BA

* Because I'm 35 now, I'm in a different age category in Networth IQ. I only have one word here: Ouch.

* What does risk-adjusted return look like and how do active fund managers fare against their respective indexes?

Morningstar has an answer (PDF).

Bottom line, it seems that only 37% of active fund managers out-perform the respective indexes on a risk-adjusted basis.

Related to this, I've added the link to Moody's explanation of the Sharpe and Treynor's ratio, along with Jensen's Alpha in my list of links. Here's a break-down of Fama-French's Three Factor model on market returns.

All short but interesting reads.

* Not really news, but remember how a while back, I underestimated the amount I should have for emergency fund? Since then, I've been focusing my savings on that, and the scary part is, I'm still working on it. Yikes! In fact, chances are good that I'll be spending most of my 2010 still doing that. Double yikes!

* Maybe you've heard of this, but I just heard a great quote on budgeting:

"Budgeting is deciding beforehand how to spend your money, instead of wondering after the fact where it all went."

So, I have a bunch of free toothbrushes that an insurance vendor was giving away at work. I think I have a year's supply on hand. My co-workers were joking if I have enough of them, but the vendor had a lot of them and didn't mind giving them out, so... I didn't mind taking them.

So somebody wanted to see the email I sent to my dad. Well, here it is:

Hi dad. How are you? I am fine and so are the kids. I don't know what to talk about, but I still look at the stock market. Maybe I shouldn't, because I think something bad may happen soon.

The economy is sick, and the government added a lot of money to fight it, like trying to cause a fever to fight off an illness. Of course, if the fever is too high, that's dangerous too. People are getting scared now because it may be too high.

So, the government has to stop sooner or later, and the market will probably fall some. Nothing bad like last year though. But, I decided to sell some stock today anyways.

Please take care.

He's a doctor, and hence, my patient analogy. Also, I way over-simplified the situation, but that's the point of the exercise.

Stock market talk.

So, my dad is trying out this internet technology and he had me email him. And since I'm so pre-occupied with trying to figure out the stock market, I suppose it was inevitable that I would try to email him about it.

My dad's a smart man and he also holds individual stocks, but his primary interest isn't so much as stock trading or even investing, but rather, he just wants to retire. Can't blame the guy.

But between his interest being largely casual and our language barrier, I found myself trying to explain my stock market thoughts in very simple terms so that he can understand it.

And then, something funny happened along the way. By having my words be held personally accountable to my dad, and being forced to use simple terms, I suddenly found myself... I don't quite know how to articulate this....

Well, most of the time, I'm just lost for words. Anything that is too complicated or is highly speculative, I had to throw it straight out the window. The rest had to make sense in such a way that any reasonable person on the street can understand it.

In other words, my theses had to be simple, clear, and convincing. And I tell you, there wasn't a whole lot to say when I was done.

But just the exercise helped me so much to clear my own thoughts that I began writing additional emails to him, just for my own sake.

This is an amazing technique! I think I'm going to keep doing this exercise from now on, even if I don't actually email him some of these, because like I said, a lot of the theses simply fell apart, and I don't want to send him those.

So... thanks dad!

So Wachovia sent me this letter saying they're doing a $50 promotion (they still have the $25 referral one as well). I looked it over, read it again, and called a customer rep to double check. Yep, the offer looks good! So, after work today, I rushed over to the nearest branch to set it up.

I had a wonderful conversation with a service manager who opened the account for me. Originally, I was just going to sign up for the checking account, but they also have the Way2Save savings program.

Rep: $1 will be placed in the savings account for every debit transaction.
Me: Ok....
Rep: First year earns 5% APY, 2% APY on the second and third year.
Me: REALLY?
Rep: Yeah, and you can also transfer $100 a month to that account as well.
Me: Sign me up!

So I walked away with their no-fuss free checking and the Way2Save program. The first year is great, but after that, it won't beat my credit union's current 3% APY. So, after the year is up, I'll re-evaluate the situation.

Truth is, all this probably won't make much difference in terms of real dollars, but hey, I'm still willing to play the game. Plus, they said that the $100 a month transfer can be automated. So, with that and a small change in direct deposit, it's going to require no effort from me anyways. I love getting paid to be lazy.

I think this is like.. the third time I've signed up for Wachovia. The last time I was there, they had an online promotion that I signed up for and I made $50 there as well. So, there you have it: My on-again, off-again fling with Wachovia. We just got back together again. Next year? Who knows?

I don't have anywhere near the $4 million for this, and even if I did, I would never pay that much for a place to live. However....

This

James Franco house has a lot of charm that I like and fantasize about in a dream house. I mean, there are some things I don't like about it either, but overall, I can't get enough of that warm, organic Spanish charm!

Just look at even the first picture in the gallery! I would love to be out at a place like that, on a nice cool night, with some candles and a small fireplace, and maybe toast some marshmallows while trying to learn some more acoustic guitar. Ahhhhh....

Fantasy aside, I do find these pictures useful in that they help me get an idea of what decors I like, why, and most importantly, how I might be able to replicate that without too much money. Is that even possible? I don't know, but I would love to try!

Completely non-financial, but I just had one of the craziest dreams ever.

Basically, the earth suddenly froze over. Ice age, global warming, I don't know. At first, a bunch of people and I who are stranded together thought it was just a bad winter, but as it dragged on and supplies depleted, it became clear that it was not.

Anyways, we were wondering what we should do from this point on when someone I've never seen before went around to all of us and said to congregate at this big house in the distance. They promised to have plenty of heat and snacks, so why not.

A fairly large group showed up, and this woman who was apparently the leader, addressed us. First she welcomed us and talked about what we would need to survive, and that there could also be roaming bandits and we needed to protect ourselves. Then she had us split into groups that she said we need to stick together at all times. Ok, that made sense.

Then she went on talking about how the Goddess Gaia is angry with us and this is her way of punishing her children for abusing the planet. Something like that. I wasn't paying attention because I thought she was nuts.

She must have sensed that because after her speech, she went back into a private room with several of her people, and suddenly came out with a power saw. She came straight up to me, and with fire in her eyes, grabbed my hand, put the saw next to it, and screamed in front of everyone, "Are you a spy?"

I was like, "What? I'm not a spy of anything!" That completely shocked me. Equally shocking was that, while I resisted her putting a revving power saw to my hand, I didn't fight back. Well, she may have been crazy, but she was a smallish woman and somehow I thought I could convince her that I wasn't whoever she thinks I was.

She went on screaming about me being a non-believer, and well... she got me there! I only went along quietly because I didn't want to be rude, but I don't know what in the world she's talking about with her Goddess and why that has anything to do with us trying to survive the cold.

At one point, I thought she might have been convinced that I wasn't at least a spy, but then she grabbed my hair, and started to rev the power saw behind my neck. By then, I thought, "Ok, I've had enough of this", and just when I was about to fight back, I felt a hot burning behind my neck, my body jerked, and suddenly I woke right up.

My very first conscious thought when I woke up was, "What happened? She killed me.... She killed me! That bitch! I'm going back to sleep just so I can beat some sense into her!" Ah, but alas... I can't just fall back asleep and dream the same thing again. Besides, it was time to go to work anyways.

The drive to work this morning was a rainy, somber one, as I reflected on the dream I just had. "Wow, that's the first time I've ever died in my dreams for anything. Ever. And not only that, but I was executed."

I tried to make sense of it, but I couldn't. I mean, I have to admit that a public execution was actually a pretty smart way to control a group from the get go, because it eliminated a potential detractor, and at the same time, scared the rest of her "flock" into submitting to her authority.

But it's only a dream right? And dreams tend to be irrational to begin with. But then again, I also think dreams often times contains some nuggets of insight into our own personal psyche. I just wish I knew what it is. It wasn't a nightmare, and I was more pissed than anything. And I don't really have any problems in real life. I just don't know what to make of it, except that it was the first time I ever died in a dream.

What about you? Have any idea what it could mean? Had any weird dreams like that before?

Lately, everybody seem to be sharing pictures of their personal spaces here. Pictures like that fascinate me to no end.

I don't know what that means, if anything, but since my personal space has changed somewhat, I thought I should "return the favor" by sharing new pictures of my room.

And for extra fun, I did not straighten anything out this time. Everything is exactly as you see it in my everyday life.

This here is my bedroom:


As you can see, it's really not much different from before. The arrangement is only because I have a new alarm clock that can hook up to a pair of speakers that I have set up on each side of the bed. It's pretty neat, because I can now listen to soothing music when I am lying down. Unfortunately, there is also no shortage of audio power here to wake up me up in the morning. Well, I guess that's a good thing.

Here's a picture of my computer desk, the other space I generally "live in":


What may not be apparent in the picture is that I've moved the computer out of my bedroom and into a different room. The room accommodates the audio equipment better, I am less tempted to jump out of the bed to check something online, thus forcing me to sleep, and it has more space to accomodate the children since we tend to congregate around the computer....

I know it doesn't look like much, and I agree it isn't. But I am still a house-sitter, and this isn't my house. So, there's no point settling in with a bunch of stuff, because I have to move out some day anyway.

It's kind of a psychological bummer too, because deep down, I dream of having a place of my own.... A place I don't have to wonder when I'll have to leave and where I will end up next. A place I can finally stretch out and feel at ease in. A place that I can finally call... home.

Boy, I must sound really effeminate there. In the meantime, this house-sitting gig isn't bad at all, and I am grateful for such an opportunity!

I think I just ran into a snag.

Netflix tells me that they've already shipped a disc. I never received it. At least, I don't see it anywhere.

Did I lose it? I've been cleaning up lately. Or was it ever shipped here?

Any of you Netflix users ever run into this problem?

What a bummer. I need to know what happens next on my Battlestar Galactica!

NPR did this radio documentary called "The Giant Pool of Money" about a year and a half ago.

If you are not familiar with it, they did an hour long piece on the recession, and several people along the process, from quants that did the risk analysis, to the mortgage guys, to everyday people who bought too much house....

The show was so popular that NPR spawned a separate program called "Planet Money", and they decided to do a follow-up documentary following up on the original Giant Pool of Money.

If you haven't heard of this yet, here's a link, and you can listen to the Quicktime podcast, located right below the newspaper image.

Here's the link.

From what I understand, they will only have this link up for a week, so hurry! If you have any remote interest in this recession, tune in because the original and this follow-up are both really good!

Cellphone
I finally ran out of phone minutes and had to buy more. This month's usage has been freakishly high and I used up an abnormal $18.90 worth. And yet, it's STILL cheaper than having a local-only land line!

I continue to be amazed at just how good the Tracfone/Net10 service has been so far. You'd think a discount, 3rd party cellular service has some flaws or compromises, but NO! In some ways, they're actually BETTER than premium cellphone services!

The only "compromise" is that they only have basic, low end phones, but I don't really need fancy phones anyway.

After about six months of tracking, I am thoroughly satisfied with the results, and so, I'm going to close the book on the updates. After all, there is only so much I can talk about cellphone minutes.

Gracias, Senor Slim.

Net worth
Well, my irregular expenses have finally hit, and it's taking the expected toll. However, thus far, my net worth has continued to march forward and even crossed an important milestone. Not that it's easy to see because I cropped out some of the details.

Sorry, I just don't want to detail my net worth for personal reasons. Most of this is driven by retirement funding anyway, so it doesn't translate to much in real life terms, but it's still a very important psychological victory for me.

I'm not in the clear yet though. Any financial slip or accident, especially in this economy, and I would be trouble again. So, I remain vigilant, but very thankful for all the help my parents have provided in my recovery.

And I thank you guys too, for all the support and help! This community has been great, and I doubt I would have made it this far on my own.

Stock market talk.

One of the more curious phenomenon I've observed is that a lot of things could be going through my head even though I could still end up doing absolutely nothing with my trades.

Take my current oil position for example. Er, oil services with a side of natural gas to be exact. Conoco Philips (COP). Since the time of my purchase, the darn thing has run up to 20% YTD.

I bought it when oil was like $30 a barrel, and though I may not be the sharpest tool in the shed, it doesn't take a genius to realize that it has gone way too low. The second I heard OPEC was cutting substantial supplies, I was in.

But now, we're at a point where I feel oil has reached a fair market value... or at least one that OPEC seems to be satisfied with, especially considering that we are still in the midst of a recession.

So, now I have to figure out what I think may happen next. I know oil producers have a ton of oil standing idle. I just read that they're already introducing more supply, but still, they are deliberately trying not to flood the market to maintain current prices.

Now, here's the thing. If the economy recovers, they'll be happy to unload their excess. I don't think they'll deliberately choke supplies to jack up current prices even more because they know the delicate condition of the current markets. That and considering they just increased their supplies by a bit, and I think that action speaks for itself.

Contrast that with a double dip scenario. The market goes back down, and what do they do? They may decide to cut supplies again to maintain current pricing, but that's not likely as they have fought internally in the past against such a move. Again, they are all too aware of market conditions.

What is more likely to happen is that they may more or less maintain current levels and let the price of oil fall again. Again, if we slip back into recessionary lows, the last thing they want is to stifle recovery by having gas prices too high. They may settle for $60 or even $50 a barrel.

The market could conceivably move sideways as well, but it's hard for me to imagine that such a market trend is sustainable with so much going on. And anyways, COP isn't the only dividend producer I have, so I'm still good for the market going sideways....

At least that's what's going through my mind right now. For now, I haven't sold yet, but I think I am getting ready to on the basis that there seems to be more downsides than there are upsides. Besides, 20% gain is pretty respectable, and there's nothing wrong with locking that in....

Anybody have any thoughts on this?

A friend of mine called me up earlier, being completely frustrated about how his wife is, according to him, micro-managing the way he spends again. On the surface, it seems like such an insignificant issue to get worked up over. I think it was over a $1 iTune song he bought their son. However, I'm sure the cost is not the issue because they make good money, but rather, it's the way both handle money and each other that is the problem....

The irony is, even though this man is my very good friend, I tend to logically agree with his wife because she's the money person in the house and she is the one who understands the big picture.

Interesting enough, when I asked her if she was excited that her husband, my friend, finally landed a decent job and that he could help her with the bills, she said that she was, but at the same time, she dreaded the money fights that would follow as well. Knowing her husband well, she knew he would feel entitled to spends at least part of the money on how ever he sees fit. How uncanny....

My friend is probably one of the best man you'll ever meet, but yeah... I suppose personal finances isn't exactly his forte. Still though, I had no advice or suggestions for him. I had no intentions of attempting to "solve" math problems. He was simply frustrated and he needed to vent. So, I just listened... well OK, I vented a bit about my ex as well, but only to commiserate with him about his plight. He needed a sympathetic ear, and as a friend, I was happy to lend it.

But as a curious outside observer, I must say, this stuff is beginning to seem kind of foreign to me. A small part of me is thinking, "Wow. You're such a lucky man to have such a great wife who is also good with money. Who cares if she fusses over a $1 iTune song? Just kick back, relax, and enjoy life minus a song or two."

Of course, such things only seem "simple" on the outside, and I am reminded of how even the smallest straw can break the proverbial camel's back if there is enough prior weight and stress on it.

So far, I am learning that we can't always decide our situation in life, but we can always make the best of it. This conversation with my friend helped me realize how fortunate right now in that I don't have to have money fights... er, most of the time anyway. I don't know what my future holds, but whatever it is, I do know I need to be in a much better financial situation than I am in right now.

So, my mom did something unique yesterday. She let me see one of my aunt's retirement account letters. She wanted me to tell her what it meant and whether it was something my aunt needed to worry about.

The letter turned out to be nothing more than a regular update statement. However, what kind of worried me was the asset allocation. There are only two mutual funds in the account. One I think is a large cap growth, and the other is a mid cap growth.

I asked my mom if she knew what other money my aunt had, because this account was only $10k total, and being in their early 60's readying for retirement, surely there had to be more money. Unfortunately, my mom didn't know.

So, with no other details to go on, I tried to explain to my mom that having 100% stock mutual funds is really risky for people in their 60's, and suggested that my aunt sell the mid cap and buy a bond fund instead.

Of course, that's hardly an ideal asset allocation, but with my broken Chinese and their lack of interest and understanding with the investment world, well, it was the easiest thing I could think of.

Another interesting detail is that my aunt has the same investment "advisor" as my mother. It would seem that my family is making referrals to each other, and the only qualification they looked for is someone who spoke Chinese.

Now, don't get me wrong. I'm OK with that, because when it comes to something like this, it's good to have someone who can explain it to you in your native tongue. However, this is one of those companies that charge massive 5% front loads, and ER is something like 1.5%-ish!

I'm not going to be able to talk them out of who they are investing with, but at the very least, I was actually complimented that my mom would trust me enough to look at my aunt's statement.

Anyway, I hope they all experience smooth sailing into retirement.

I'm about to vent some serious negativity about my ex. Please skip if you wish.

Seriously, this woman drives me up the wall. She never apologizes for anything, believes she's never wrong, and more recently, has decided that she found "self-empowerment" or some junk. (And I know that using absolutes like "never" is pretty strong, but I think it's actually appropriate in this context....)

The inability to apologize for anything, even when blatantly shown to be false, in my opinion already speaks volumes. But what does she need "self-empowerment" for? She's never had problems being self-empowered. Seriously. I mean, she left me for another guy, despite being supposedly afraid of any ensuing consequences for doing so. What does that tell you?

What she truly lacks is the "common sense" department. Even empowerment is useless if you don't know the proper direction upon which to project that energy. It's like swinging a giant sledgehammer, but constantly missing the target. What good is that still?

Honestly, I give her way, way too much slack, even when I said I wasn't going to. I am such a sap.

Her latest round is wasting my time trying to explain to me how she doesn't make a lot of money, how she's got all this student loan that is still under deferment, and how even her "boyfriend" has to chip in.

Hello? Is anybody home?

You make good money. Boyfriend is paying you rent. Heck, you even managed to defer your massive student loans (with "floaty APRs"). You can pay to take care of the kids!

So why can't she? Isn't it obvious? Lowering her standard of living is simply out of the question. She's not broke. She's maxed out! And she thinks that entitles her to... my hard-earned money?

This, despite the fact that she bitterly complained about me not "spending" on her when we were married (because we were in a serious financial mess back then) and how she would tell me, "Nick doesn't care about money. He just wants me to be happy." I was trying to save our sinking financial ship, and she equates spending to her happiness....

And now, she's trying to stick me with the kids' braces to the tune of something like $190 per month! That's insane! That's like a car bill! And for what? So she can continue on with HER standard of living with HER boyfriend that she committed adultery with?

And really, it does not help her case at all that in the same conversation, she has the galls to say, "But you know what? When I go home, you don't even enter my mind. You don't mean anything to me. At all."

Gee thanks.

I must say, this summer has been an interesting learning experience for me. As it turns out, my mother has been going into overdrive, talking to my relatives from both in the US AND abroad to consider moving and eventually retiring in our home town here.

Together with a real estate friend of hers, my mom has been going all over the place, buying several houses on behalf of my relatives who are planning to move here. Sometimes, my mom would ask me to tag along because her English isn't very good, so that's how I am finding out about all this.

What really blows my mind is the amount of money that they all seem to have and are throwing around. Typical prices for a single dwelling house in my area is around $150k to $250k, and they're all paying... are you ready for this? They are all paying in cash! Up front!

Insane!

I'm like, "Mom. How in the world are they all able to do this?" Mom is like, "Well, that's just the way Chinese people are. They scrimp and scrounge for 30 years, they help each other with lodging and businesses if necessary, and they always pay everything with cash."

Insane!

It's true though. For example, I'll never forget how, growing up, my mom would have us walk around in the house with our winter coats on, but the thermostat is still set pretty low while it's snowing outside. We also lived with my uncle's family while we were helping him out with his restaurant. I didn't realize until later on that this is pretty unusual.

Another thing that leans very favorably for them is that, in my native country, real estate is extraordinarily high. It costs even more than High Cost of Living Areas (HCOLAs) in the states, and anyone living in an HCOLA will tell you even $250k won't get you much.

So, when they found out how much "house" they can buy in our area, it was like, "Oh OK, great! Yeah, let's move and retire there!"

To be honest though, I am also a little worried about how they are going about this. You see, in my native country, real estate is insanely high, but everything else is insanely cheap. Food, clothing, you name it. And they live cheap anyways.

So, their mindset is that if you can get past a house, you are pretty much home free. I don't know if that's entirely true living here in the US.... For example, my native country still has a very high percentage that rides bicycles and motorscooters. And being so densely-packed, you're never that far from a flea market. So, it's very normal to see even the elderly go out and walk to the market, and 20 minutes later, come back with grocery in hand. In the US where I am, you can't do that.

Plus, I am a great believer in diversifying your money. What they're basically doing is putting most of their life savings straight into the house. Some also don't have retirement savings besides whatever they have socked away in the bank. Again, it's that old school mentality... yeah.

But I tell you what though. So long as they band together, I'm pretty sure they'll work it out. After all, having a fully-paid house isn't exactly the worst kind of financial problem to have....

Anyway, the point of this story is that, sometimes it's easy to feel down and feel like we're not getting anywhere with all the scrimping and saving, and we may even wonder if we ever will. I know I do. But when I look at the checks they cut, and when I step into the houses they've bought-- in cash!-- and realizing that many of them are just simple people with modest living, it really sinks in just how powerful frugality can be!

Insane!

Already one week into the month, and I completely forgot to update my cellphone minutes. Let's see, I've been chattier than usual, and I am updating late. So, that's 154 minutes used, or $13.86 for the cost of August (and parts of September).

That's over my usual budget of $10 per month, but it's all flexible. And anyway, $14 is still very low for total phone use.

Kraft is feeling down today because he tried to woo Cadbury, but she turned up her nose at the $16.7 billion in flowers and engagement ring.

But you know what? Kraft really is a good catch, even if Cadbury thinks she could do better. Seriously, he's a highly dependable guy, offering a great product line that sells well even in this recession. He also pays out an insane amount of dividend (currently 4.37%).

So, it really doesn't make much fundamental sense anyway for him to have a 5% to 6% technical drop today. Kraft is still the same great guy as he was yesterday and the day before.

Who knows what will happen next in the soap opera that Kraft is entangled in, but whatever it is, I'm still happy to get him for a dipped price of $26.50.

I think I've seen this one years ago, but I watched it again tonight. Even now, I think it's unnerving when you think about the level of financial mess that we as a society are in.

I am currently watching I.O.U.S.A. Wow, the numbers they are showing in here is mind-blowing. I had no idea how severe the national debt is, especially when you consider that it's being artificially propped up by raiding the Social Security coffers. And we're already in a bad enough debt!

But, ten years from now? I'm scared to even wonder what's going to happen when the SS well runs dry! And that could be only 5 to 10 years away!

Seriously, I'm scratching my head as to how in the world SS is even going to be there for me when I retire. Seriously.

I highly recommend watching I.O.U.S.A. Please, everyone, if you haven't seen this yet, please do so. Then tell everybody else you know about it.

In a previous comment, someone mentioned that they may not fit in as a frugal because they like the finer things in life, even though they pursue it in a responsible manner.

You know what? That's exactly what it means to be a Frugal!

Frugality and us Frugals (or Fruggies) tend to get a bum rap, as if we're all some 30's Depression old fogeys clinging to our tattered clothes and hoping for the next hand-out at the soup line because we're too stingy to pay for our own food.... Er, no offense if anyone here IS from that time period.

But the point is, we need some serious PR work here because that's not what being frugal is all about! No, seriously it's not!

Frugality is simply a path of self-examination, investing in what is important to us and what brings us comfort and joy in life. The pursuit of happiness, but in an intelligent and responsible manner.

Frugality doesn't mean you can't travel, go out for dinner, or buy nice things once in a while. Yes, it may involve delayed gratification, budget planning, and saving up for it. Yep.

Doesn't sound too exciting, but we're smart people with head on our shoulders and feet on the ground, right? Some planning, saving, and even self-sacrifice is necessary sometimes in order to realize our dreams. We can either accept that and work hard at it, or we can live in the nightmarish world of false hope and false dreams through 19.9% interest and overdraft charges.

Now, I know some people are being frugal because they need to right now. Times are tough, and pinching pennies is a necessary way of getting by. That's true. But I think that only shows the versatility of Frugality, and not necessarily its full potential. Truth is, in my darker days, even just not having to worry about credit card debt was a source of happiness in itself. But it doesn't have to stop there either. In time, frugality brought even more comfort and joy to my life. And all that it asked in return is to be realistic about it and have patience.

But don't you see? We're the Bon Vivants of the financial world! Smile. Dance. Travel. Just don't go into credit card debt over it. Know what I mean?

To me, frugality is a world of beauty that is filled with guitar music, slow dances, and candle lights in a dreamy little foreign locale somewhere. And yet, it's also a world made very possible and very real simply because we work hard and approach it in a smart and realistic manner.

So, maybe I'm in a weird mood tonight, but come on now, who's with me?!

For those who may not be familiar with it, it's a basic economic theory that the richer people are, the happier they are.

What makes it a "paradox" is the elaboration of this concept by Richard Easterlin, who wrote the paper on this back in 1974. Basically, it is the following:

1) Within a society, rich people tend to be much happier than poor people.
2) But, rich societies tend not to be happier than poor societies (or not by much).
3) As countries get richer, they do not get happier.

Sounds pretty reasonable enough, doesn't it? Even if it does seem paradoxical at first.

Well, the good folks at Freakonomics decided to take another stab at it with more recent data from around the world, and here's what they've concluded:

There is no Easterlin Paradox.

1) Rich people are happier than poor people.
2) Richer countries are happier than poorer countries.
3) As countries get richer, they tend to get happier.

Or so they claim.

Here's their news article, and here's a spiffy graphics they've created with the data.

Perhaps it IS that easy. Richer = Happier. Or perhaps not. What do you think?

While reading some financial stuff elsewhere, it occurred to me just how a frugal person can be so distinctly different from a non-frugal. Not in a "I'm better than you" sort of way (although I admit I do think frugality is a better way of living), but... I'm just musing how because we are different, I sometimes forget that not everyone is like us.

For example, I believe frugal people actually enjoy doing their budget. I know I do. But it's easy to forget that many people find it daunting, or at the very least boring.

Another example is that hunting bargains and even clipping coupons may scratch a certain itch that non-frugals may not possess. It gets us rubbing our hands together, perhaps even doing a victory dance, while non-frugals think we've fell off our rockers.

Yet another example is that non-frugals only find joy in spending I think. Therefore, saving and even investing is often times seen as a lamentable exercise in necessary evil rather than giving one warm, fuzzy vibes.

Last but not least, I think frugals might find all this to be "perfectly normal" while the rest of the world may think of us as odd or even extreme. For example, I think debt is generally a "bad thing", best to be avoided unless it can't be helped, or it somehow pays back even more (such as a cash-back credit card). Non-frugal people may think that having debt is as normal and American as apple pie and Fourth of July. Yuck.

That said, I don't consider myself as a natural frugal though. I think there are some people who just seem to have a knack for this, and therefore, didn't have to "train" to become frugal. I, on the other hand, had to be re-born and taught from scratch. But at least I'm on the path now eh? It's also heartening to know that anyone can learn to be frugal, even if they didn't start out that way.

So, do you think there are differences between frugals and non-frugals, and if so, what other distinctions do you think there are?

It's that time of the month again.

Currently, I have only four categories when working with net worth: Cash, 401(k), Rollover IRA, and Roth IRA. Thankfully, having so few and having them all being assets makes it both easy and a joy to work with.

I know that can't last, and that's why I am enjoying it while I still can.

So, this month, I thought I was going to get hit by a raft of irregular expenses, but I was wrong. It's getting pushed back to September, so this month has been a surprisingly good month.

Well, this month's market performance has been literally flat, so the uptick is driven mostly by cash savings that, again, I thought was going to be used to pay for irregular expenses.

In any case, expenses are definitely coming up for the month of September and possibly October, so I think my "pretty months" for the year has probably come to an end.

So how does this work anyways? You just list stuff that have costed you at least $1k?

If so, well, my list is pretty short I think.

My whole PC setup, including the monitor and home theater speakers is well, um ahem, it's closer to $2k actually. BUT, let me add that I had to build from scratch, and this time, it's with future upgrades in mind. So, should not cost that much into the near future.

My mattress is actually $1k. Yeah, believe it or not. I bought one of those premium ones that is suppose to last like 30 years, and after crunching some numbers, it actually came out to be the better value, and with a better quality bed! Assuming that it does last that long....

I guess my car and my college tuition bill if you want to count that. But both are paid off.

Annnnd, that's it!

Addition
Ok, so apparently I am not doing this right. The above is my post-divorce, frugal list. So, what you are seeing in this section would be my pre-divorce non-frugal list.

House - $170k
New station wagon - $17k
New Apple desktop - $3k
Three new Apple laptops - $4k
Two new PC desktop - $3k
New furniture for the house - $3k
SelectComfort air bed set - $2k
Various firearms - $3k

I'm sure there is more to this, but that's all I can think of right now. Does her ring count? Anyways, we sure loved computers back then, didn't we? I still do, and she probably does too. Yeah, it was interesting that I was with someone who liked computers perhaps as much if not more than I do. Equally surprising is how conservative I am today about computers, especially when you consider how much I like them.

One quick thing about the firearms. I've swapped them in and out over the years, and by the time we separated, I've sold it all and probably at a slight loss. So, yeah, I spent a lot on it, but... I recovered most of it as well.

Also noteworthy is that it was all acquired by going into debt! Yeah, pretty much all of it. However, everything in my first list was bought up front, paid in full with money I saved first.

Summary
This is kind of stock-trading talk, but it's also something that I think will interest serious investors as well.

Question: Can market inefficiencies be exploited?

Better question: Do I know anyone that can?

Even better question: Can *I* exploit it?

Short answer: I highly doubt it.

That's the sad but short truth. Now, for those who are still interested, please read on.

Premise
Imagine a deceptively simple and seemingly "sure-fire" premise. You see something that is currently running for a very low price, what do you do? You buy it. You see something that is currently running for a very high price, what do you do? You sell or short it.

Buy low. Sell (or short) high. Simple right?

So, why are so many smart people having such a hard time with this seemingly simple concept?

The more I learn, the more I am realizing the following: Most people don't know where the lows and the highs are. And for that matter, we don't know if current lows could go lower, or if current highs could go higher.

At least, not I.

And when you think about it, most trading strategies have to do with covering the possibility of a trade going wrong. Risk mitigation. Or is that loss mitigation? There's a difference there.

But to answer my own second question, the only person who I can think of that can seem to beat the market is Warren Buffett. I even have a link in this blog, linking to a white paper that claims he isn't just lucky.

So what is he doing that makes him succeed where everyone else has failed? After all, everybody knows about value investing by now. A whole lot of smart people are practicing it. So, why not others? Why only Warren? I don't know.

Articles
If you're wondering what brought this up, consider this interview with

Jeremy Grantham of GMO investing. When you read that article, you get the sense that he is indeed a pretty smart man and he talks a lot of sense. Now consider this rebuttal by Larry Swedroe of Buckingham Family Financial Services.

Granted the rebuttal itself is not without some criticism, but if Swedroe is correct, then why is Grantham himself isn't able to exploit the market based on that simple premise? Yes, the same premise as my own that I am hoping to exploit?

I think it's not so much that zigging when everybody is zagging isn't a bad idea. But rather, the problem is we really can't tell when the market is zigging or zagging at all. Even when the valuations seem so "obvious".

Well, either way, I am still not fully convinced that this is impossible. I mean, even if it is, I'd like to keep trying for now. But peering into others who are obviously smarter and more experienced than I am, and yet having just as much of a hard time with the same basic thesis I'm using, it does give one pause.

I got my first bill with AT&T. I pay all my bills online. With AT&T, this shouldn't be a problem.

But it is.

In order to access my online account, I need either the last 4 digits of my social security # and my zip code, or my PIN number.

My social security # isn't listed in my account yet because this is my first time. I don't have PIN because I'm paperless (unless they plan on sending the first one which has not arrived yet).

I call up their support hotline. The automated voice message is buggy. Yes, a telecom giant with a buggy automated hotline! I got hung up three times. What in the world?

I finally manage to get through, and this poor lady is having a hard time routing me. And when it finally routes me through, the automated voice support tells me to go visit their website.

What the heck? And when I check online FAQs, it tells me to check the printed bill!

What kind of crazy operation is this? The DSL is great, but this is ridiculous! Seriously, I'm tempted to disconnect on general principle. And I WANT to pay them! This is insane.

I know not everyone is interested in this stuff, but this is what's going through my head right now, and I'm always curious as to what some of you think about this. I'll also try not to ramble.

* India's affluence is shooting up, and so is their investment sector. I heard that some India's investment ETFs have quintupled. Crazy. And the only way to top that? I think there's still upside to it. So, how crazy am I for thinking this?

* The sugar commodity has had a huge run, no thanks to drought that has artificially driven up prices to all-time highs. Am I crazy for thinking I should short this?

* Speaking of shorting, I've never shorted anything in my life. And I'm thinking it's time that I at least learn how and add that to my tool box.

But of course, this also involves going into options trading, which I've generally avoided. Am I crazy for considering converting my Roth account into an Options account?

* Guess who's back?
Back again?
Bernanke.
Tell a friend.

Congrats on your second term!

* Finally, volatility continues to fall, and in fact, is headed towards early 2008 levels. I think that's a good sign, but it's not time to celebrate just yet, because if you put it in context, the entire 2008 was kind of abnormal.

I was hanging out with this particular friend of mine again. You know who. But you know what? He wasn't even remotely bothersome this time around. He really is a cool guy when we're by ourselves and he's doesn't get uptight about competing for women or something.

Anyways, he was talking about how he met this woman he is completely not attracted to, but she appears to be interested in him, and she also makes a lot of money.

Unfortunately, my friend is very financially-challenged. In fact, he's currently unemployed, living on student loans while he's back in school. Well, anyways, he was asking me if he should "go for it" for the sake of money.

Of course, you know how I feel about stuff like this, but I also don't believe in telling people how to live their lives. So instead, I asked him, "Well, what do you think she would want you to do in return for fondling her money?" ("Fondling her money" was his words in the question, not mine.) He shuddered and said, "Yeah, no, that ain't gonna work."

I think the more interesting point here is that there's this running stereotype that only women like men with money, but it goes both ways. I think, in general, the more someone desires something that they themselves don't have, the more they are attracted to those who have it.

Anyway, he brought up about starting up a smoothie shop again. And he's starting to admit that he's worried about money. Very peculiar, you know, for someone who says that money is evil. Anyways, I don't think or at least remember him saying that he's actually worried about money before. Anyways, he basically came out and asked me if I would be interested in getting a business loan. He figures $70k or so should do it.

Um, do what?

Usually, we just day dream about stuff like this, or what to do with winning the lottery, or some other amusing topic, but hmm, I think he's actually serious this time. Seriously though? I don't want to go into debt, betting it all on a business plan that, so far, only involves "finding a good location" and "re-renovating". Especially in this recession. Seriously, wow, that's crazy.

But I didn't want to be rude and step on his dreams or anything. So, I basically told him that my credit is still bad right now, which was true.

In keeping with the humorous joke that there is an index for everything, here's an interesting way to look at the differences in purchasing power.

The Big Mac index

Edit: Wow, just found out that this index has been around since 1986! Interesting!

Multiple posts today, but I can't resist sharing

this picture. It really brings home the definition of useless paper money.