issues with the analysis but interesting discussion.
• The most dangerous idea in central banking, explained. Vox. Agree that this is a bad idea.
• Circumstances in Which I Will Not Pet Your Dog. New Yorker. Yep.

You’ve probably read some stuff about the yield curve inverting earlier this month. Or at least heard someone talking about it in the last few weeks. What’s up? Is there going to be a recession? What moves should you make with your portfolio to protect yourself?

I like using the logic of financial analysis to solve everyday household problems. In the past, I have looked at whether I should bail on my old truck, and whether you should for an MBA. In that spirit, I’d like to take a look at a subject that has no bearing on my own life, but I’m interested in nonetheless. What types of activities should you encourage your high school aged kid to take up during their summer breaks?

The reliability of various news media was a focus of discussion during the 2016 and 2018 elections. Various news sources have been criticized as biased, or even “fake”. A lot of analysis indicated that the opposing sides of the political debate were consuming very different information. Is there a way to improve how we consume news?

• 16,000 Readers Shared Their Experiences of Being Told to ‘Go Back.’ Here Are Some of Their Stories. NY Times.
• New Inequality Data Is a Gift to Campaign Sloganeers. Barry Ritholtz.
• Josh Hader’s Fastball Is Baseball’s Most Mysterious Pitch. FiveThirtyEight. I find baseball to be the most boring sport to watch but the most fun to read about.
• Harsher Punishments Lead To More Suspensions For Black Kids. Futurity.
• What Senator Hawley Gets Wrong about American Identity. CATO. Probably a good time to point out that I think more Democrats and left-leaning people should read CATO stuff.
• Toddlers Can’t Truly Answer “This or That” Questions. Futurity. Although don’t think recency bias goes away fully as we grow up!’
• I don’t think anything newsworthy happened at the Mueller hearing, but if you haven’t yet, please read the 6 or 7 page executive summaries in the actual, public Mueller report here. If nothing else, it will allow you to smugly ask your fancy dinner party friends if they’ve actually read the Mueller report.

• How U.S. Tech Companies are Helping Build China’s Surveillance State. The Intercept.
• How Iran Sees Its Standoff With the United States. Foreign Affairs.
• New Inequality Numbers Are a Gift to Campaign Sloganeers. Bloomberg.
• Dollar under pressure after Fed fuels bets on large rate cut. Reuters.

Last month I took a look at a question with some relevance to me personally: should I buy a new car? In a similar vein, this week I’d like to take a look at a question that a lot of my peers are currently facing, and one that I faced myself a few years ago. That is, I’d like to take a look at whether going back to school to get an MBA is worth it or not.

This is an example of a cost-benefit analysis. Cost-benefit analyses can aid our decision-making in a lot of situations. They can be used to figure out:

• which R&D project a company should devote resources to
• what price to buy a factory for
• whether you should make an investment in your own education

The basic idea behind a cost-benefit analysis to see if an MBA is worth it is 1) measure the total costs of getting an MBA, 2) define a baseline against which we will measure the “MBA bump”, 3) measure how much we can beat this baseline by, by getting an MBA, and 4) somehow account for the timing of these costs and benefits.