Friday, May 4, 2012

Short Takes: New Sources of Growth, Diversification Benefits, and more

Raghuram Rajan has a very interesting essay on why the west can’t borrow and spend its way to recovery. He argues that for decades our prosperity has been driven by increasing debt and that this is unsustainable; we have to find a path to real growth. Hat tip to the Stingy Investor for pointing me to this one.

Larry Swedroe has an excellent way to explain the problem with not owning enough stocks: “a few big winners (e.g., Google) cause the average return to be above the median return. As a result, there are more stocks that have below ‘average’ returns than there are stocks with above ‘average’ returns. This makes the purchase of individual stocks a loser’s game.”

Tom Bradley at Steadyhand has a very interesting list of 5 things that need to change in the wealth management industry.

Canadian Mortgage Trends gives a thorough discussion of Flaherty’s musings about privatizing CMHC. I don’t know enough about the issues here to have an opinion one way or another, but I am skeptical of CMHC’s stress tests that “imply a 1 in 200 probability of insolvency.” I just don’t believe that this can be measured accurately.

Preet Banerjee launched a new weekly podcast series called Mostly Money Mostly Canadian. I love the cartoon image of Preet.

Million Dollar Journey’s latest net worth update is filled with conservative accounting. It make sense to be conservative with the value of your home or pension, but I have to wonder if he’s just trying to put off the day when he hits a million dollars and has to shut down his blog :-)

Big Cajun Man wants to start a new television show to dish out tough love to people who use payday loan services. Do we get to hit them with bats, too?

My Own Advisor explains why he wants to have a $10,000 emergency fund. This in combination with access to some available credit seems like a good idea.

Retire Happy Blog highlights the differences between pension splitting and CPP splitting.

Canadian Couch Potato reviews Alan Fustey’s book on the shortcomings of financial models.

Money Smarts says that to truly win a house bidding war, sometimes you have to walk away.


  1. I believe the bats can be at the end to close the show out, or possibly tazers, I'll have to see if I can get Louisville Slugger to be a sponsor!

    Have a great weekend!

  2. Thanks for the link Michael. I'm hoping you'll come on the show to talk about dividend investing.

  3. Thanks for the mention. Looking forward to your dividend talk on Preet's show.

  4. @Preet and @Mike: It might be a short show: "People talk a lot of math, indexes, diversification, and taxes, but I like Fortis."

  5. Thanks for the link Michael. Enjoy our sunny weekend.

  6. I must say, it's a pet peeve of mine that Mr Swedroe doesn't know what a "loser's game" is. He equates it with "a game you'll probably lose", while it is actually "a game whose outcome is determined by the actions of the loser". I pointed this out one time in a comment on his blog, but he insists on using his own more subjective, less useful definition.

  7. @Patrick: Here is a page that attempts to link the two definitions:

    I find the logic a little tortured, but there is some similarity. In the end I've accepted that there is a game theory definition and an investing definition.