Not that this will get the article any more hits, but I strongly recommend Bob Murphy's takedown of the all-too-common belief that it's somehow impossible or damaging for everyone to reduce or eliminate their debts. It was in response to the latest articulation of the idea by Paul Krugman.
Really, folks, any economy that relies on a certain level of indebtedness is not an economy I care to defend, as it rests on a poor foundation. The purpose of an economy is to provide people with the best consumption/leisure/labor bundle possible, not to goose the hippest new econometric.
A blog by Silas Barta
Showing posts with label finance. Show all posts
Showing posts with label finance. Show all posts
Thursday, November 3, 2011
Monday, October 11, 2010
Today, I smack myself
An idea occurred to me after reading Bob Murphy's overpromised book on infinite banking, which carries the wonderful insight that if you save a lot, you can "borrow" from yourself on favorable terms -- oh, and that's also true if you save through a whole-life insurance plan.
But the real insight is in how much of your money (if you're a typical debt-carrying mouth-breather) goes to financing costs that could be avoided if you simply saved before a purchase, which was backed by some surprising examples.
Now, that doesn't do much for my finances because I'm a big saver. But it dawned on me: even if I'm not a big borrower, employers are, including and especially mine. So if I'm not living paycheck-to-paycheck, then they and I could work out a deal whereby they defer my salary payments (effectively taking a loan from me) and pay me interest much greater than I could get on savings (0%), but much lower than they would pay the financial markets (all costs considered, probably 30+%). Everyone wins.
But how many workers actually want to do something like that? No, it's too bizarre, so alas, I suffer again from being the rare saver...
And that's when I smacked myself -- they've had a program that lets me do that the whole time! They call it the employee stock purchase program, and it lets you set aside money so that at pre-defined six-month intervals you can buy company stock at a 15% discount to its current value, and yes, you can sell it immediately. I never bothered because I figured there was some catch to it that I never fully researched, even as those who used it assured me there's not.
Using the program, if you set aside money, buy at a discount, and immediately re-sell, you get an effective annual return of 38%! (Actually, higher, because the money wouldn't all be "invested" at the beginning of the six-month period.) I had just never realized what this was for the whole time! Stupid, stupid, stupid...
Oh, and there's a severe thunderstorm going on right now.
But the real insight is in how much of your money (if you're a typical debt-carrying mouth-breather) goes to financing costs that could be avoided if you simply saved before a purchase, which was backed by some surprising examples.
Now, that doesn't do much for my finances because I'm a big saver. But it dawned on me: even if I'm not a big borrower, employers are, including and especially mine. So if I'm not living paycheck-to-paycheck, then they and I could work out a deal whereby they defer my salary payments (effectively taking a loan from me) and pay me interest much greater than I could get on savings (0%), but much lower than they would pay the financial markets (all costs considered, probably 30+%). Everyone wins.
But how many workers actually want to do something like that? No, it's too bizarre, so alas, I suffer again from being the rare saver...
And that's when I smacked myself -- they've had a program that lets me do that the whole time! They call it the employee stock purchase program, and it lets you set aside money so that at pre-defined six-month intervals you can buy company stock at a 15% discount to its current value, and yes, you can sell it immediately. I never bothered because I figured there was some catch to it that I never fully researched, even as those who used it assured me there's not.
Using the program, if you set aside money, buy at a discount, and immediately re-sell, you get an effective annual return of 38%! (Actually, higher, because the money wouldn't all be "invested" at the beginning of the six-month period.) I had just never realized what this was for the whole time! Stupid, stupid, stupid...
Oh, and there's a severe thunderstorm going on right now.
Tuesday, September 23, 2008
Well, I guess the crisis is over now
Warren Buffett is buying into Goldman Sachs, on very favorable terms -- 10% "perpetual preferred shares" plus the right to buy the stock cheaper than it currently is. This will signal that Goldman Sachs is sound, which will then provide a basis for trusting one party, which can then establish a basis for trusting their counterparties, until everyone can trust each other and the crisis can be averted -- for now -- long enough for me to dump the rest of my US shares on idiots -- without a massive government bailout. Hooray!
Alright, maybe a bit too optimistic.
Yeah, I know some of you are waiting for me to joke about how "Buffett has gold man-sacks" ... not gonna happen. This is a family blog. Hi Mom! :-)
Alright, maybe a bit too optimistic.
Yeah, I know some of you are waiting for me to joke about how "Buffett has gold man-sacks" ... not gonna happen. This is a family blog. Hi Mom! :-)
Sunday, July 27, 2008
To invest in oil, invest in OIL
A reader who wished to remain anonymous suggested to me that if I want to go long on oil (so as to make its price collapse and end the suffering), I should take the route in plain sight: buy the ETF with ticker symbol OIL. Apparently, its value stays very close to 1.68 times the current spot price of oil. In fact, since neither Yahoo nor any of the finance sites I go to actually let you chart the history of the price of oil, you should use that chart when you want to compare something to oil's price history.
(The reason is that the quoted price of a barrel of oil is actually the price for a delivery in the near future, so expanding the time history of that just gets you the price of a briefly-traded security. But when you want the *history* of oil's price, you don't want a plot of the price of an "August 08 delivery"; you want a plot of "August 07 delivery as valued in July 07, September 07 delivery as valued in August 07 ...".)
Why you'd want to remain anonymous about that, I have no idea. :-/
(The reason is that the quoted price of a barrel of oil is actually the price for a delivery in the near future, so expanding the time history of that just gets you the price of a briefly-traded security. But when you want the *history* of oil's price, you don't want a plot of the price of an "August 08 delivery"; you want a plot of "August 07 delivery as valued in July 07, September 07 delivery as valued in August 07 ...".)
Why you'd want to remain anonymous about that, I have no idea. :-/
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