Money and Financial Business

There's a Billy Joel song by the same title. "And so it goes." It's sort of a bittersweet song, one I identify with, corny as that may be, and a fitting way to ring out the year that has been bittersweet to say the least. At the beginning of the year I was a little cash poor and generally without a care, in June I hit a bus, a breakup and a turning point, in that order, in July I started this

Tim Worstall has been posting a few bits and bobs about gender and pay.

In my mind the key task is to analyse occupations, gender and pay and to see if pay differentials can be explained by the type of work or the human capital brought into the workplace. If a bloke and a woman do exactly the same job and outputs in the workplace but are paid differently then there's discrimination.

But as a former labour market economist, I don't see gender pay differences in occupations and automatically scream about equality outrages. There might be some very good reasons for differences, such as productivity for one.

Also - it reminded me of something - and that's subject choice at school by gender. There are quite apparent links between subject choice and gender. Look at these two pdfs:

• A level entries by subject and gender
• GCSE attempts by subject and gender - i.e. those who sat GCSEs (didn't necessarily pass them) - this is as close to 'subject choice' as I could get.

What does this mean? well it means that the die is cast along gender lines for quite a few of our young people at a fairly young age. Interesting I thought.

Perception is our understanding of reality & we understand reality by relating cause & effect. When what we perceive is in line with reality, the perception becomes an information. Mental blocks of such information collectively consititutes our knowledge. But sometimes what we perceive, because of cognitive illusions, can be in contradiction to reality.

"When perception does get through to man’s brain, it is often misweighted, because what is registered in perception is in shockingness of apparent contrast, not the standard scientific units that make possible science and good engineering"-Charlie Munger

I think understanding the limitations in relating cause and effect can help us reduce the perception-reality gap.

"Just as a man working with his tools should know its limitations, a man working with his cognitive apparatus must know its limitations"--Charlie Munger.

Cause & Effect:
"Today is yesterday's effect & tomorrow's cause"--Philip Gribble

The above quote highlights the importance of the fact that the present can be seen in context of past & future. Similarly we can use our thought process in two different, both equally important, modes, Forward thinking & backward thinking. None of the these is limited to relating present to past or future, as the name may suggest. Instead, backward thinking suggests relating causes to some known effect & vice versa.

Backward Thinking:
"'Invert, always invert,' Jacobi said. He knew that it is in the nature of things that many hard problems are best solved when they are addressed backward"--Charles Munger.

It is the process of working backwards from the effect & attributing causes, based on our understanding of the effect. We all do this almost on a daily basis. But we often forget a very important property of cause & effect,

"Causes & effects can be widely separated in time & space" by Joseph Connor in 'The Art of Systems Thinking'

The reason behind that is human mind has limited circuity & it can easily get influenced by psychological tendencies (like availability bias, first conclusion bias while attributing) The point is while attributing we tend to overweigh the elements which are readily available for our cognition to assimilate.

"Cognition is ordinarily situation-dependent so that different situations often cause different conclusions, even when the same person is thinking in the same general subject area"--Charlie Munger

This could be dangerous as we could end up without attributing any cause to the effect or even worse we can end up attributing wrong cause to the effect. Operating with such a disadvantage can be cited as similar to Mr. Munger's, 'disadvantage of one legged man in an ass kicking contest'

Forward Thinking:
"If corporate pregnancy is going to be the consequence of corporate mating, then the time to face that fact is before the moment of ectasy"-Warren Buffett

This is the bottom up approach where we work from a cause & think of various effects that the cause could induce. But we often forget an important property of cause & effect,

"Effect can be disproportionate to the cause" by Joseph Connor in 'The Art of Systems Thinking'

Think of a conglomerate which enters into a new business. Once the new business is created it gets a life of its own. The reason behind that is 'effects of effects' (ie) effect can become cause & induce further effects, which may become uncontrollable. The point is while thinking we should incorporate the effects of effects, where the smallest of causes can lead to a larger effect & vice-versa.

Conclusion:
The cornerstone for successful investing is "Take care of the downside & the upside will take care of itself." Similarly, I think the cornerstone for successful use of our cognitive apparatus is

"Take care of the limitations & the advantages will take care of themselves"

It always makes me laugh heartily when it snows in Britain. Its a crisis of gargantuan proportions, or so the TV news would have it. The 24 hour news have a field day. Its like the Blitz all over again, the collective bedding down in village community centres, the distress of seeing abandoned vehicles, no-one to care for them!

I laughed at the coverage from Kent's M20 yesterday as the reporter wittered on about the huge problem of snow, when we could see, behind him about an inch of soft wet snow on a railing! FFS!

What a load of bloody stupid nonsense. We can all see from the weather forecast that its going to snow, and well, what's the big deal anyhow?

In countries where snow is present most of the winter, they just get on with it. OK, they stick their winter tyres on which helps them drive in wintry conditions. But they also have mobile phones etc to ask for help. And they wear warm coats, always having hats scarves and gloves etc. Although some don't bother. Basically they just get on with it really - without a daft fuss like what we Britons do.

I've been to Kazakhstan in winter and seen them scoot about on ice all day in ladas, and then also ski every year in Austria, and well, normality is in abundance with snow cover for 4-5 months.

I have written before of my medical insurance mess. I just got my next quarterly bill from Assurant / Fortis and the rate has increased exactly 27.46% from a year ago! The rate is now up to $2,193.54 quarterly* with a $5,000 deductible. And to make matters worse -- last ...

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I havent posted in a while been busy with Christmas and everything. Here is an update to my progress. Got 3k from my dad for Christmas to go into my IRA. Account Totals Banking $45,736.52 Credit Cards $0.00 Investment $28,467.39 Total Value $74,203.91

I tend to go a little crazy around holiday season. I am the person that you hear people talking about. Some people go crazy around holiday season, they say. Cut up your credit cards, they say. Cut cut cut. They are really all just talking about me. Went out to buy a gift for J late last night. Came home with stuff for myself. That's what good girlfriends are for. Not that he minds. I think he

One thing I will say about my current job. I actually have time for a life. It's an interesting change from before. For the greater part of my career I have worked in small startups or rapidly growing companies where 120 hr work weeks were not unheard of. Now, I actually get to go home by 6 or 7 pm. I don't quite know how to deal with that. So while I am figuring out how to enjoy my free time

Business Week sat down with Timothy Vick and asked him for his insights on the current market. Vick "sees stocks as the best investments in 2006" and he thinks "the stock market is likely to do better for investors than other vehicles for their money."

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Forbes has published their "The Worst Cars 2005". The list doesn't surprise me much, though when I read headlines like this I secretly hope for a skewering that goes farther than general crash test and quality ratings.

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A few months ago when I turned down two other job offers to accept the Microsoft one I asked myself if I was making the right decision. It was a decision based more on some kind of fascination with the software giant rather than any concrete reason to work there. The last thing I said was "Decisions based on impulse tend to be short love affairs. Foreshadowing perhaps? I hope not." Well, I guess

"There is lots of noise that comes with information and one needs to train himself to separate noise from information" -- Naseem Taleb (in substance)

Over the past few weeks, I have realised that two areas where discerning information from noise can be of great help are decision making & interpretaion of financial information.

I will use a famous experiment done by Tversky & Kahneman & quote Charlie Munger, Buffett, & Ralph Wanger to drive home the point.

Decision Making:
Success or failure is a consequence of decisions that we make over our lifetime. We can control our decision making process but not how they will fare out. This reminds me of wonderful quote by Ayn Rand,

"One can evade reality but he cannot evade the consequences of evading reality."

To understand how to make decisions I think it is important to realise how decisions are not to be made & work backwards from there.

Psychological tendencies (or) Noises:
We all get, to varying degrees, influenced by psychological tendencies while making decisions. Some of the most common are Availability Bias, Doubt avoidance tendency, Inconsistency avoidance tendency & Psychological denial. (List of other tendencies)

Tversky & Kahneman's Experiment:
Question: 'Are there more words in english language starting with letter 'K' (or) with 'K' as third letter?'

Tversky: "The responses to the question illustrate the general principle that people use to reason under the conditions of uncertainty. They try to think of examples of the word starting with 'k' & with 'K' in the third place. Just because it is much easier to recall words starting with 'K' they assume that there must be more letters starting with K whereas in reality there are twice as many words with K in the third place. We refer to this as Availability Heuristics."

Charlie Munger on Human misjudgment:
"The brain of man is programmed with a tendency to quickly remove doubt by reaching some decisions" (Doubt Avoidance Tendency)

"The brain of man conserves programming space by being reluctant to change, which is a form of inconsistency avoidance." (Inconsistency Avoidance Tendency)

"It is easy to see that a quickly reached conclusion, triggered by Doubt avoidance tendency, when combined with a tendency to resist any change in that conclusion, will naturally cause a lot of errors in cognition for modern man."

I think that we should train ourselves on how to deal with these biases while making decisions and one of the ways of doing that is to try what Charlie Munger has done all through his life,

"I have long looked for insight by inversion in the intense manner counseled by the great Jacobi: 'Invert, always invert.' I sought good judgment mostly by collecting instances of bad judgment, then pondering ways to avoid such outcomes."

Interpretation of Financial Information:
The movement of stocks or markets is a function of how a given news or event is interpreted by the group of investors & traders. If we interpret those news or events the way most of the investors do then we will end up doing the same things as most of the investor & with the same results too. This is where I think we need to train ourselves to think differently than the herd which we are trying to outrun. This is well explained by Ralph Wanger as,

"If you want to stand out of the pack, you have to think out of the pack"--Ralph Wanger.

Having said that I would like to add that being contrarian for the sake of being one can be cited as similar to markets overreaction to good news.

Buy & Sell Decision?
We all aspire to be successful. But confusing that aspiration with the means to attain that objective can be dangerous (ie) while deciding when to buy & when to sell, we should not let our subjective aspirations clash with what the current situation--based on the value of the underlying stock-- warrants us to do.

Taking a loss should not make us feel like a stupid, if our process is right & taking a profit as genius, if our process if wrong. One can hope to achieve what he aspires in the long run. But, in the short run, we have to learn to accept what we deserve & keep on improving.

Conclusion:
During the last decade or so, with the development of internet, ease with which the information gets transmitted from one place to other has increased substantially. Thus it becomes even more important that we respond to information that we think are information & not noises.

"You don’t need 99 percent of the information out there for investments”-Warren Buffett.

Stock went high and i got divident from Dupont for $37.

Account Totals
Banking	$41,694.60
Credit Cards	-$51.05
Investment	$28,392.56
Total Value	$70,036.11

Account Totals
Banking	$41,684.97
Credit Cards	-$51.05
Investment	$28,279.14
Total Value	$69,913.06

Intrest rates are now 4.25% woo hoo. Hopefully HSBC will raise it to 4.25%. I will be updating my finance shortly.

Well was thinking to myself, i get paid a lousy 38,000 a year and i am 24. Thinking of the best way to make 60k by 30 years old at least. I been working at a company for 1 years 2 month. Raises dont happen till March which sucks. I got dicked by comming in in Oct so i didnt get a raise in Dec. Then they make me wait till March now. So pretty much i worked a year and half with no raise till i get a raise. Thinking of being an analyst or DBA gives u more pay when switching jobs. Plus they are better paying positions. * End Rant*

INTC announced that it plans to issue $1.4b in Junior Convertible debentures. INTC currently has very little debt on its books. Its long-term debt is close to $400m, paltry amount when you look at the accounts payable balance of over $2b. The $1.4b is also a paltry amount for a company with market cap of $160b. So why issue debt when a company like INTC generates wads of cash every quarter? For

Oh how time flies when you are having fun. Or in my case, when you are jetlagged and can't remember your password. Seriously, isn't it high time we moved on to retinal scans or neurological pattern matching or some other such hi fi method of user identification? All this having to remember passwords when you are trying to battle a haywire body clock is very annoying, particularly when you have an

Now guys here is the real deal. You can see exactly where i put my money and how much. I have a strange allocation. Account List Your accounts are listed below. To see account details, click the name of the account. MSN Money Accounts HSBC Bank USA Banking Earns me 4% 14 hrs ago $25,386.04 Paypal - Money Ma Premier Account - United States Buy/sell Stuff 2 hrs ago - United States $7.47 Washington Mutu TRADITIONAL CERTIFICATE OF DEPOSIT Empty CD 37 mins ago $0.00 Washington Mutu TRADITIONAL CERTIFICATE OF DEPOSIT Gets 3.75% 37 mins ago $12,362.60 Washington Mutual FREE CHECKING For rent and expenses 37 mins ago $3,928.86 Credit Card Accounts Citi Cards CREDIT CARD ************7316 Charging stuff and earning 1% back 12 hrs ago -$51.05 Citi Cards CREDIT CARD ************8156 2nd Credit card " " 12 hrs ago $0.00 Investment Accounts Charles Schwab Investment 49 mins ago $16,755.88 Stocks Great-West 401k Investment 52 mins ago $6,564.57 401k Janus Investment N/A $4,276.47 IRA Account Totals Banking $41,684.97 Credit Cards -$51.05 Investment $27,596.92 Total Value $69,230.84

I make 38k a year, as a technical support engineer, just got of college about 1 year and 4 months ago. Been working for 1 year and 2 months now. I save about 2k a month. My take home after taxes is 2600 a month. Expenses are 600 a month. $400 on rent 200 on food/gas and everything else. Sometimes i do go over my 600 but not by much maybe $40 at most. Putting 2k a month is nice however i do have to live pretty frugal. Drinks at a club cost $10 a pop. Buying a round of drinks for friends would cost anywhere from 60-100 depending on how many people are there. Then there is the girlfriend which does not want to eat fast food haha. My spending style is very conservative. Spending $20 on gas a week and $20 on food a week. Some people may ask how do i have a large networth if i have been only working 1 year. I been working and saving my whole life. Plus since being Asian my parents paid for college and everything associated to it...I am lucky.

I bonds are 6.73% which is really high. I would recommend anyone to buy them since they are safe and yield a high return. Only a hand full of online banks such as emigrantdirect and HSBC are offering a nice 4%. The best thing is that HSBC gives you an ATM card you can use to take out cash instantly.

A good site to compare and track finances is Networthiq.com. You can compare by age, education, salary, and industries. Below is my networthiq profile. I am going to have to update it. =)

Comments Off Financial Nitty Gritty admin @ 11:33 pm — Link to this post Account Totals Banking $41,684.97 Credit Cards -$51.05 Investment $27,636.62 Total Value $69,270.54 I use MSN money online and love it. I love the ability to update and keep your account up to date. Another good service is Yodlee.com. Well as you can see this is my financial picture right now. Currently i am trying to save as much as possible. I would like to retire at 55. Almost at 70k, my 401k should update tommorow to reflect a 600 increase in my networth. Comments Off Sales still going, but are slowing admin @ 8:29 am — Link to this post The number of New Listings and Pending Sales dropped dramatically the last week of November as both buyers and sellers were focused on the Thanksgiving holiday.  Last week saw a bump up in showings as buyers got back to their normal routines.Many buyers are concerned that there haven’t been many new listings coming on the market in recent weeks.  This is a seasonal trend… we should see a pick-up in new listings after the New Year. As we near the end of the year, I encourage buyers sitting on the fence to go out and find your home now while the market conditions are in your favor.  For sellers, keep in mind that a buyer who is looking at houses this time of year may be very motivated… if you take your home off the market till the new year, you may miss the buyer looking for a home like yours.  Comments Off December 7, 2005 5.00% APY for 13 month CD. Can you top this rate? admin @ 1:05 am — Link to this post I’m looking for a place to park some cash and found this rate. If you can top this, please leave a comment so others may benefit. Small print... Read more news like this from PFBlog Network, the personal finance bloggers' network.. Comments Off December 3, 2005 iPod / MP3: A unique gift idea for that special music lover admin @ 9:00 am — Link to this post If someone special on your shopping list happens to be one of the 30+ million iPod / MP3 owners, here's an idea for an add-on to help them get the most from their portable player... Read more news like this from PFBlog Network, the personal finance bloggers' network.. Comments Off December 2, 2005 What’s The Deal? - Visa Buxx Cards admin @ 2:40 pm — Link to this post Visa Buxx Cards offer check card functionality with a limited balance. They are meant for teens who want to have a credit card but whose parents are not too keen on the idea. I think they are a good tool to manage spending without going fully to credit or letting ... Read more news like this from PFBlog Network, the personal finance bloggers' network.. Comments Off December 1, 2005 Lessons taught by a Coin admin @ 3:22 am — Link to this post "Your idea has to be original only in its adaptation to the problem you are working on"-Edison. In the last chapter of Security Analysis (1934), Ben Graham mentioned about an experiment done by Frederick Macaulay to prove the invalidity of technical analysis. Experiment: "...Frederick Macaulay plotted the results of tossing the coins several thousand times (heads = one point up; tail = one point down) & had thereby obtained a graph resembling in all respects the typical stock chart--with resistance points, trend lines, double tops, areas of accumulation, etc. Since the chart could not possibily hold any clue as to the future sequence of heads or tails, there was a rather strong inference that stock charts are valueless." (Pg no: 608) I got fascinated & wanted to try it out myself. The plan was to plot a chart with 100 coin tosses & see how it looks like. But then I looked at the chart & wanted to check if regression to mean holds. In the process I ended up with 400 coin tosses & few important lessons. Invalidity of Technical Analysis: Everybody will agree that it would be fallacious to look at the above chart and conclude that there will be a more head or tails in the next 50 tosses. One argument that, I think, people who believe in technical analysis can use against the logic here is 'Each coin toss is an independent event, whereas daily stock price moments may not be independent events. How do you rationalise it?' I don't know the answer but it reminds me of wonderful quote by Ben Franklin, "There's none deceived but that he trusts." Gambler's Fallacy: There were many instances where I had sequence of 5 heads or tails in a row. I could clearly hear in the back of my mind, while the coin went up in the air, that this time it should be head or tail based on the past vivid sequence. All this even after being aware of the fact that each coin toss is an independent event & it has got nothing to do with the past events. This is also one of the reason that I continued till 400 (ie) I did it until I stopped predicting, subconsciously. This reminds me of what Tversky & Kahneman have said, "Under some conditions, when the conditions are knowable, we should not trust our intuition because we are liable to predictable errors & biases. Also the fact that we can predict in advance, when intuition might falter, gives us some hope of implementing procedures to avoid the errors." 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