Radio Nuggets

I took a little road trip yesterday, and when you spend 5 hours on the road and listen to as much talk radio (no heavens, not Rush Limbaugh!) as I do, you learn a lot of interesting information. Here are some snippets of things I remember:

According to Dr Kathleen Hall, founder and President of the Stress Institute, studies have showed that stress levels are sometimes higher in people stuck in traffic than fighter pilots in combat!

I heard an interview with James Loewen, author of Lies Across America: What Our Historic Sites Get Wrong. The interview was by a local (northern VA) station, and focused mostly on the inaccuracies in several monuments in Virginia and DC, but was fascinating. I intend to add this book to my "wishlist" reading list of books I intend to read in the near future.

Good suggestions for interviewing and looking for jobs (which I'm not doing in the near future!) from Ford Myers of Career Potential, including trap questions to skip over and negotiating.

Well, those were all I could remember for now. Hope the websites will provide you with good information.

Nutritional Biohazards

One of the websites I visit every day is Men's Health. Yes, it's filled with advice I would never follow, often of a morally questionable nature or that requires you to spend such an incredible amount of time grooming yourself that you might as well be gay! But it's fitness and nutritional information is top-notch, and a daily visit gives me several new ideas to live my life.

Here's one y'all (men and otherwise) could use - four nutritional biohazards. They are:

High Fructose Corn Syrup

Trans Fats

Saturated Fats

Refined Carbs

Do be aware of some caveats, of course. For example, peanut butter is rich in saturated fats, but the good kind (rich in omega-3). But even in peanut butter, there is considerable nutritional variety between brands, and the generic brands are sometimes better. My preferred brand is Kroger, which does not have the crappy partially hydrogenated oils that Jif and some other brands have.

So live healthy and enjoy your life!

Indian Bees

I was just reading about the results of the 2006 Geography Bee contest and I was amazed that the top three finishers were Indian American. Three of the last four winners of the Spelling Bee were Indian American too. Tell me immigration hasn't caused a lot of smart new American kids!

Negotiation Delays

Several newspapers published stories today about the "resilience" in real estate markets, with the number of new homes sold hitting a new high. These stories did note that the median price of the homes sold did drop, but failed to connect it with the sale volumes. Well, I'm no economist, but here's the way I see it (hmm, I keep pointing out I'm no economist, but then propose my theory on economic issues ... oh well, that's why I have a blog!)

Price in free markets is fixed by a negotiation process. If sales of say new cars aren't doing very well, offer a discount and sales should improve - simple enough. I like to call this 'negotiation delay', although I'm sure there's a technical term for it. In stock markets, information is transmitted quickly, and hence a reluctance to pay higher prices for equity assets quickly results in sellers reducing prices until there are buyers at the new price. Negotiation delays can be longer in real estate markets, especially when individuals are reluctant to sell for a loss (or even for less than what a neighbor got for theirs). After a few months of seeing prices decline, sellers (especially speculators) recognize new information (the bubble may be bursting) and are keen to get out at existing prices, even if it represents a loss.

It is then rational that we should see increased sales at lower prices. It isn't a sign of resilience, just a sign that speculators and some non-speculative sellers recognize the sound of a bubble popping!

Bribe the People

As I fret about the pervasiveness of populism, be it in the capitalist model-state of the United States, or in the still-ambivalent New World, including my own India, I came across this quotation from Alexis de Tocqueville that struck a chord:

The American Republic will endure, until politicians realize they can bribe the people with their own money.

Bribe the people indeed! In my home state of Tamil Nadu in India, the DMK party won the recent state elections by promising subsidized rice, a free television for every family and a variety of such pork that would make a conservative shudder. No one ever asked why the party was unwilling instead to commit to provide a robust economy that would alleviate the need for subsidized rice or free TVs.

Here in the US, as our governments rack up record deficits from being unable to cut out our spending sprees, we would do well to remember those words.

Leave Americans to Baseball

Sambit Bal, writing for the online magazine Cricinfo, questions the merit of seeking to expand the game of cricket beyond its present sphere of influence, and in doing so, touches a chord this this:

Cricket is not an easy game to start liking. It is a complex and baffling game. It demands utter devotion, infinite patience, certain intellectual engagement, and that utterly scarce commodity: time, lots of it. Also, the cricket lover, particularly those attracted to the alluring charms of Test cricket, must be prepared to enjoy the journey for the sake of it, without obsessing about the destination. Try convincing your American friend that a drawn Test is not a waste of five days.

(For my American friends, as Bal puts it, a game of Test cricket lasts 5 days and quite regularly ends with neither team winning the game!)

Understanding Risk

Even if you are not mathematically inclined, bare with the geektalk on this post for what I hope will be a useful revelation

My monthly newsletter from T Rowe Price included a note from one of their bond fund managers who noted that a 50-50 stock and bond allocation has been shown to produce 85% of the returns of stock-only portfolios while substantially reducing volatility. I flipped the page - I'm not the kind of guy who sells when the market crashes, and hence don't worry about volatility.

But maybe I should. A new day brings new insight, and I wondered what volatility does to "terminal values", which really is what you and I care about. A terminal value is the value of an investment after some lengthy period of time. So, for example, how does volatility affect the value of a $1,000 investment after 20 years? Intuitively, we all seem to think it doesn't matter - as long as the timeframe is "sufficiently long", the returns will approximate the mean returns, things will average out. But is that true?

So as I chomped on my lunch, I wrote a little program to simulate terminal values (yes, sad is the life of a geek!) And the results were revealing. I simulated two artificial portfolios - fund A has a mean return of 8% and standard deviation of 8%, while fund B has a mean return of 16% and a standard deviation of 24%. The simulated mean returns after 20 years, not surprisingly showed that fund B was a lot better than fund A - your $1,000 investment was now worth $20,540 in the former, as opposed to $4,690 in the latter. Ah, the joys of compounding!

But what about the ranges? Your terminal values in fund A could have ranged from $1,700 to $11,600, while in fund B, you could have been left with $630 to $178,440. That is, even after what you consider a long time, the volatily in fund B could have caused you to lose money, although it just might have made you phenomenally rich!

This is the part left out of the literature for the common investor. Risk matters ... in fact, risk is pivotal. I understand that many publications are trying to get excessively conservative investors to embrace risk (the ones who refuse anything riskier than a bank deposit), but the average Joe and Jane do have to worry about risk. This is especially true when they read stories of people who invested in a speculative issue or hot real estate market and ended richer than you could ever dream - yes, it can happen to you, but you could lose your shirt and a lot more.

It strikes me that a statistically appropriate measure while planning for retirement would then be to study this dispersion, and have a certain degree of confidence in achieving some basic milestone. (So you may want to be 90% confident of retiring with a $1 million)

Postscript Since the time of this post, I have noticed several articles and mutual fund companies refer to similar probabilities, even though they are closer to a 75-80% chance of adequate savings (a higher probability causes a dramatic rise in the required savings, as one can determine from the shape of a Bell curve). Nevertheless, I still think this aspect is underplayed in articles and most personal investors do not have an appreciation for risk.

The Retirement Apocalypse

PBS' Frontline did a special called 'Can You Afford to Retire' focusing on the retirement disaster for so many. I only caught parts of it, but it really drove home how underprepared so many are for the challenge of retirement. (The full video should be available online on Thursday here. I was horrified to hear that the average family balance on a 401(k) account was $29,000. How on earth do people expect to retire with that kind of paltry sum?

Some of the best insight came from Brooks Hamilton, founder of Brooks Hamilton and Partners, a firm that designs 401(k) plans for large clients. Here was one excerpt where Hamilton challenges the notion that employees can manage their own 401(k) plans:

I should have seen it sooner, but my gut told me that forcing novices ... to direct their own investments was not really a good thing to do. I used to ask the CEO, CFO of my major clients, often in an environment, conference room. Some young employee would bring in coffee and all and as they would be leaving, I would ask the CEO, "Fred let me ask you: Would you allow that employee to direct the investment of your account in the 401(k) plan?" And they always thought I was some kind of idiot. It's kind of like, "Don't they teach you anything down in Texas, Brooks? Of course not. I wouldn't let them touch my account with a 10-foot pole." And I said, "But you force them to manage their own! And they are running their money into the ground. They are novices. They don't know what they are doing. They don't know a stock from a bond. They don't know the Indianapolis 500 from the S&P [Standard & Poor's] 500."

Here was an interesting fact Hamilton points out:

The Department of Labor pointed out that when ERISA went on the books, of all contributions that were being made to plans, the worker put in 11 percent; the company put in 89 percent. That was in 1974. Fast-forward to 2000, and the same source of data, the Department of Labor, the same said that of all contributions being made, workers are putting in 51 percent, companies 49 percent. The contributions have also gone down. We're not putting in 6 and 8 percent of payroll anymore; we're putting in far less, maybe half of that, most of it by the worker. So the companies are putting in 1 or 2 percent of payroll, as a general statement, to a 401(k) plan.

And then there was John Bogle, founder of Vanguard, who pointed out that a hypothetical $10,000 investment compounding at 8% annually grows to $140,000 in 65 years, while an expense ratio of 2.5% means that at the end of those 65 years, you'll have made $30,000 while the fund company would have made $110,000! (Bogle calls it the tyranny of compounding costs)

This is a real concern. As a young graduate student, I feel guilty about not contributing to a Roth IRA. Imagine my shock when I discover several staff members at the university who have never heard, let alone contribute to a Roth. An incredible number of people are underprepared, relying on faith of time or a solvent pension plan to see them through. And yet, state and corporate pension plans are phenomenally underfunded. I am often tempted (and have been guilty of) coaxing especially older employees to be more aggressive with retirement investing, but I suspect it often falls on deaf years (plus it means I'm not a particularly popular fella these days!).

Guard the Border

PBS' Newshour had an interesting panel discussion on the administration's plans to use National Guard troops to reduce illegal immigration. Former Pentagon official Lawrence Korb suggested what I had suspected as a lay person, that the move was largely symbolic - he thought you'd need 50-60,000 troops to make a difference. Brig Gen David McGinnis, a 29-year veteran and former Director of strategic plans and analysis, thought 6,000 troops was doable, but suggested that the approach used by the present administration wasn't very smart, and that allowing the National Guard to develop a solution using technology such as the use of sensors would have been much more effective.

All this is window dressing. President Bush and every realistic politician knows we aren't going to stop illegal immigration as long as life is as miserable in Mexico, and jobs are so available in the US of A. Bush probably wants to give some to get some. No problem with that, except I don't see a guest worker program passing through the House and Senate any time soon. That's the incredible nature of Washington - a lot of talk and no action!

Are You Sure?

This story of a man exonerated by DNA evidence after 10 years in jail reminds me again why I'm so uncomfortable with the death sentence. I don't have problems accepting the murder of a heinous criminal, but can we ever be sure that we have the right man or woman? This story highlights that even a confession isn't failproof, and I certainly think there is room for DNA evidence to be misinterpreted.

And yet, part of me thinks some b*st*rds, you know the ones who rape and kill and harm children, that they don't deserve to live. It may be illogical, and may be wanting to play God, but that's just how it is ...

Don't Help?

This report of ill-treatment of an Afghan man who had saved a US Navy Seal outraged me. It isn't enough for the military to simply refuse to comment on the topic. After all, could it be that such apparent boneheadedness means many others will chose not to help US troops in trouble in this and other hotspots?

Hush, Big Brother's Watching ... Well, Sort Of!

The revelations this week that Big Brother was building a master database of telephone calls were startling and cause for concern. Readers of this blog will recollect that I supported the Bush administration in bypassing the special Foreign Intelligence (FISA) courts to obtain warrants on suspected terrorists. This new program, however, goes a lot further. Suddenly we aren't just collecting information on suspected contacts of terrorists, we're collecting information on everyone.

Polls suggest a majority of the American people support even this new program. But I think that misses the point. I'm not worried that Bush and his cronies are going to start spying on my activities (actually, if they do, I'd really be worried because these top brains are wasting their time on my boring life!). I do worry however that a very real scenario exists 10 years down the road that a politician will influence could use this database to discredit or blackmail his opponents.

And where does surveillance stop? Reports have indicated that our intelligence services have been spying on Quaker, vegetarian and peace groups. Is there any evidence that any of these groups support a militant process?

That is one thing that's great about America - our checks and balances. I'm willing to sacrifice some of our liberties for protection from the evildoers, but at some point, the Bush administration line starts to get old. That power can easily be abused towards an end was evident in two cases this week. One was the revelation that the NSA blackmailed Qwest that failure to provide the records they requested (which Qwest wanted a court order for) could result in them being blacklisted for federal contracts. The other was down in North Carolina, where the police arrested a cab driver for an old unrelated shoplifting charge, which gave the impression of witness intimidation (the cab driver's testimony was supportive of defense claims in the Duke rape case).

I don't mean to suggest that all this needs to be done in the open. I certainly appreciate national security concerns, but checks and balances can be achieved by a closed-door session of Congress, or even just relevant committees, developing guidelines for what's permissable. That's the least we can do to prevent the good ol' US of A from becoming to a Putin-ocracy!

Why So Silent?

There are times in a man's (and yes, a woman's too) life when very public musings are abandoned for very private introspections, and this time is one such in my own life. I hope the adherent to this blog is not disappointed by the lack of activity on this brimming bazaar of cyberspace - rest assured, my rants will continue with ever more fervor when this phase passes.

In the meanwhile, I thought I'd share a list of books I'm currently reading (some of which are listed on the panel on the right under 'Recent Book List', others which aren't), as well as list a 'wishlist' of books I intend to read. If you wonder how it is that a person could possibly read multiple books at the same time, it springs from my association of books with friends. Sometimes you desire a chirpy companion, at others your heart is warmed by a passionate friend, while there are moments when your mind is sent on an exploration by the philosophies of some.

I invite you all to suggest books that you have found interesting or personally enriching, by using the comment feature of this blog.

Current Reading List

American Vertigo: Traveling America in the Footsteps of Tocqueville - Bernard-Henri Levy

Setting the World Ablaze: Washington, Adams, Jefferson, and the American Revolution - John Ferling

Downsize This! Random Threats from an Unarmed American - Michael Moore

Empire of Debt: The Rise of an Epic Financial Crisis - William Bonner, Addison Wiggin

Wish List

Democracy in America Alexis de Tocqueville

Hunger of Memory: The Education of Richard Rodriguez (want to read a second time!)

Me Talk Pretty One Day David Sedaris