Archives For November 2011

I read an article in today’s WSJ about “free” cell phone services for the poor. These services are paid for through taxes on regular cell phone bills. The article inspired me to calculate how much my family spends on cell phone taxes and fees on a monthly basis. Here’s what I found:

For us, the $28.54 (roughly $342 per year) represents an 11.9% tax (we have four cell phones on our plan).

I found it kind of funny that the taxes and fees are broken down into two different sections. The first section is under “Credits, Adjustments and Other Charges” and the other section is called “Taxes.” You can put them in whatever section you want but the bottom line is they are taxes and fees.

As promised, here are the fifty worst months in the history of the S&P 500 (and its precurser, the S&P 90 prior to 1957).

Of the 50 worst months, 30 of them were followed by positive returns over the next 12 months (not including the worst month). Ironically, these numbers are basically identical to the what happened after the 50 best months (those results to follow this post).

In the last two days I have received three books from Wiley. All three look like great reads. They are (all affiliate links)…

Great read so far. I’ll review once I’m finished (hopefully Friday).

Ken Fisher’s latest. Looks interesting.

Again, another interesting-looking read.

I look forward to reading them all. Fortunately, all of them are fairly short. I like that Wiley is sending me these kinds of books. I enjoy reading and learning about financial crises.

I read an interesting humor piece in this weekend’s WSJ by Scott Adams (creator of “Dilbert”) titled What if Government WEre More LIke an iPod? The point of the piece is adapting government to the internet age.

In the modern era, it doesn’t make sense for a candidate to trek all over the country in a bus. If I may be blunt, citizens who change their political views after shaking hands with a candidate, or seeing him eat grits in a diner, probably shouldn’t be voting.

It’s funny because I have always thought that.

Where I tend to disagree with Adams is at the end of his piece where he talks about the Constitution:

The most common objection to a [new] constitutional convention is the popular belief that the Constitution is so perfectly crafted there’s no room for improvement. To them, I offer a thought experiment. Imagine that Thomas Jefferson pops back to life today. Do you think he’d say the Constitution is working great? Or do you think he was the sort of guy who always thought things could be improved? (Hint 1: Monticello.) (Hint 2: The American Revolution.)

Imagine showing Jefferson the Internet. I think he’d immediately launch a start-up, design three apps and propose a new form of government that leverages social networks, all before lunch.

If James Madison came back, he’d be peeved that he was the primary author of the Constitution and we honor his memory by not caring when his birthday is. When he stopped whining about that, and noticed that the system he designed has turned into a congealed ball of lard that eats money and excretes red tape, he’d probably be more humble about his contribution.

Actually, I think the Constitution is fine. It’s our politicians not adhering to it that’s the problem. If the Constitution had a glitch, it was that “promote general welfare” clause (Article 1, Section 8, Clause 1). That one clause has done more harm than good. Of course, that’s my opinion. You may have your own opinion.

How’s that for a title?

These posts NEVER generate any discussion but I still think they are interesting. Anyway, today’s post expands on last week’s findings. I took the same graphic from last week and expanded it to include the best and worst returns for the monthly return ranges, which helps put the average returns in perspective. For the ranges that only had one occurance, I went ahead and just repeated that one occurance’s returns for both the best and worst returns.

WSJ: Generation Jobless

November 7, 2011

This morning’s WSJ contained the first article in a series this week on the unemloyment situation for young people. This morning’s article focused on young men between the ages of 25 and 34. The article profiled two young men. Neither of them had a college education (and one has a criminal record). I don’t envy these young men’s situations.

On a recent afternoon, he sat in his parents’ kitchen, combing online classified ads. But construction work remains scarce and other positions available for which he’s qualified don’t pay more than he makes at the factory.

This is what happens in a downturn/recession. Those most at risk are those who have little to offer employers.

My advice:

1. Realize that this is temporary (though it may last a while).

2. Come up with a plan. Maybe get another low-paying job. Go to school. Start a business. Accept anything but the feeling of helplessness.

And please…ditch the PS3 and XBox and PICK UP A BOOK!

From John Hussman’s weekly commentary:

Here in the U.S., our broadest models (both ensembles and probit models) continue to imply a probability of oncoming recession near 100%. It’s important to recognize, though, that there is such a uniformity of recession warnings here (in ECRI head Lakshman Achuthan’s words, a “contagion”) that even an unsophisticated, unweighted average of evidence indicates a very high likelihood of recession.

He goes on…

…nearly every traditional asset class is priced to achieve miserably low long-term returns. While Wall Street remains effusive about stocks being cheap on a “forward operating earnings” basis, that conclusion rests on the assumption that profit margins will sustain record highs more than 50% above their historical norms into the indefinite future. That assumption is terribly at odds with historical evidence (as it was in 2007 when Wall Street was gurgling exactly the same thing). Given that stocks are a claim on a very long-duration stream of deliverable cash flows, our money is clearly on more thoughtful and historically reliable valuation methods.

Oh joy…