Friday, January 29, 2016

Short Takes: The Big Short Gets it Right, Common Sense, and more

Here are my posts for the past two weeks:

Financial Dreck

Getting Rid of Excess Money: Binary Options

How Should New Investors Enter the Market?

Identity Theft for $6668.49!

Here are some short takes and some weekend reading:

Barry Ritholtz says the movie The Big Short gets it right. I agree with him.

Canadian Couch Potato reviews Ben Carlson’s book A Wealth of Common Sense.

Preet Banerjee uses this video to explain employer matching in retirement plans.

Boomer and Echo say that indexers are terrible at indexing. It’s definitely true that most people who call themselves indexers invest quite actively.

The Blunt Bean Counter lays out the elements of a messed up estate plan (or non-plan).

Big Cajun Man is now coming up with plausible sounding names for investing strategies designed to confuse investors. I don’t think financial institutions need help with this, but maybe this post will help to make people more wary of investing strategies they don’t understand.

My Own Advisor profiles a retiree with no financial worries. The main takeaway is that investing becomes a lot less important when you have a valuable pension.

Million Dollar Journey looks at how taxes vary by province when trying to retire on non-eligible dividend income.

8 comments:

  1. I am thinking that a Spiral Bimodal Long-Term Retirement solution would sound great and confuse the living hell out of most folks (including me). Have a great weekend!

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  2. I was a little surprised at your subject line this week. I was going to disagree. The movie is fun, but not enough time was spent on how the environment before the movies events laid the foundation for the meltdown to occur. I guess it would be even more boring for the average person then to get through the movie. I clicked the links from Barry's website to his list from 2009 and saw his list. I felt a little better after seeing that though.

    I would also ask people to also consider some other books from some pretty intelligent people from that time. The great American Stickup, The Dollar Meltdown, and The great American Bank Robbery. Also if one does not get bored easily to read through The Financial crisis Inquiry report (about 600 pages) which Brooksley Born herself was a part of.

    I agree with much of Barry's opinion + list of culprits on the crisis, but I feel the evidence shows there is more to it.

    I would really like to know why any high level person has not had any criminal charge laid on them for their part on taking the worlds economy to the brink of meltdown? Is someone afraid where the blame will eventually lead to, or what it may reveal? I find this odd 8 years later and "all the evidence" Barry claims in his linked blog that no one is sitting in a cell.

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    1. @Paul: I thought the movie did a good job of hitting most of those who are to blame. Barry's list of guilty parties is quite extensive. What do you think is missing?

      Maybe I'm too cynical, but I'm not surprised that bankers didn't go to jail. After all, they exert tremendous influence over politics and law making. Given that so much of the money intended to help homeowners was given to banks, it follows that bankers wouldn't go to jail.

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  3. I disagree with him dismissing the CRA connection. It should be one of the items on the list. Maybe not a high one but it was a factor. Some Banks were forced to open up in neighborhoods they would never dream of being in under threat of legal punishments if they did not comply. Also Policies set by both the Reagan administration and the Clinton one thereafter created the playground for people to behave badly in.

    If you read the book there is the example of the pizza driver turning into a mortgage broker overnight and transforming his low income life into one quite a lot richer. You can imagine that has an addictive effect.

    Say you just had a divorce and you have to pay your ex $1000 a month. Understandably in our badly biased divorce system, an individual may feel cheated. If an opportunity presents itself where you could make that money back by cheating someone else, you may tend to develop an attitude that that's simply how life works. Your just being made whole again by your actions. Obviously a lot of people just jumped on board and went for the ride. Pay it forward can be negative too.

    There should have been better checks and balances. I speak about this here as if this is in the past tense. You do know we are going back to the same bad habits even now? I first heard about this 2-3 years ago as shady lenders had simply switched to the car industry. Seems it's more again.

    http://www.bloomberg.com/news/articles/2015-09-08/liar-loans-redux-they-re-back-and-sneaking-into-aaa-rated-bonds

    http://www.zerohedge.com/news/2015-09-08/liar-loans-are-back-2008-here-we-come

    http://globalnews.ca/news/2140474/liar-loans-helping-to-inflate-ontarios-hot-housing-market-experts/

    So we have learned nothing... It seems people behaving badly never ends, I wish I could venture ideas on how to fix it, but that is beyond my knowledge.

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    Replies
    1. @Paul: I agree that the U.S. government's drive to promote home ownership was a contributing factor to the financial crisis, but I wouldn't put it in the top 3 major causes. Greed was a bigger factor.

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    2. So to solve the problem we need to focus on changing human nature. Also need to ensure that default has no consequences to the individual. Because it's the greedy bankers fault.

      Problem solved - no more greed, and no defaults.

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    3. @BHCh: No, the answer is effective regulation.

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  4. Thanks for the mention. Haven't read (or watched) The Big Short yet but it's on my to do list.

    Hope you had a good weekend.

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