The Big Picture for the Week of November 28, 2010

Pragmatic Capitalism reposted a list of ten reasons why US banks are better to buy than European banks which was originated at Credit Suisse. You should click through to read the list. The logic of the list might be completely correct drawing the correct conclusion; US banks may indeed be better to buy than European banks. That said, they could both stink and be undeserving of your investment dollars. If you have been reading this site for a while you know that this has been my opinion for a long time now; they both stink and that one group might collectively stink less is not much of a hook for me. The notion of sovereign contagion should be plausible from Asia 12 years ago and what has happened thus far in Europe. Of course there might not be any further dominoes to fall which leaves banks that operate in markets facing declining real estate prices, over indebted consumers, lousy demographics and weak (at best) growth prospects. From where I sit it doesn’t look much different for the US banks in terms of where we are right now and what appears to lie ahead fundamentally, even if there are many trading opportunities along the way. I was able to find three financial sector ETFs that exclude the US and Europe (if there are others please leave a comment as it would be easy to overlook something given how many funds there are). There is the iShares Far East Financial Fund (FEFN) which is 59% Japan. There is the iShares Emerging Markets Financial Fund (EMFN) which is promising but has 28%...

Save More, Spend Less

Jonathan Hoenig has a wonderful post up about his oft mentioned grandmother who recently passed away at age 106. In the article Jonathan mentions a bit of wisdom that is similar to something Nassim Taleb has said. Taleb has talked about people learning everything they need about finance from their grandmother in terms of saving a lot of money and avoiding debt (both sides of the transaction). Specifically he writes; The most often-repeated financial advice she gave me was also the simplest: Save your money. Long before Suze Orman and Dave Ramsey made fortunes selling books about living beneath your means, this old lady, like many children of immigrants who survived the Depression, understood the importance of frugality and delayed gratification. As a child, she’d reward me for good behavior with a few coins while asking how much of it I intended to put away. “If you get a dollar, save a quarter,” she’d implore. That discipline stuck with me at an early age. Market participants seem to be questioning the viability of markets and investing more than any time I can remember. It should be obvious that a big part of the solution can come from our own behaviors, independent of market volatility, of spending and saving. Reducing the monthly nut means the portfolio has to do less work and a larger savings pile means a greater margin for error along the way. As a very obvious example a $15,000 monthly income funding a $10,000 lifestyle where $4000 goes to taxes and $1000 into savings leaves very little room for the unexpected. These people would not make it...

Save More, Spend Less

Jonathan Hoenig has a wonderful post up about his oft mentioned grandmother who recently passed away at age 106. In the article Jonathan mentions a bit of wisdom that is similar to something Nassim Taleb has said. Taleb has talked about people learning everything they need about finance from their grandmother in terms of saving a lot of money and avoiding debt (both sides of the transaction). Specifically he writes; The most often-repeated financial advice she gave me was also the simplest: Save your money. Long before Suze Orman and Dave Ramsey made fortunes selling books about living beneath your means, this old lady, like many children of immigrants who survived the Depression, understood the importance of frugality and delayed gratification. As a child, she’d reward me for good behavior with a few coins while asking how much of it I intended to put away. “If you get a dollar, save a quarter,” she’d implore. That discipline stuck with me at an early age. Market participants seem to be questioning the viability of markets and investing more than any time I can remember. It should be obvious that a big part of the solution can come from our own behaviors, independent of market volatility, of spending and saving. Reducing the monthly nut means the portfolio has to do less work and a larger savings pile means a greater margin for error along the way. As a very obvious example a $15,000 monthly income funding a $10,000 lifestyle where $4000 goes to taxes and $1000 into savings leaves very little room for the unexpected. These people would not make it...

Happy Thanksgiving!

Always a good day for football, once (or twice) a year food and a little introspection on what you are thankful for. Me, I’m thankful for a ridiculously long list of...

Happy Thanksgiving!

Always a good day for football, once (or twice) a year food and a little introspection on what you are thankful for. Me, I’m thankful for a ridiculously long list of...