One of our faithful readers has just published his first book. It is an historical account of the steamship Gratitude. We hope you'll support our little community of readers and writers and purchase a copy.
Merry Christmas,
J. Sweeney
Tuesday, December 25, 2007
Monday, December 24, 2007
Merry Christmas - Happy Winter Solstice
We at WeeklyMusings would like to wish all of our readers a very Merry Christmas and Happy Winter Solstice! Whether you celebrate the magic of long-lasting lamp oil, the birth of Jesus or the end of the shortening of the days and lengthening of the nights, we can all join in the celebration of light and its increase in our world.
J. Sweeney
PS For our readers in the Southern Hemisphere, we are delighted to have you with us and hope that you enjoyed you longest day.
J. Sweeney
PS For our readers in the Southern Hemisphere, we are delighted to have you with us and hope that you enjoyed you longest day.
Wednesday, December 05, 2007
Open Letter to Senator Clinton
Dear Senator Clinton,
My wife and I are teachers and looking forward to buying a home in a better school district. We have been waiting for the market to correct itself rather than use an ARM. For the last few years prices in our area have increased much faster than incomes due to over-borrowing. We and other financially prudent families do not appreciate the idea of our government now meddling with the appropriate collapse of prices.
This is going to make more of us have to use terrible levels of debt to get into a home.
Please stop. Don't allow the Bush administration to bail out the banks and the millions of Americans that have not learned to balance their checkbooks. What the hell are you people in Washington doing?
Looking for a new candidate,
Joe Sweeney
My wife and I are teachers and looking forward to buying a home in a better school district. We have been waiting for the market to correct itself rather than use an ARM. For the last few years prices in our area have increased much faster than incomes due to over-borrowing. We and other financially prudent families do not appreciate the idea of our government now meddling with the appropriate collapse of prices.
This is going to make more of us have to use terrible levels of debt to get into a home.
Please stop. Don't allow the Bush administration to bail out the banks and the millions of Americans that have not learned to balance their checkbooks. What the hell are you people in Washington doing?
Looking for a new candidate,
Joe Sweeney
Thursday, October 04, 2007
Weekly Musings "A Booming Whimper"
Weekly Musings© - “A Booming Whimper”
10/4/07
J. Sweeney
I saw a lovely conversation with Charlie Rose and Alan Alda last night. They were discussing meaning in their lives and how near death experiences had served to focus their attention on the quality of their time and choices. They struck me as two thoughtful and worldly men entering the “wisdom” phase of their lives. I frequently give thought to the likely impact of the impending retirement of the “Boomers” and last night I began to hope that the impending retirement of the Boomers would translate into a golden age of volunteerism and reflection… well I got to Musing.
You’ve already read plenty about how the largest segment of our population is about to retire. Media outlets are quick to pander to the egotism of the Boomers with comments about how they have transformed every stage of life in our culture. Most of this is said with an eye on capturing a Boomer audience delighted and puffed up with self-importance. They are a large segment of the shopping population and have more dollars to spend on consumer items than their offspring or parents, so such marketing is effective.
I think the Boomer retirement will bring about some significant changes and it is possible that some of them will be positive. However, most of the impact will be felt as a shift in spending across the broad economy. You should expect a relatively flat housing market for the next ten years. There will be brief interludes of irrational exuberance. But, on the whole the number of people selling homes in order to downsize will match and at times exceed demand for single homes. Real estate will remain a local phenomenon until we have near instant transportation across large distances. So, there are some markets that will continue to appreciate in price, but for the most part price increases will be constrained to niche retirement and nursing communities.
Economic growth will be substantially slower over most of the next two decades. The productivity gains realized by the additional worker in most households (women to work) and the impact of personal computing will not be repeated in the near term. Productivity gains due to outsourcing will not be as large in the future. The low-hanging fruit has been picked and economic growth in various developing countries is slowly closing the gap in compensation that generates the bulk of savings.
The focus of spending on health and life extending technologies will eventually result in massive productivity gains due to increasing levels of intelligence in infrastructure, shipping and power generation. The enabling technologies are likely to arise from the fields of bioengineering and nanotechnology. This surge in productivity will not occur within the next fifteen years and should not be relied on for the rapid returns on investments realized in the 1990’s via Internet related technologies.
Due to inadequate planning and savings, most Boomers will constrict spending relative to recent levels in the final years prior to full-retirement. Fear, which seems to be the hallmark of the Boomers, coupled with anemic retirement investments, and low returns on savings will result in lower-than anticipated budgets for most. This constrained spending, on all but health related consumables, will have a downward pressure on revenues across the US economy.
Health failures will be substantially higher than planned for in the United States relative to other industrialized countries. Low levels of physical work, few vacations, and years of stress (often coupled with smoking) will bear a terrible fruit. Boomers who expected to live longer and healthier than their parents will require more maintenance drugs and surgeries. This spending and the fear of such spending will further erode their sense of financial security.
Now, the big one, currently Boomers are the most financially solvent and highest earning members of our economy. As stated so many times before, they are also the largest group. As Boomers begin to retire companies are looking forward to hiring cheaper replacements and realizing savings. What this means is that our economy will lose high wage earners and tax payers at the very same time that demands on benefit programs, like Social Security and Medicare, spike. The replacement workers will be fewer in number (companies looking for net attrition) and earn less on average than previous workers.
The required governmental outlays for retirees will be paid for in service reductions and tax increases. Lower government spending and higher taxes will lead to a recession in an environment with flat consumer spending.
While I would like to join the rosy picture club and paint for you an idyllic golden age of volunteerism and reflection I think it is much more likely that we will experience a sharp and prolonged recession. It will start in the next two years and it’s going to get nasty.
Buckle up.
10/4/07
J. Sweeney
I saw a lovely conversation with Charlie Rose and Alan Alda last night. They were discussing meaning in their lives and how near death experiences had served to focus their attention on the quality of their time and choices. They struck me as two thoughtful and worldly men entering the “wisdom” phase of their lives. I frequently give thought to the likely impact of the impending retirement of the “Boomers” and last night I began to hope that the impending retirement of the Boomers would translate into a golden age of volunteerism and reflection… well I got to Musing.
You’ve already read plenty about how the largest segment of our population is about to retire. Media outlets are quick to pander to the egotism of the Boomers with comments about how they have transformed every stage of life in our culture. Most of this is said with an eye on capturing a Boomer audience delighted and puffed up with self-importance. They are a large segment of the shopping population and have more dollars to spend on consumer items than their offspring or parents, so such marketing is effective.
I think the Boomer retirement will bring about some significant changes and it is possible that some of them will be positive. However, most of the impact will be felt as a shift in spending across the broad economy. You should expect a relatively flat housing market for the next ten years. There will be brief interludes of irrational exuberance. But, on the whole the number of people selling homes in order to downsize will match and at times exceed demand for single homes. Real estate will remain a local phenomenon until we have near instant transportation across large distances. So, there are some markets that will continue to appreciate in price, but for the most part price increases will be constrained to niche retirement and nursing communities.
Economic growth will be substantially slower over most of the next two decades. The productivity gains realized by the additional worker in most households (women to work) and the impact of personal computing will not be repeated in the near term. Productivity gains due to outsourcing will not be as large in the future. The low-hanging fruit has been picked and economic growth in various developing countries is slowly closing the gap in compensation that generates the bulk of savings.
The focus of spending on health and life extending technologies will eventually result in massive productivity gains due to increasing levels of intelligence in infrastructure, shipping and power generation. The enabling technologies are likely to arise from the fields of bioengineering and nanotechnology. This surge in productivity will not occur within the next fifteen years and should not be relied on for the rapid returns on investments realized in the 1990’s via Internet related technologies.
Due to inadequate planning and savings, most Boomers will constrict spending relative to recent levels in the final years prior to full-retirement. Fear, which seems to be the hallmark of the Boomers, coupled with anemic retirement investments, and low returns on savings will result in lower-than anticipated budgets for most. This constrained spending, on all but health related consumables, will have a downward pressure on revenues across the US economy.
Health failures will be substantially higher than planned for in the United States relative to other industrialized countries. Low levels of physical work, few vacations, and years of stress (often coupled with smoking) will bear a terrible fruit. Boomers who expected to live longer and healthier than their parents will require more maintenance drugs and surgeries. This spending and the fear of such spending will further erode their sense of financial security.
Now, the big one, currently Boomers are the most financially solvent and highest earning members of our economy. As stated so many times before, they are also the largest group. As Boomers begin to retire companies are looking forward to hiring cheaper replacements and realizing savings. What this means is that our economy will lose high wage earners and tax payers at the very same time that demands on benefit programs, like Social Security and Medicare, spike. The replacement workers will be fewer in number (companies looking for net attrition) and earn less on average than previous workers.
The required governmental outlays for retirees will be paid for in service reductions and tax increases. Lower government spending and higher taxes will lead to a recession in an environment with flat consumer spending.
While I would like to join the rosy picture club and paint for you an idyllic golden age of volunteerism and reflection I think it is much more likely that we will experience a sharp and prolonged recession. It will start in the next two years and it’s going to get nasty.
Buckle up.
Thursday, August 16, 2007
A little thought on water...
I was taking a glass of cool refreshing water up to the office with me when a thought struck, "Water isn't clear."
The musing began thus:
Isn't it odd that water is so essential to life, the one liquid we most need, and it happens to be clear.
I wonder if anyone has thought about this before.
Wait, maybe it isn't clear. Maybe it just looks clear because being the liquid we evolved in it is both necessary and our light perception system (eyes and brain) filter out the distortions in water.
Our eyes and brains evolved in a medium of water and so the eyesight that evolved is one that manages the water distortions to such a degree that they virtually vanish...
So, that is what happened in my head on the way up from the kitchen.
Cool, now what do you think?
J. Sweeney
The musing began thus:
Isn't it odd that water is so essential to life, the one liquid we most need, and it happens to be clear.
I wonder if anyone has thought about this before.
Wait, maybe it isn't clear. Maybe it just looks clear because being the liquid we evolved in it is both necessary and our light perception system (eyes and brain) filter out the distortions in water.
Our eyes and brains evolved in a medium of water and so the eyesight that evolved is one that manages the water distortions to such a degree that they virtually vanish...
So, that is what happened in my head on the way up from the kitchen.
Cool, now what do you think?
J. Sweeney
An Awful Juxtaposition
Weekly Musings – An Awful Juxtaposition
J. Sweeney
August 16, 2007
I am going to keep this brief. If they show up, please consider the two articles linked below. One is about women in Iraq forced to prostitution in order to feed their children. The other is about the engagement of the U.S. President’s daughter.
Some women are struggling to keep their children fed after their husbands died in a war started by a man who lives in a palace and gets to look forward to his daughter’s wedding.
George Bush deserves to be impeached. If he were a decent human being he would have resigned after no weapons were found. If the democrats were capable of leadership they would force his resignation or impeach him.
It is essential that we as citizens send a message to the world that our leaders are not tyrants, free to make war with our children and treasure without being accountable. We owe it to the dead in Iraq and to the millions suffering to hold our leaders accountable.
IMPEACH BUSH
http://www.cnn.com/2007/WORLD/meast/08/15/iraq.prostitution/index.html
http://www.cnn.com/2007/POLITICS/08/16/jenna.bush/index.html?iref=mpstoryview
J. Sweeney
August 16, 2007
I am going to keep this brief. If they show up, please consider the two articles linked below. One is about women in Iraq forced to prostitution in order to feed their children. The other is about the engagement of the U.S. President’s daughter.
Some women are struggling to keep their children fed after their husbands died in a war started by a man who lives in a palace and gets to look forward to his daughter’s wedding.
George Bush deserves to be impeached. If he were a decent human being he would have resigned after no weapons were found. If the democrats were capable of leadership they would force his resignation or impeach him.
It is essential that we as citizens send a message to the world that our leaders are not tyrants, free to make war with our children and treasure without being accountable. We owe it to the dead in Iraq and to the millions suffering to hold our leaders accountable.
IMPEACH BUSH
http://www.cnn.com/2007/WORLD/meast/08/15/iraq.prostitution/index.html
http://www.cnn.com/2007/POLITICS/08/16/jenna.bush/index.html?iref=mpstoryview
Thursday, August 09, 2007
Thank you Jessica (and Amazon)
Well, it finally happened. After years of working in software and building websites for others, I finally sold a simple product online to a customer. Using Amazon's website I listed and sold an old book. I'm heading to the UPS store to ship the book.
If I were making a list of things young people should know how to do, selling a product online would definitely be one of them. This is the equivelent of working at the corner store for a summer back in our nation's golden era. Partcipating in the exchange of goods and services as a provider not just as a consumer has value for young people trying to acquire a real sense of how society works.
Anyway, I'm off to ship the book. Who knows, this may be the start of a new way to fund my main hobby, stock investing...
J. Sweeney
If I were making a list of things young people should know how to do, selling a product online would definitely be one of them. This is the equivelent of working at the corner store for a summer back in our nation's golden era. Partcipating in the exchange of goods and services as a provider not just as a consumer has value for young people trying to acquire a real sense of how society works.
Anyway, I'm off to ship the book. Who knows, this may be the start of a new way to fund my main hobby, stock investing...
J. Sweeney
Thursday, July 12, 2007
"Mixed Progress"
The White House released the Administration's progress report on Iraq today. They claim mixed progress and are now trying to spin the results to seem like half of the benchmarks are met. You can read the report for yourself, and I think as a voter and taxpayer, you should. The results are not balanced. See for yourself. The White House seems unwilling to square with the American people. If this were a report card about a student's progress (something we all have experience with) the student would be failing.
You can argue that the benchmarks were too hard, and they do argue that in some cases. For example spending our money on captial improvements is not progressing fast enough to spend $10 billion in time. Maybe they need our congress over there... we could build a couple of bridges to nowhere for them.
Or, take the "Satisfactory Progress" rating they gave to the benchmark that the Maliki government deploy three additional brigades of Iraqi Army units in Bagdad. This disingenous rating was achieved by drawing forces from other units around the country, not by establishing new units as proscribed.
Once again this administration is playing fast and loose with the truth and demonstrates their aversion to accountability.
You're doing a hell of a job Bushie...
You can argue that the benchmarks were too hard, and they do argue that in some cases. For example spending our money on captial improvements is not progressing fast enough to spend $10 billion in time. Maybe they need our congress over there... we could build a couple of bridges to nowhere for them.
Or, take the "Satisfactory Progress" rating they gave to the benchmark that the Maliki government deploy three additional brigades of Iraqi Army units in Bagdad. This disingenous rating was achieved by drawing forces from other units around the country, not by establishing new units as proscribed.
Once again this administration is playing fast and loose with the truth and demonstrates their aversion to accountability.
You're doing a hell of a job Bushie...
Saturday, July 07, 2007
Democrats - Bill Richardson
I just watched an interview by Tim Russert of Governor Bill Richardson of New Mexico on the Meet the Press website. If like me you thought that he represented a reasonable candidate for the Democrats to nominate, it might be instructive.
He is a former Ambassador to the United Nations, Energy Secretary, and Congressman. The guy should know his stuff. Sadly, it looks like he knows politics and polls, but not foreign policy or consistency.
His call for immediate withdraw of all US troops from Iraq is a direct contradiction of his statements in his recent book. (Not named here to keep from giving him revenue.)
When pressed by Russert for a reason for the change: hot air.
Click the link above to go to the video clip. Once you get to the video page, the Richardson clip is down on the right. If the link doesn't work, head on over to the site via Google or your favorite search engine. Just watch and scratch off another Democratic hopeful.
J. Sweeney
He is a former Ambassador to the United Nations, Energy Secretary, and Congressman. The guy should know his stuff. Sadly, it looks like he knows politics and polls, but not foreign policy or consistency.
His call for immediate withdraw of all US troops from Iraq is a direct contradiction of his statements in his recent book. (Not named here to keep from giving him revenue.)
When pressed by Russert for a reason for the change: hot air.
Click the link above to go to the video clip. Once you get to the video page, the Richardson clip is down on the right. If the link doesn't work, head on over to the site via Google or your favorite search engine. Just watch and scratch off another Democratic hopeful.
J. Sweeney
Sunday, July 01, 2007
Income Investor
Please take a look at the new Income Investor Blog at your convenience. On it I'll be posting content focused on building financial freedom. The first few posts will mostly be about building a foundation of knowledge. Motivating essays and How To guides will foloow.
J. Sweeney
J. Sweeney
Saturday, June 30, 2007
Letter from Bob Casey
I received a letter from Bob Casey today asking for funds to support the campaign of embattled Democrat, Senator Tim Johnson.
I offer my brief reply here publicly in the hopes that others will share the message with Democrats and Republicans alike.
"Why would we want the Democrats to keep the majority? You have not ended the war or achieved anything substantive with it thus far. End the war, close all funding of private armies (Blackwater), and stop deficit spending or we will vote you out of office.
A former supporter,
J. Sweeney"
Here's hoping that our representative form of government begins to represent the voters.
Here's a fresh link to the Podcast project for Weekly Musings (c)
http://web.mac.com/josephesweeney/iWeb/Site/Podcast/Podcast.html
I offer my brief reply here publicly in the hopes that others will share the message with Democrats and Republicans alike.
"Why would we want the Democrats to keep the majority? You have not ended the war or achieved anything substantive with it thus far. End the war, close all funding of private armies (Blackwater), and stop deficit spending or we will vote you out of office.
A former supporter,
J. Sweeney"
Here's hoping that our representative form of government begins to represent the voters.
Here's a fresh link to the Podcast project for Weekly Musings (c)
http://web.mac.com/josephesweeney/iWeb/Site/Podcast/Podcast.html
Sunday, June 24, 2007
Weekly Musings PODCAST Project
The link here is to our new Podcast project. Please go and check out the new site. We'll be adding our Musings to the site soon.
Thank you,
J. Sweeney
Thank you,
J. Sweeney
Sunday, April 22, 2007
iMac
We purchased an iMac to replace our failing PC. It's like someone handed us the keys to an arts studio...
Wednesday, February 07, 2007
WeeklyMusings - Too Much of a Bad Thing
WeeklyMusings © - “Too Much of a Bad Thing”
It was my custom in the months and years prior to the new millennium to gather my thoughts each week and attempt to put into specific language the swirling content of my mind. I came to call these expositions my WeeklyMusings. Events in the life of our great nation call me back to the task once more. Perhaps in these pages I can contribute some small part to the dialogue…
“The Lord of the Rings”, J.R.R. Tolkien’s masterpiece opens with a dappled mare pulling a cart down a well-worn country path. In the light of that sunny day we are introduced to characters I fondly recall from my youth. Seated on the cart is dear Gandalf the Wise. Soon he will call on young master Frodo in that most idyllic of settings, the Shire.
I love the Shire. I love the sunshine, and the rolling hills. I love the gardens, small paths carved by ponies and bare feet. I love the smell of fresh cut grass, of baking bread, and even the slow scent of pipe smoke blown in gentle puffs onto the breeze. It is a tranquil picture of domesticity, of quiet moments and friendly visits. How I wish I could raise my family in the peace of the Shire.
So, I sit tonight in a quiet room with a stopped clock and a fireplace that is always ready to receive a log. I sit down deep in a soft sofa, wrapped in a wool sweater that Gandalf would have reached for in his study had Mr. Tolkien thought to write him one. I sit here and contemplate whether my children and my wife will ever feel the innocent surety of a Shire life. I sit here and write of these things while my fellow citizens bleed on a battlefield across the sea and my brothers at home spend restless nights watching evil men plot evil deeds.
Is the dream of the Shire incompatible with the reality of modern man? Can such a place of peace and simple prosperity exist in a world torn by religion and resource scarcity? Am I merely delaying the inevitable call to arms and will one day soon yield to duty and like Cincinnatus of Rome, or perhaps even Frodo, go and fight, forsaking the labors I love for the most detestable of toils?
I came closer today than I have in many months to signing on for a tour of duty. Men are dying in the uniform of our nation.
I did not ever vote for George Bush. I wrote letters to my representatives in Congress, to the Senators from our Commonwealth, and to others urging that they resist what I perceived to be an unnecessary war.
In my humble opinion Mr. Bush was unfit for office due to a lack of executive experience and a history of poor judgment. He lacked the foreign policy experience and liberal education required of a global leader. But, elections have consequences, and if a democracy (or democratic republic) is to survive we must honor the results of elections. I was against the war, but like the election we must stand united once a decision is made or we are doomed to fall.
War is evil. It is always evil. But, sometimes evil is required for survival. The trouble with this war is not that we are losing, though it seems obvious that we are. The trouble is that this war was not required for survival. The consequences of voting for incompetence are now being showered upon us all.
We brought down a government of tyrants in a land of hatred. They are killing one another in the name of a fairy tale. They believe that God will reward them for their sacrifice, for their murders. They believe that it is preferable to exchange violence rather than compromise. They are never going to live in the Shire.
From where we are now I see no path that leads us to peace. These people are barbaric and beneath our contempt. So to those in this nation that would replace reason with religion, science with superstition. Our society is an opportunity for humanity. We are blessed by the bounty of nature and history and can make of ourselves nearly any truth we desire.
I long for the Shire; for a people of peace, learning, community, and tea. I am not a luddite. Far from a technophobe, I embrace the promise of modern technology as a way out of our many challenges. But while technology may solve energy needs, it will not solve the great human need to live in tolerance and peace.
Tolerance is not a lack of judgment, rather it is a willingness to accept the differences of others and to refrain from judging their personhood. But, tolerance does not require abdication of freedom and defense of one’s liberty.
My fellow citizens it is time for the United States of America to let Iraq fight for Iraq. It is time to bring our brothers and sisters home. It is time to spend the taxes raised in this nation on the future of this nation. We should be building schools here until they learn to build bridges there.
It was my custom in the months and years prior to the new millennium to gather my thoughts each week and attempt to put into specific language the swirling content of my mind. I came to call these expositions my WeeklyMusings. Events in the life of our great nation call me back to the task once more. Perhaps in these pages I can contribute some small part to the dialogue…
“The Lord of the Rings”, J.R.R. Tolkien’s masterpiece opens with a dappled mare pulling a cart down a well-worn country path. In the light of that sunny day we are introduced to characters I fondly recall from my youth. Seated on the cart is dear Gandalf the Wise. Soon he will call on young master Frodo in that most idyllic of settings, the Shire.
I love the Shire. I love the sunshine, and the rolling hills. I love the gardens, small paths carved by ponies and bare feet. I love the smell of fresh cut grass, of baking bread, and even the slow scent of pipe smoke blown in gentle puffs onto the breeze. It is a tranquil picture of domesticity, of quiet moments and friendly visits. How I wish I could raise my family in the peace of the Shire.
So, I sit tonight in a quiet room with a stopped clock and a fireplace that is always ready to receive a log. I sit down deep in a soft sofa, wrapped in a wool sweater that Gandalf would have reached for in his study had Mr. Tolkien thought to write him one. I sit here and contemplate whether my children and my wife will ever feel the innocent surety of a Shire life. I sit here and write of these things while my fellow citizens bleed on a battlefield across the sea and my brothers at home spend restless nights watching evil men plot evil deeds.
Is the dream of the Shire incompatible with the reality of modern man? Can such a place of peace and simple prosperity exist in a world torn by religion and resource scarcity? Am I merely delaying the inevitable call to arms and will one day soon yield to duty and like Cincinnatus of Rome, or perhaps even Frodo, go and fight, forsaking the labors I love for the most detestable of toils?
I came closer today than I have in many months to signing on for a tour of duty. Men are dying in the uniform of our nation.
I did not ever vote for George Bush. I wrote letters to my representatives in Congress, to the Senators from our Commonwealth, and to others urging that they resist what I perceived to be an unnecessary war.
In my humble opinion Mr. Bush was unfit for office due to a lack of executive experience and a history of poor judgment. He lacked the foreign policy experience and liberal education required of a global leader. But, elections have consequences, and if a democracy (or democratic republic) is to survive we must honor the results of elections. I was against the war, but like the election we must stand united once a decision is made or we are doomed to fall.
War is evil. It is always evil. But, sometimes evil is required for survival. The trouble with this war is not that we are losing, though it seems obvious that we are. The trouble is that this war was not required for survival. The consequences of voting for incompetence are now being showered upon us all.
We brought down a government of tyrants in a land of hatred. They are killing one another in the name of a fairy tale. They believe that God will reward them for their sacrifice, for their murders. They believe that it is preferable to exchange violence rather than compromise. They are never going to live in the Shire.
From where we are now I see no path that leads us to peace. These people are barbaric and beneath our contempt. So to those in this nation that would replace reason with religion, science with superstition. Our society is an opportunity for humanity. We are blessed by the bounty of nature and history and can make of ourselves nearly any truth we desire.
I long for the Shire; for a people of peace, learning, community, and tea. I am not a luddite. Far from a technophobe, I embrace the promise of modern technology as a way out of our many challenges. But while technology may solve energy needs, it will not solve the great human need to live in tolerance and peace.
Tolerance is not a lack of judgment, rather it is a willingness to accept the differences of others and to refrain from judging their personhood. But, tolerance does not require abdication of freedom and defense of one’s liberty.
My fellow citizens it is time for the United States of America to let Iraq fight for Iraq. It is time to bring our brothers and sisters home. It is time to spend the taxes raised in this nation on the future of this nation. We should be building schools here until they learn to build bridges there.
Saturday, January 27, 2007
Money Managers
Friends,
A few days ago a friend's email had me pondering why professional money managers seem more willing to risk their client's money than individuals are to risk their own. Now, it might seem obvious to you that a person is more concerned about risking their own property than someone else's, but to me this conjecture doesn't hold up to evidence from personal experience.
For example, imagine that your friend lends you their car. Aren't you more cautious driving that vehicle than you are even your own? (I hope the answer is yes, otherwise please don't ask for a loaner.) Likewise when watching a friend's child, aren't you just a little more attentive and protective than usual?
So, why are professional money managers willing to take on higher levels of risk than individuals with their own money?
As the gerbil in my head ran on his rusty wheel, I began to muse...
There must be something in the way money managers are incented that causes them to alter their ethical bias away from protecting their client's fortunes toward risking it. I submit that the cause is the way that manager performance is measured. If you read investment prospectives you'll notice comments like "marketing beating performance for the last 10 out of 15 years". You might see marketing material with statements similar to, "twice the returns of the S&P 500 since inception". Of course it only mentions that inception of the fund was two or three years ago in the small print at the bottom or on the back of the advertisement.
Is it possible that money managers are measured like sports teams, by wins and losses? Is it possible that their careers depend on people looking at the number of times that they've beaten or fallen short of the average market or index returns? If their perofmance is measured by wins and losses instead of cumulative returns then they could be incented to choose a slightly riskier strategy than someone investing for the long-term.
The table below is an example of a "successful" money manager. The returns in the first column were generated by a random number generator and a slight (3%) upward drift. In other words the money manager is choosing riskier investments than the index but still getting the natural benefit of inflation.
The second column is the annual return for the money manager. The third column is showing his "wins" or "losses". A win is a year with an annual return greater than 3%, the average market in our example. A loss is any year when the manager's return is less than 3%, in other words a year when he does not beat the market.
Notice that our money manager is a winner! He beats the market 12 out of 19 years. He is beating the market 63% of the time! If this were baseball, that would be equivalent to a .632 batting average. He'd be worth millions.
However, look at the last column. The lowly individual investor in an index fund that is just treading water. He is beaten by the money manager 12 out of 19 times. In professional investing circles he is a loser. But, look at the final totals. The money manager with his .632 batting average has a cumulative return of only 65% whereas the individual loser has a more impressive cumulative return of 75%.
I did not assign these values for the purpose of proving my point. Instead I generated multiple examples randomly and then selected one for illustrative purposes. The problem here is not with the numbers. The problem is with how we track performance for professional investors. Too often the industry pushes the "wins" count, or batting average, instead of cumulative returns. Why?
I have some theories and will express them later, but for now here is the table. If you'd like a copy of the spreadsheet for your own modeling, please drop me an email. Special thanks to Shawn for initially sending me the email that got me musing.
J. Sweeney
A few days ago a friend's email had me pondering why professional money managers seem more willing to risk their client's money than individuals are to risk their own. Now, it might seem obvious to you that a person is more concerned about risking their own property than someone else's, but to me this conjecture doesn't hold up to evidence from personal experience.
For example, imagine that your friend lends you their car. Aren't you more cautious driving that vehicle than you are even your own? (I hope the answer is yes, otherwise please don't ask for a loaner.) Likewise when watching a friend's child, aren't you just a little more attentive and protective than usual?
So, why are professional money managers willing to take on higher levels of risk than individuals with their own money?
As the gerbil in my head ran on his rusty wheel, I began to muse...
There must be something in the way money managers are incented that causes them to alter their ethical bias away from protecting their client's fortunes toward risking it. I submit that the cause is the way that manager performance is measured. If you read investment prospectives you'll notice comments like "marketing beating performance for the last 10 out of 15 years". You might see marketing material with statements similar to, "twice the returns of the S&P 500 since inception". Of course it only mentions that inception of the fund was two or three years ago in the small print at the bottom or on the back of the advertisement.
Is it possible that money managers are measured like sports teams, by wins and losses? Is it possible that their careers depend on people looking at the number of times that they've beaten or fallen short of the average market or index returns? If their perofmance is measured by wins and losses instead of cumulative returns then they could be incented to choose a slightly riskier strategy than someone investing for the long-term.
The table below is an example of a "successful" money manager. The returns in the first column were generated by a random number generator and a slight (3%) upward drift. In other words the money manager is choosing riskier investments than the index but still getting the natural benefit of inflation.
The second column is the annual return for the money manager. The third column is showing his "wins" or "losses". A win is a year with an annual return greater than 3%, the average market in our example. A loss is any year when the manager's return is less than 3%, in other words a year when he does not beat the market.
Notice that our money manager is a winner! He beats the market 12 out of 19 years. He is beating the market 63% of the time! If this were baseball, that would be equivalent to a .632 batting average. He'd be worth millions.
However, look at the last column. The lowly individual investor in an index fund that is just treading water. He is beaten by the money manager 12 out of 19 times. In professional investing circles he is a loser. But, look at the final totals. The money manager with his .632 batting average has a cumulative return of only 65% whereas the individual loser has a more impressive cumulative return of 75%.
I did not assign these values for the purpose of proving my point. Instead I generated multiple examples randomly and then selected one for illustrative purposes. The problem here is not with the numbers. The problem is with how we track performance for professional investors. Too often the industry pushes the "wins" count, or batting average, instead of cumulative returns. Why?
I have some theories and will express them later, but for now here is the table. If you'd like a copy of the spreadsheet for your own modeling, please drop me an email. Special thanks to Shawn for initially sending me the email that got me musing.
J. Sweeney
Changes to Comments
Friends,
WeeklyMusings has changed the comment process to include a verification process meant to weed out comments added by spamming software and only allow comments by persons. Please feel free to continue to comment. It is our intention to continue the policy allowing anonymous comments. We would certainly prefer that people take ownership for their comments, but the anonymous feature allows people not registered with Blogger or Google to comment without having to register. The new verification process is not meant to restrict commenting by any person, it is only meant to stop comments added by software. For an example of the kind of commenting we are attempting to block please see the comment associated with the Senate Debate below.
Thank you and we look forward to hearing from you,
J. Sweeney
WeeklyMusings has changed the comment process to include a verification process meant to weed out comments added by spamming software and only allow comments by persons. Please feel free to continue to comment. It is our intention to continue the policy allowing anonymous comments. We would certainly prefer that people take ownership for their comments, but the anonymous feature allows people not registered with Blogger or Google to comment without having to register. The new verification process is not meant to restrict commenting by any person, it is only meant to stop comments added by software. For an example of the kind of commenting we are attempting to block please see the comment associated with the Senate Debate below.
Thank you and we look forward to hearing from you,
J. Sweeney
Subscribe to:
Posts (Atom)
