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Nov 4, 2008 | General Nonsense | Permalink
There are many election-related signs in my town. Some signs are in lawns, or along public roads. Others are waved by small groups of enthusiasts at major intersections. These signs make me a little bit sad, because there are only two explanations for their existence:

1. Voters are so dumb they can be swayed by signs.

Or

2. Signs make no difference whatsoever but the people running for office and supporting various ballot propositions are too dumb to realize it.

Either way, it's not a good thing.

Down the road from my house a guy has been spending hours a day standing at an intersection vigorously waving an Obama sign. I don't mean to be unkind, but my story demands that you know this fellow looks like a bit of a douche bag. The only information he is conveying is that if you vote for Obama you can belong to a group that includes at least one douche bag, guaranteed. (I have not ruled out the possibility that he secretly supports McCain and this is some sort of dirty trick.)

If you are a registered voter in the United States, today you must choose between the Antichrist and the only guy that scares the piss out of the Antichrist. My strategy involves buying a wheelbarrow and waiting for the rapture. I understand there will be a lot of gold fillings and diamond earrings left for me and my homeys.
 
I wonder if today will be remembered as the last day of the Republic. If Obama gets elected, lots of McCain supporters will be displeased, but I would expect an orderly transition of power. That's one possibility.

The other possibility is that McCain is elected and there is widespread suspicion, founded or not, that the election was rigged. That, for all practical purposes, will be end of the Republic. Citizens will take to the streets, the lame duck administration will declare martial law, half the country will stop paying taxes, and we will begin the long slide toward a Mad Max economy.

That means we still have all of today and a good part of tomorrow to enjoy ourselves before all Hell breaks loose. So send me links to photos of any good Halloween costumes you saw this weekend. Those are always good for a laugh.

On Friday I found myself without a costume just two hours before a party at my restaurant. So I put on a pair of pajamas that were a foot too long, hiked them up to my nipples, donned my free Motley Fool hat that simply says "FOOL" on the front, and I was good to go.

How about you?
 
 Yesterday I was talking to some McCain supporters about how they arrived at their preference. We don't see many McCain supporters in my neighborhood, so I always take time to hear their views. Admittedly my sample is not large, but of the dozen or so McCain supporters I have spoken with, there is a common thread: Obama gives them a vague feeling of discomfort that they can't quite identify.

When I ask about this vague feeling of discomfort, the answer has something to do with how his views got formed, his past associations, how quickly he rose to prominence, and how charismatic (slick) he is.

The risk, as I understand it, is that once in office Obama would start sporting a turban and begin each speech with WAHLALALALALALAL!!!! He would appoint Supreme Court justices who favor a redistribution of wealth to unborn gay babies, and he'd legalize crack. It would all be part of his master plan to destroy America. I might have the details wrong, but it goes something like that.

It's hard to argue against someone's vague feeling of discomfort. After all, studies have shown that people are actually quite good at determining character and intelligence from nothing more than photographs. I just found it interesting that the people I spoke with described a vague feeling of discomfort in forming their preference. That is not something I ever heard in other elections.
 
The first time I ever tried to get a cartoon published, it was a submission to New Yorker magazine, around 1987. New Yorker is considered the most prestigious publication on Earth for a cartoonist. They rejected me with a form letter. But I never released on the goal of getting a comic in that publication. This week I finally achieved my goal. Well, sort of:

http://www.newyorker.com/services/referral?messageKey=ef1f47a74daa0ebb224178d474ae0e40

I never really let go of a goal. That's not always a good thing, since all of my unfulfilled goals gnaw on me from within. But it sure feels delicious when one of them wanders in from the wilderness.

Three and a half years ago, when I lost my voice to spasmodic dysphonia, I set my goal on not just beating this incurable condition but ending up with a voice that was better than it had been before I got the problem. My original voice was a bit nasal, and I had a habit of mumbling. If you're going to have a goal of defeating an incurable condition, you might as well add some extras. I wanted my next voice to be better than it had ever been.

As I have written before, I had surgery in July with Dr. Berke at UCLA, who pioneered a procedure to fix this sort of voice problem. It was supposed to take 3-4 months from the day of the operation before a good voice returned. Sure enough, right on cue, this is the 3.5 month mark, and my voice is about 90% functional for most purposes. (I can't shout yet, and by the end of the day it is a bit hoarse.) Still, it's frickin' amazing.

Over the next year, my voice is expected to improve further. But that's not good enough. I'm going to put some serious work into making my new voice better than it ever was. It might take me twenty years, but I'll get there.

 
In yesterday's post I said that investing in the right basket of 20 or so individual stocks could give you the same performance and diversification as owning an S&P Index fund but without the fees. Many of you thought that was a bad idea. Allow me to acknowledge those criticisms and suggest a modification to the plan that addresses them.

Criticism 1: Exchange Traded Funds (ETFs) mimic the S&P 500 (see ticker symbol SPY), and their fees are trivial, so forget the basket of 20 stocks and invest that way. (Full disclosure: That's mostly how I invest in stocks.)

Answer: If you had $350,000 in stocks, your annual fee for an ETF would be in the range of $1,000 a year. That is small compared to a managed fund which might charge you $5,000 per year, but it is still real money. If you could save $1,000 per year and give up nothing, you would do it.

Criticism 2: Most of the historical gains of the S&P 500 came from a handful of hot stocks, such as Dell. Your basket of 20 stocks has a good chance of missing the hot stocks that make all the difference.

Answer: Good point. Let's modify my plan to say that each time you put money into the market you pick a company from the S&P 500 that meets two criteria:

The stock has one of the highest ratings of the stocks you don't already own, according to a source with no conflict of interest, such as Charles Schwab. This increases your odds of getting a hot stock, since those would be rated high.


The stock improves your diversification compared to the stocks you already own.
 

Criticism 3: If you buy stocks every month, as you earn money to invest, the transaction fees can get expensive.

Answer: That's true, so don't buy stocks every month. Do it once or twice a year. Each stock you buy or sell will cost about $9 once. Or if you have lots of patience and discipline, invest only when the market drops from its high by ten or twenty percent.

Criticism 4: The S&P 500 changes composition over time, weeding out the weaker companies in a crude way. Your basket of 20 stocks wouldn't get that benefit.

Answer: After you own twenty stocks, sell off the lowest rated stock and replace it each time you add money to your investment, once or twice a year. This prunes the laggard stocks in a crude way similar to how an ETF would rebalance its position.

The most important element of this revised investment plan involves ignoring the advice of pundits and columnists, and especially ignoring your own gut feelings about stocks.

I hope it is obvious that you shouldn't get your financial advice from cartoonists. And feel free to tell me why this modified approach is defective. That's always the point of anything you see on this blog.

 
Experts tell us that a small number of carefully selected stocks - fewer than twenty - would nearly mimic the S&P 500 in terms of diversification and performance. That means you could buy just those stocks and never have to pay a fee for fund management.

Avoiding fees is a huge deal when it comes to lifetime earnings. Managed mutual funds have substantial annual fees. Even an index fund has a management fee. So does a SPDR. If you buy your twenty stocks and just sit on them, you avoid all of the fees while enjoying the same performance and diversification as managed index funds.

It wouldn't be hard for experts to tell you which stocks to buy, and how much of each, in order to mimic the S&P 500. But you will have a hard time finding that sort of information because no expert has an incentive to produce it. Perhaps an author of some sort has produced it, but I haven't seen it.

Obviously everyone can't buy the same twenty stocks because they would quickly become overpriced. But there are many combinations of stocks that would give you the same performance and diversification as the S&P 500. All you need is a computer program that randomly spits out a different basket of stocks for each investor, so the buying gets spread around.

For the lack of that simple information, and the false believe that managed funds have some magic advantage, investors spend billions each year. Arguably, that makes it the most valuable information in the world.
 
Every now and then you read about a Civil War reenactment where someone gets shot with a live round. I would like to be the sort of person who doesn't find that funny, but some dreams are destined to be unfulfilled. I give you...

http://www.msnbc.msn.com/id/27372438/?GT1=43001


You might wonder how real ammo gets into a Civil War reenactment. The funny part is that there are so many ways it could happen. Allow me to list the first several theories that pop into my head.


  • One of the participants is a Method Actor.
  • In any large group of people, one of them will not know the definition of "reenactment." That person is likely to own ammunition.
  • One of the participants secretly hates Civil War Reenactments.
  • One of the participants is from the South and is a sore loser.
  • Someone had a plan to commit the perfect murder.
  • One word: Taliban

My favorite theory is that some goober spent the entire weekend hunting for turkeys with his Civil War reenactment blanks and didn't realize it. Later, when he discovered what he had done, he didn't want to face the embarrassment of telling his fellow bearded dorks that he used up all of his blanks. So he figured he'd do the reenactment with live rounds and just shoot over the heads of the other actors. No one would be the wiser. It was a good plan until he stepped in a woodchuck hole and accidentally shot some guy in the shoulder.

The wound wasn't fatal, but the Civil War reenactment medics sawed off the victim's legs anyway, just to err on the cautious side.

 
Some folks from The Motley Fool interviewed me recently. You can see their article, along with my generic investment advice here, which I first published several years ago:

http://www.fool.com/investing/high-growth/2008/10/23/9-things-you-should-do-instead-of-buying-stocks.aspx


The power of the nine items is that they are in the order in which you should do them. That doesn't sound like a big deal, but if you are new to investing, you wouldn't know where to start, and you'd have a hard time finding that answer anywhere else. You would probably end up letting some professional manager handle your money while converting much of your gains into his fees. The nine point list solves that problem.


The other power of the list is that it excludes all of the investment concepts that you shouldn't be messing with. Notice that there are no derivatives, or options, or anything exotic.


Obviously every investor is in a different situation, and I wouldn't expect many people to follow the nine points exactly. But I think it helps to know what the standard model looks like before you decide where to make your own exceptions.


All bets are off for the moment, obviously. The big question this week is which one of your neighbors you should eat first when things get bad. And of course I expect some sort of zombie problem. But in normal times, the nine point list is useful.


Arguably, all of our economic problems stem from too many people not following the nine point investment list.


Astute observers will point out that anyone who had a lot of money in stocks, as the model suggests, would have gotten hammered this year. That's true, but one of the obvious exceptions to the model is that if you think you need to withdraw your money in the next five years, you should reduce your stock holdings to avoid the risk of just such a downturn.

 
Suppose you were a skilled hypnotist, and so charismatic that you knew you could change the opinion of an average person simply by your choice of words. Would it be ethical to be that persuasive?

To make it interesting, let's say you believe in the rightness of your own views, and you are talking to someone who firmly believes the opposite. You both have the same information at your disposal, so it is simply a case of different opinions. If you knew you could sway that person with your words, without adding any new information to the mix, would it be ethical to do so?

I encountered this dilemma after learning hypnosis. You can extend the methods of hypnosis into normal conversation, the way a trial lawyer, politician, or top salesperson would. You can't turn anyone into a zombie slave, but obviously a skilled salesperson can close more deals than an unskilled one. Your choice of words has a huge impact on how other people form their so-called opinions. Where do you draw the line between a normal exchange of views and an outright manipulation of another person's brain?

Long time readers of this blog know that I view humans as moist robots who have no free will, and therefore morality is an irrational concept. But most of you disagree with that view, so for you this is a fair question.

Allow me to put it into concrete terms. Suppose I knew that I could use my powers of hypnotic persuasion, in the form of common words in this blog, to cause some portion of you to change your vote in the upcoming election. And suppose I believed I was helping the country by doing so. Would it be ethical to change people's opinions without adding any data to the process?
 
I wonder if economics is making war obsolete, at least for the larger countries. Waging war is just too damned expensive, even if your enemy lives in mud huts. If you're looking for the silver lining to the wars in Iraq and Afghanistan, here it is: They prove once and for all that the occupier doesn't come out ahead even by "winning."

It makes more sense to turn off the economic spigot to any country that starts to look threatening to its neighbor. Arguably, the United States is already in a war with Iran, but it takes the form of developing alternative fuels. When Iran can no longer find much of a market for its oil, it will have to start being a lot friendlier. The same goes for the United States. The next President of The United States (probably Obama) will be projecting a new humility thanks to a crippled economy.

North Korea has been defeated economically, for all practical purposes. So was the Soviet Union. Venezuela is getting less cocky as the price of oil plummets. China has become zero threat to the U.S. because of economic interests.

Terrorism is still the wild card. But the end of oil will put more of a dent in terrorism than any war could.

In the old days you could make a profit from a good war, thanks to pillaging and slavery. Those days have passed. Switzerland has one of the highest standards of living in the world.

I think the age of big war has passed.
 
 
 
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