Archives for May 2013

Ugly Americans Book: Eight Rules of Carney

I’ve been falling behind on my book reviews. Here’s an older book I found that made for good airplane reading – Ugly Americans: The True Story of the Ivy League Cowboys Who Raided the Asian Markets for Millions by Ben Mezrich. The book is supposedly based on the true story of young, male hedge fund traders during the mid-1990s Asian stock market boom who take big risks, make big money, meet beautiful women, don’t care about ethics… and after all that testosterone there’s the usual bit of self-reflection at the end. A major part of the plot even managed to involve boring ole’ index funds! 🙂

One of the main characters was head trader Dean Carney, who had his “8 Rules of Carney”:

  1. Never get into something you can’t get out by the closing bell. Every trade you make, you’re looking for the exit point. Always keep your eye on the exit point.
  2. Don’t ever take anything at face value. Because face value is the biggest lie of any market. Nothing is ever priced at its true worth. The key is to figure out the real, intrinsic value — and get it for much, much less.
  3. On minute, you have your feet on the ground and you’re moving forward. The next minute, the ground is gone and you’re falling. The key is to never land. Keep it in the air as long as you f—ing can.
  4. You walk into a room with a grenade, and your best-case scenario is walking back out still holding that grenade. Your worst-case scenario is that the grenade explodes, blowing you into little bloody pieces. The moral of the story: don’t make bets with no upside.
  5. Don’t overthink. If it looks like a duck and quacks like a duck — it’s a duck.
  6. Fear is the greatest motivator. Motivation is what it takes to find profit.
  7. The first place to look for a solution is within the problem itself.
  8. The ends justify the means, but there’s only one end that really matters. Ending up on a beach with a bottle of champagne.

Mezrich also wrote about the MIT Blackjack team in the NYT Bestseller Bringing Down the House, which was recently made into the movie 21 with Kevin Spacey. If you enjoy financial thrillers, both these books are fun page-turners.

Sick Leave

I’ve been getting my butt kicked by a bout of food poisoning, so posting will be light this week. Fever, chills, sweats, and I haven’t been able to keep down any solid food in over 48 hours. Blech.

Don’t Squander The Power of Adaptation

Over the weekend I read all 73 posts of Arctic Dream, a blog written by the family who took a DIY sabbatical from their comfortable American life and spent a year living on a small Norwegian island in the Arctic Circle with only 180 residents. Besides quaint stories of smoking fish, there were some life lessons:

And that’s probably our biggest lesson from this year: people adapt very fast — much faster than they think. The new normal sets in and new routines established quickly.

They had no car. No cell phone. No TV. The village had no cafe, no Wal-mart/Target, not even fresh beef. But they were very happy. From the post Learning To Live With Less:

Humans have an amazing skill: the ability to adapt to a new environment without affecting our mental well being. Our ancestors honed this skill for millions of years before we emerged and became the most adaptable species ever to roam the earth. But too often, we forget that we have this skill, this genetic gift, and we squander it and make decisions in life as if we’d fall apart under adversity. And many of us sacrifice gravely in order to “maintain standard of living.”

My feeling is that humans can adapt very quickly, but they usually only find this out if they are forced to. Studies have found that those with permanent disabilities like being confined to a wheelchair are often quite happy. Conjoined twins tend to be happy the way they are. Adaptation also works both ways. People who earn more than $60,000 don’t get any happier.

However, if we are given the option, usually we’ll stay with the status quo. But think of how much more flexible your life would be if you were more confident of your ability to adapt. You could live in a smaller house, live in a new state, live in a new country! You could drive a used car, drive one less car, or have no car at all. It’d feel weird at first, but you’d adapt and still be happy. By spending less, you could build some F-you money. Instead of constantly fretting about losing the steady paycheck of your current so-so job, you can spend your time reaching for that next, better job.

I need to remind myself not to be afraid of positive change. I can adapt.

Best Sunscreens in 2013 – Consumer Reports

The problem with choosing between sunscreens is that they all claim to do everything. The July 2013 issue of Consumer Reports magazine again tested a variety of sunscreens against their claims. For example, one important thing that CR tested for was protection against both UVA and UVB rays. UVB causes sunburn, but UVA damages and ages skin on a deeper level. Some major brands are notably weaker in protecting the UVA part of the spectrum. New labeling and test requirements from the Food and Drug Administration have also added specific requirements before a sunscreen can claim “broad-spectrum protection” from UVA/UVB. Other factors like water-resistance were also tested, as there really is no such thing as “water proof” or “sweat proof”.

Consumer Reports used to say that anything above SPF 30 doesn’t get you much extra protection, but this year’s test results suggest that going up to SPF 40 can actually help. Above SPF 40, it will likely wear off before it makes any difference. Instead, reapply every 2 hours and after swimming or sweating.

2013 Consumer Reports Best Buys
Equate (Walmart) Ultra Protection Lotion (SPF 50, $0.47 per ounce)

2012 Consumer Reports Best Buys
No-Ad Lotion (SPF 45, $0.59 per ounce)
Walgreens Continuous Spray Sport (SPF 50, $1.30 per ounce)

2011 Consumer Reports Best Buys
The Target Up & Up spray (SPF 30, $1.16 per ounce)

The Consumer Reports test results haven’t always been consistent over the last few years. CR has noted that their testing on UVA/UVB effectiveness has varied from year-to-year with the exact same product, even though the manufacturers claim the formula hasn’t changed. A brand that had one of the highest tested SPF in 2012, tested last in 2013. In addition, I noted last year that the Target spray which was a 2011 Best Buy wasn’t even tested in the 2012 issue. It was included again in 2013, again taking the top score rated “Recommended” although it didn’t win the Best Buy rating due the higher per-ounce cost.

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Stefan Sagmeister: Things I Have Learned

Designer Stefan Sagmeister did another TEDtalk titled Happiness by design where the best part was when he shared the list below of “Things I have learned in my life so far” (which later became a book of typographic artwork).

  • Complaining is silly. Either act or forget.
  • Thinking life will be better in the future is stupid. I have to live now.
  • Being not truthful works against me.
  • Helping other people helps me.
  • Organizing a charity group is surprisingly easy.
  • Everything I do always comes back to me.
  • Drugs feel great in the beginning and become a drag later on.
  • Over time I get used to everything and start taking it for granted.
  • Money does not make me happy.
  • Traveling alone is helpful for a new perspective on life.
  • Assuming is stifling.
  • Keeping a diary supports my personal development.
  • Trying to look good limits my life.
  • Worrying solves nothing.
  • Material luxuries are best enjoyed in small doses.
  • Having guts always works out for me.

Non-Traditional Retirements, or DIY Sabbaticals

NPR Morning Edition featured a story today about non-traditional retirements: Seeing The (Northern) Light: A Temporary Arctic Retirement. Instead of waiting until 65, Winston Chen decided to stop working for an entire year mid-career and moved his family to a small Norwegian island in the Arctic Circle with only 180 residents.

The whole family got to do many things they’d never do otherwise. Financially, they offset their mortgage by renting out their Boston home completely as-is for a year to another family on a temporary work assignment. His wife Kristin was able to get a job teaching elementary school in Norway for a year, as it was a remote area that needed teachers. They could keep expenses low as the tiny village had no need for a car, no malls, and no restaurants. One of his pursuits ended up being an iPhone app that took off and now supports their entire family, although that wasn’t the goal.

The inspiration came from the TEDtalk “The power of time off” by designer Stefan Sagmeister. Here’s a screenshot (sorry for the poor quality) illustrating the traditional working timeline: learn for 25 years, work for 40 years, then retire for 25 years.

A commenter pointed out that this shows that our society seems to feel that education is for the young, work is for the middle-aged, and leisure is for the elderly. But what if you decided to snip 5 years from those retirement years and sprinkle them between your working years? This is essentially the idea of sabbaticals, usually associated with tenured professors taking a paid year off from their usual teaching and research duties. Every 7 years, Sagmeister completely shuts down his popular design shop for an entire year.

Both Sagmeister and Winston Chen add that if you do this, you shouldn’t just give yourself a year of nothing and expect to figure it out along the way. At the minimum, you should make a list of all the things that you want to try and/or accomplish (Chen’s included oil painting, photography, reading, learning Norwegian, and learning how to play the ukulele). Both broke it down into a daily schedule as well (Chen’s is below).

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Georgia Tech Online Master’s Degree in Computer Science: $7,000

gtomsThe Georgia Institute of Technology and are partnering together to offer an accredited master of science degree in computer science (press release). What makes it special is that this MSCS will be from a top-tier university, 100% online, and the full tuition cost for all coursework will be under $7,000. Georgia Tech believes that it can pull this off due to advances in technology and the resulting ability to maintain an instructor:student ratio of 1:100 rather than 1:10.

Anyone can take the courses online, but if you want the accredited degree and grades you’ll still need to gain admission into the program. As AT&T is funding the 2014 pilot program, it appears that most initial students will be from AT&T and other corporations affiliated with Georgia Tech, with enrollment hopefully ramping up in future years. Still, this is a big step in the evolution of online education, and especially good news for those looking to get further education but can’t afford to be a full-time on-campus student.

More news coverage: Forbes, WSJ

If this is successful, it’d be natural to wonder about a cheap, 100% online bachelor’s degree from a major public university (not some regionally accredited/for-profit diploma mill). I can’t help but keep recall this excerpt from Is College a Lousy Investment? by Megan McArdle:

In Academically Adrift, their recent study of undergraduate learning, Richard Arum and Josipa Roksa find that at least a third of students gain no measurable skills during their four years in college. For the remainder who do, the gains are usually minimal. For many students, college is less about providing an education than a credential—a certificate testifying that they are smart enough to get into college, conformist enough to go, and compliant enough to stay there for four years.

Will such online degrees maintain the same prestige just with a lower price tag, or will it just devalue the entire concept of having a degree even further? Or will an on-campus degree always be seen as better?

Charlie Munger on Teaching Character Values in Childhood

I just started reading a biography of Charles Munger, Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe, originally published in 2000.

Charles Munger is best known as Warren Buffett’s long-time friend, business partner, and vice-Chairman of Berkshire Hathaway. I find him fascinating on many levels – as a thinker, investor, philanthropist, and even philosopher. One of my favorite tips from him is to Work For Yourself An Hour Each Day, something I found in Warren Buffett’s biography The Snowball.

Here’s a memorable quote from the book dealing with his childhood:

Like Warren Buffett, Munger inherited no wealth. […]

“While no real money came down, my family gave me a good education and a marvelous example of how people should behave, and in the end that was more valuable than money,” explained Munger. “Being surrounded by the right values from the beginning is an immense treasure. Warren had that. It even has a financial advantage.”

Right now, there is a lot of focus on teaching “financial literacy” – which is good – but if you’re a parent of young children I feel that you have to think differently. It’s not critical to give your kid some fancy allowance iPhone app or online savings account to teach them how to manage money. What you should really be conscious of is how you act around them. Positive character traits like self-discipline, being dependable (keeping your promises), and frugality (not being wasteful) are often best taught by example. Watching you and learning such traits will help them to avoid credit card debt more than showing them how APR works. If only I could just buy them a book or something. 😉

Top 10 Frugal Fruits: Which Fruits Offer the Most Nutritional Value Per Dollar?

(Update: Doh! The original version of this post contained a basic mathematical error. I have corrected the rankings.)

When I wrote about What are the Cheapest Vegetables Per Pound?, reader Brady kindly pointed out the Aggregate Nutrient Density Index (ANDI) as a measure of relative nutritional value. Which got me to thinking, which vegetable or fruits provide the most nutrients per dollar? I decided to start with fruits first.

The ranking calculation is detailed below, but here are the top 15 fruits ranked by nutritional units per dollar:

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Calculating the ROI of a 4-Year College Degree

People tend to assume that getting a college education is a good financial investment. But a new Brookings report Should Everyone go to College? [pdf] finds that the actual value of a 4-year bachelor’s degree can vary dramatically depending on factors such as field of study, type of college, graduation rate, and future occupation. As usual, I’m just plucking out the charts that I like from the study. As you read all this, remember that correlation does not mean causation.

The more selective the school, the higher the return on investment (ROI) as calculated by Payscale. Here the annualized ROI seems to average around 10%, while other studies have found it closer to 16%. Public schools tend have a higher ROI than private schools (remember that ROI isn’t in absolute dollars). The bad schools are pretty bad, as Payscale found that 1 in 5 have a negative ROI over 30 years.

The lifetime earnings of a graduate also varies widely with the type of major and subsequent occupation:

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Affordable Care Act Summary for Self-Employed, Unemployed, and Early Retirees

Much of the discussion around The Patient Protection and Affordable Care Act (PPACA) aka Affordable Care Act aka Obamacare has been about politics. But it’s the law, it’s constitutional, and a lot of things are happening soon. For most full-time workers that wish to keep their employer-provided health insurance, little will change. However, things will be very different for the self-employed, unemployed, uninsured, and those seeking semi-retirement or retirement before age 65 and Medicare. You can use it even if you already have employer-provided insurance, although you may become ineligible for certain tax credits. There’s way too much information to cover everything, but here’s my summary of the developments.

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David Foster Wallace “This is Water” Commencement Speech

Graduation season is here again, making it the perfect time for The Glossary to create a short film out of a great commencement speech by the late writer David Foster Wallace. It has great application to life, and thus great application to those seeking financial freedom.

Consciousness. Conscious living. Conscious spending. All things that sound simple but are so hard to actually do on a daily basis.

The speech is abridged above, I enjoyed reading the full version.