Saturday, October 25, 2008

Recommended Articles

Here are some of the interesting personal finance articles I read this past week:

NPR featured a good interview with Vanguard founder John Boggle in which he reiterates his investment advice: don't panic and make rash decisions; and invest in index funds. 

MoneyNing wrote a good post about how some mighty big investors are not panicking even though many of them have lost hundreds of millions of dollars. He thinks that the primary reason these guys aren't freaking out is that they don't need the cash in the near term.  I speculate that the real reason for the lack of big investor panic is that money has a “diminishing marginal utility”. What I mean by this is that your first $1,000 a month is very important because you use it to buy food and shelter; the next $5,000 a month are also important to you because you use it to ensure you have a decent lifestyle and save some money for a rainy day… after a while… say your $10,000,000 or so (maybe its $100M - what do I know) - money sort of loses its importance… I mean, these guys couldn’t spend all their cash if they tried… so I think that the small guy who lost much of his 401k savings in the market is feeling much more pain than the tycoon who is technically losing MUCH more money…

The Digerati Life is cheering for the U.S. economy, saying that we are still #1 and things aren't all that bad. I tend to agree that things are not as gloomy as some make them seem. I mean, if you walk in the streets, folks are still out and about, dining establishments are full and most of us (still) have a job. This is, in fact the point that Frugal Zeitgeist is also making.  

Here's a good one - Moolanomy has a piece about recency bias - our tendency to look at recent history as if it is representative of reality. For example, people's tendency to assume that real estate is a sure fire investment and will never go down on a nationwide basis, back in real estate bubble times. A similar, but somewhat more insidious bias is our tendency to extrapolate current trends into the future, indefinitely. E.g. just because the stock market has been taking big hits every day for the past few days, does not mean that all stock investments are worthless...

American Consumer News had a post this week warning folks to watch our for nasty health benefit cost increases as their health insurance plan comes up on its annual "open enrollment" season - also known as "let's screw the consumer annual fiesta". With changes effective in November, our medical plan is going to have much higher co-pays for most procedures. The really annoying thing: my company is not the one cutting benefits - they are still paying just as much for coverage, but the cost of health care coverage in this country is inflating out of control. This is definitely something the next President should address as a high priority.

Finally, my favorite for the week: JLP of All Financial Matters wrote a post that I agree with completely - way too many people claim to be victims in this financial crisis. The vast majority of these are not victims they simply think that they should be protected from the consequences of their own financial decisions. Being an idiot doesn't make you a victim, it simply makes you... an...errr... idiot.

This week I participated in the Carnival of Money Hacks, check it out.

1 comment:

frugal zeitgeist said...

Thanks for the link! I appreciate the pointers to so many good articles. I have some reading to do later on today.