Len Cabrera's Blog, page 3
June 6, 2017
Consider Income When Considering Career
In an earlier post, I referenced an article that discussed Bloomberg’s Shift: The Commission on Work, Workers, and Technology. That’s Bloomberg-as in Michael Bloomberg, the former mayor of New York City. I was shocked at the credit given to the capitalist economic system. From the report: “Today, the poorest Americans have higher living standards-and live healthier, longer lives-than the richest Americans in the 19th century.” It goes on to praise technological advances because increased prod...
Why Productivity Matters
Bloomberg’s Shift: The Commission on Work, Workers, and Technology report tried to address the problems workers face with technological innovation. It did, however, praise technological advances because increased productivity is the only real way to advance our quality of life. Here’s why:
Consider the most basic model of a firm selling a single product in a competitive market. That means the firm can sell as much as it can produce at the market price, p. The firm’s inputs are labor, L, and c...
June 5, 2017
Under 30? Time is on Your Side. Don’t Waste It.
Nicholas Hopwood has an article in Investopedia (& Business Insider) that says your best asset is your income, not your home or savings. He makes a good point for millennials. (It doesn’t apply to those of us with fewer earning years ahead.)
A home ties up a lot of income and actually increases your expenses. Plus studies show the real return to real estate is negative. For savings, Hopwood is referring to 401(k) balances. There’s not much there for younger workers, but higher income allows y...
June 1, 2017
Make Your Own Savings Plan
We’re definitely in a period of “fake news.” Two stories on Yahoo make me think April Fool’s Day was postponed to May this year. The first story claims millennials save for financial freedom rather than to leave the workforce and retire. It cites a Merrill Edge study that claims the 18-34 age group is saving more money than any other age group. That’s hard to believe, given a Consumerist article two weeks ago that said nearly half of Americans are not able to cope with a $100 surprise expense...
May 31, 2017
Don’t Let Your 15 Minutes of Fame Be as a Bad Example
CNBC seems to be highlighting people’s financial mistakes . They started in January with a story about a woman spending $700 a month on Uber. This month, they have two stories: one about a guy with $100K in debt spending $1,100 a month on takeout (nearly 30% of his income!); the other is someone who wasted $41,000 at Amazon on over 1,400 items, none of which she can remember. That last one also links to a story about how consumers underestimate their online purchases. OpenUp studied 1000 sub...
May 30, 2017
10-Year Forecasts are Fairy Tales
The Wall Street Journal just had a great article on the pathetic job the Congressional Budget Office (CBO) has done with predicting costs and coverage from the Affordable Care Act. It’s about time someone points out the idiocy of these projections from Washington (not just the CBO). If you’ve had any statistics classes, you know the standard error for a prediction gets bigger the further away it is from your data. For a time-series model, the error as little as three periods into the future i...
May 24, 2017
Emergency Expenses Are Part of Financial Planning
The Consumerist (a service of Consumer Reports) recently reported on a Bloomberg study on Work, Workers and Technology. The nugget they pulled is not related to any of those things; it deals with financial security, and the result is very bad. One thousand respondents were asked if they were prepared for unexpected expenses, and a majority said no. The results:
$1000 expense: 80% could not pay it
$100 expense: 48% could not pay it
$10 expense: 28% “would have to worry about being able to p...
May 23, 2017
All CFPs Come From Lake Wobegon
It’s amazing how two people can read the same article and come to completely opposite conclusions. A couple days ago, I mentioned a study by Arizona State professor Hendrick Bessembinder that likened individual stocks to lottery tickets. The study itself looked at all stocks from 1926 and concluded (among other things) that 58% of individual stocks failed to outperform 1-month Treasury bills over their lifetimes. That last part is key. Any stock can have a good day, good month, or good year....
May 22, 2017
The Future of Trading is Scary
My last post discussed Robinhood’s targeting of millennial investors, suggesting Robinhood was the real winner of the Snap, Inc. IPO. It may be hard to see how they “won,” given that Robinhood allows free trades. What they did was build a customer base by targeting a generation that expects everything to be free.
But how does Robinhood expect to survive as a “sub-discount” broker with free trades? Investopedia has some ideas: (1) low costs (no physical locations or PR campaigns), (2) interest...
May 19, 2017
Young Investors = Easy Prey for Brokers
Years of investment advice boils down to (1) diversify your portfolio and (2) the easiest, cheapest way to do so is with low-cost, index mutual funds. Given this reality, where are brokers going to find new suckers clients? Enter Millennials. An article by Jefferson Graham in USA Today says the Snap, Inc. (i.e., Snapchat app) IPO on 3/2/17 was very popular with investors under 30. As with many IPOs, initial hype led to a strong opening (up 59% in two days). Once people realized Snap, Inc. has...
