Wednesday, July 28, 2010

Back to the mean

Today, on the Big Picture blog Barry Ritholz posted the graphic shown below (click to enlarge). I'm a big fan of Robert Shiller and when he speaks I listen. The projection isn't his, however, it is derived from the perceived trend of the chart. Talk about reversion to the mean! This prediction would necessitate another drop in housing prices of 25%! I'm glad I am not in the housing market at all (renting) let alone one of those unlucky millions of Americans who were unwitting buyers in 2005/06. Those people are so deep underwater they can't help from drowning when it comes to their loan-to-value ratio.

Don't give in to the - Terror

I've been posting a lot of comics lately, but I subscribe to even more. Trust me. I only pass on those fit for print. If this one doesn't make you laugh, I don't know what will. (click on the comic to see a clearer picture)

This one is from Ryan North of Dinosaur Comics fame. His stuff is consistently a hit for me.

Tuesday, July 27, 2010

A very disappointing day indeed

Yesterday the results from the June 2010 CFA Levels 1 and 2 exams became available. Story from Bloomberg here. This year, instead of being required to log in to the website (which crashed for hours last year) they email blasted everyone their scores. 42% of level 1 and 39% of level 2 of applicants passed this year, down from 46% and 41%, respectively, last year.

I was one of the 58% level 1 candidates who were unsuccessful last year. Almost exactly this time last summer I sat on the edge of my seat, along with thousands of others, facing my computer while anxiously mashing F5 over and over again causing the site to crash but hoping that others would get frustrated and quit and then the problem would resolve itself so I could see my results. I mean my achievement. But when the smoke cleared the outcome was, to put it mildly, suboptimal. I was in the top band of unsuccessful exam participants which means I was in the top 10% of failures. Hooray!

No not hooray. I was understandably upset. Other than my D in microeconomics 101, it was the first thing that I had ever attempted and actually failed at. When I texted my girlfriend, she was empathetic with my situation because she had been denied acceptance to medical school in her first application cycle (though accepted on the second try). That day, she rode the metro down to my office building to bring me a homemade lunch packed with my favorite foods. It was very nice. That helped to turn my day around.

That's not to say that it filled the hole - the deep, gaping hole of failure. I really didn't begin to feel better until I read a post on the results by the professor who ran the now defunct blog, Financial Rounds. It lists a number of reasons a non-pass (the nicer pejorative of fail) shouldn't be cause for alarm, including: incredibly smart people populate both sides of the dividing line, studying the same material again will indelibly lead you to have a better foundation to begin the next level, there is no significant difference between becoming a CFA charterholder at 28 or 28 and a half, and the best but yet incredibly dismissive reason: nobody will care but you. Thanks for those words, Joey DeVivre.

In the end, I resolved that I wouldn't resign to being labelled a failure by the CFA Institute. I said "I will rise again!" (queue the overly dramatic) And I stick by that aim. I will eventually retake the CFA, but for now I am taking the CAIA level 1 in September as a baby step towards learning the investment management industry while also credentialing up.

Daddy, what's the birds and the bees?

I hope this is exactly how it goes when I explain the birds and the bees to my hypothetical son.

Cyanide and Happiness, a daily webcomic
Cyanide & Happiness @

Monday, July 26, 2010

Dilbert on achieving retirement goals

I was combing back through my RSS feed on posts I starred when I came across this great Dilbert strip. You know, I think people on Wall Street also use that expression in reference to money.

Friday, July 23, 2010

Born Anew

Last week I finished Wooden: A Lifetime of Observations On and Off the Court and now I feel like a new man. It wasn't just some coach recounting on his greatest triumphs, although there was plenty of that which is to be expected because it is the source of Wooden's authority. This book stimulated, challenged, and motivated me to change my status quo. Regarding this book, I've written one email to my mom and two to my dad. I fully plan to buy one for every member of my family at Christmas to share its tenets.

Wooden's book was earth-shakingly good. I've started to incorporate his philosophy into my everyday life, things such as:

"True success can be attained only through self-satisfaction in knowing that you did everything within the limits of your ability to become the very best that you are capable of becoming. Therefore, in the final analysis only the individual himself can correctly determine his success. You may be able to fool others, but you can never truly deceive yourself, except, perhaps, for a short time."

“Motivation must come from the belief that ultimate success lies in giving your personal best.”

“Don’t try to be better than somebody else, but never cease trying to be the best you can be.”

I've decided that I am going to incorporate this concept of success into everything I do from now on. Up until this point I believe I have just cruised on the intellect that I was lucky enough to win in the biological lottery and the bare minimum work allowable to advance at what I deemed to be an acceptable level. Tragically, yesterday I realized the worst phrase I've ever learned was - "I didn't study." When offered to my peers, it suggested that I could have done better while sheltering me from realizing the limit to my potential. My fear of failure was great. But after reading Wooden I realize that I was really failing all along. By not maximizing myself I wasn't attaining life-satisfying success. No more.

I am studying for the GMAT in order to get into a PhD program in finance. Previously I would have done as I always did, i.e. not study, and coasted to an average to slightly above average result. Screw that. On the day I registered (two days ago) I bought the Official Guide that came with an 800-question bank and the Princeton Review book. I received the books 11 hours after I ordered them - wow Amazon, kudos, seriously - and I began studying last night. I read six chapters out of the Princeton Review and did the first 40 math questions out of the official guide (38 right - but they start easy and progress in difficulty).

When I was finished studying, I pushed the book away and smiled. For the first time in my life I realized I am putting myself out there, exposing myself to the possibility of failure. The end result could fall short of my goal when you account for the increased level of effort. But Coach Wooden prepared me for that possibility already with this perfect gem of a quote - “You never fail if you know in your heart that you did the best of which you are capable.” I know I'm going to live a much fuller life going forward and it's all because of Coach Wooden and his inspirational words of wisdom.

Friday, July 16, 2010

Being an economist in the real world

As this gentleman is demonstrating, just trying to get by without flipping out on everyone all the time for their inaccurate and outlandish statements can be difficult for an economist. This is from one of my favorite comics - Saturday Morning Breakfast.

Thursday, July 15, 2010

Energy subsidies

The burning question is: why is there any value of subsidies, direct or indirect, in the lower left quadrant?

If Congress's job is (I don't personally believe this, but I do believe a majority of the electorate does) to influence the population's behavior through the tax and subsidy systems, then why hasn't a very untenable political state been rectified? What I mean is - there is no politician in his right mind who stands up in committee and says, "damnit we need to increase oil consumption - lower the taxes, increase the subsidies. This is IMPORTANT." I think it really speaks volumes for the immutability of policies once they are established.
Hat tip to the Big Picture.

Tuesday, July 13, 2010

I passed the test

I did it. I passed the test, the test of personal character. A few weeks ago my girlfriend and I were going to pick up dog food at our local Target in the mall. When we arrived, we overheard there was a Telemundo (Latin television) festival outside and decided to check it out. We’re young which means we never carry cash so we had to stop by a Bank of America ATM in the mall on our way outside. A lady was just finishing her transaction when we arrived. When she left we approached the machine and that’s when I noticed that she hadn’t closed out by pushing “exit,” or whatever else the command is called.

This is where my test was created - do I: a.) push “another transaction” and steal her money, potentially wiping out her entire balance or b.) push exit for her and go about my own business? I mean she was the idiot who doesn’t know how to bank properly, right? Without hesitation I did the right thing – I hit exit and put my own card in the machine to withdraw $20 from my own account.

I’m very pleased to look back on that instant because it confirms to me that I have a good character and I won’t steal from ladies in the mall even if their pocketbooks are open to me and no one is watching. If you don’t know who you are until you are pressed to act on your morals and values, then I am very glad to know that I’m not a thief-who-steals-from-women-who-don’t-know-how-to-bank-properly, or as it is more generally known, thief.

Monday, July 12, 2010

Are you happy? infograph

I love this infograph for its simplicity and its message. This chart is definitely a candidate to be printed, framed, and placed in an office (or in my case, cube).
Hat tip to The Reformed Broker.

Tuesday, July 6, 2010

Dilbert on investing

Thursday, July 1, 2010

Types of Libertarians

Hat tip to Barry Ritholz.