Ten Things to Do with Yesterday’s Business Paper

Yesterday’s paper still holds value of another kind. A few lessons in business writing and reading.

Whether it’s yesterday’s business paper or last week’s it still holds some value. This post is written in a humoristic manner but it also emphasizes the importance of understanding journalistic trends, interests and business writing as a concept.

I’ll start right away with what can be done with yesterday’s business paper:

#1 Get a good laugh from quickly irrelevant commentary and analysis

Source: NY Times

There’s only one guarantee in economic and stock market analysis and commentary. The central and generally agreed upon scenario won’t happen. Everything else is quite possible.

Nothing puts things in perspective as reading yesterday’s paper or better yet last week’s or last month’s papers. No one really knows what’s going on. We’re all pretty much shooting in the darkness.

Anyone who reads analysis and commentary recognizes the usual twisting and squirming with forecasts that include more conditional prepositions than any real analysis. I should know. I’ve written some (although I try to convey my general thesis).

They are pretty useful as jokes however.

#2 Note the ones that do know what they’re talking about

There are good analysts and journalists our there. Getting to know them is well worth the effort.

Next to financial reports, investor relations and the market itself we have precious little data regarding the economic and business environment.

It takes time, patience and experience to really know how to read a paper, what should be filtered, what the various interests in each article are and what is really important. The good news is that it’s a learned trait.

#3 Notice how yesterday’s heroes become today’s villains and how yesterday’s trends become today’s bubbles

Much like anything in life business news, commentary and analysis is cyclical. It crowns the kinds of the business world; it creates and usually strengthens trends and hypes and is also the first to tell us “we told you so”.

New business models, new economics, recessions, expectations, oil, housing bubbles and more are mirrored and toyed with in the papers. There are actually patterns to reporting bubbles and trends and I believe the follow the following (hopefully I’ll write a bit more about it in a future post):

• Unnoticeable 100 word articles or press releases.
• Reports of abnormal return on investment.
• Analysis which sets goal prices at 50% higher after 400% increase in the past 3 years.
• Debate, commentary and cover stories of the heroes of the new trend.
• Unnoticeable 100 word articles of veteran investors warning of miss conceptions and over-valuations of new business models and new economies.
• Commentaries that claim the old must adapt to the new or be lost forever.
• Reports of sudden and severe drops in prices.
• Commentaries analyzing why everything that’s happening is only a part of a healthy realization of past capital gains.
• Mass hysteria and stock selling as everything comes crumbling down.
• "We told you so" by every economic commentator everywhere.
• Old veterans buying everything they can get their hold on.

And the cycle continues. Those who ignore history are bound to repeat its mistakes

#4 Browse it again to stimulate your creative blogging bone

I find business papers and personal finance blogs a great source of inspiration. I either agree or disagree with what I read and sometimes I just can’t wait to tell you why.

For me, constant creativity is the hardest part of blogging. Thinking at today’s business news and economic analysis from another point of view usually gets my writing going pretty quickly.

#5 Save it for making money in future time travel to the past

Had we had the opportunity wouldn’t we all take advantage of it? Much like Michael J. Fox did with a 2000’s sports almanac back in the 1950’s in Back to the Future?

That is a bit far fetched, I agree, but haven’t we all wondered what would we do had we known how the market will act? Looking at graphs and charts trying to predict their future behavior from past patterns and constantly failed?

Many business papers publish seasonal and event driven articles with great recommendations, advice and how-to’s. Saving these can be very helpful the next time around. Tax planning recommendations, Christmas and holiday shopping tips and many more helpful articles often hold great potential to be taken advantage of the next time around any particular event becomes relevant.

There must be many other good uses to yesterday’s business papers. I’d appreciate your thoughts and comments on the matter.

You could always go with a more practical view and do any of the following:

6. Line your pet’s bed or cage
7. Wrap fish
8. Recycle it
9. Cut it into a bouquet
10. Line your floor while painting

Why We Shouldn’t Expect An Inheritance, Investment Mistakes Made By Couples And More @ The Round-Up

The customary weekly round-up

Weeks really go by fast. I usually try to do something extra-ordinary every week to slow down the feeling of passing time. Whether we like it or not, it’s time for another weekly round-up (time stops for no men):

A couple of good articles from around the web:

• A great article in the NY times discusses 8 Reasons You Should Not Expect an Inheritance.
• Adapt to a Bear Market by Investopedia for Yahoo Finance is another great read for turbulent times.

The Money Hacks Carnival #18 was hosted by My Investing Blog. My post on The Importance of Learning to Let Go made editor’s choice! I especially liked the following posts:

• Investment Mistakes a Couple Makes @ Living Almost Large
• 13 Lucky Tips to Save on Life Insurance @ The Wealth Hunter

The Carnival of Personal Finance #158 was hosted by Mrs. Micah. I enjoyed the following posts:

• What Being A Surgeon Has Taught Me About Personal Finance @ Value for your Life
• How To Protect Your Job and Career During an Economic Slump @ The Digerati Life

The Festival of Frugality #131 was hosted by Broke Grad Student. I’ve found the following particularly interesting:

• The Greatest Frugal Generation @ SavingAdvice
• A Real-Life Example of How to Save $1,300 in Less than Two Hours by Shopping Around for Car Insurance @ Free Money Finance

More from fellow personal finance bloggers:

• Thoughts on the Law of Attraction @ The Financial Philosopher
• Are You Financially Healthy? The 5 Stages @ Moolanomy
• A Reminder to Keep Your Beneficiaries Up-to-Date @ Gen-X Finance
• The Carnival of Money Stories #65 @ The Dividend Guy

My View of Frugal Thinking

Presenting my thoughts on frugality and personal finance literacy

I’ve never been a huge fan of extreme frugal thinking. I’ve always thought excess frugality comes at a rather high price which outweighs the financial benefit of saving $30 a month. I don’t, by any means, discredit a sum of $30 a month. However, as a big fan of efficiency and productivity I believe the time and effort it takes to get frugal enough to save quarter to quarter is just too precious.

Reading and writing personal finance articles has opened my eyes to many different views of frugal thinking. The simple act of reading is already enough for some ideas to grab hold and nest in your head ready to evolve with the next article and next post.

Those of you who have been following my writings here at The Personal Financier have surely noticed by now that my view of frugality is a bit different. I believe in investing the time in financial education and competence which later translates to much bigger savings.

Clipping coupons has its place and is very wise if you can afford the time. Quarters add up pretty quickly as grains of sand create dunes (I’ve expanded on this here: The Little Savings That Could). However, learning basic financial thinking, financial math and getting to know the capital markets better will pay higher dividends in the long run.

I suggest concentrating efforts at becoming very knowledgeable in the following personal finance niches which will serve as true leverages to your personal finances:

#1 Mortgages and Loans

I’ve recently wrote an article about how I saved over $3,000 in one hour. It sounds like, and it really is, a catchy headline, but it’s also completely true. Realizing we are in a very low interest environment allowed me to quickly capitalize on low interest rates by refinancing my mortgage. My financial understanding also made me to keep my mortgage payments at their current level thus saving on the number of payments and directly on interest paid (Naturally, the factor of time is crucial for compounding interest).

#2 Investments

Understanding common investing mistakes will also save you much more than any homemade rain water receptacle. These are fun and creative to build but financially wise don’t translate to significant savings. Understanding the relation between risk and return, the concepts of investment terms, asset allocation and investing goals and planning is much more valuable than throwing frugal birthdays.

I’ve written on my share of common investing mistakes. Two of my favorites are: 10 Sure Ways to lose 50% of your investment and Investing mistakes to avoid.

#3 Retirement

All the frugality in the world won’t get you a proper retirement unless it’s combined with solid financial planning. The amount of money required to retire properly has no equal (besides, maybe, a New York Apartment).

There are so many mistakes we can make that will affect our retirement it’s no wonder such a small percent of people retire as they planned (more on How to Avoid Crippling Your Retirement Funds here).

#4 Insurance

One of the most important aspects of financial planning is making sure the financial impact of sudden and unforeseen events is smoothed out through insurance. Life and disability on the one hand and property insurance on the other will ensure a smoother financial “life line”.
Insurance always seems easy enough but is really very complicated. Different coverage, plans, alternatives and more create a dazzling array of products to choose from. I’m not knowledgeable enough to be writing on insurance but hopefully in the near future I’ll be closing more knowledge gaps and become more proficient.

#5 Real Estate

One of the biggest expense and investment items in our lives is real estate. As a result each successful or less successful decision has a huge impact on our lives. Location is often mentioned as a prime consideration, home renovations and their return on investment is a popular topic, rent vs. buy comparisons are always relevant and more (there are a lot of relative posts in my top posts section).

#6 Career Planning

Instead of constantly focusing on how to spend less, which usually holds a finite and small potential I believe in concentrating on earning more. Career planning and opportunities offer much more than simply saving on expenses. From education to day to day management career planning is crucial for success. We do most of the things intuitively but often times some posts and articles can offer precious ideas.

I recently wrote, what in my opinion is a very good post on how to actively manage our careers which should really clarify what I’m talking about.

There are more subjects to explore such as budgeting, debt and risk management, credit cards and loans and more with an almost infinite pool of knowledge.

To conclude, my view of frugal thinking is of learning and education. I believe sinking our teeth in all of these subjects has a greater return on time invested than focusing on every-day frugality. I agree frugality translates, directly, to pocket money but how much are we talking about here?

Image by: ethorson

Free Market Proponents Call for Regulation on Speculative Oil Futures Trading: Define Irony

Analysts say speculative oil trading is to blame for gas prices at $4 a gallon. Congress considers regulation and legislation. What happened to market forces of supply and demand?

In the 2005 movie Syriana an oil company executive quotes Nobel Prize winning and renowned economist Milton Freedman: “Corruption is government intrusion into market efficiencies in the form of regulations”, he says. Freedman, one of the strongest proponents of the free-market, promoted the view of minimal government intervention in the markets as a means of creating political and social freedom.

We are born and raised according to the theoretical concepts of the free market and we are diligently taught the rules of the ‘vanishing hand’ and market forces at work. Our economic upbringing and formal academic education teaches us about market efficiencies and perfect competition only to face, later in our lives, a very harsh and different reality.

Gloating isn’t the best of qualities, yet I couldn’t avoid it when I read about a recent congressional panel regarding rising oil prices. Four senior analysts testified before congress claiming speculators are to blame for $4 a gallon gas prices.

The four senior analysts are: Michael Masters, who heads up Masters Capital Management, Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy Consultants.

All four analysts agreed limiting speculators’ participation in energy markets will lead to sharp drop in oil prices to the economically reasonable level of $65-$75 derived by supply and demand.

Apparently Congress is looking to revise legislation to do just that. There are several bills at work trying to limit or even remove speculation from energy markets.

More than 63% of oil futures owned by speculators

According to the Energy and Commerce Committee speculators now control overwhelming amounts of the oil futures market.

The economic function of a future contract is to enable any corporation to hedge its business and fix the price of oil in a future business deal, either paid for or sold. Imagine oil companies who wish to raise the level of certainty behind their revenues. They will offer future contracts to buy oil in certain prices in a future given time. Should a trucking company find those prices reasonable a deal is closed today with known prices for both enabling them to smoothen out uncertainties in future business.

The level of contracts owned by speculators rose from 37% of the contracts in 2007 to 63% in 2008 with the rest owned by oil refineries, trucking companies, wholesalers and other end users.

Imagine all that speculative money removed from the market. Suddenly an overwhelming over-supply is created and prices drop sharply.

The following are more charts presented before the committee. They are real eye openers:

The massive increase in speculative investments is evident from the charts. Another important observation is the level of relative growth in speculative investments:
More regarding economic theory, free markets and reason

Projecting the case of speculative investments on Milton Freedman’s entire economic philosophy is a huge over-simplification and I won’t be going that way. I only wish to illustrate the delicate balance that need be between the freedom of markets and government regulation.

Lack of proper regulation enables speculators to take advantage of market failures. Sadly it’s not a perfect world and there’s no real ‘vanishing hand’, perfect competition and market forces. There are opportunities and opportunists grabbing what is left open for grabbing.

There’s no doubt speculative activities contribute to market efficiency. The price of a lack of proper regulation and supervision can be very high.

Ayn Rand, the noted author and philosopher who wrote the infamous book “Atlas Shrugged” believed and promoted, wholeheartedly, the concept of freedom and objectivism. She is quoted for writing, much like Milton Freedman that “Every government interference in the economy consists of giving an unearned benefit, extorted by force, to some men at the expense of others”.

As an idea these words echo strongly. The problem is they are often correct the other way around. A Lack of government interference in the economy might give unearned benefit, extorted by force, to some men at the expense of others.
If we’ve sunk deep into philosophy than we may also recall Thomas Hobbes and Jean Jacques Rousseau’s words regarding the government:

“That a man be willing, when others are so too, as far forth as for peace and defense of himself he shall think it necessary, to lay down this right to all things; and be contented with so much liberty against other men, as he would allow other men against himself” (Thomas Hobbes)

“As soon as any man says of the affairs of the State "What does it matter to me?" the State may be given up for lost” (Jean Jacques Rousseau)

Related Posts :

• Is There an Oil Price Bubble Evolving?
• Higher Gas Prices: A Blessing in Disguise or America's Wakeup Call
• Spontaneous Observations on Commodity Prices - Will Prices Remain so High?

Image by: ping-news.com

The Economic Impact of Euro 2008 and a Generic Illustration for Global Sports Events

Global sports events have a tremendous economic impact on both the hosting countries and the rest of the world. Euro 2008 as a test case.

A picture of the beautiful Innsbruck Stadium against the Austrian Alps

American’s are probably less aware of the grand football tournament taking place in the European continent these days. Euro 2008 is co-hosted by Switzerland and Austria and is considered to be the second most important football tournament in the world and is the third most-watched global sporting event after the summer Olympics and the world cup (football as well).

The Euro, or European soccer championship, takes place every 4 years (like the world cup and the summer Olympics) and lasts three weeks. Europe’s 16 top national football teams will be competing in 19 games for the cup.

UEFA (Union of European Football Association) expects over 1 billion people will view the matches on TV and internet traffic and interest is expected to reach over 100 million visitors.

It’s very interesting to observe the economic impact of such global or continental events. The Euro’s impact extends far greater than the hosting countries themselves and is carried, much like a wave, into all of Europe and the world. The upcoming Olympics in Beijing will undoubtedly leave, and has already left, a significant economic mark on China and the world.

A graphic illustration of the economic impact of global sports events

The following is my attempt at a graphic illustration of the impact of global sporting events:

Austria and Switzerland will be hosting these games and will benefit most of incoming tourism, broadcasting rights, merchandizing, commercial revenues and more. Another economic boost comes in the form of temporary jobs and investments in infrastructure much more obvious in Beijing.

Weighing the numbers each tournament and qualification’s match suddenly seems that much more important. A country that fails to qualify to the Euro will obviously lose a major and significant share of the potential economic gain.

Women are not left out

A very interesting study done for MasterCard estimates women spending and commerce revolving around the tournament at 140 Mil. Euros (Approx. $210 Mil). These spending are entirely football related. That’s around 10% of the total economic impact of the entire tournament.

Traditionally a men’s sport football seems to have slowly, yet surely, found its way to women’s hearts as well. The festive atmosphere in and around the stadium’s as well as the high maintenance level and comfort level of the facilities attract more families and women to the matches.

Image by: Nico3000