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A Look at Inflation-Adjusted S&P 500 Data for 1960 Through 2010 and Dividend Reinvestment vs. Non Dividend Reinvestment

August 7, 2011 By 5 Comments
S&P 500 Dividend Reinvestment Inflation-Adjusted Data

I am working on my What is a mutual fund? category at About.com and a thought struck me.  I wanted to go back and look at the most recent investing lifetime (the 50 year period between 1960 and 2010).  I imagined that an investor could have bought the S&P 500 stock market index (obviously you can't since an index is just a theoretical construct but you could have built a portfolio to mirror it provided you had enough capital; at least until the rise of the now indispensable index fund). … [Read more...]

Filed Under: Stock Market Tagged With: ,

Note to Washington: You Cannot Separate Human Psychology from Economics

September 23, 2010 By 2 Comments
Predictably Irrational Book

The Huffington Post is talking about Obama's handling of the economy and the world view of his economic advisers now that Larry Summers is resigning. Those policies -- the bailout of Detroit automakers, an $814 billion stimulus package, subsequent programs under TARP, Cash for Clunkers and the administration's unlimited backstop of Fannie Mae and Freddie Mac -- arguably saved an economy that many considered to be on the verge of collapse. But while the recession officially ended last year, … [Read more...]

Filed Under: Economics Tagged With: , , , , , , , , ,

Factor In Your Income Sources When Seeking Diversification

September 13, 2010 By Leave a Comment
Are You a Stock or a Bond

When it comes to diversification, you have to look at your entire life and not just your portfolio.  Several years ago there was a book I really enjoyed that dealt with this topic called Are You a Stock or a Bond?: Create Your Own Pension Plan for a Secure Financial Future. It explained some professions, like tenured professors, are like bonds - there is little risk of you ever losing your job, the pay it steady and almost fixed with small incremental increases based upon inflation, and you … [Read more...]

Filed Under: Book Recommendations, Diversification Tagged With: , , , , , , , , ,

What a Superpower China Means for the United States

September 12, 2010 By 3 Comments
The Face of Modern China

When I was 16 years old, I was sitting in the hallways of the local high school, waiting for class to begin, discussing the state of the world with Molly.  She stopped me and asked a simple, direct question: "Do you believe that the life of an American is more valuable than the life of any other human?  Because the answer to that question is going to determine your economic, political, social and moral worldview." As we established in the first essay on the rise of the Chinese … [Read more...]

Filed Under: Politics, Religion & Culture Tagged With: , , , , , , ,

Banks Brace for New Basel III Regulations

September 11, 2010 By Leave a Comment
Basel III Bank Regulations to Require Higher Bank Equity Reserves

According to The Wall Street Journal and The Financial Times, regulators from 27 countries are meeting in Basel, Switzerland right now to hammer out tough new banking rules designed to prevent another catastrophic global meltdown like the one that occurred in 2008.  These new rules, called Basel III because these are the third incarnation of the banking framework, will require banks to keep a minimum of 7% of their balance sheet in equity (money belonging to owners, or net worth), which … [Read more...]

Filed Under: Accounting & Finance Tagged With: , ,

How We Used Shares of Coca-Cola to Teach My Youngest Sister About Investing (and Why the Cycle of Consumption and Financial Stress Starts as a Teenager for Most Americans)

September 7, 2010 By 2 Comments
Coca-Cola Direct Stock Purchase Plan and Coca-Cola Dividend Reinvestment Plan or Coke DRIP Literature

When I was a senior in high school, I bought my youngest sister, who was first grader at the time, a single share of Coca-Cola common stock for her 6th birthday.  I had it framed with an engraving of the first part of Deuteronomy 8:18 placed under it, "You shall remember the Lord your God, for it is he who gives you power to get wealth". I registered the ownership as a uniform gift to minors, naming our father as the trustee.  He and my mom decided to have $50 each month taken out of their … [Read more...]

Filed Under: Dividends, Dollar Cost Averaging, Featured, Saving Money Tagged With: , , , , , , , , , , , , , , , , ,

How to Solve the Trade Deficit – A Five-Part Essay on the American Trade Imbalance

August 31, 2010 By Leave a Comment
How to Solve the Trade Deficit in the United States of America

When American citizens buy more foreign goods (import) than we sell to foreigners (exports), we have to transfer part of our national wealth to foreigners.  The amount we have to transfer to foreigners is called the trade deficit. Think of it like a big, international credit card.  When we buy more from the world than we sell it, the world takes our dollar bills and has to invest them.  That means they are earning interest, dividends and rents and, over time, own an ever-expanding piece of … [Read more...]

Filed Under: Economics, Featured Tagged With: , , , , ,

New Wardrobe Additions for the Wedding

August 27, 2010 By Leave a Comment
Kelsey and Tyler's Wedding Gift

Aaron and I went shopping today for my sister and soon-to-be-brother-in-law's wedding gifts.  We also decided we wanted to wear something new that wasn't parked in our respective closets so we headed to Nordstrom and a few other stores. I ended up going with a modern cut lavender white stripe dress shirt with mother-of-pearl buttons and a silk bow tie in the same color family, which I will wear with a charcoal gray suit with white and faint blue pinstripes.  I took a picture so I could send … [Read more...]

Filed Under: My Life Tagged With: , , , , , , , , , , , ,

How to Marry a Millionaire – An Economic Update on the 1953 Film

August 15, 2010 By Leave a Comment
How to Marry a Millionaire

In 1953, a great movie starring Lauren Bacall, Bette Grable and Marilyn Monroe was released called How to Marry a Millionaire.  I got curious as to how much money it would take to equal the same net worth today so I did an inflation adjustment because I wanted to know how big their motivation was in the film. Turns out, someone who had $1 million in 1953 would have roughly $8 million today. That kind of asset base should generate cash dividends or interest of $34,000 per month without … [Read more...]

Filed Under: Economics, Movies Tagged With: , , , , , , , , , , , , , , , , ,

Response to What Is Probably the Most Ignorant Message I’ve Received In 10 Years of Writing Finance Articles

July 26, 2010 By 2 Comments

A reader named Medusa wrote me and, to keep it short, explained that I shouldn't believe people should be rich because the Bible is against rich people, that I was going to die a miserable, lonely old man with no one who loved me because I saved my money instead of spending it, and that after reading a profile I wrote based on Federal Reserve data of the Capitalist Class in the United States, she was starting to consider the possibility that the rich were nothing but oppressors who steal from … [Read more...]

Filed Under: Saving Money Tagged With: , , , , , , , , , , , , , , , , , , , , , , , , , , , ,
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