Investment Help

If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.

Sunday, July 31, 2011

The Yin and Yang of Economics

According to Wikipedia, the Asian philosophy of Yin Yang describes how "seemingly contrary forces are interconnected and interdependent in the natural world, and how they give rise to each other in turn." Furthermore, "Many natural dualities—e.g. dark and light, female and male, low and high, cold and hot— are thought of as manifestations of yin and yang (respectively)."

Economics, with its concept of equilibrium, involves similar dualities. The fundamental principle of economics, for example,  is that buyers want low prices and sellers want high prices.  The result is that prices stay in check - unless, of course, you have a Federal Reserve bent on keeping prices low.  Then it will, over time, totally devalue the monetary unit - but that is another story.  It is important, in the context of Yin and Yang, in that it seems that by explicitly seeking stable prices the Federal Reserve, in fact, causes inflation over time. When your grandmother said that the dollar doesn't buy what it used to, it was her way of saying there has been significant inflation.

The two-sided impact is always there but many times ignored or not realized.  An important example of the Yin Yang type of duality in economics involves interest rates.   It is common to laud the Federal Reserve (especially by the Chairman himself) for its policy of lowering interest rates to increase economic activity.  After all, lower interest rates make it easier for business and other economic entities to borrow and thereby increase economic activity.  But there is another effect of lowering interest rates.  It reduces income of people living on fixed income, (mostly retirees, who in fact have a high marginal propensity to consume) and, in fact, produces an incentive to take greater risk in the investment markets. Today, for example, retirees who can't live on the income produced by bank savings accounts or money market funds have put a greater percentage of assets in dividend paying stocks.

The macroeconomic impact of lowering income for investors who seek low risk investments should, it would seem, always be brought into the analysis but especially in demographic situations like the present-- where in the U.S. and other countries there is a significant aging of populations occurring.  To often it's not.  In the end, policy makers sit around after their actions have had their impact and try to figure why employment is stagnant.  Maybe a significant contributing factor is the loss of income from short-term rates being driven to zero.

Every economic policy has a positive and a negative impact.  Every policy has a Yin and Yang.  Both need to be understood, especially in relation to the environment in which they are undertaken.

Friday, July 29, 2011

A Failure to Govern - a Sad Day For America

I have to go back to the parrot in Disney's Alladin - "why am I not surprised?"  Washington is being held hostage.  In the old days, the wheeling and dealing was done by trading pork barrel projects and committee chairmanships.  This week we learn the the arm twisting is hostage to extreme views.   And so we are subject to a charade which takes us to the brink of economic upheaval.  But I'm not surprised.

If we stepped back to 1/1/2000 and recognized that the demographics meant a tsunami wave of gray and asked what we could do to wreck the baby boomers' retirements, we would have come up with a list of what actually was done.  The first  thing we would have thought of would be to drive interest rates as close to zero as possible.  Thank you Bernanke and Greenspan.  Check one.

We would have thought of destroying the housing market.  Again, thank you Greenspan and Bernanke with a tip of the hat to rating agencies, lax regulators, Congress pandering to Fannie and Freddie, Check 2.  We would have thought of taking a long-projected surplus and turning it into a massive deficit. Then we could threaten cuts in Medicare, Social Security, etc.  Thank you Congress and Bush.  Check 3.  We would have spent the annual surplus on Social Security collected by an extremely regressive tax. Thank you Congress.  Check 4.

Today, this ineptness is extended and actually possibly being outdone.  The House is voting on a bill that is held hostage by the extreme right and is dead on arrival as a day of reckoning approaches, whereby America won't pay its bills.  One of the speakers on the House floor noted the hit to the nation's retirement funds during the past week of wheel spinning and blatant posturing and asked whether Congress was waiting for a 700-point down day before coming to its senses ala TARP.

IMHO, the failure to govern is obvious and means that the system needs drastic changing.

Thursday, July 28, 2011

Kernan and Santelli on CNBC

Joe Kernan on CNBC just listed a number of bad Presidents in reaction to a statement that Obama is the worst president of all time. Is Obama the worst President of all time?

Conspicuous by its absence from the list was a recent President who came into office with a budget surplus at a time when the Chairman of the Fed worried that the national debt might be eliminated! The idea of a lockbox for the Social Security surplus was scoffed at. A massive tax cut was passed that was predicted to result in a balanced budget down the road, and a war was started with a nation on false pretenses not to mention a highly dubious election win. This President signed every spending bill that came across his desk. Help me out here...should this President be on the list? Have the pundits gotten Alzheimers all of a sudden?

Rick Santelli from the floor of the New York Stock Exchange had a great line this morning. He cited FDR as saying that "the only thing we have to fear is fear itself " and quipped that, apparently, he wasn't looking at Congress. Maybe the teapartyers are to be feared as well?

Wednesday, July 27, 2011

Increase the Debt Limit

Source: AP Photo
A couple of years ago, I went to a graduation ceremony to see my nephew graduate from community college. The first 40 minutes or so was taken up by politicians recognizing each other and congratulating each other for their service to the country. I sat in the audience wondering how it was that the audience didn't boo these men and women out of the building. I wondered how it was that the audience bought their BS hook, line, and sinker.

Politicians don't serve the community. They serve themselves. They have perks and privileges that they would never extend to the people they put in office. They zip around in limos and spend their evenings at the Capitol Grille amidst high-priced call girls being wined and dined by lobbyists. They constantly seek their own glory in their pursuit of sound bites on the evening news. And they govern badly. Very badly.

The fiasco with the debt limit is just the latest example. The hang-up is what got us into the present difficulties in the first place. Washington doesn't vote on the merits of legislation. Instead, they vote for your project if you'll vote for theirs. You "buy" your vote for a boondoggle waste of tax payer funds by promising to vote for their "bridge to nowhere." And so it goes. Today the increase in the debt limit, which failure could lower our debt rating and scare our creditors, is hung up by other legislation which includes features extremists in both parties refuse to accept.

Warren Buffett has said there shouldn't even be a debt limit, and he is right. The problem is that we are dealing with egotists who use the debt limit as a prop to express their outrage at the wasteful spending in Washington as they go about business as usual.  And so we have it - a stalemate that could potentially cost the country dearly. 

Let's increase the debt limit. Do what it takes. Even if it takes the President invoking the 14th amendment. Then take up the issue of taxation and spending. Let's try something different - let's try responsible governing.

Tuesday, July 26, 2011

There's No Longer an Excuse - Teacher's Journey to Wealth

Source: Dividend Ninja

An Excerpt From Millionaire Teacher

If you were considering a profession and you wanted to become wealthy, certain lines of traditionally high-paying work might tempt you. Would it be law, medicine, business, or dentistry? Few, if any, would choose my profession if they aspired to be rich. I’m a high school English teacher—a middle-class professional if there ever was one. Yet I became a debt-free millionaire in my 30s.
I didn’t take exceptional risks with my money and I didn’t inherit a penny from anyone. When I went to college, I paid the entire bill myself. How did I pay for my own schooling and amass more than a million debt-free dollars before my fortieth birthday? Fortunately, I learned from (and was inspired by) some financially savvy characters, urging me to master what I should have learned in high school. Because financial literacy isn’t adequately taught in most high schools, you might be among the millions who were shortchanged by our education system. This book is my attempt to make it up to you.
Give this book to your financially challenged friends.

For a recent interview with Andrew, check out "An Interview With Andrew Hallam" by Dividend Ninja.  Millionaire Teacher is a life-changing book for those who can grasp its lessons.