Category: Christianity

Book Review: The Snowball, Epilogue

Book Review: The Snowball, Epilogue

Posted on by David Merkel

After I finished last night, I realized I had a few more things to say.? First I need to correct what I wrote in part two regarding the separation of Buffett and Susie.? Here’s some help from one of my readers:

I do have a bone to pick with your review of the Snowball, part two: in describing the Buffett’s separation and arrival of Astrid Menks, you have substituted your own judgment for that of Schroeder and Buffett, without making it clear that it is your own viewpoint.? I certainly understand your assessment of the marriage and perhaps your desire to defend Buffett, as he is someone you clearly respect (as do I).? But Buffett’s own view, expressed in the book that Susie’s leaving was “99% [his] fault”.? Schroeder also indicates that Buffett was quite difficult, and of course, he was totally driven, and in any case, not terribly emotionally supportive.

The ethical judgments that I made in parts two & four were mine.? They were not those of Alice Schroeder, Buffett, or anyone in Buffett’s family.? That said, because of the role I play in my church, I have had to counsel some people on marriage.? My results have been good, bad, and indifferent.? Usually I think that I have been called in on the late side, when hope is almost non-existent.? Better to call in a counselor on the early side.

I have known many men, and some women who I would call “pieces of work,” where they are very difficult to get along with.? I’ve seen cases where the spouses of such people succeed, and more where they failed.? In marriage, it takes two to make a failure, leaving aside adultery and desertion.

My opinion is this: if Susie could bear with it for 20 years, she could bear with it for 40 or more.? Buffett was maturing emotionally, and was better able to interact with others.? Susie missed the best years of Warren.

As it is, children are affected even if adults when parents separate; they become more prone to divorce.? Buffett’s children had their own marital problems.? It also doesn’t help when you didn’t get a lot of attention from your father when young.

On the Patience of Buffett

Buffett does not have to deploy capital; he does not have to grow.? He can live with a lot of cash on hand, earning zero.? He knows human nature.? As a group, we tend to panic every five years or so.? Buffett picks up a lot of bargains, whether by sector, or across the market as a whole.? He finds good companies that are out-of-favor, and he gives them a good home.? This is very different than how most people invest.

Buffett waits until he sees a return on book capital with reasonable certainty that exceeds his threshold, and then he buys aggressively.? He can do that because he has a balance sheet, and he has simple goals for return on capital.?? So long as he continues to be careful he never has to worry about insolvency — his balance sheet is conservative.

Final note on Religion

Because of who I am, I was interested in how Buffett’s and Susie’s parents viewed religion.? Buffett and Susie were a lot like my in-laws: raised in the church, but turned against God.? There was something in the era, as people sought bad interpretations of the Bible so that they could live their own way, and not God’s way.

Quibbles

Already expressed.? This is a great book if you are looking to read about the life of Buffett, rather than the aspects of Buffett’s investing that you can’t imitate.

Who would benefit from this book:? This book will not help you invest like Buffett, unless you are bright, and know all of the details that lay behind Buffett’s strategies.? This book is the best to help you know Buffett the man.? It is a great book.? If you want to, you can buy it here:The Snowball: Warren Buffett and the Business of Life.

Full disclosure: I borrowed it from the local library.

If you enter Amazon through my site, and you buy anything, I get a small commission.? This is my main source of blog revenue.? I prefer this to a ?tip jar? because I want you to get something you want, rather than merely giving me a tip.? Book reviews take time, particularly with the reading, which most book reviewers don?t do in full, and I typically do. (When I don?t, I mention that I scanned the book.? Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.? Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.? Whether you buy at Amazon directly or enter via my site, your prices don?t change.

If you Want to be Well-off in Life

If you Want to be Well-off in Life

Posted on by David Merkel

I write this because it should be obvious but is not.? I grew up in a house where my Dad earned an average income from his business, but my Mom took around 10% of the income and invested it half in utilities and half in growth stocks.? As my Mom said to me, “My utilities are my bonds.”

Bright lady; my first teacher in investing.? She beat the market for four decades plus.

But the main thing that she did right was to spend less than my Dad earned.? This is critical.? You can’t build capital unless you set assets aside.? This is the most important of the rules.? You must consume below your means, and invest the surplus wisely.? I remember many ways in which she said “no,” to a variety of expenditures.? We didn’t live below the appearances of our neighbors, but we were one of the last on the block to get a color TV.? Good thing, TV is such a waste of time — and I wasted a lot of time there when I was a kid.

The second main thing that she did right was take moderate risk.? Looking at her portfolio, one might ask, “Why so many utilities?”? Or comment, “A lot of boring GARP-y stocks.”? I contrast her with my paternal grandfather, who retired in 1966-7, and sold his business to his two sons, and then lived off the interest income from CDs, etc.? He took no risk in his retirement, though he took moderate risk as a businessman, and as a pool player.? (Rumor is he was Wisconsin state champ at some point… but I can’t prove that.? I played him a kid, and never won.? My Dad, who learned from him, I beat only once, and lost many times to him.)

An investor in CDs will get what he contracted for, absent default.? The investor who is like my Mom will have a more jagged trail, but will earn more.? Even in the late 70s and early 80s, my Mom did not lose confidence in her strategies, even as Grandpa earned 15%/year on his CDs.? Her time was yet to come.

My Mom would hold stocks for 10 years on average.? So long as you pick companies with a sustainable competitive advantage, you will generally do well over longer periods, should you have the fortitude to not trade frequently.

So, my third point is don’t be an aggressive trader.? Yes, have trading rules, but don’t try to make money in the short run.? Try to make money in the long run.

My fourth point would be “do it yourself” if you can.? (Yes, I know I run money for others.? I will say what I believe even if it costs me business.)? But that means you have to learn a lot, like my mom, or me, or my father-in-law, three people all mostly self-taught, with different investing philosophies.? Good investing is like running a business on the side.? It is not easy.

My fifth point is pay attention to taxes, but don’t let taxes dominate your decisions.? There’s a balance here, and for my clients, I try to generate taxable losses on net, while letting winners run.

My sixth point would be that income in investing is important, but not for the reason you might expect.? Income is important because it motivates reinvestment opportunities, not consumption opportunities.? When you are older this changes a little, but in many cases it is smarter to focus on total return, and consume from capital rather than have every stock try to produce income.? That said stocks that pay dividends tend to do better than those that don’t.? 28 of the 33 stocks in client portfolios (of which I am a client as well) at present pay dividends, and the portfolio as a whole has an above-market dividend.? Reinvesting income compounds your gains in new ideas that were hopefully more promising in the new environment.

The seventh point is study investing to the point where you have an intelligent strategy, and once you have that, don’t abandon it.? Too many people flit from one hot idea to another, but never end up with a coherent strategy that that employ for decades.? Even if I close down my investment business, I will keep applying the same investment strategy for myself, it has worked well for me, even if at present it has been middling for clients.

Every investment strategy goes through periods where it works poorly.? That’s life.? If you have a strategy that always works well, that means:

  • You haven’t run it long enough.
  • You’re not running enough money.
  • You’re not taking enough risk.

Survive through your bad times, and prosper during the times where your intelligent strategy is paying off.? Patience is a virtue in investing for the most part.

Okay, there are seven points from my experience, from my Mom, and from my late Father-in-law.? None of us trained to invest in a formal way, myself included.? (Yes, I received a CFA Charter, but I knew far more than the syllabus did before I took the exams.? The academic stuff I learned was not a help when I was in graduate school.)

An eighth point to consider is that money matters temporally.? Eternally, no, it doesn’t matter.? No one can buy Heaven, as Psalm 49 points out.? But you can use your wealth to aid those who are trying but failing.? That’s important.? As John Wesley put it, “Earn all you can, save all you can, give all you can.”? I am fairly certain that the first two were honored more than the last one, but Wesley was correct there.

In general, being willing to give also correlates with prosperity.? Doing well means more than becoming rich; it means living your life for the good of others.? We should not live for ourselves.? Money is merely a means; it is not an end in itself.? Use your money to the best end that you see.? Loan money to a poor but honest friend at no interest.? You will do something really good there, and God will bless you.? I have done that many times in my life, and it has paid off, though I can’t prove that empirically.

One more note, when you are a giver, you become more careful with your own spending.? You begin thinking more broadly about the world, and realize there is little advantage to most luxuries.? If you have enough, good.? Even Warren Buffett (No Christian he) likes his Burgers and his Coke.? He does not look to luxury in consumption, even as he owns jewelry stores.

He is a bit of a miser, but as he has aged, he has handed over most of his wealth to the Gates Foundation.

In closing, take care over your saving, investing and giving.? They are all important aspects of how those who are improving their financial well-being improve their lives.

Set it and Forget it

Set it and Forget it

Posted on by David Merkel

This post is directed at people who don’t get the markets.? People who think they they are experts can stop reading now.

I’m the Chairman of the Pension Board of the Reformed Presbyterian Church of North America.? Yes, that long-lived but small denomination that never went through the controversies of modernism, still teaching that Jesus Christ rules everything on earth NOW, and we exclusively sing the psalms of David without accompaniment in our worship.

Here is something that is no surprise: most pastors who are serious students of Scripture don’t get financial markets.? Truth, that is true of most people who know their technical crafts, but don’t get how financial markets work.

What I am about to say should work for most people who don’t get investing — choose a blend of risky and less-risky assets.? Ask your self this question: how much are you willing to lose in a year at worst as a percentage of assets? Take that amount and multiply it by 2.0-2.5.? That is the maximum amount that you should allocate to risky assets.? (Strangely, that mostly corresponds to the current margin rules.)

Average people can’t monitor the markets, and even if they did, they would not know what to do.? Far better that they “set it and forget it,” than that they panic when things are are going bad, or get greedy when things are running hot.

Thus we encourage the pastors to buy blended funds.? I encourage them to buy one notch down on their risk tolerances, because the return give-up is small, but the likelihood of them not panicking is large.

For those who are uninformed, that is important.? Buy-and-hold is a good strategy if maintained at a risk level that avoids panic.

Now. I’m not crazy about the market at present.? I would shade allocations to the 2.ox side of risk, not the 2.5x side.? But what we have found at the pension board of the RPCNA is that the pastors do best who choose a blended fund that they can stick with through tough times.

My own pastor is squeamish with investing, but I looked at what he “should” do in investing, and told him to dial it back one notch.? It has been to his benefit.? He has not panicked, and has made decent money over the last 10 years.

Thus to summarize: estimate your willingness to lose money over a year, and size your allocation to risky assets appropriately.

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Market Dynamics

 

  • On Paradigm Shifts http://t.co/h68quEDX Hunter takes us through mental exercises 2 make us intelligently contrarian. “Invert, Always Invert” May 02, 2012
  • Hedgers’ net short position vanishes in US oil http://t.co/X0hLOWGB Commercial interests do not fear lower prices, could be bullish 4 crude May 02, 2012
  • There’s Plenty of Money for Junk http://t.co/vXML0Bao Presently the credit cycle is virtuous; vicious part is coming, but no appt set $$ May 02, 2012
  • Bad Models Mistook Housing Bust for Dot-Com Bubble http://t.co/IxC8m2mk Busts of assets that are heavily levered harder than unlevered $$ May 02, 2012
  • Best U.S. Real Estate With Self-Storage http://t.co/mxyHdK2U Self storage a winner in the past, may not do so well in the future; hi vals May 02, 2012
  • Marginal oil production costs are heading towards $100/barrel http://t.co/G2zNB5JS Same as my reasoning on high crude prices $$ May 02, 2012
  • Four-percent rule a relic, advisers say http://t.co/PrdHQy48 Better rule: 10y Tsy yield plus 0% if bearish, 1% if neutral, 2% if bullish $$ May 01, 2012
  • The remarkable resurgence in synthetic credit tranches http://t.co/1iIZ8ous Increases in the notional amounts of several corp bond swaps May 01, 2012
  • Contra: Black Scholes & the formula of doom http://t.co/flVNsYMx Debt levels & Asset-Liab mismatch largest causes of crisis not BS model Apr 30, 2012
  • Energy’s Pain is Consumer Discretionary’s Gain http://t.co/lM7UW0T7 I have been on the wrong side of this trade. Sigh. $$ Apr 30, 2012
  • Notes from the DoubleLine Lunch with Jeffrey Gundlach, Spring 2012 http://t.co/KDiqA5Sp Gives a good overview, w/a large topping of snark $$ Apr 30, 2012

?

China

 

  • China’s Auditing Train Wreck http://t.co/UeIZtw06 Any Chinese firm listed in the US, the auditors should be subject to SEC scrutiny. $$ May 05, 2012
  • China bear Pettis says world coming around to his view http://t.co/lo1nGc7e Pettis isn’t a bear but a realist; invt-led growth overplayd $$ May 04, 2012
  • The Family and Corruption http://t.co/R4NwZ6od Family ties & group affiliation dominate economic/political power among Chinese Communists $$ May 04, 2012
  • Who is Fu? Chinese exile is ‘God’s double agent’ http://t.co/plyQhwtg Story of a Chinese Pastor in US & escape of Chen Guangcheng $$ May 02, 2012
  • Microblogs Survive Real-Name Rules?So Far http://t.co/5UItJjwj Even the CCP would have a hard time shutting down their Twitter-apps $$ May 02, 2012
  • Beijing?s secret: It?s not really loosening http://t.co/3RPhAOwH There is not enough demand in China 2 pay all of the high prices. $$ May 02, 2012
  • China’s Left Behind Children http://t.co/OL0gmSFE Economic growth that separates parents from children imposes significant costs on China $$ May 02, 2012
  • China Closes Unirule Website http://t.co/ItkW0p0A Founder receives award from Cato Institute; China government shuts down his website $$ May 02, 2012
  • China?s property boom has peaked, forever http://t.co/aLC2U8F8 Amount of deadweight in China property is so large that prices have peaked $$ Apr 29, 2012

 

Financial Services

 

  • Caution: Contents May Be Hot http://t.co/cp9yjbH3 I worry about ETF slippage from bad creation/redemption unit design & bad trading by users May 04, 2012
  • Well, That Was Awkward? http://t.co/zS5f6zAI Bank Chiefs’ Regulatory Concerns Met With Official Silence; maybe regulators getting fed up May 04, 2012
  • A talent shortage looms as the industry booms http://t.co/QGLZzzg7 Financial planners getting old/retiring faster than the Baby Boomers $$ May 04, 2012
  • 2nd attempt2 automate bond trading 1st failed RT @BloombergNews: Goldman preps trading system for corporate bonds | http://t.co/NceasmN7 May 04, 2012
  • Mortgage Rates in US for 30-Year Loans Fall to Record Low http://t.co/LPolAP5Q Mtge rates b nimble, MR b quick, MR go under limbo stick $$ May 04, 2012
  • Spending A Year On An M&A Bidding War Is Apparently Overrated http://t.co/tKguPYGy It’s well-known that scale acquirers underperform $$ May 04, 2012
  • Every liability has an asset, but not every asset has a liability. Some are owned outright. http://t.co/fB3ARju7 May 03, 2012
  • Canadians Dominate World?s 10 Strongest Banks http://t.co/qj6TOgA3 Ask again after their housing bubble pops, same 4 other fringe nations May 03, 2012
  • Pimco’s latest ETF shields against price spikes http://t.co/TmOrCIj2 I wonder if active ETFs will have more performance slippage. $$ May 02, 2012
  • Hedge Funds Hurt by Volatility http://t.co/ogoL62qT Hedge funds r vehicles that do better when credit spreads r tightening $$ May 01, 2012
  • Bond Market Is Creating A New Galaxy for Trading http://t.co/YgvNwz1j Dealer inventories thin; trading costs rise; electronic mkts start May 01, 2012
  • US banks still cutting commercial real estate exposure http://t.co/qsqIMRph Banks still rotating out @ an almost constant rate since 2009 $$ Apr 30, 2012
  • Largest U.S. Banks Resist Federal Reserve?s Credit Limits http://t.co/JndcrvWI Big banks need 2b broken up or shrunk; they don’t accept it Apr 29, 2012

 

US Fiscal/Regulatory Policy

 

  • CEOs rank Texas tops for business, California worst http://t.co/jWEIGP89 8th year in a row for this survey; high taxes/regs annoy CEOs $$ May 04, 2012
  • Exposing the Medicare Double Count http://t.co/HIVIx3lJ Same $$ being spent twice, must borrow the difference. May 02, 2012
  • Coburn: `We Ought to Totally Revamp Our Tax Code’ http://t.co/71WquMIf Very similar to my proposals; simplify code eliminate deductions $$ May 02, 2012
  • U.S. Considers Notes That Float http://t.co/jynXGcYG Intermediate-dated Tsy floaters would trade above par, neg yields like TIPS $$ May 01, 2012
  • Trying to Shed Student Debt http://t.co/0GmvckOn Lawmakers Rethink Bankruptcy-Law Ban on Walking Away From Education Loans $$ #slavery Apr 30, 2012
  • Can the US Economy Recover Without a Housing Recovery? http://t.co/Tqy4l8J3 It will probably have to try w/o housing’s assistance $$ Apr 30, 2012
  • Central Bank paper suggests house prices have ?over-corrected? http://t.co/KDrXCkzy Have Irish housing prices overshot? Tough 2 say. $$ Apr 30, 2012
  • http://t.co/KbnUO93s Treasury floaters could b issued @ premium 2 par 2 inflation speculators allowing the Tsy 2 finance @ negative rates Apr 30, 2012
  • U.S. Perfecting Formula for Budget Failure, Says Bowles http://t.co/vlLQzZ8q It’s nice 2b a part of a nation that is a global leader 😉 $$ Apr 30, 2012
  • Will TARP Make a Profit? That’s the Wrong Question http://t.co/MZBHaO51 Conflicting govt goals make policy hard 2 implement & interpret $$ Apr 30, 2012
  • You will buy more Govvies, or else http://t.co/DLrnyb9u Financial Repression, Quantitative Easing, Debt Monetization, Hyperinflation $$ Apr 30, 2012
  • On Student Loans, Accounting Gimmicks, Electric Cars, FX and a note on SS http://t.co/2BCB9nAi Hodgepodge of insight from @brucekrasting $$ Apr 30, 2012
  • ?The Treasury should be issuing 100 year or perpetual bonds until the market can?t stand it anymore to lock in these ? http://t.co/gXMUXW4C Apr 30, 2012
  • The floating YTMs will probably be negative, as interest rate speculators will pay more than par for the floating rat? http://t.co/OSmE7QuJ Apr 30, 2012

 

Eurozone

 

  • The euro crisis just got a whole lot worse http://t.co/XSqmQnGv Election of Hollande may lead2 Euozone policy paralysis; growth v austerity May 04, 2012
  • Making eurozonians, or not http://t.co/JmuO5OXC The Eurozone was never a natural place to set up a shared currency. $$ May 04, 2012
  • Madness in Spain Lingers as Ireland Chases Recovery http://t.co/BXdYSX5e Ireland may b rebounding, as Spain’s slump deepens #austerity $$ May 02, 2012
  • Why the New York Times?s Paul Krugman is clueless about the European economic crisis http://t.co/xMuzZXC7 Aside frm Ireland no austerity yet May 02, 2012
  • Core infection and eurozone PMIs http://t.co/xr97yPgD Core of the EZone sluggish @ a time when it can least afford it $$ #depressionary May 02, 2012
  • ECB Measures Pushing Domestic Bonds Into Domestic Banks, Planting Seeds for Euro Disintegration http://t.co/HAITJJnX Yeh, this da future $$ May 02, 2012
  • The rise in the Eurozone money supply has not improved credit conditions http://t.co/rYazqcuP Euro M3 diverges from bank loans $$ May 01, 2012
  • The ECB lending to periphery governments via “backdoor SMP” http://t.co/uQeG2QQK How to stuff the ECB full of Eurofringe debt, c/o LTRO $$ May 01, 2012

 

Rest of the World

 

  • Brazil: cutting at any cost? http://t.co/mh3vN1Te Pushes up asset & price inflation, as currency held down 2aid exporters; unsustainable $$ May 04, 2012
  • Turkey Credit Rating Outlook Cut by S&P on Worsening Trade http://t.co/pFDzEhZl Wide current account def & hi external financing needs $$ May 02, 2012
  • Once poster child of crisis, Iceland recovers http://t.co/Sgr2wTGl Letting banks fail & stiffing foreign creditors -> winning solution $$ May 02, 2012
  • Which emerging economies are at greatest risk of overheating? http://t.co/olHdiYRE A gauge from the Economist on which Em Mkts r2 hot $$ Apr 29, 2012

 

Company News

 

  • Buffett?s CTB Adds Chicken Eviscerators in Dutch Purchase http://t.co/K6Q3NGt2 Buffett’s firm is no chicken; it has a lot of guts! 😉 $$ May 04, 2012
  • Sorry, really sorry… May 04, 2012
  • Ackman Rejects Canadian Pacific Deal Ruling Out CEO Pick http://t.co/KYe970NJ Pick is former CEO of $CP rival $CNI – Bad blood; good CEO May 02, 2012
  • Impressive work Mr. Einhorn. The analyst that wrote up the question deserves praise; if you did that… http://t.co/tSTWxqBa May 01, 2012
  • Phillips 66 aims to run more shale oil http://t.co/tC7NBfLO LD: + $COP $PSX First day of trading for the new $PSX. Combo up 2%+ so far $$ May 01, 2012
  • Value investing does not mean cheap. It means margin of safety. Cemex does not have that. Look at the debt. $CX $$ http://t.co/ydklVkth May 01, 2012
  • Falcone Agrees To Step Aside http://t.co/bYgLxMMV “a final agreement may not be reached, and a bankruptcy filing was still possible” $$ Apr 30, 2012
  • Delta to buy US refinery for $150 million http://t.co/IsK9xsDu If zero is dumb & 100 is very dumb, this one scores in the 90s. $$ Apr 30, 2012
  • Discuss “At $1.7 billion, Nook is worth more than Barnes http://t.co/xOz6skwP Spin off Nook 2 create value $$ $BKS $AMZN #interneteatsbooks Apr 30, 2012
  • @ampressman Would it have been value-enhancing to $BKS 2 sell the whole Nook unit 2 $MSFT, in your opinion? $$ Apr 30, 2012

 

Statistical Analysis

 

  • trading-and-the-null-hypothesis http://t.co/QpYutOTb Problem:No academic journal wants2 publish studies with ‘no result’ as their conclusion May 04, 2012
  • . @thenumb47 Allows for too much of a specification search; would be good to require disclosure of everything tried but not published $$ May 03, 2012
  • Have to allow for accidents! RT @incakolanews: just scrub the word “validate” and I think you have a great idea May 03, 2012
  • Thus my proposal for economists: come up w/research idea: goes 2a database. Randomly assigned economist will analyze & trash/validate it $$ May 03, 2012
  • Unlike double-blind studies, raw statistical research allows health analysts to inject their own bias into the analysis, as economists do $$ May 03, 2012
  • Analytical Trend Troubles Scientists http://t.co/bzcAIpHG Health researchers using statistics like economists find ambiguous results $$ May 03, 2012

 

Miscellaneous

 

  • 14 Lessons From Benjamin Franklin About Getting What You Want In Life http://t.co/BWAjCz1l Advice from 1 of the wealthiest men of America $$ May 04, 2012
  • Is Wall Street Meeting God’s Expectations? http://t.co/5H5j2QGG Many Christians misuse the Bible; almost all non-Christians misuse it $$ May 03, 2012
  • What would Jesus trade? http://t.co/Dkrfwt9k Many Christians misuse the Bible; almost all non-Christians misuse it; another example $$ May 03, 2012
  • And in a more honest way than Google RT @SconsetCapital: Long good, short evil. May 03, 2012
  • Apparel-Swapping Millennials Eschew Stores and Malls http://t.co/B7jq2dcY “Is that a new outfit?” “Well, it’s new to me!” An odd trend $$ May 03, 2012
  • @TheStalwart Kasriel was different enough that he will be missed, kind of like the sound of one hand clapping $$ #littledoghasbuddhanature May 01, 2012
  • The record 4 tallest bldg s/b based on weighted average height; weighting based on cross-sectional area @ height http://t.co/03HNZ0BB $$ Apr 30, 2012
  • So if you have something thin at the top, it wouldn’t count 4 much. A rectangular parallpiped would get full credit 4 height $$ #usingmath Apr 30, 2012
  • That would work, simpler than mine $$ RT @Pollack7: @AlephBlog Meh.Highest continuous occupancy floor. Apr 30, 2012
  • As the smartest boss I ever had said “Make bets, but never bet the franchise.” http://t.co/qWdHX3BS Apr 30, 2012

 

Monetary Policy

 

  • Bernanke Charts New Mission For Fed: Financial Stability http://t.co/6RrWEQws Fed has a hard enuf time w/a double mandate, triple will b wrs May 02, 2012
  • Then again, if focusing on financial stability forces the Fed to be more restrained in its monetary policy, that would be good. $$ May 02, 2012
  • Bernanke: Be Humble! http://t.co/6icSHD1K The picture says it: http://t.co/OqOflqsI Humility in BB’s view: leaving monetary policy loose $$ May 01, 2012
  • My Speech Delivered at the New York Federal Reserve Bank http://t.co/DbAhOdQR An Austrian let loose amid the marble palace in NYC?! Wow. $$ Apr 29, 2012

 

US Politics

 

  • Renewed Hope that Jon Corzine, President Obama’s Top Tier Campaign Bundler, Will Face Criminal Charges http://t.co/wCLrXFve J. Tavakoli $$ May 01, 2012
  • Occupy Wall Street Plans Global Protests in Resurgence http://t.co/0FLjKfiJ #OWS won’t b effective until they organize as a 3rd party $$ + May 01, 2012
  • Or, organize to influence the Democrats the way the t-party does the Republicans. #OWS is irrelevant until then, b/c it doesn’t do anything May 01, 2012
  • Is that a bailout in your pocket? http://t.co/8xwW4Cbi Boyazny, panel’s populist, replied that the credit markets had become ?undemocratic? May 01, 2012
Life With Wife

Life With Wife

Posted on by David Merkel

My wife has only given me financial advice twice in my life.? She was totally right both times.? Now, she doesn’t have a financial bone in her body.? She was raised in a household where she never lacked anything, with non-materialistic parents where the father earned a lot as a nuclear physicist.? She was a princess,never having to worry, and married a prince, me, where she never had to worry.

As an aside, the father recently died, and he was quite a guy, but humble.? If you ever get therapy in a hospital that requires a cyclotron or any delivery device that allows positrons or any anti-particle to be used in surgery, my father-in-law was the brains behind it.? He was an amazing man, and though my wife is astounding, one benefit of marrying her was getting to know her father, who was an amazing man.? (Did I tell you he was amazing? 😉 )

Anyway, the first time my wife gave me investment advice was when I worked for the St. Paul.? My boss invited me to his officein early 2000, and handed me an envelope.? He said, “This is your bonus, invest it wisely.”? At that point in time, St. Paul was in the tank, and no one liked it much at all.? I took the wad, and put it all on The Saint Paul.? (My wife was amazed at the size of the bonus, but the bonus was given for keeping the company safe, not for making a ton.)

Eventually, it leaked out that I had invested so much in the parent company.? Members of my investment team told me I was a dope, and that the St. Paul was a lousy company to invest in. One told me, “No that’s not value investing, value investing requires a catalyst, and there is no catalyst here.”? (Note: catalysts do not always appear, and they can be expensive.)

Me, a value investor thought that buying a company at 55% of liquidation value, and a single digit multiple of forward earnings would do fine.? After one month, several P&C insurance CEOs announced that they were seeing pricing power, and the stock of the St. Paul rose 30%.? I could not sell, because I was constructively an insider, though I had no insider information.

After another 3 months, the cycle was in full swing, and the St. Paul’s common stock was up 80% from where I bought it.? At that point, my wife came to me and said, “You’ve been talking a lot about the St. Paul over the last few weeks, how important is it to our family?”? I told her, “It is half of our net worth.”? She said, echoing things she had heard me say previously, “Shouldn’t you take something off the table?”? I told her that I would.? I liquidated the whole position at my first opportunity, given my restrictions.? My gain was 95%, over six months.

As it was, after I did this, that many people at the St. Paul came to me saying, “You sly dog, you are a genius, but now we are doing it too; we are in this with you.”? I told them, “Aack, no.? Don’t do this.? You are buying? the top.”? And, wrong again, the price rose for a few more months, only to fall dramatically.

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A few years later, my wife said to me, “You keep talking about Wright Manufacturing, and how well it is doing, but how much do we own of the company?? I said, “You see our house?”

She said, “Of course.”

I said “Well, our holdings are worth a little more than our house.”

Beyond her ordinary ability, she asked, “Okay, David, but would you invest in this company to the degree that you have if it were publicly traded?”

I told her “No.”

She then asked, “then why don’t you take something off the table?”

I was cut to the heart, and I told her I would do so.? I sold half of my shares to the second largest shareholder.He told me that he would meet me at my office at Hovde.? After he got there he was amazed at me and said, “Wait, you are a smart guy, what am I missing here?”? I told him that I needed the money for the college educations of my children, so I needed more liquidity.

That mollified him, and allowed me to sell before the price cratered in 2008-9, as the company nearly failed.

But that’s another story, one where I bought amid distress, but not enough….

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I love my wife.? We just celebrated our silver (25th) anniversary.? She is wonderful in so many ways that I cannot describe here, and her children (and mine), biological and adopted would agree.

Though a princess, she absorbed enough of my ideas to counsel me at two particularly important turning points for the good of our home.? With the St. Paul, I probably would have done the right thing but with Wright Manufacturing, probably not.

So I praise her here for absorbing my wisdom, and applying it to me, when I could not do so myself.

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To bright people in finance I would say pay attention to those near you who don’t have your acumen, if they have been around you long enough.? They may give you cues that you could not ordinarily get, and it might just save your hide.

For me, this gives me an opportunity to praise the second most important person in my life, my wife, who typically has no impact on financial decisions, but at a few critical points did very well for me and the family.? She learned from me.

As for the one most important, that would be Jesus Christ, who many imagine they are honoring at this time of year, even though he never asked that his nativity be celebrated.? Just saying.

Book Review: Miles Away… Worlds Apart

Book Review: Miles Away… Worlds Apart

Posted on by David Merkel

This book is unusual.? Let me give you my quick view: this is a book written by an Orthodox Jew regarding an unscrupulous Jew who used his abilities to communicate to swindle others in a Ponzi scheme.? This is a surmise, because of all the ill-will toward Jews created after the scandal broke, the author tries to differentiate between one who is nominally/ethnically a Jew, and one who takes the ethical principles of Rabbinic Judaism seriously.

As such, this is really two books.? One on the author’s congregation, friends, and extended family, and the good things that they have done as Orthodox Jews, and a book on how the author concluded earlier than anyone else that Scott Rothstein was a fraud, and probably running a Ponzi scheme.? (Alternatives were money-laundering, drug transport, etc.)

I appreciate the logic that the author brings to the table in the book.? I myself have uncovered a variety of investment scams from life settlements, collateralized stock loans, Nigerian schemes, and penny stock promoters.? The author zeroed in on the lack of data to verify the cash flows, and the unlikelihood of so many cases being handled by one man, Scott Rothstein.

As an aside, always be wary when you meet someone that wants a lot of information, but is averse to sharing information.? Divide-and-control is an excellent way to gain power in an organization.? Fight it by connecting with others.

Once the author came to a firm conclusion that Scott Rothstein was dishonest, he faced the question of where to take the information.? Because Rothstein had used some of his clients’ money to buy favor with state and local officials, he decided to go to the FBI as the most competent interested federal organization.? After less than two months after talking to the FBI, the Scott Rothstein’s organization collapsed from a lack of cash flow, partly due to the efforts of the author to convince potential investors not to invest.

And now Scott Rothstein and more than a dozen of his associates are doing time in jail, because of a $1.4 billion Ponzi.? Not the hugest, but give the author credit, he kept it from becoming bigger.

One final note: the title of the book is delicious, because the author and the felon were miles away in distance, but worlds apart in what they valued.

Quibbles

There are a few misspellings, but nothing major.

I understand why he brings up the good deeds of Orthodox Jews, but to have it occupy so many pages of a book dealing with financial fraud will leave some cold.

Also, I disagree with the way Rabbinic Orthodox Judaism interprets the Law (Torah).? We are not to create a hedge around the Law, as the author states.? We cannot be holier than God.? To add to God’s Law is to take away from God’s Law and substitute Man’s Law in its place.? Far better to understand the Law the way Y’Shua Ha’Mushiach (commonly called Jesus) did, and understand that it applies to our hearts and actions, as best expressed by the Larger Catechism Questions 91-153.

Who would benefit from this book:

Most people would benefit from this book — it will make you aware of financial fraud on two levels: the way that the finances of a fraud don’t make sense, and the outward aspects of the life of one committing fraud.? If you end up more suspicious of those offering opportunities that are too good to be true, that will be worth more to you than the price of the book 100 times over.

If you want to, you can buy it here: Miles Away… Worlds Apart.

Full disclosure: I asked the author for this book, and he sent it to me.? I read and review ~80% of the books sent to me, but I never promise a review, or a? favorable review.

If you enter Amazon through my site, and you buy anything, I get a small commission.? This is my main source of blog revenue.? I prefer this to a ?tip jar? because I want you to get something you want, rather than merely giving me a tip.? Book reviews take time, particularly with the reading, which most book reviewers don?t do in full, and I typically do. (When I don?t, I mention that I scanned the book.? Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.? Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.? Whether you buy at Amazon directly or enter via my site, your prices don?t change.

On Harold Camping and the End of the World

On Harold Camping and the End of the World

Posted on by David Merkel

Longtime readers know that I am an Evangelical Christian, and worse yet, a Calvinist (or, Reformed).? I am even one of the leaders in my congregation, and I serve my denomination.? But if religion turns you off, or you hate Christianity for some reason, stop reading now, because this is an abnormal post at this blog — I try to limit posts like this to once or twice a year, so if you don’t like this sort of thing, hit the backspace key.? That said, you might learn a little about how some Christians think.

My goal here is to explain Harold Camping as I see him.? I probably would not write this, except that I have two bits of secondhand personal data about him, and there is little intelligent commentary in the general news media about him.

In 1988 I was a member of Covenant Reformed Church of Sacramento.? Excellent church, I recommend it to all near Sacramento.? Now, Calvinism is sparse across the US, but it is even more sparse in the West of the US.? Calvinism does not appeal to individualists.? So, if there is some sort of fracas in the Reformed churches in central California, well, word tends to get around.

I met a person who was in the last church that Harold Camping belonged to, which was in the Christian Reformed Church at that time, and he told me that Camping had been a Sunday School teacher for the adults at the church, and that the pastor eventually cut him off because what he was teaching was not Biblical.? And after that, Camping left, never to darken the doorsteps of the established church again, though for quite some time, he encouraged his hearers to go to Reformed churches.

After that, a minister from Georgia came to our congregation.? He had come to Sacramento in 1988, to minister to a group of followers of Camping in Sacramento (Camping had not at that time told his followers to leave the churches).? He told them during his candidating that he was not a follower of Camping, and he would not follow Camping’s interpretations of Scripture.? They called him anyway, and he came, with a wife and three children.? After he arrived, after a few months, they fired him.? What gored him was how the members would dismember his sermons saying, “What would Camping say about XYZ?”? Camping was their gold standard.

He went to visit Camping at a conference, and tried to ask him questions during a time of free questions, and Camping just ignored him.? No matter what he tried, Camping ignored him, so he told me.? To the degree that Camping gave answers, it was akin to a politician who does not answer a question, but answers a related question that he would like to answer.

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Harold Camping is a Evangelical Christian, in some sense of the term.? But he has a bevy of personal doctrines that differ widely from Evangelical Christian doctrines.? Most notable is that figurative and numerological interpretations of Scripture are valid.? Most Evangelicals believe that the Bible should be interpreted like any other document.

  • Understand the literary genre being used.
  • Interpret books, then chapters, then paragraphs, then phrases.? Don’t ask, “What does this phrase mean?” until you understand the book, chapter and paragraph, in that order.
  • Look for the plain meaning of the text, unless there are reasons from the genre to do otherwise.

Those who look for figurative and numerological meanings everywhere, like Camping, are trying to escape the plain meaning.? The plain meaning is powerful enough, so why would Camping build up a following telling nonsense stories?

Evangelicals who are not Calvinists have a hard time understanding the Old Testament, and Camping makes their life easy by flattening it into “easy-to-understand” narrative that resembles salvation in a simple sense.? For many, a simple interpretation is better than a correct one.

But beyond that his idea that the Church age has been over since over since 1994 is just sour grapes over his prior prediction of 1994 failing.? Like Ellen White in 1844, he makes something up to say he was really right, but you just didn’t see it.

But his his idea that the Church age is finished stems from his past rejection by pastors of the church.? His teachings are aberrant in many ways, not the least of which is that one can name the date of the return of Christ.? All those who have tried to suggest a date for Christ’s return in their lifetime have erred.? Many have had sins they were trying to hide.

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Camping has a big media platform.? I don’t.? If I could have drowned him out, I would have done it.? He disgraces Christianity by his commentary, and by encourages those who dislike Christianity to jeer when May 22nd arrives.

But when there is no Rapture on May 21st, will Camping repent?? In 1996, two fellows who upset South Korea on similar terms repented on national television.? If Camping does not repent, it will do great harm to the cause of his Savior that he claims to represent.

Luther was once asked if he were planning to plant? a tree the next day, and he then learned that Jesus was returning tomorrow, what would he do?? He said that he would plant that tree to the glory of God.

And so it goes… Luther is very common-sense, as is Calvin.? Harold Camping is not common-sense — you must rely on his unique interpretations of the Scriptures, which he uniquely developed.

God does not work through “lone wolves.”? In the Bible, he revealed through 44+ men, over 2000 years, who agreed. Any religion that relies on one writer is false.? I leave it to you to fill in the blanks there.

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But after all of the media furor, I have to say there are few among Evangelical Christians who believe what Camping says.? That group is very small; the only reason it gets the press that it does is that Camping has his fleet of radio stations.

Thus, aside from damage to the church and individual believers who have believed Camping (a small number), I see little effect from all the furor.? In June,? few will remember this.

Thanksgiving Thoughts

Thanksgiving Thoughts

Posted on by David Merkel

My main reason for blogging is not to develop a business, make political points, or earn money off of book reviews, advertising, or anything else, but to give something back.? I have a gift of sorts, which means that I should do some “pro bono” work for the good of all.

My work is an expression of me, with all of my idiosyncracies, biases, contrarian views, and as my wife would say, “Merk Quirks.”? I love my wife.? We just celebrated our 24th anniversary.? She doesn’t understand much about money and finance, but she supports me in all that I do — as I support her in our efforts in homeschooling our children.? She works as hard as I do; we both work 12-16 hours/day, 6 days per week, and we love it.

What I write here is an expression of who I am, and how I interpret the world.? My experience has shown me that so far I do better than most at anticipating future problems.? That said, I usually can’t get timing or severity right.? But if I make things easier for people to understand, I consider that a victory.

I am healthy, but I don’t know how long I will live.? True for most of us.? While I have the chance, I try to write articles that will have longer validity than most.? I view my role as not telling you what to do, but trying to teach you how to think, so that you will do better.? I don’t want to die without recording what I think are my best thoughts.? I think I have done most of that, but there is more to do before I am done.

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With that, I want to comment briefly on Thanksgiving.? To me, it is more than family around a meal, though I cooked an excellent spread for my family and in-laws.

The next time I visit my in-laws house, I need to get the title of a book that I read there, which purports that the Pilgrims worked exceptionally hard to pay off their debts to the merchant adventurers who funded them.? The Pilgrims were idealists who risked life and limb for religious liberty.? I have no Pilgrim blood in me, but my kids have ~10% of their ancestry there through their Mom.

How hard did the Pilgrims work?? Consider this piece from my friend Caroline Baum, which she publishes annually, with small changes each year.? The Pilgrims, who suffered huge losses in their first year, would not have survived as a colony if they had not privatized agriculture.? Once they did that, they had plenty to eat and to trade for other goods.

Caroline comments, “Their good fortune had little to do with God.”? I would disagree. The Bible commends personal property rights and diligent labor through the eighth commandment.? Obedience to what God commanded brought blessing.

But to take another angle on this, the Pilgrims had quite a debt to pay off, and their agents in London did not negotiate well for them.? It took them ~20 years to pay off the merchant adventurers, who earned a return of ~40%/year off of the idealists who could not do the math, but who did love God.

Considering how well the merchant adventurers did, I would still say the Pilgrims were the victors.? They flourished in their faith, and having more wealth would not have brought them much in the new world.

Bradford, on the other hand, was not as pleased by the end of his life.? In a pattern that would repeat in US history, by the end of his life, Plymouth was almost deserted, because the descendants of the settlers had moved further west, seeking earthly prosperity.? Did they put the ideals of the original Pilgrims first?? No.

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In my own life, I could have earned a lot more money had I sacrificed my family and church.? There are tradeoffs in this life, and often the better things get sacrificed for monetary goals.? But to what end?

As for me, I am grateful for my family, my congregation, my church, my nation, and all the blessings that come from God to support them.? May God bless you, my readers, richly as well.

Time to Grow Up

Time to Grow Up

Posted on by David Merkel

This is a post about economics, but it will probably sound more political than most.? Part of being mature is learning to live within boundaries.? No, not everything is possible.? Immature people like Bush II, Obama, JFK, and FDR tell us that we can have our cake and eat it too.? It is not an uncommon positions for assume, particularly when they can use a particularly large cohort of workers as a tool to sap revenue from, while not retaining the funds for retirement benefits.

That said, I can look at the past and be a critic.? That’s easy, there have been real jerks that have milked our society, and retained a good name, though they robbed the future to pay the past.? It is criminal what municipal politicians have done, hiding behind high assumed investment assumptions, supported by brain-dead consultants who assumed markets are magic, and always provide high returns.

But there are enough targets in the present.? The evil party, the Democrats, ignore the long run effects of their deficits, and ignore the entitlements crisis that will engulf the nation.? The stupid party, the Republicans, rolled over for the idiocies of Bush II, and ignored the long term effects of debts and entitlements.

But there is a new force of anger, the t-party.? And that is about all they have, is anger.? They want their taxes reduced, but don’t want large entitlement programs reduced, or defense.? They represent small-minded libertarianism.? I am an economic libertarian, but I recognize that my views mean real pain for many in the short run, though I think those policies will be best for all in the long run.

There was a real loss in our nation when we abandoned the idea that national budgets needed to be balanced.? It brings out the worst in politicians when they think money is free, and they can engage in the basest demagoguery with no cost.? As it is today, we would probably be better off electing our politicians via random selection.

I have no sympathy for the t-party.? If you only have economic interests, and aren’t willing to take stands on broader ethical questions, you do not deserve to be our rulers.? Government is ethical as a rule, and the most important questions are what behaviors we encourage and discourage in our society.

I have a further concerns.? Leaders should not be merely facile rhetoricians, but should be genuinely mature.? I cringe listening to the t-party endorsed politicians, because they aren’t mature enough to rule.? If you can’t control what you say, and how you say it, you don’t have enough control over yourself to be one who promotes order in society.

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I wrote the above three weeks ago and sat on it.? After writing it, I said to myself, “This is not one of your better works, are you going to say that?”? After review, I am saying this with full conviction.? Most t-party candidates are not ready for prime time.

Take Sarah Palin as an example. Sarah Palin is a bad joke.? If she is such a good Evangelical Christian woman, why is she not at home taking care of her young children, particularly the one with Down Syndrome.? Or, why was she occupied with Alaska politics at a time when she should have been there for her daughter Bristol, who was about to make some very bad decisions.

Feminism has no place in Christianity.? Men are to lead, not women.? Go home, Sarah.? Homeschool your children, if you can. I would not say this to a woman outside the Church, but since you claim to be one of the disciples of Christ, I say it to you.

I say this as a leader in the Church, ordained by the elders of my presbytery, in a Bible-believing church.? There is no good that comes from neglecting your own home to address the problems of the nation.? Sarah Palin is no Deborah.? Deborah was wise, and Sarah Palin is not.

I fear God more than I care about the political direction of this country.? As the Apostle Paul said, “Shall we do evil, that good may come?”? Paul spoke rhetorically, saying that we should do what is right, regardless of the results.? There is no good that comes from trying to save society, when our own house is not in order.

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I could talk about the other t-party candidates and their idiocies.? Time would fail me.? I am in favor of a brainy libertarianism and Biblical morality, rather than a brain-dead libertarianism, and appeals to general morality.

The most pressing and immediate economic problem is this: we are facing a funding crisis for all of the promises made by governments and corporations regarding retiree employee benefits.? Every day I see more articles about the pain municipalities are going through over funding pensions, with occasional pension strengthening from corporations.

The sins of past governments, making promises that could not easily be fulfilled, or, at least fairly funded in the short run, are coming home to roost.? Funding issues for all levels of government are rising.? It doesn’t matter if you have met the budget this year, however you have done it.? Next year will be worse, because the assets will not throw off enough income to satisfy the liabilities over the intermediate-term, across the whole nation.

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We go to the polls in the US today, but no one dares talk about the funding crisis.? They talk of tax cuts or protecting benefits, while at the same time the economic decay continues, where debt grows, and ability to repay it declines.

It is a sad state of affairs, and indeed, I despair over it.? I love my nation, though I do not support its wars or its economic foolishness.? Unlike what Reagan said, America is not the last best hope of man on Earth, rather it is the God-man Jesus Christ, to whom we must all eventually answer.

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If I have a fault economically, it is that I look to the long-term.? For me, it is Heaven, though on Earth it is what will happen to my great-grandchildren and beyond.? Our policies are slanted to the present, and will force those who are younger to pay far more than they ought to pay, because they will be carrying the profligacy of the Baby Boomers.

No party is seriously looking at the future funding crisis.? There are little hints among the municipalities that are the worst running into problems now.? Those problems will only grow, and spread.? The problems in the unfunded Federal plans will be a plague in their time.

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This is an unusual post for me, prompted partly by the elections, because I don’t think anyone from an economic standpoint is addressing the real problems that we are facing.? Mere politics prevails for now, with fine-sounding but empty words telling the electorate that they will be restored to prosperity.

There are bigger forces in play here.? Consider my old piece, Rethinking Comparable Worth; as it stands, less skilled labor in the US should see wage declines as the rest of the world becomes more competitive.? Unskilled labor is not scarce. Skilled labor is somewhat scarce. Good ideas are scarce.? Real capital is scarce, but financial capital is not scarce.? Commodities vary in scarcity.

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I see this as a time for the US to “grow up,” and see that there are no easy solutions, but that it will take shared sacrifice to preserve our nation.? Taxes will have to rise while benefits are cut.? Keynesians will scream, but the average person in the US will see it as fair, because they know that everything must be paid for; there is no free lunch.

Where the Rubber Meets the Road at Home

Where the Rubber Meets the Road at Home

Posted on by David Merkel

Dear David,

Quick question in case you find yourself with time to spare on your blog (ha!! ) :
You have a large family. What do you teach your children?? How do you prepare them using the economic back drop? What are the hopes, the fears that a parent has for their youngsters ?

It is the real-life application that so often is skipped over in financial blogs.? Maybe that’s as it should be – not every reader might find it of interest.? But isn’t that where the rubber meets the road?

So, I’ll send this off and maybe one of these days, the question ties in with something you were going to write.

Thanks a lot for your insights.

Regards,

A.S.

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As the snow starts to fall, and Baltimore is in the eye of the storm (18-24 inches of snow predicted), I think it is a good time to sit back and think about the bigger things of life.? I’ll be spending all day tomorrow with my family.? Now, that’s normally true.? I work from home, and my wife and I homeschool.? We have two graduates, one drop-out (a sad tale, and what made me start working from home to protect my family until we told him he had to leave), an eleventh grader, ninth grader, two sixth graders, and a second grader.? Five of the eight are adopted, and are African-American to varying degrees.? All of them have very different ability levels, and different levels of being willing to work hard.? The one that left was bright, but lazy, and that was part of his undoing.

I’m not a natural parent, but I have learned to control my temper better as the years have gone by.? I never realized how much I like things quiet until I had a lot of kids. ;)? My wife and I work as a team.? She does most of the teaching, and I do most of the discipline, but each of us does both.? My wife is bright, but I can still do Algebra 2 through Calculus.? I pick up the slack there.

My kids do get some economic training from me in a variety of ways:

1) Informally at dinner, I explain what is going on in the world.? The eleventh grader gets a lot of it, while the college students can’t be bothered.? The ninth grader and sixth graders get a decent amount of it.? But it is precious when one of the kids comes and says “Dad, can you explain to me what happened during the Great Depression?”? That said, it was even more precious when I tried to explain what I did as a corporate bond manager to my kids seven years ago (100 phone call per day), and the then eight-year-old said, “It’s like ordering pizza all day, right?”

2) There is the “Bank of Dad.”? This is not original to me, but I tell the children that they can deposit their money with me, and I will pay them 5% interest (annual equivalent yield).? Oh, and to get started, they must amass $100.? That is psychologically important, because it is a barrier to getting into an exclusive club.? The rate has been 5% for the last 10 years — the rate is subsidized to encourage children to save.

My children are not all natural savers.? Half are and half aren’t.? The ability to earn interest makes them all more inclined to save.? What we try to put forth to those that are not natural savers is to spend less than all that they earn, and save the rest.? If all Americans did that our economy would be much better off.

3) Work hard.? That applies to schoolwork and chores.? Basic chores get no pay but there is an allowance if those normal chores are done.??? Then there are other tasks that are available for pay, and those have varied over the years:

  • Cutting the yard.
  • Yard work.
  • Analyzing documents, and shredding the useless ones.
  • Sorting financial documents.
  • Shredding documents.
  • Checking derivative confirms.
  • Entering ABS cashflows for delivery to Bloomberg.
  • Entering industry rank data into spreadsheets.
  • Washing/waxing the cars.
  • Fixing the cheap Ikea furniture around the home.
  • Killing crickets and other vermin in the home.
  • Teaching math, or other subjects to younger children.
  • And more… if their schooling is done, neighbors often employ them for tasks, because the children are very reliable.

4) I spend time regularly explaining to my children what careers are in demand, and which are not.? I also explain the basic ideas of how companies make money, or not.? Then they follow what is happening in my career, with the media appearances, talks and other things that go on with me.? In any case, I try to explain to them to be practical, which is not generally taught in the schools.? Yes, do what you love, but don’t be dumb… no one will pay for useless bits of knowledge, and there are few teachers needed in such areas.

5) I do drop in on the homeschooling to provide greater background on history, economics, theology, and science.? I see my wife smile as I give greater depth to topics as I motivate them.

6) We have dinner together every night, and the discussion helps the children grasp on to what is going on in the world, as does subscribing to The Economist, and The Wall Street Journal.? I have subscribed to both for the last 20+ years.

7) Hopes and fears?? Ugh.? My third child made my life a mess.? I loved him so, but he gained a bunch of evil friends and turned against us.? But that is just one child.? My goal is not to create clones of me, but to create people who can be productive in the world, and faithful to Jesus Christ.

I have fears that the future won’t be as good for my children as it was for me, but I also know that my children are better prepared than most.? I can’t control the external macroeconomy; even my predictions are only a vague help.? My goal is to turn out children that are better prepared than most, and willing to work.? Beyond that, I pray to Jesus, but that is the best that anyone can do.

In the end I know that my efforts are valuable but not determinative.? I can’t make anything happen.? I can only teach my children, and trust in God for the rest.

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