Tuesday, November 15, 2005

what's a random walk?

Proverbs 12:11 He who works his land will have abundant food, but he who chases fantasies lacks judgment.

I just finished working on the initial draft of the handout for this Sunday’s class, Godly Wisdom for Managing Money. The session is about saving and investing. It is really a fun topic with a lot of counterintuitive results -- surprising stuff that twists up your preconceptions and otherwise messes with your mind.

I like that.

One result is that changes in stock market prices appear to be a random walk. What’s a random walk? Well as you might have noticed at the top of this page -- in big capital letters -- it is part of the title of this blog. In fact, the title of this blog is a play on words. Unfortunately, it is a play on words that only an economist would get. Double unfortunately for non-economists, like explaining a joke or like explaining any other play on words, if you have to explain so folks can get it, the it quickly becomes not worth getting.

The best predictor of tomorrow’s price of a stock, say a share of Microsoft Corp., is today’s share price. Why? Well, to put it simply, buyers and sellers have already incorporated all current information and all expectations about the future into today’s buying and selling. For example, suppose on Tuesday a lot of people knew (or thought they knew) that Microsoft stock was going to rise in price to $500 per share on Wednesday. That’s the word on the Street. Wouldn’t they be buying up shares on Tuesday before the price went up? Of course what will happen if lots of folks start buying up the stock on Tuesday is that the share price will rise on Tuesday.

So what will be Tuesday’s price of Microsoft? $500! People would keep buying and bidding up the price of Microsoft until there would be no expected profit to be made by buying one day rather than the next.

When Wednesday comes, Microsoft’s share price might go up again or even down from $500. However, any change would be the result of another reason – some news or other information not available Tuesday.

Wednesday’s news may be good or bad, but we don’t know what that news is on Tuesday. Any change would appear to be a random movement – a random walk -- from the price the day before. Of course, by Thursday we might have an explanation of what happened. But that won’t help anyone buying and selling two days earlier.


The implication is an important one. Unless you have some secret knowledge, unavailable to anyone else, any profits from speculating, from picking the right stocks which will go up in price, is going to be dumb luck. You win some, you lose some. It is random. If you get your news from the newspaper, it is probably too late to profit. Such information has already impacted the share price.

The lesson? Don’t waste your time speculating in individual stocks. You are just chasing fantasies.

Be blessed!

Sunday, November 13, 2005

what would you do with a million dollars?

What would you do with a million dollars? I started out our seminar at church this morning with just that question. What would you plan to do if you were given a million dollars? Would you tithe? Would you pay off old debts and bills? Invest some and enjoy receiving interest payments instead of paying them? Buy a new car? New furniture? Remodel the house or get a new house? Put some away for your old age? Maybe have some fun by giving part of it away. Say, pay off the pastor’s mortgage or hand out $100 bills to folks who are struggling?

Would you want to be like the folks who win the lottery and then a few years later have run through the money, not knowing where it went, ending up back where they started? No most people would plan how to use the money. Most people don’t want to blow their riches.

Wouldn’t this be the end to all your financial problems? Wouldn’t you want to get the most out of the million?

Go ahead, have a little fun. Plan how you would use your imaginary million bucks.
. . . .

Guess what? This million dollars is not imaginary. God is giving you a million bucks!

. . . .

That’s right. Did you know that almost everyone reading this will earn over a million dollars during their lifetime? That is a very conservative estimate. A million is earned with an average of just $25 thousand per year over 40 years. That is just an average. Almost everyone under the age of 40 will be able to do that. Most younger people will earn multiple millions in their lifetime.

How do you plan to use your million dollars?

Even we older folks would earn a million during our working years if we adjust our past incomes from earlier years for inflation. I started thinking. Often when I start thinking, especially when I start thinking abut spiritual matters, it becomes like the reverse of one of those “good news-bad news” jokes. Except unlike the jokes, I think of the bad news first. First, the bad news is…I have run through so much money and not done very much with it. I could have done so much better if I had started approaching my finances in a Godly way at an earlier age…If I had only been more diligent when I did learn Godly principles. What wasted opportunities. I feel like such a loser.

I find this first part very depressing. It is not a joke and it is not funny.

The good news is that God is not done with me yet. I started figuring out how much time, if the Lord willing, I have left. I’m in my early 50’s. A male my age who doesn’t smoke, who is in reasonable health, on average, lives to be about 79. (I fully expect to beat that: I’m competitive enough that life expectancy numbers just provide me a challenge that I will try to figure out how to beat.) I’ll have probably a dozen or more years of working at my current job. (As many years as I want since profs have no mandatory retirement age.) I have more than 25 years left.

I have a third of my life left to go. If my life were a hockey game, I’d only be at the intermission between the second and third periods. (In fact if you count only my years as an adult, I’m still in the second period!) There’s be plenty of hockey left. The game is far from over.

Anyway, so I added it up. I have at least my future income, my retirement funds, and future social security benefits. I should have over a million dollars left to steward if the Lord gives me the time. This is double cool. I still have time to plan what to do with the next million.

And so do you. You may have more than or less than a million left. However, God has given you significant resources yet to manage. C’mon now, this is Good News! The past is past. God hasn’t replaced you. You are a Godly steward. God is still going to use you to manage His resources.

This is what Christian personal financial management is about. This is what planning, the budgets, living debt-free, and the blah , blah, blah, is all about: Living your life for the Lord. Being a good manager or good steward of all that God has given you.

So what are you going to do with your million dollars? This is not a hypothetical question. This is a reality, not a fantasy. Are you going to plan so you won’t blow it, so you won’t fritter it away with nothing to show?

How are you going to serve God?

Be blessed!


my hidden agenda

I have a hidden agenda when I deal with Christian principles of personal finance.

What is this hidden agenda? Patience. I’m going to write about some random, seemingly unrelated thoughts. Don’t worry. I’ll tie things together. . . eventually.

Practicing the Presence of God. That is what I want to do. I’ve read and reread the Christian classic of that name by Brother Lawrence. I have a copy on my nightstand. It's a short book but I only read a few pages at a time so I can better absorb it. In the past year alone, I must have read it four times.

Friday morning I woke up early and was unable to get back to sleep. I got up, showered and was in my office a couple of hours before my first class. While I was reading email, checking my rss news feeds, and shuffling papers on my desk, I listened to a sermon by Andy Stanley, LO$T Part 2 (see sermons on my personal finance page).

The sermon was absolutely, totally excellent. I could not imagine anyone doing better on the subject. It was so amazingly good.

I the started thinking about my life. You know, where I am and what I want to be. I am so tired of being an ordinary, regular Christian. I am tired of merely knowing I am saved, getting through the day with a minimum of “tribulation,” occasionally throwing out a prayer God’s way. Don’t get me wrong. These things aren’t bad. Believe me, don’t want more tribulation. It is just that there ought to be more to the Christian life than I am experiencing.

That’s when I put Brother Lawrence’s book together with Pastor Stanley’s sermon. Brother Lawrence practiced God’s presence by constantly reminding himself of God’s presence. God is always with the believer. Jesus lives inside the believer. However, we are seldom conscious of that reality. Brother Lawrence did everything “as unto the Lord.” He asked God constantly for wisdom and direction. When God seemed silent, he still acknowleged His presence, walking out what he was supposed to do knowing God was with him. I mean with him in a real, physical sense, not with him in the sense of “he’s on my side, he supports me from afar.”

Pastor Stanley was preaching what I already thought I knew. Our handling of finances is a spiritual activity. All we have is God’s, we are merely stewards of His resources. God uses our finances to test, train, guide, and sometimes even to expose our hearts.

When we go about our daily business, shouldn’t we be doing what Brother Lawrence did? Shouldn’t we practice the presence of God by constantly seeking God’s direction and wisdom with our finances? When God seems silent, then we can do the steward thing – we manage our time, money, and material possessions recognizing God’s true ownership.

God is with us always, whether we recognize it or not. I want a Christian life, a full-time Christianity that constantly recognizes His presence. I believe that as I practice this more, I will get better, more consistent at it. That is what Brother Lawrence found.

Here is my hidden agenda. Here is my confession: I really do not care that much about money or teaching people how to better manage their finances. What I really enjoy is seeing God move. What I really love to see is God become active and real in people’s lives. Again, don’t get me wrong. I love teaching on the subject, I love helping people with their finances. I love doing it because God is going to come through for his people, not because money is involved. God is going to move. God is going to manifest himself in peoples lives and I get to see it. I love it when someone stops me or calls me on the phone to give praise to how God unexpectedly came through for them. To me, it is not that God’s coming through is unexpected, it is just how, or in what manner, he does it that is unexpected.

I love when people realize that God really does care about them. I love it when God’s love becomes real rather than a theological concept. I love it when people can go beyond “Jesus loves me this I know, for the Bible tells me so” to experience God’s love personally, confirming what the Bible tells us so. I love it when I get to witness people realizing, knowing that they know that they know, God cares about them.

I love it when people have a personal relationship with God, not just in the sense that God is a person, but because God gets intimate, God gets personal with us.

I love seeing healing miracles. I love seeing deliverance and seeing people’s changed lives. In the same way, I love seeing God move in people’s finances. Why? Because it can be just as dramatic, and more importantly, because it happens much more frequently. How often do you pray for physical healing or deliverance? How often will you approach God for fiscal healing and deliverance? All the time, if you practice the presence of God with your finances. This is where we live everyday. You don’t have to wait for Sunday meetings or for believers to come together. There are far more opportunities, far more prayers, and therefore, far more answers from God when you practice God’s presence with your finances.

When I practice God’s presence with my work, with my buying, and with my financial planning for the future, I am living the Christian life. I am walking with God. He’s is with me even if I ignore Him, whether I know He is there or not. However, I’m missing out if I don’t know it. I’m missing out big time.

So that is my hidden agenda. I just want to see God move in people’s lives and to see people awaken to God’s love for them.

Be blessed!


Thursday, November 10, 2005

new home page

I created a new personal finance home page this week. It has a number of links to Christian resources on finances: Bible studies, books, counseling services, sermons, radio shows, and even a video.

Thanks go to David Perry for finding the sermons by Andy Stanley. That man can preach.

I think you’ll enjoy the video – my daughter found it and sent it to me.

I also added an insurance page tonight.

If you have or find something that I can add to the site or any other suggestions for improving it, please let me know. Please let me know if you find any mistakes, typos, bad links, etc.

Be blessed!


Sunday, November 6, 2005

this is the first post

I have started a blog to complement my personal finance website and the Godly Wisdom for Managing Money seminar.

I have updated some of my webpages. I added a bunch of financial calculators that I found. They should really help you with financial planning. Even if they don't, they are kind of fun to pay with.

All the currently available materials for the Godly Wisdom for Managing Money seminar are posted there as well.

This site also has an rss news feed so you can be notified when it has been updated.

Comments or suggestions or questions or even wisecracks are welcome. You can or contact me privately or post them here by clicking "comments" right below.