Tuesday, July 22, 2008

End of conspicuous consumption?

I could not believe my eyes when I saw this article about people becoming frugal all of a sudden. There was even a mention of a Great Depression mentality of extreme frugality (rhyme unintended)

People trying to get rid of their gas-guzzlers. Discounters see brisk business. Bicycling to work. Will we see the death of conspicuous consumption and see the dawn of ...living within one's means( and maybe even below those means)?
It was 30 years overdue but better late than never.

Wednesday, July 16, 2008

Lessons of IndyMac

Now that the big banks started to fold, the word FDIC came up. It is a federal entity insuring your bank deposits. Insurance is up to $100k PER DEPOSITOR. That is , if you had multiple accounts within the same bank, only $100k out of all of them will be returned to you ( the limit for bank IRA is $250k- I guess, some people still have those). By the way, it is said that by bailing out IndyMac depositors, FDIC used 10% of its reserves. Is it possible for FDIC to run out of money while bailing out banks that will be folding in the near future?

Now, with some brokerage houses potential to fold, I did some investigation about their insurance. They don't have FDIC, but they are insured by SIPC (Securities Investor Protection Corporation) It has a website www.SIPC.org Brokerage accounts are protected for up to $500k in case of a broker-dealer insolvency( limited to $100k for claims for cash) Also, a brokerage might have some extra insurance from private sources (say, Lloyd of London)
That, to me, means you shouldn't really hold more than $500k( hats off to those who have that much in retirement funds) at any particular broker-dealer, no matter how reputable and old that broker is.
Market forces have no regard to reputation

Monday, July 7, 2008

Morningstar study: Do fund managers invest their own money in the funds they manage?

Another interesting article from Marketwatch.com:


Yep, those fund managers won't invest their own money into the funds they manage. And that's taking into consideration life-cycle funds ( suppose, those managers are very young and they happen to manage the fund designed for people about to retire) and state-specific bond funds.
I can think of only 2 reasons: either they have an access to much better investment options (such us private equity) than the people investing in their funds, or they know something about the funds they manage the rest of the investing public don't know.
I won't eat at a restaurant where its chef doesn't want to eat its famous entree.

Thursday, July 3, 2008

Graduating residents and fellows: financial challenges

Now when the old academic year is over (and the new one just begun with the influx of freshly baked interns), the newly baked attendings, after being "institutionalized" for so many years, face financial challenges they never dealt with before: making on their own.
No more resident's salary. No more ignorance of the issues of one's health or malpractice insurance. Maybe moving to the new place. All of these issues can be tackled successfully based on their previous experience of moving from a college to a med. school and on to the residency, often in another part of the country.
What our residents are utterly unprepared for is what to do with their sudddenly (and seemingly) larger paycheck. The theme I hear over and over again is " What should i get now when my old Honda gave up the ghost: Lexus or Infiniti?" All these years of semi-voluntary and semi-imposed from outside financial self-restraint are catching up with our residents... er, attendings. And it is hard not to go on a spending spree with your first real paycheck in 11-12-13 years. And it's fine , I guess, to get some stuff you're really craving, as long as you keep the bigger goal in mind: financial freedom.