User:Vtaylor/Financial responsibility

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2010 Q3

  • Economic Depressions: Their Cause and Cure recession - insufficient private spending > government to increase its own spending, preferably through deficits > nation's aggregate spending stream. budget cuts or harder money is "bad"
    ...critical problem because they do not bother to square their business cycle and general price theories: the peculiar breakdown of the entrepreneurial function at times of economic crisis and depression. In the market economy, one of the most vital functions of the businessman is to be an "entrepreneur," a man who invests in productive methods, who buys equipment and hires labor to produce something which he is not sure will reap him any return. In short, the entrepreneurial function is the function of forecasting the uncertain future.


play it safe strategy: capital preservation, hedge funds that hedge, income emphasis

economy: deflation (jobs, wages, deficit, credit), stocks: short (overpriced, expect to decline), bonds: long government (flight to safety, rates remain low or lower), real estate: wait (overpriced but declining)

  • Fed promise to keep rate low > deflation, investors are pricing stocks nearly 40 percent above long-term valuation levels (using normalized earnings)


development - point of view, sources, advisers, guidance, ideas, analysis, strategy

  • fiscal conservative, moderately risk averse, regular review
  • long-term strategy, scenarios, market indicators, independent assessment
  • how do you know... - indicators - leading, trailing
  • ideas, advice, suggestions - resources, blogs, newsletters - category, quality, timeliness / time sensitivity
  • reality check - evaluation criteria, interpretation - media, consumer publications


work in progress

  • inflation, deflation, interest rates > asset allocation Q3 2010 - long bonds, short equities
  • low interest rates, high unemployment, government support (welfare, unemployment benefits, government jobs, bailouts, mortgages), military spending, trade deficit, stock valuation / returns, bond yields


Indicators

  • Federal Reserve Bank of Cleveland Median CPI
  • S&P return
  • ECRI Weekly Leading Index - Husman 8/15/2010 - up slightly to a -9.3%
  • ISM Purchasing Managers Index - Hussman 8/15/2010 - in the low 40's by October or November
  • Employment Economic News Releases Numbers in thousands - Civilian noninstitutional population / Civilian labor force / Participation rate
    July 2010 ... 237,890 . 153,560 . 64.6
  • real estate - cost of ownership compared with rent - time to consider buying when rent is realatively more expensive


Information sources

  • Dave says... - not just cash - corporate and government bonds, some equities, some gold, guestimates for end of 2010 - Dow, 10 year
  • fiscally responsible government bonds - examples


Profile quiz

project - find/develop a multiple choice quiz to determine financial literacy style preferences - similar to True Colors or Merrill-Reed but for personal money management

  1. current knowledge level - beginner, need help, somewhat knowledgeable,
  2. analytical - budget, close tracking, systematic
  3. big picture - need context
  4. show me - process
  5. so what - why, possible outcomes
  6. need facts
  7. authority, sources


Learning activities

color / temperament Green/ Driver Orange/ Expressive Blue/ Amiable Gold/ Analytical
learning style CS Concrete Sequential
systematic
- Organized, stable, productive, perfectionist 		CR Concrete Random
instinctual
- Curious, hands-on, impulsive, impatient 		AR Abstract Random
absorption
- Spontaneous, adaptable, social, perceptive 		AS Abstract Sequential
research
- Precise, conceptual, visionary, opinionated
focus objectives, measurements
learning activities row 2, cell 2 row 2, cell 3

http://www.floatingneutrinos.com/Message/arcs/links_on_abstractrandom.htm#Following%20tables

  • financial literacy learning activities to match preferences


Resources


Discovery

The economy is a mess already, but it will likely get worse before things get better. Acquiring basic financial survival skills for money management. It is important and interesting to learn something new every day. Keeping a record may save having to relearn them in the future.

  • overall trends - asset class indicators based on ETFs
  • retirement - Roth IRA, taxation
  • financial service certification
  • industries, stocks
  • basics - Prechter, one economic rule with variations, Austrian economics, behavioral investing / finance, James Montier - The Little Book of Behavioral Investing
  • BLS inflation calculator


Credit Counseling and Debtor Education

  • [ CRR and CIC Certification]

Credit Counseling and Debtor Education http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre41.shtm

Only the counselors and educators that appear on the U.S. Trustee Program’s lists can advertise that they are, indeed, approved to provide the required counseling and debtor education

nationally certified credit counselor. Certification is provided by the Association for Financial Counseling and Planning Education (AFCPE).

member of the Association of Independent Consumer Credit Counseling Agencies (AICCCA), a national membership organization established to promote quality and consistent delivery of credit counseling services.

Rio Salado College in Phoenix.

Family Economics & Financial Education (FEFE) program

University of Arizona’s Norton School of Family and Consumer Sciences through the Take Charge America Institute for Consumer Financial Education and Research (TCAI)

Consumer Credit Counseling Services 2140 Shattuck Ave., Ste 1208 Berkley, CA 94704 866-702-4175


Asset classes

  • DBO GCC GGX GLD JNK QQQQ SPY TBT UDN - all trending up = recovery, inflation, all down = deflation, recession or worse - following 50 day moving average
  • Oil, Gold, 10yr Treasury, EUR/USD


Financial discovery

commentary / guidance

  • Marc Farber - commodity stocks no longer attractive, buy currencies of Canada, Australia and Singapore, avoid bonds, buy gold $750-$800 ..7apr09
  • John Taylor of Stanford
  • Don Coxe - commodity fund


Financial literacy

financial literacy - general information, personal wealth management, retirement, taxes, other people

  • risk and return - risk assessment, conservative income, asset safety, bonds, income trusts
  • depression, saving, investment
  • boomer retirement - cashflow, walk-to, working
  • what would happen if the governments, G20 summits, etc. stopped throwing trillions of dollars at these problems?
  • prepare for recession - cash, income protection, multiple sources, more...
  • BOTW (best of the web) personal finance blogs - good list, test drive several

2009.04.03 - looking for other blogs with sound advice, good point of view followup


Absolutely essential

  • accepting personal responsibility
  • money to cover at least 8 months living expenses - mortgage or rent, health insurance, transportation, food, any other essential expenses
  • work toward eliminating credit card debit, not increasing debit
  • contributions to retirement saving - free money if there is employer matching
  • money for retirement or other spending within 5 years should be in safe cash or equivalents - not in the stock market


People

  • Joseph Stiglitz (who characterized the Treasury policy last week as “robbery of the American people”) --jh
  • Paul Krugman (who called it "a plan to rearrange the deck chairs and hope that that keeps us from hitting the iceberg") --jh


Need to know

  • money management basics
  • time management to ensure that there is time for money management
  • where you stand with your money - exercise with sample form from Suze Orman - Retirement Planning
  • cashflow - money in, money out
  • financial planning
  • sources of information - finding, analyzing, following


Understand

  • stagflation
  • the difference between the economy and the stock market
  • stocks, bonds, other financial instruments
  • commodities, metals, energy
  • interest rate fluctuations
  • saving and investing vs spending and consuming
  • how to save and what to expect
  • likely global economic trends
  • how to survive and thrive in the next 10 years


Take action

  • protect current assets
  • plan for the future
  • manage risk

Special situations

  • not the primary money handler in the family - spouse takes care of money
  • responsible for finances of others - elderly parents, non-relatives
  • financial advisers - fee for service, commissions


Research and Analysis

  • saving - who does, why
  • advice and advisers - good ones and how to know
  • bonds - conservative and safe?
  • risk assessment
  • cashflow
  • economic indicators - leading, trailing
  • debt society, moral bankruptcy
  • boomer lifestyle - retirement, working, walk-to living, end of money


Learn more...

  • government agencies
  • financial companies
  • non-profit, public interest groups
  • education
  • consumer groups
  • books, magazines
  • online communities
  • social learning
  • non formal learning

News and information

  • The Economist
  • monthly reports - US economic indicators - inflation, consumer confidence, purchasing managers, ADP jobs private sector jobs, conference board
  • indicies - volatility, money supply
  • indicators - foreign exchange rates, gold, silver, oil, natural gas, shipping rates


Government agencies

  • The Federal Trade Commission (FTC), the nation’s consumer protection agency, created this website to help you tackle some money issues head-on - FTC Money Matters scams,credit cards, managing your money, dealing with debit, your home, jobs


Consumer groups

  • National Consumer Law Center
  • Institute of Consumer Financial Education (ICFE)


DISCLAIMER: Observations, article selections, comments and opinions are general in nature, are not meant as specific investment advice, and do not necessarily represent the opinion of anyone but the authors. Individuals should consult with their own advisers for specific investment advice. In the interests of full disclosure, the blog Financial Reality is written by a significant other.


Behavioral economics

  • behavioral finance - risk tolerance, compure
  • Austrian school, Mises
  • Robert Prechter
  • Greg Mankiw's Blog: Behavioral Economics Jun 28, 2006 ... Without doubt, the next hot research topic after new growth theory, at least here in Cambridge, has been behavioral economics, ... http:// gregmankiw.blogspot.com/2006/.../behavioral-economics.html
  • Behavioral Economics: Unifying Psychology and Economics 17 March 2008, Lecture: Behavioral Economics: Comm Mistakes in Daily Decisions presented by Professor Dan Ariely at London School of Economics and Political ... http://behavioraleconomics.blogspot.com/
  • Nudge blog ... more behavioral problems in school and scored lower on standardized tests. ... Julie Power, a Nudge blog reader with 7-year-old twins, knows that boys ... http://nudges.wordpress.com/
  • Behavioral Economics: At Odds with Freedom - Mises Economics Blog He presents a very well written and easy-to-understand account of behavioral economics; in doing so, he illustrates, contrary to his intention, ... http://blog.mises.org/archives/009427.asp
  • BECG theblog daithí mac sithigh's blog on cyberlaw....and then some! Listics Frank Paynter's latest and greatest ..... My Website. Behavioral Economics Consulting Group ... http://www.becgllc.com/

Searches related to: behavioral economics blogdaniel kahneman behavioral economics nudge behavioral economics behavioral economics financial crisis obama behavioral economics behavioral economics phd behavioral economics harvard behavioral economics mit journal behavioral economics

  • Behavioral Economics: At Odds with Freedom - The person who values certainty does not judge solely by estimates of probabilities: he has added something, the high value he places on certainty, to the equation. The fact that he would make contradictory judgments if he were to decide only on probability judgments has no force. What Ubel offers as a contradiction is nothing more than a version of the familiar Allais paradox, a major challenge to the Savage approach. ... In like fashion, people who view the same probability distributions differently when they face a loss from when they face prospective gain do not commit any mistake in reasoning in so doing.


Taxation who - federal, state, local; what - income, gas, property, dining, purchases

  • differences - CA/FL/VA/WA Canada BC/ON Europe UK/NL

State statistics - tax revenues, budget, poverty, federal


Free market

a free market is NOT without laws - that would be anarchy. The role of government is to protect me from you and vice versa, but not in protecting people from themselves. The government should be involved in:

  • Determining what potential commercial behaviors qualify as anti-competitive, and create/enforce legislation that makes those behaviors illegal.
  • Defining what qualifies as a "limited resource", and creating legislation that either stops a singular entity from controlling those resources, or gives the State legal recourse to act should such a situation come to pass.
  • Ensuring honesty-in-commerce.

Also - opposed to corporate taxes. Anyone who believes that the consumer doesn't pay the bill has no comprehension of business.


Strategies

  • What are your real priorities? Is it time to downsize your budget? What are your own hurdles in money management? How much is enough? Could you have fun and live a financially responsible life at the same time?
  • Investment vs speculation vs gambling
  • Trading - position - Jesse Livermore 20/20/20/40
  • Risk - safety
  • Exit - down 10%, take profit
  • indicators - log scale plot - GDP, consumer debt, mortgages, stimulus package, manufacturing, agriculture, imports, trade deficit


Retirement accounts

  • IRA, Roth, RRSP
  • withdrawal - rules, tax
  • strategy by account type


Advice and resources

  • economic indicators - index of leading economic indicators - composition - interest rate spreads, S&P 500 Index
  • news and information
  • guidelines
  • people
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