I recently saw an episode of Law & Order: LA called “Angels Knoll” whose villain was intended to be like Bernie Madoff, the swindler who took investors for billions in an enormous Ponzi scheme. Now I’m not naive enough to think that it’s the role of television shows to educate the masses, but I was disappointed that the show perpetuated a widely-held misconception about Ponzi schemes. Parts of the show involved prosecutors searching for the billions the Madoff-like character stole from investors. However, in real life, most of the “stolen” money in Ponzi schemes never existed. When a Ponzi scheme blows up and the perpetrator is found out, investors hold statements saying they have large accounts, but the money doesn’t exist. In fact, in most cases the hapless investors have been receiving phony statements for years. With each passing year, the gap between the statement figures and the real money keeps getting larger. By the time the scheme collapses, there is usually very ...

Most of us dream of a comfortable retirement with the freedom to do what we want. We'd also like this retirement to start when we're young enough to enjoy this freedom. Parts of the investing industry tap into this desire with a self-sustaining marketing strategy. We regularly see ads with images of retirees traveling, golfing, and generally enjoying an upper-middle class retirement lifestyle. While it is possible for an individual to achieve such a retirement, we can't all achieve it; there just wouldn't be enough young people to maintain golf courses, prepare food for us in restaurants, and provide all the other services desired by an army of wealthy retirees. This guarantees that most people will fall short of the retirement dreams that are marketed to us. Most people are also aware that they are not on the right financial track for a dream retirement. This leads to the next type of marketing: retirement polls. There is no shortage of retirement polls that...

Wealthy Boomer reports on an Investors Group study showing that most people aren't overly concerned about debt. I find this one funny because it was an Investors Group representative who pushed hard to get me to borrow a large sum to invest in stocks just before the tech meltdown a decade ago. It's a good thing for me that I declined. Retire Happy Blog reminds us that TFSAs can be much more than just savings accounts. Big Cajun Man looks at the economics of buying your cable box instead of just renting it.

Recently I was pleasantly surprised to receive a gift certificate redeemable at Amazon. However, my happiness was short-lived. The first clue to potential trouble was that the amount of the gift certificate was £620. It’s not too uncommon for me to get U.S. dollars, but I don’t often receive British pounds. A scan of the gift certificate’s fine print revealed the following: “Amazon.co.uk gift certificates ... cannot be redeemed at Amazon.com, Amazon.de, Amazon.fr, Amazon.ca, Amazon.co.jp.” It’s hard to see a good reason for Amazon to make restrictions like this. Unless Amazon.co.uk delivers to Canada for a reasonable price, this gift certificate won’t do me much good.

I’m often struck by the extreme difference between the cost of my business travel and the cost of my personal traveling choices. It’s not just the cost that is different; my attitudes about what types of accommodations, flights, and meals are acceptable differs depending on whether my travel is personal or business. It’s as though I have a split personality. As examples of costs, the airfare of my last two business trips adds up to about $11,700, but the total cost of my last vacation (of 8 days) was $1200 including food, golf, accommodations, and airfare. As an example of attitudes, I’m content to sleep on a bunk-bed and eat burnt toast when I’m on a personal golf trip, but I find myself critical of small things at hotels when on business travel such as inefficient handling of my luggage or poor timing of maid service. I’d be interested in knowing how common it is for people to have very different spending personalities in different contexts.

The book Investing and the Irrational Mind by behavioural finance expert Robert Koppel brings together a comprehensive collection of ways that our minds steer us to irrational decisions. The focus is on the behaviours of traders, but any type of investor can benefit from reading this book. While reading this book it would have been easy to read each irrational tendency and feel superior because I don’t do such dumb things. However, pausing to think about each type of mistake I had to admit that I was guilty of most of them at one point or another in my investing life. I think the reader is likely to get more benefit from this book by trying to think of examples of his or her own mistakes. I definitely recommend this book to anyone who is serious about becoming a more rational investor. Those who hope to make their living trading may get even more benefit. In my case, my attempts at rational analysis have led me to give up on trading and focus on long-term index investing. H...

The Economist takes a thoughtful look at which occupations require licensing and what the advantages and disadvantages of requiring people to have licenses before practicing these occupations. The main purpose of licensing is to control the number of practitioners and inflate their pay. But requiring licensing is usually justified as a means to guarantee a minimum standard.  Preet Banerjee brings more analysis of whether Warren Buffett’s track record is luck or skill. A part of this analysis is more bashing of the normal curve. An important thing to understand about the normal curve is that it is an approximation to reality that usually works well for predicting things about likely events and is way off for predicting extreme events. The real skill of a statistician is understanding when the normal curve applies and when it doesn’t. The Blunt Bean Counter gives us the benefit of his extensive experience with explanations of six typical situations when you would have to ...