Sunday, October 28, 2007

Recommended Articles

This week's recommended articles post is a little (OK, a lot) late. The problem is that I have time enough for only one post per day, and this week there were some things that I really wanted to write about, for example the price new parents pay to stay at home with kids; the fact that having too many mutual funds can lead to less diversification; and the fact that government is way too involved in business sometimes. So, the recommendations got delayed a little bit - even though there were a ton of great articles out there this week.

This week I only participated in one Carnival, the Carnival of Personal Finance, hosted by The Dough Roller.

One of The Dough Roller's editor's picks for the Carnival was an article about how China could crush the Dollar on a whim. Why, yes, they could. Just like Russia could annihilate the U.S. with a nuclear strike, but that's not likely to happen either. The article completely misses the point. Every action China could take to harm the USD would immediately backfire and greatly damage the Chinese economy, since it too is highly dependent on the value of the Dollar. If China starts dumping large amounts of Dollars, the Dollar would indeed decline, and with it the value of China's own foreign exchange reserve. China's exports to the U.S. would become more expensive, and demand would decline, leading to a slow down in the Chinese economy. Stop with the xenophobia. The rise of China is a good thing for the world economy. Let's stop worrying about them and start worrying about us.

One of the most amusing articles in the carnival was published by A Penny Closer. Apparently, she recommended someone for a job who was the worst candidate ever to interview with a company. You gotta read this one to believe it. However, I think Melissa did everything right. Sometimes bad things just happen to good people.

In other news, Blue Print for Financial Prosperity, one of my favorite blogs, had a detailed discussion of a new tax reform proposal that Democrat Charlie Rangel is trying to push through Congress. Among other things the bill would eliminate AMT and would impose a 4% surcharge tax on families earning more than $200K. Well, this bill is about as likely to pass as George W. Bush is likely to get re-elected. However, there have been many calls recently for imposing additional taxes on families earning more than $200K per year. My problem with such proposals is that $200K means very different things in different parts of the country. If you live in rural Kansas, $200K will make you very wealthy (I recently met someone who was doing very well on $29K per year in that part of the country), but it will not get you far at all in Silicon Valley, where very ordinary houses cost close to a million Dollars.

Gen X Finance is running a poll asking his readers where they would put their money if they could only invest in one asset class. The scary result: 40% of responders said they would invest in international stocks. Is it a coincidence that this has also been the best performing asset class in recent years? Is there a little bit of performance chasing going around? Maybe more than a little.

Finally for this week, The Finance Professor (he is a real finance professor), had an article about whether finance professors practice what they preach when investing their own money. Turns out that they absolutely do. About two thirds of them invest.... passively, i.e. in Index Funds. Do you need more proof that index investing is the way to go??

That's it for this week. As I said, there were some really excellent articles this week.

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