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20 Cents from April 2012

Kim Petch — Tue, 01 May 2012 09:46:48 +0000

Markets have been subject to some April showers this year. Will they lead to May flowers? We’ll find out soon. In the meantime, check out some of the great articles I noticed across the web during the past month.

1. Creativity is often underestimated as a driver of economic growth. Flip Chart Fairy Tales asks Is There a Creativity Crisis? citing a post from Chris Dillow that observes that less innovation leads to lower GDP growth. Another article in The Globe and Mail pointed to Maria Montessori and her education model as a producer of creative individuals. Apparently, some pretty well-known innovators attended Montessori schools. (Anyone heard of a company called Google?) In a third, very short but excellent article, Seth Godin writes On Making a Ruckus in Your Industry.

2. Sheila Bair’s Washington Post article on how to Fix Income Inequality with $10 million Loans for Everyone was an eye-opening (and more-than-a-little-ironic) look at the mechanics of the Fed bailouts of large financial institutions and hedge funds. If you think this disdain for the financial sector stops at the northern U.S. border, think again. The Huffington Post published a Q&A with Bruce Livesey, Author of Thieves of Bay Street. Apparently, our banking system isn’t as squeaky clean as some would have us believe.

3. Market Watch presented the view of another author (Richard Duncan), who says that Capitalism Is Dead and Credit Is the New King. According to Mr. Duncan, attempts to unwind the credit-driven nature of our modern economy may be “cataclysmic.”

4. Do you handle money better or worse than your siblings? According to a new survey, Birth Order and Financial Personality are Linked.

5. The Spec took issue with GICs as the Ugly Stepsister. In a similar vein, Watson Inc. wondered Are There Any Safe Investments Anymore?

6. Science Daily had a really interesting article on how Consumerism and Its Antisocial Effects Can Be Turned On – or Off. Here’s a sample: “Money doesn’t buy happiness. Neither does materialism: Research shows that people who place a high value on wealth, status, and stuff are more depressed and anxious and less sociable than those who do not.” Makes sense to me.

7. Here’s a story on 5 Money Moves a Fed Follower Is Making. It’s about James Bianco and his contention that these days markets move on the actions of the Federal Reserve rather than economic or corporate fundamentals.

8. Who knew a single food could be so important to protecting your brain? Psychology Today informs us that Fat Brains Need … Tomatoes.

9. Brain Pickings covered some advice from C.S. Lewis on the dangers of acting only out of a sense of duty. There are some really compelling quotes from letters he wrote to children who asked him questions.

10. In a guest post on Michael Hyatt’s blog, Justin Wise explains What Elementary School Taught Me about Personal Productivity and how you can apply it to your work or business.

I hope you found these articles informative. Please feel free to comment on them below!

20 Cents from March 2012

Kim Petch — Mon, 02 Apr 2012 09:46:04 +0000

The first quarter of 2012 has come to a close, bringing with it a significant market rally. Who knows what the future holds? In our area, March brought an early taste of summer followed by a final gulp of winter cold. It also brought its share of great reading. Here are some of the articles I enjoyed last month. I hope you enjoy them too!

1. Lack of Sleep Is Killing You. If you’re one of those folks who regularly sacrifices sleep with the idea that it makes you more productive (I’m looking at you Mr. Cents ) have a look at this infographic.

2. This one’s actually from February 29, but I discovered it too late to include it in last month’s edition of 20 Cents. I’m going to take the liberty of including it this month due to the Leap Year as well as the fact that I think it puts forth a really interesting thesis. The North American industrial complex is en route to extinction right? Maybe not. Check out this compelling argument by Chris Mayer of The Daily Reckoning: The Great Comeback No One Will Believe.

3. John Heinzl of The Globe and Mail put together a pair of articles that presented a nice balanced look at dividend growth investing. While he admits to being a fan of the approach, he also pointed out some myths about dividend growth investing to watch out for.

4. Jim Yih wrote about Creating Retirement Income with Buckets of Money at the Retire Happy Blog. Who doesn’t love the idea of buckets of money? Kidding aside, there’s some wonderfully practical information here.

5. According to My Own Advisor Pay Yourself First Means Bill Payments to Us Inc.. Paying yourself first and making it automatic are among the most important principles in personal finance.

6. When Making Big Decisions about Money, Seth Godin advises us to take the numbers out of it. Have a look!

7. One of the headline-grabbers from March was the scathing New York Times Op-Ed article by Greg Smith on why he left Goldman Sachs. I came across two great reads that offered a Canadian angle on the topic. The Wealth Steward made the case that the Goldman issues were not isolated and that we have some room to improve the Canadian wealth management industry too. On a more personal note, Globe columnist Tim Kiladze wrote about leaving Bay Street and the six-figure salary that went with it.

8. In the era of always-on everything, the one-step-at-a-time approach may seem a little anachronistic. While many of us think multitasking is the wave of the future, I can vouch for the fact that juggling too many balls at once means you’re more likely to drop them. Time to embrace The Magic of Doing One Thing at a Time (courtesy of Tony Schwartz via Business Insider).

9. The Big Picture posted a cool infographic from the Wall Street Journal on Nasdaq 3000: 2012 vs 1999. Apple wasn’t in the top 10 companies in 1999. You can guess where it is now.

10. I’m a big believer in the idea that happiness is, to a great extent, a choice. It’s not about living in denial. Bad stuff happens. It’s about dealing with it. Marc and Angel Hack Life wrote about 10 Ways Happy People Choose Happiness. Go ahead. Pick one!

Feel free to comment on any or all of these fantastic articles.

20 Cents from February 2012

Kim Petch — Thu, 01 Mar 2012 10:45:34 +0000

February has passed, offering a bonus day thanks to the leap year. It’s been a profitable month for stock investors, with most major indices adding to January’s gains. It’s also been a busy month for us as we’ve been doing a lot of organization for the business in preparation for the spring, summer and fall, which are the busiest part of the year for our industry.

Still, I found time to read a lot (mostly while waiting for our sons at various appointments and music lessons). As a result, I’ve got a nice variety of articles to share for this month’s edition of 20 Cents:

1. If you’ve yet to get serious about this year’s obligatory “exercise more” New Year’s resolution take a look at 23 and 1/2 Hours: What Is the Single Best Thing We Can Do for Our Health? This Toronto doctor’s research shows that just a few minutes of exercise each day (like going for a walk) can significantly reduce your risk of developing any number of diseases and extend your life expectancy. In a similar vein, 101 Centavos wisely counsels us to Take It Easy, Just Go for a Walk. There are some fantastic quotes in this article (the Kierkegaard one at the end is probably my favourite) and it offers a nice way to extend this thinking to personal finance and investing. (Hint: KISS – Keep It Simple Stupid.)

2. My Own Advisor wrote about why he and his family choose to Optimize Rather than Maximize RRSPs. With so many competing financial priorities, it seems like balancing your capital allocation among them is a more realistic answer for most people. Figuring out how RRSPs work and how they fit into your unique financial situation is more important than just throwing as much money as you can into them each year.

3. A Financial Post article by Moshe Milevsky started off with the following attention-grabber: “this year’s RRSP season is the worst possible time to make an RRSP contribution.” The idea is that making your RRSP contribution earlier (rather than waiting until the February of the following year) allows for longer tax-deferred growth. Still, Milevsky likes the whole RRSP season hoopla thing because at the very least it gets more of us thinking and talking about retirement planning.

4. A guest post by Teacherman of My University Money at the Canadian Finance Blog certainly got people talking about The Generation Gap when it comes to OAS and CPP. While many took issue with the author’s tone, the article raised some valid issues. The comments that followed, however, demonstrated why we can’t seem to make any progress on these key pension issues. Everyone thinks someone else is the problem and no one wants to give up anything to fix it. Eventually, the debate devolves into a schoolyard squabble that solves nothing. Back to square one.

5. On the topic of schools, Seth Godin just came out with an education manifesto called Stop Stealing Dreams that asks what is school for? The idea is that “the economy has changed, probably forever. School hasn’t.” You can download the manifesto for free. It’s at the top of my reading list for the next few music lessons.

6. Jeremy Grantham just came out with GMO’s Longest Quarterly Letter Ever. Having read it rather quickly, it didn’t seem that long to me. In addition to his investing insights, Grantham shares his concerns about the finite resources of our planet. He’s worried for our grandchildren because we are not making provisions for the future, thanks largely to the fact that politicians (and thereby policies) can be bought – definitely worth reading.

7. Ken Faulkenberry at the AAAMP Blog offers Two Simple Investment Concepts for Retirement Investing – Most Investors Fail at Least One of These.

8. Beating the Index had a very informative post on Natural Gas Stocks: Beware of Declining Natural Gas Prices. As I write this the NatGas ETF (GAS) is diving to new lows.

9. Jim Yih of the Retire Happy Blog explains how Paying Lower Fees Directly Can Be Tough on Investors. Many people I know aren’t aware of the fact that their mutual funds are costing them money every year. They don’t see it on their statements, so the costs are invisible. If you pay a planner directly for their services, your fees are likely a lot lower, but also more visible.

10. I guess if you had to boil down the main principles of personal finance to just 3 words, Save Invest Give might be perfect. Maybe that’s why the author of Retire at 45 recently changed the name of the blog to those three words – great choice, in my opinion. Head over there and check out some of the latest articles, including this one on The 3 Axioms of Risk.

Thanks to these fine authors for sharing their thoughts with us this February.

Please feel free to comment on any or all of these articles that caught your eye.

20 Cents from January 2012

Kim Petch — Wed, 01 Feb 2012 10:45:21 +0000

So the first month of 2012 is behind us. Did you set any goals for the year? How are they coming along? There were some fantastic financial articles out there last month. Here’s a tiny sample:

1. Farnam Street posted an excerpt from a new study on Willpower & New Year’s Resolutions. Apparently, the key to keeping our resolutions is to make sure we don’t need to call on our willpower too often by minimizing temptations. That’s probably why automating your finances by paying yourself first works.

2. The World Economic Forum takes place in Davos, Switzerland each January. Umair Haque pointed out Ten Things You’re Not Allowed to Say at Davos. Enlightening.

3. Take a look at this interview with Danielle Park at Cambridge House in Vancouver. “Wise investors concerned about the real direction of the economy will learn something here!”

4. At Personal Dividends, Miranda asked Should You Care About European Financial Problems?

5. If you’re concerned about the economic challenges facing Europe and the U.S., you may want to check out this Market Watch article on Living the American Dream – in Canada.

6. Which is better: Tax Free Savings Account or Paying Down Debt? Jim Yih tackled this question at the Retire Happy Blog – and he drew some neat pictures too!

7. Has you financial advisor ever told you that “You’re young so you can afford to take more risk”? If so, you might want to head the other way according to FiGuide. That line was included in their list of The 6 Worst Pieces of Financial Advice.

8. Overheard in the workplace: “Only stupid people give to charity. I give enough with my taxes.” Wealth Informatics posted an interesting analysis of why we give and how to give smartly.

9. Forbes had a really interesting article on 5 Personality Traits That Lose You Money.

10. The Reformed Broker linked to a CBC interview with Seth Godin: It’s a Forever Recession – So Race to the Top. I’m reading Seth Godin’s Linchpin at the moment and loving it. Maybe I’ll post a review when I’m done.

I hope you enjoyed these articles as much as I did. Feel free to comment on any of them here.

20 Cents from November and December 2011

Kim Petch — Sun, 01 Jan 2012 13:38:34 +0000

I missed posting the November 2011 edition of 20 Cents due to my short blogging sabbatical, so I’m combining some highlights from November and December here. There are a few bonus links in there too. Enjoy!

1. Let’s get things started with 3 great articles courtesy of Barry Ritholtz at The Big Picture. Barry calls out Cognitive Dissidents, says the U.S. Is a Corporate Monarchy, and highlights 29 Systemically Dangerous Global Banks. All are well worth your time.

2. Million Dollar Journey posted an excellent article on Why Cash Is King. In a volatile marketplace, cash provides a much-needed, if low-yielding, margin of safety.

3. Global investors watched Eurozone leaders make unequivocal statements followed by very equivocal retractions for most of 2011. John Hussman did his best to sort out this economic Hokey Pokey for the rest of us.

4. Charles Hugh Smith (Of Two Minds) was much more direct in his characterization of the Euro debt crisis, and what’s necessary to resolve it: Why Isn’t Anyone Talking about Writing Off 3 Trillion Euros of Bad Debt?

5. I rarely highlight another roundup in my 20 Cents post, but this one from Abnormal Returns is so chock full of worthy articles, I couldn’t resist: Wednesday Links: Healthy Capitalism.

6. Interloper is one of my favourite newcomers to the financial blogosphere in 2011. Check out the article on why the “Highest Risk Tolerance Wins” Investment Era May Be Coming to a Close. While you’re at it, stick around and browse a while. I’m sure you won’t be disappointed.

7. The Oblivious Investor made some excellent points in Asset Allocation: Maximum Tolerable Loss.

8. A friend inspired My Own Advisor to ask What Does Smarter Living Mean to You?

9. Science Daily may have some answers on cognitive dissonance for Barry Ritholtz in the study on Why People Defend Unjust, Inept, and Corrupt Systems.

10. Here’s another collection of great articles from another site I just recently discovered called Farnam Street. Check out all three:

Happy New Year! I wish all of you peace and prosperity in 2012!

Feel free to comment on any of the articles that piqued your interest!

20 Cents from October 2011

Kim Petch — Tue, 01 Nov 2011 09:45:38 +0000

It’s hard to believe 2011 is already winding down. Soon we’ll be busy with holiday preparations, year end reviews and goals for 2012. It’s been a beautiful fall in our new city and I look forward to experiencing Christmas here for the first time. Now ~ 1. Where to find a tree? & 2. Where to put it in the new house? Hmmm . . .

While I wrestle with these profound questions, I’ll leave you with a selection of 2 cents from 10 different places. Enjoy!

1. Jonathan Burton of Market Watch wrote an interesting article on Why Geezers Give the Best Investment Advice. ‘Based on the evidence found in the research, anyone between 43 and 63 “is really in their cognitive sweet spot.”’ Woo hoo! I’m almost in my cognitive sweet spot! Wait . . . does that mean I’m almost a geezer?!

2. Brent Arends of Smart Money brings us 10 Bogus Investing ‘Truths’. “In this market, the conventional wisdom no longer holds.”

3. Mark Hulbert of Market Watch shows how Cash Is King – Even in a Bull Market. He profiles a money manager who has beaten the market in spite of carrying a very high cash position since the 80s. He chose a select group of boring blue chips and a big gold miner for his small equity weighting. Interesting approach.

4. Rob Bennett wrote about Investing and Human Emotion, concluding that we are Stock Drunk. Otherwise, why would we pay for overvalued securities?

5. Clark wrote about How Leveraged ETFs Work at Million Dollar Journey. I used to trade the leveraged inverse ETFs before the single inverse versions became available. The leveraged ETFs are too fast for my pace. Handle with care.

6. The Wealthy Barber is back with another book for Canadians. Jim Yih loved the book and wrote a great review at Retire Happy Blog. I haven’t read the book yet myself, but it looks like it’s just as good as the first one.

7. My Own Advisor posted a great article on DRIPs (Dividend Reinvestment Plans). Check out his list of DRIPs the DRIPers DRIP.

8. Canadian Finance Blog asks and answers this important question: Will Rising Interest Rates Affect My Variable Rate Mortgage?

9. Mashable had a fascinating infographic on How Recruiters Use Social Networks to Screen Candidates. This is a must-read for anyone hunting for a job, looking to move up the ladder, or simply maintain a professional profile. Note to self: The social media revolution means we are all expressing our character (or lack thereof) on a global stage.

10. Here’s What’s Wrong with the Economy (And How to Fix It). This rather long post by Henry Blodget of Business Insider is well worth a few minutes of your time. Whether you agree with his fix or not, the article does a great job of delineating the rather daunting challenges we currently face on the economic front. There are lots of facts and stats, which are always good food for thought.

Thanks to all of these great authors for sharing their 2 Cents with us this October!

Please share your thoughts on any or all of these selections!

20 Cents from September 2011

Kim Petch — Mon, 03 Oct 2011 09:45:14 +0000

This month it was truly difficult to pick only 10 articles to include. I almost had to up the ante to 30 cents! But my goal with these monthly collections is to keep them succinct so readers aren’t overwhelmed with information. Suffice it to say that some really great pieces were left on the proverbial cutting room floor. I hope you are enjoying the beautiful fall weather and I hope you enjoy these articles as much as I did!

1. If You Have Only a Little Money, Should You Invest It? Shelley White from the Globe and Mailed posed the question to Danielle Park and Bruce Sellery. Ms. Park recommended paying down debt first and staying on the sidelines in terms of equities. “[I]n her opinion, you would be better off parking your money in GICs rather than diving into stocks or bonds because of the current volatile investing environment . . . You could have sat out of the stock market entirely for the last 12 years and be further ahead if you’d have just used GICs at your local bank.” Mr. Sellery agreed that those who are stretched should put off investing until their financial basics are well in hand: Those who are living paycheque to paycheque “have bigger fish to fry.”

2. If you’re interested in a detailed discussion of current market conditions you’ll want to read through The Reformed Broker’s Notes from the DoubleLine Lunch with Jeffrey Gundlach. You can also take a look at the full presentation at Business Insider. There are some fantastic perspectives here.

3. I highlighted this gem from The Big Picture in last week’s article on 5 Economic Trends Affecting Your Money, but it’s worth another mention here in case you missed it. The article was entitled Take the Loss and that imperative is repeated throughout the piece as Barry Ritholtz lists the numerous moments when our financial and political leaders have flouted a cardinal trading rule.

4. Andrew Hallam wrote A $$$ Tale of Two Boys and a Super Mom. It’s a really nice piece about his sister and how she’s teaching her two sons to handle money wisely. (If you haven’t already, check out Andrew’s book Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School.)

5. My Own Advisor had a post about his Favourite Canadian Equity ETFs. He’s picked some good ones and noted a few things to be concerned about, especially with regard to HXT. If I had to add a couple of my favourites, I would probably choose HIX (the inverse ETF) and XTR – just for the yield of it! One thing about the XTR, however, is that it’s not strictly an equity ETF. It’s basically an ETF of ETFs that includes some bonds, REITs, and preferred shares. Come to think of it, maybe that’s why it didn’t make the list!

6. Rob Carrick from the Globe and Mail had some interesting news about A Milestone in Low-Cost Investing. Apparently, Scotia iTrade is now offering commission-free online trading on 46 ETFs. Sweet!

7. Barbara Friedberg had a fine article on Wealth and Economics: Community vs. Country Club. Well said Barb, and thanks again for sharing your article Moving Stinks! And I Never Want to Do It Again here in September.

8. Squawk Fox kicked off the back to school season with Healthy Snacks: Make Healthier Lunchables for 32% Less. I’ve never bought Lunchables for my boys and it’s nice to see some math to back up that decision. Way to crunch those numbers Kerry!

9. How Low Can Yields Go? Canadian Mortgage Trends gives a detailed answer. There’s a lot to consider in the land of ZIRP! (That’s Zero Interest Rate Policy for the less nerdy among you .)

10. Doctor Stock came up with a great idea. It’s called The Sunday Stock Exchange. It’s “a forum for investors and those interested in investing to share ideas on their perspectives on investing.” Many of us use Sundays as a day to prepare for the coming week. Head over to Invest In the Markets to see what others are thinking about the current investment environment.

Your comments or questions are always appreciated!

20 Cents from August 2011

Kim Petch — Thu, 08 Sep 2011 09:45:20 +0000

I’m quite late with my August collection of articles thanks to a busy couple of weeks moving. I’ll write more about our experiences next week. Thanks to those who wished us well and to those who continued to read/check in/comment at Balance Junkie during my extended absence. We’re still settling in, but I’ll try to get to all of the emails, comments and requests I’ve been neglecting as soon as possible. Thanks for your patience.

In the meantime, I didn’t think it would be fair to deprive you of some of the great reading I discovered in between long hours of packing and unpacking boxes. Consider this belated collection my little contribution to an extended summer that is notably lacking in the weather around here.

1. Jeffrey Sachs, Professor of Economics and Director of the Earth Institute at Columbia University wrote about The Economics of Happiness. He suggests we follow the lead of the Himalayan Kingdom of Bhutan in pursuing “gross national happiness” rather than gross national product: “The relentless pursuit of higher income is leading to unprecedented inequality and anxiety, rather than to greater happiness and life satisfaction.”

2. Jim Yih’s Retire Happy Blog asks How Much Money Will $100 000 Pay You In Retirement? As Jim wisely points out, there are many variables that could affect your individual situation including where your $100K is invested. But don’t let the seeming complexity of the question deter you from asking it. It’s one of the most important aspects of your retirement plan. You don’t have to get the amount of the return exactly right to make this exercise useful. Jim has lots of good advice on how to arrive at a reasonable estimate. Personally, I use a variety of the methods Jim talks about and I occasionally take a look at what various annuities are paying on $100 000 of invested money, bearing in mind that the returns when I retire may look very different.

3. Staying with the topic of retirement planning, Million Dollar Journey looked at the Top 5 Pension Myths. This article clears up some common misconceptions about pensions. I learned a lot about issues I hadn’t really considered before.

4. Boomer and Echo asked another great pension question: Should You Make RRSP Contributions If You Have a Pension?

5. Given yesterday’s Bank of Canada decision to hold rates steady and signal that they will remain low for some time, the 2011 – 2012 Canadian Interest Rate Predictions from Beating the Index may seem pretty logical. At the time the article was posted in early August, however, there were still some pundits warning of an inevitable rise in interest rates. Instead, Mich pointed out the weakening U.S. economy and employment picture as key reasons rates on both sides of the border are liable to remain low for at least the next couple of years. (We put our money where our mouth is on this as well by choosing a variable rate for our new mortgage.)

6. Financial Highway had an interesting article on how Absolute Return Bond Funds Shake Up Fixed Income Investing.

7. Rob Bennett, writing at Out of Your Rut, explains why Buy-and-Hold Is Either the Best Strategy of All Time or the Worst. Intriguing as always!

8. Rob Carrick, having written about personal finance for more than a decade, was still able to come up with a slide show depicting 20 Things I Don’t Understand about Personal Finance. It’s worth a look.

9. Preet Banerjee, another Globe and Mail columnist, offered some good advice for anyone who’s just starting out with personal finance or struggling to stick with it: Forget the Spreadsheet – Just Start Saving.

10. My Own Advisor explained why he drives an 11-year-old car. It may seem rather simple, but maintaining your possessions is an excellent savings strategy. Both of our current vehicles are about 5 years old now, so we’re starting to get the itch to replace one. Thanks to Mark for reminding me of all of the benefits of owning a vehicle that well-maintained – and paid off! (Bonus: You can now follow Mark on Twitter @myownadvisor.)

Well, it felt good to exercise these slightly flabby typing fingers. I hope you enjoyed these articles and I look forward to writing about some of the things I learned during our recent adventures in relocation. Your comments are always welcome.

20 Cents from July 2011

Kim Petch — Mon, 01 Aug 2011 09:45:46 +0000

Here come the Dog Days! It’s time to savour every last moment of summer. Unfortunately, our Dog Days will begin with another surgery for my son. Things aren’t quite going according to plan, so he needs a day surgery to (hopefully) fix that. At the same time, our move out of town is less than two weeks away. As a result, posts in August will be exceptionally sporadic as will email and comment responses. Thanks for your patience!

I’ve got a really nice mix of articles for you here from July. Enjoy!

1. Tony Schwartz presents Ten Principles to Live by in Fiercely Complex Times. There’s some great food for thought here.

2. Bret from Hope to Prosper reminds us that He Who Dies With the Most Toys Is Dead. There are some fine tips here on saving for the future without living like a pauper in the present.

3. Umair Haque wonders aloud Is “Finance” a Cult? He suggests that today’s financial industry “has little to nothing to do with (real) economics. Where economics is about creating authentic value, igniting positive sum games, discovering pathways to prosperity, finance is (or has become) about reshuffling yesterday’s value, extracting the lion’s share in zero sum games.” It’s a fascinating read.

4. According to an article on Business Insider, Shanghai Is Looking More And More Like Japan’s Great Bear Market. There’s an interesting chart there that compares the performance of China’s Shanghai index (from 2007 to present) to Japan’s Nikkei 225 (from 1989 to present). The inference is that China’s market may be embarking on an extended bear market, much like the one Japan has endured for over 20 years – and counting.

5. Frugal Trader over at Million Dollar Journey explains Why We Switched Our Cell Phone from Rogers to PC Mobile. We’ll be in the market for a couple of new cell phone plans soon. Truly, the options are dizzying. But this article offered some good ideas on what to watch.

6. Few Investors Enjoy a Lifetime Stock Return As High as the Average Stock Return. Rob Bennett reminds investors that buying and holding is not always a very effective investment strategy. We need to consider valuations when we buy or sell equities.

7. You Are Not an Equation. Well, that’s a relief. The Big Think made this seemingly obvious observation, taking it a step further to point out how our current reliance on mathematical models to predict just about everything – including human behaviour – can lead us astray: “In finance, people built models that use mathematics to describe markets and to describe people and the participants in the markets. And it becomes tempting for them to believe that the mathematics is a theory and forget that it’s actually an analogy [i.e. model] that only has limited extension.”

8. The ongoing debt crisis in Europe has raised more doubts about the utility of credit default swaps (CDS) as a hedging tool. The most recent deal involving Greece involved a partial default such that the CDS were not triggered. What good are CDS if they don’t pay off when the bonds they’re supposed to insure don’t pay out? The Wall Street Journal covered this in an article on what to do when A Hedging Tool Loses Its Edge. This is just another example of how our financial system has become a Ponzi scheme.

9. On his Retire Happy Blog Jim Yih asked What Rate of Return Should You Assume for Your Retirement Plan? Planning for retirement is not as easy as entering a certain rate of return in a retirement calculator and sitting back to watch that return materialize. Jim provides a good look at why that’s the case and some reasonable ideas on how to plan for a range of returns.

10. This last article is actually from May, but I just discovered it via Advisor Analyst. It offers 12 Common Causes and Proven Cures for Unhappiness – something to ponder during a quiet moment.

I hope you enjoyed this month’s reading. Feel free to comment on any of the articles below!

20 Cents from June 2011

Kim Petch — Fri, 01 Jul 2011 09:35:12 +0000

It’s been a busy couple of weeks as my son had a significant surgery on his leg last week. Caring for him afterwards has been a round-the-clock job. I hope to be able to jump back into writing a little more in the coming weeks, although we have our big move looming as well. I’ll do my best to keep up with my one post a week minimum and add in a few bonus articles when I can. In the meantime, I did manage to find some good thought-provoking articles from around the web this June. Enjoy!

1. In an article published in the Washington Post, Barry Ritholtz of The Big Picture blog shared 7 Life Lessons from the Very Wealthy. This one is well worth a few minutes of your time.

2. What If 8% Is Really 0%? This is the question posed in an article posted at Advisor Analyst. It reviews the thoughts of Mebane Faber on the realities faced (or not being faced) by large pension funds. They are underfunded even if they do achieve the 8% annual returns they need, which is highly unlikely. This is another great read.

3. Josh Brown of The Reformed Broker writes about Bloggers as the Conscience of Wall Street. As much as many of us (myself included) decry crony capitalism and unfair financial practices, there are many financial blogger/practitioners out there (Josh included) who do their best to give the rest of us a peek behind the curtain. I, for one, am very grateful that they take the time to do so.

4. Every so often I discover a blog that I wish I had found earlier. Frances Coppola writes about finance and many other topics out of the UK from the perspective of an ex-banker. Check out her post on The Hole in the Fence, and while you’re at it, explore some of the other great articles at Coppola Comment. This blog proves that you can miss out on some great writing if you get hung up on rankings that depend on mindless keywords and meritless link-counting rather than thoughtful commentary.

5. Thoughtful commentary doesn’t always have to be very wordy. Sometimes a picture really is worth a thousand words. Thanks to Joe Taxpayer for sharing a cartoon about our Sisyphean Economy. For those who are a little rusty on Greek Mythology, Sisyphus was the king who was punished by being compelled to roll a huge boulder up a hill only to watch it fall to the bottom again. He was condemned to repeat this pointless task for eternity. Hmmmm.

6. While we’re on the topic of insurmountable debt, you might want to take a look at Jim Yih’s post on How Much Debt Is Too Much? over at his Retire Happy Blog.

7. The Financial Post had an interesting article on Canada Missing Out on Commodity Boom. Apparently, our GDP doesn’t get the same boost when the bulk of commodity demand is coming out of emerging markets rather than the U.S.. Interesting.

8. Kevin from Invest It Wisely offered up 3 Reasons Why I Squirrel Away My Money. These are some great reasons to save and the cute picture of the squirrel is a bonus!

9. Sustainable Personal Finance shared some savings specifics on How Menu Planning Saves Time and Money. I can vouch for that!

10. Cullen Roche at Pragmatic Capitalism shared a video of Randall Wray talking about Why the Crisis Is Not Over. I would concur with his views about “how the banking crisis is far from over, why the bailouts solved nothing, why the US economy remains at great risk of another crisis and why no real economic change (and recovery) will likely occur until after another crisis occurs.”

I hope everyone is enjoying a wonderful Canada Day. For kicks, you might want to check out my post from last year on A Dozen Good Reasons to Move to Canada. Have a great weekend!

As always, your comments are welcome.