Carnival of Wealth, Big Game Edition

February 3, 2014

 

Or as it's unofficially known, the Super Bowl of Hunting

Or as it’s unofficially known, the Super Bowl of Hunting

 

Hope you enjoyed the Big Game. (God, that was awful. We’re better than that. Are we? Probably not.) Without further ado (or as people who want to sound smart and end up failing like to say, “Without further adieu,”) onto the Carnival:

(First post rejected because it came from 2011tax.org, the same people behind last week’s 2008tax.org. They’re getting closer.)

First real post is from the magnificent Rob Aeschbach, a/k/a The Military Financial Planner. Rob served in the United States Marine Corps, and laments that his fellow servicemen and women aren’t that good with money. We can’t imagine that they’re worse than the civilians we’ve met, but we’ll defer to Rob. He doesn’t submit every week, but when he does it’s a treat. His candor and bluntness are something we need more of.

It’s safe to say that erstwhile Army officer Jason at Hull Financial Planning is not part of Rob’s sample. If Jason isn’t our best week-in/week-out submitter, he’s in the top 3. This week, Part I of a 2-parter on the placebo effect and how it pertains to (irrational) financial decisions. Psychological benefits are only beneficial if they work. Too often, people in financial trouble prefer the taste of a sugar pill without checking to see if it’s laced with bromotrifluoromethane.

We don’t have favorite posts; they’re like our children, ranging from good and conscientious to failing and inconsistent, but we love them all anyway. That being said, our favorite type of post is the one that indeed reads as though it was written by a child. Take it away, Chris at Easy Extra Dollar. (Folks, read this excerpt aloud for full effect):

Running a business is not that an easy task. You have to think carefully that you will be handling a big responsibility though it is not that a big business. You waited for how many years to earn money and with that; you have to make sure that you will be spending your money in a sure and 100% assurance to earn more and will add an additional extra income.

What the hell? Chris’s About page says he has an MBA. We’d joke about what clown college gave it to him, but Manti Te’o went to Notre Dame and was named an academic All-American.

If we put Chris’s post side-by-side with Pauline’s at Reach Financial Independence, and asked you to guess which was the native English speaker, you’d get it wrong. We only wish Mademoiselle Paquin had been born in the United States so she could run for President. While hundreds of thousands of American (and European) students love to complain about their financial situations, Pauline embraced hers. She bought assets and sold liabilities, or did the student equivalent of same, living in humble conditions while she was young enough to prudently do so. She took one retail job after another to pay her way through school, didn’t take on any debt, and today is a Central American real estate tycoon while barely past the age of 30.

I find it hard to see value in a $150,000 degree.

If only everyone else did.

We wish we could run the comments that DQYDJ.net‘s operator appends to his weekly submissions, but they aren’t for public consumption. This week, Cameron Daniels announced his deleverage plans. He’s the rare cat who did take on student debt yet doesn’t regret it. He also has a financial defense for that absence of regret. Cameron wants to pay off his debts as slowly as possible, which we can neither unequivocally agree nor disagree with until we know what the interest rates are. But we’re leaning toward “agree”.

(Another post from Easy Extra Dollar’s Chris, this one on a different site. Sorry, you don’t roast someone twice in one night.)

Harry Campbell at Your PF Pro shares details of his upcoming honeymoon, as the Carnival of Wealth temporarily becomes Woman’s Day magazine. Alright, that’s only partially fair. He’s redeeming credit card points to visit Rome, Athens and Constantinople (it’ll re-Christianize one day, just you wait.) Good advice, but dammit Harry, you’ve got to get a bigger font.

A favorite urban legend from the 1990s was “The major tobacco companies have already bought vast swaths of marijuana fields in anticipation of its legalization.” Well, now look who’s laughing. While assessing the investment potential of several marijuana and ancillary stocks, Andrew at 101 Centavos crammed in not only plenty of worthwhile data, but every conceivable cannabis-related pun. Worth it just for the photo of Great Weed Pharmaceuticals’ quality control supervisor. Also, in classic Andrew fashion he forced us to reexamine our own viewpoint, in particular our Objectivist credentials:

Libertarian-minded types like to prattle on about the savings in the state resources and expenditures currently employed in enforcement and prosecution of drug offenses.  They would not be required if pot were legalized.  Sure, law enforcement officers’ time would be freed up to give the rest of us more speeding tickets.

In our own particular version of Galt’s Gulch, police would concentrate less on ticketing speeders and more on keeping slow drivers out of the passing lane.

This last one makes no sense, but his spelling and grammar are impeccable. From newcomer Dave at The New York Budget, a rationalization of living in The Worst City in America. This post attempts to draw parallels between different beers and aspects of personal finance. Dave keeps the specious blogger commandment to end off each post with a question, which is supposed to inspire people to leave comments. We’ve never seen a concluding query quite like this one:

What types of beers (or alcohol in general) remind you of personal finance?

Umm…Everclear and Dave Ramsey’s debt snowball? Because they’re both transparent ploys to destroy you? Sorry, we’re new at this.

Check us out on Investopedia and the Stacking Benjamins podcast. Adiós.

Filed Under: Carnivals Tagged With:

Poverty, Perpetuated

January 31, 2014

 

"Before the Speaker calls each session of the House to order, this coin-silver inkstand is placed on the rostrum. The inkstand is considered the oldest surviving artifact of the House and was made between 1810 and 1820. Although its origins are mysterious, it most likely came into the House around 1819. The inkstand is stamped with the mark of J. Leonard, a Washington silversmith and watchmaker. It contains three replacement crystal inkwells and is adorned on both sides by swags and eagles. The feet of the tray take the form of fasces with snakes winding around them, classical symbols of unity and wisdom, respectively."

“Before the Speaker calls each session of the House to order, this coin-silver inkstand is placed on the rostrum. The inkstand is considered the oldest surviving artifact of the House and was made between 1810 and 1820. Although its origins are mysterious, it most likely came into the House around 1819. The inkstand is stamped with the mark of J. Leonard, a Washington silversmith and watchmaker. It contains three replacement crystal inkwells and is adorned on both sides by swags and eagles. The feet of the tray take the form of fasces with snakes winding around them, classical symbols of unity and wisdom, respectively.”

 

Among the pointless ceremonial activities that the federal government undertakes, State of the Union addresses are about the most egregious. We can do this by numbers:

  1. President says a few platitudes
  2. His party applauds
  3. The other party doesn’t
  4. If the Speaker of the House is of a different party, he has the toughest job of all. Seated behind the President, the Speaker has to show slight indignation at the party-line tripe being spewed mere feet in front of him, but not such effrontery that he becomes the focus of attention. Thus, the introduction of a prop, the inkstand, to distract viewers from his facial gesticulations.

The whole speech was platitude upon platitude, as if a) you were expecting anything else, 2) the President’s speechwriters were capable of writing anything else, iii) the public is going to sit through an hour, 5 minutes and 7 seconds of anything that requires conscious thought. Fortunately for us, committed to providing you with new blog posts 3 times a week, the President delivered a personal finance aside:

[T]omorrow I will direct the Treasury to create a new way for working Americans to start their own retirement savings: MyRA. It’s a new savings bond that encourages folks to build a nest egg. MyRA guarantees a decent return with no risk of losing what you put in.

First, the MyRA is an account, not a “savings bond.” A savings bond can be a component of an account, but we never went to Occidental College. The MyRA is a glorified way of offering government debt and guaranteeing the slightest of returns to the investors who are most in need of growth, rather than wealth preservation.

The MyRA is a Roth IRA (you pay taxes when you contribute, not years later when you withdraw, making it the inverse of a traditional IRA) with a twist. The twist is that the MyRA consists of nothing but short-term T-Bonds. (Check out the 10-year T-Bond rate, 3rd column from the right, and see how many of the annual yield numbers beat 3%.) T-Bonds are a fantastic, safe investment if safety is your primary goal. Safety sounds good to the greenhorn, as it conjures up images of an impregnable front door, an ADT dispatcher on call 24/7, stepping on home plate triumphantly, or being wrapped in the clutches of a large masculine loved one. But if you haven’t got a retirement plan yet, and you want to spend your golden years doing something other than staying in an assisted living facility and hoping that tonight’s dinner entrée will be easy to chew, loading up on T-Bonds isn’t going to get you there.

You know who buys T-Bonds? Institutional investors, looking to move money out of one investment and into another. You know which individuals buy T-Bonds? No one. The returns suck. We defy a single reader to show us proof that they own more than $1000 in T-Bonds.

Wednesday night, the President conveniently neglected to mention the continuing rise of the deficit. A greater negative national balance means the Treasury needs to issue more debt, i.e. T-Bonds. But how to attract more investors to buy those T-Bonds? The Treasury could always increase the interest rates, but our biggest creditors – China, Japan and the UK – are already saturated with U.S. government debt. Or, the White House and its fiscal policy arm, the non-autonomous Treasury Department, could aggressively encourage employers to offer MyRAs.

Opportunity costs. You can’t spend (or save) the same dollar twice. Every one directed toward a MyRA is one fewer dollar invested in the stock market. Good, those greedy corporate Wall Street pigs already have enough of our money. Oh wait, stock returns have consistently outpaced bond returns over the length of the typical investor’s career? Never mind, then

Even worse, MyRA contributions will not be indexed to inflation. That’s what TIPS, Treasury Inflation-Protected Securities, a different kind of Treasury issuance, are for. Subtract the inflation rate – even the official inflation rate, which shaves a point or two off the real rate – and you’ll find that the MyRA doesn’t do a thing to help disenfranchised working Americans save for retirement. And again, should you want a MyRA, you’ll pay the taxes on these contributions up front.

Getting MyRAs to work – i.e., the government getting sufficient interest in them from investors – necessitates the invention of not merely a straw man, but a straw group. That’d be the poor working people, simple folk just trying to put bread on the table, but prohibited from doing so because…what’s a good, believable reason? How about “Their employers don’t offer 401(k)s”? Boom, this is easy.

The returns on the MyRA are not only minimal, and possibly negative even without factoring in taxes, the absolute last people they’re designed for are the “working families” whom the government continues to simultaneously lionize and condescend to.

If you make modest money, and your employer doesn’t offer a 401(k), open your own IRA. Do it at Vanguard, TD AmeriTrade, whatever. And for God’s sake, don’t invest it in T-Bonds. Also, pay off your consumer debt first.

Last night, a poster at Free Republic joked that given “that the market is run by absolute idiots,” the only tangible benefit the MyRA will make will be to increase the stock price of over-the-counter issue Myriad Entertainment & Resorts (symbol: MYRA). First publicly traded 17 years ago, Myriad plans to someday open a casino in Tunica, Mississippi, a/k/a the Redneck Riviera. Sure enough, after not breaking past 1¢ a penny for years, yesterday morning MYRA rose to 10¢ in an hour, more than doubling its previous all-time high.

Filed Under: Bad Examples Tagged With:
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