Thursday, December 28, 2006

new pics

new pics from November and December as well as Christmas.

Saturday, December 23, 2006

social hierarchy and child rearing

The rest of the Christmas crew arrived yesterday. Miss Lois is really quite mobile and is crawling quite well. She also is learning what the word “no” means. If she does something like touch the presents under the tree after being warned, she gets her hand slapped. It is not really that hard of a slap, and she does try to obey, but she always cries. I think it is more that she doesn’t like to be told “no.”

Our calico cat, Snickers, is not fond of children. When Ted was a toddler, he used to carry her around the house by holding her by her throat. She loves Ted, but has always just left the room if any kids ever came around the house.

For some reason Snickers does not disappear when Miss Lois is around. She just sort of ignores her and carries on with her business.

Today Miss Lois was patrolling downstairs when she spotted Snickers sleeping in her bed under the china cabinet. She started to crawl toward the resting feline and I got out the camera. However, when Lois saw the camera, she changed direction, headed toward me, and started to strike a pose. She is such a ham! She also knows the difference between a toy camera and a real camera. She knows when to turn on the smile and is never upstaged.

After I put away the camera, Miss Lois resumed her patrol and soon she again saw the cat sleeping. As Lois came closer, Snickers tried to ignore her. However, when Lois came very close and reached out her hand, Snickers gave a low, soft growl, put out her paw, and slowly pushed Lois’s hand away.

Miss Lois immediately turned around and crawled away crying. She knew what it meant. Even the cat was telling her “no.” Snickers, being a responsible adult, accepted her duty to help discipline and train the newest member of the family.

I’m really proud of them both.

Be blessed!
RB

Tuesday, December 19, 2006

frosty, don't hold your breath

Today we were sitting together, looking out the window at the blue skies and green grass outside Eben-Holden Hall. Yes, it was the annual holiday luncheon at SLU. During the meal, a colleague recieved a cell call from his co-author who works at the University of Nevada, Las Vegas. At that very moment in southern Nevada, his children were outside making snow men.

Might it then be appropriate for our kids go outside and make sand men?

Meteorologists are giving almost no chance of a White Christmas here.

Growing up in Southern California, our idea of a White Christmas was getting up early and seeing frost on the ground. Even that happened only rarely.

Suck it up. Make your adjustments. It will still be Christmas.

Saturday, December 16, 2006

advice i'd pass along to my daughter

This week The Wall Street Journal had an interesting column with the title of this post. You can read it in its entirety here.

Below is point eight of nine points:

"We all tend to think we're better-than-average drivers, pretty good looking and smarter than most. This overconfidence spills over into our investing and fuels our headstrong pursuit of market-beating returns.

"Yet this is almost always self-defeating. Trying to beat the market typically involves a heap of investment costs, and those costs mean our efforts to beat the market usually fail miserably. Indeed, you will probably fare far better by sitting quietly with a handful of low-cost mutual funds, preferably market-tracking index funds.

"But it isn't just that efforts to beat the market are usually self-defeating. They are also unnecessary. Want to retire rich? All it takes is time and regular savings."

Tuesday, December 5, 2006

congratulations to the class of 9-11

Our 2nd Lieutenant is now a 1st Lieutenant. Yes, last week on November 28th he was promoted. He didn’t tell anyone, probably due to the humility usually associated with the classic Western hero. He is, after all, a U.S. Cavalry officer. (Just picture him standing, head looking down at the ground, casually kicking the Iraqi dirt with his boot, saying, “Aw shucks, t’wernt nothin.”)

He earned this promotion because after 18 months as a commissioned officer in the U.S. Army he 1) has a pulse and 2) is still breathing. These are very good things. He has been consistent and diligent with these tasks. We want him to continue and keep up the good work.

All who graduated with him from West Point on May 28th of 2005 were promoted to 1LT together. Time magazine ran a cover story back then on his class, designating them the Class of 9-11. They were just weeks into their first year when the towers of the World Trade Center came down, so they are the first group of West Pointers to graduate having spent their four years post 9-11.

What does this promotion mean? His rank insignia is a single silver bar rather than a single brass bar. More importantly, it means a raise in pay.

We are looking forward to our 1LT’s next promotion to captain. The standards are tougher: he must maintain a pulse and still be breathing for another two years.

We’d like that.

Congratulations to the Class of 9-11.

Be blessed!
RB

Monday, December 4, 2006

confirmation of better returns

Today’s Wall Street Journal had its monthly review of mutual funds (Section R). It certainly confirms yesterday’s post on the wisdom of crowds. In the table below, you can see that over the past twelve months, indexes (market averages) beat the professionally-managed mutual funds in three major categories, or segments, of the stock market: 1) the largest companies (i.e., large caps), 2) small companies (small caps); and 3) international stocks.



Might this be just an anomaly for one year? Okay, let’s look at the returns over the past five years. The indexes still win except in the small companies category.



Small companies are where you would expect that professional managers would do better since information is not as readily available publicly as it is for large corporations. Even given that, the average fund beat the market index by less than one percentage point. If you figure in the difference in management fees between index funds and managed funds, it would be a virtual tie.

It’s not talk. It’s not theory. It’s the facts.

Be blessed!
RB

Sunday, December 3, 2006

knowing less sometimes means making more

Today I started reading a fascinating book, James Surowiecki’s The Wisdom of Crowds (Anchor Books, 2005). This is a best-selling business book written by a journalist who not only writes well but also gets things right. The counter-intuitive premise of this book is that the collective wisdom of people operating independently is very often superior to the individual wisdom of experts. There are some seemingly strange, out-there examples (terrorist threats, predicting elections) but also the more mundane examples of betting point-spreads, parimutual gambling (e.g., horse racing), financial markets, futures markets, even estimating the number of jellybeans in a jar.

The results are well known, or should be, to economists. However, Surowiecki is not an economist but a journalist. He presents the ideas in what I find to be a novel and interesting way while making them accessible to people unfamiliar with them.

Yesterday I read an interesting article (“Limited Menu: Choose Only Three,” The Wall Street Journal, 2 December 2006, p. B4) about a simple way to outperform stock pickers, investment experts, and mutual fund managers: just divide your money between three indexed mutual funds for domestic stocks, foreign stocks, and bonds.

An indexed fund has a portfolio or collection of stocks that simply mirrors a market index. An index is just a sort of average of stocks that reflects what is happening in a particular part of the financial market. Examples of indexes you may have heard of are the Dow Jones Industrial Average, S&P 500, NASDAQ Index, and Wilshire 5000.

The evidence that market experts do not beat the market, as measured by overall averages or indexes, is overwhelming. Over the last five years, over two-thirds of all mutual stock fund managers have failed to beat the market. 95% of bond fund managers failed to beat indexes. Over the period of 1984 to 1999, 90 percent of stock fund managers failed to beat the market.

Non-experts do even worse.

So why buy managed mutual funds to under perform the market when you can just buy the market? To do this, buy an index. It is just a small fraction, a representative slice, of the market.

Why do stock market index mutual funds beat the experts? First, they have low management fees, almost a percentage point below the average mutual fund fee of 1.4%. The fees are lower because they can have a computer manage it cheaply and there are fewer expenses due to less turn over (buying and selling of individual stocks) than a managed fund. In a very competitive market, an extra margin of 1% means a lot. Second, indexed funds have no sales fees – at least no competent investor would buy one that did. Third, index funds utilize the wisdom of crowds.

The book gives a better explanation than I could, but here is a very short one. With large numbers, markets tend to aggregate or sum up the private knowledge (information, hunches, intuitions) of many individuals. Also with large numbers, some overestimate while others underestimate, but the different errors of many individuals tend to cancel each other out.

Index funds have less risk. This is a good thing and is due to greater diversification, having money spread out over a large range of things. As a result, you will always do just about average, no better, no worse. The downside is you will not ever get to brag about great returns on your stock picks. The upside is that over the long run you will outperform the vast majority of the pros as well as just about everyone else.

Would you rather be able to every once in a while, occasionally brag, impressing people who don’t know any better, or always retire richer?

Friday, December 1, 2006

wanna save money?

Many participants in the Dave Ramsey course (Financial Peace University) have spoken how using cash in an envelope system actually saves money. (An envelope system is where you put the planned or budgeted amount in an envelope and use only use the cash there for a purpose.) Most start out using a cash envelope for food purchases. For some reason folks are not quick to spend using cash rather than plastic. We’ve had testimonies about envelopes for clothes, going on vacation, etc. Even a college student found he was saving as a result of the envelope system.

This confirms studies that show that people tend to spend on average 18% more when using credit cards. They not only buy more but pay more for what they buy

Since this is the first of December and Christmas comes in December this year, try something new. (Christmas in December may be a surprise for many people. At least a lot of folks act as if it is by not planning to have money rather than credit available for purchases.) This year plan how much to spend for Christmas. Put the cash in an envelope and use it for all Christmas shopping. If more than one person does the shopping, use separate envelopes for each person, then divide the cash between them.

What if you do not have the enough cash? Then you probably ought to rethink what Christmas is about. It is not about becoming a slave to the lender (Proverbs 22:7). Jesus came to free us from bondage. Is it really appropriate to celebrate his birth by going into financial bondage? Yeah, I know you want to have a ‘good” Christmas. If a good Christmas is about Santa Claus, buying stuff, the materialism thing, then finances may not be your most serious problem.