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Sunday, December 31, 2006

Books of the Year

There were a few articles recently in the Wall Street Journal and the New York Times about the new face of Philantropy: in an age of global information, new philantrophists are now finding it hard to justify giving money to the arts (such as Opera, or Ballet) where there are so many more important initiatives that need funding (such as poverty, global warming, and disease).

Similarly, when contemplating the books of the past year, I find it difficult to rank the Fiction highly when compared to non-fiction. How could one compare even the most well-written piece of fiction to books that teach you how to manage assets, change your mind about the causes of poverty, or unveil why the politics of the country is the way it is? Kelly Link and Karen Joy Fowler when they visited this year at Google said that the biggest challenge of a fiction author is to be a more compelling read than the latest non-fiction, in an increasingly science-fictional world where the web by itself would serve up article after article of interesting stories about MIT students making money on blackjack, or fascinating economic commentary from Berkeley professors.

Having said that, I'd feel like I am chickening out if I didn't make fast and hard decisions, so here they are.

The book of the year is Joseph Stiglitz's Making Globalization Work. Scarlet will tell you about the arguments we've had over the years about globalization. For me, there was never a doubt that free trade was a universal good. The mathematics of Comparative Advantage was undenial, and perhaps I was even a bit too smug about understanding it. Stiglitz changed my mind about all that. The brilliance of a man who not only understood the theory, but also understood the assumptions that don't apply in the real world behind it, coupled with his experience at the world bank makes this book easily the most important book of the year, and a rare book in that it will change your mind about what important problems are most critical to tackle. It even seemed to open up the minds of a few rabid libertarians at my workplace, which I think is a first. Libertarians seem to me to be no different than fundamentalist devotees of middle-eastern religions (of which Islam is only one) in that their minds are already made up and their attitude is, "don't confuse me with facts!" Well, this book has a lot of facts, all put together well, and very much worth reading.

A close runner up was The Way To Win, an expose about our modern political system, which I find interesting. I had an argument 13 years ago with Reed Hastings (CEO of Netflix) that I felt modern elections were too much about character and not enough about issues. After 8 years of Bush politics, I feel vindicated in that assessment. A book explaining how all the dirty and not-so-dirty tricks that go into running for the presidency (an important topic, especially in the upcoming years, which will determine whether or not we will ignore global warming or start to do something about it) is definitely something worth reading.

The best fiction I read this year was a toss up between Iain Bank's excellent The Algebraist, or Lois Bujold's The Curse of Chalion. I find myself tipped towards Bujold's book for many of the reasons why she's won so many Hugo awards: she's got a lovely flowing prose style that's extremely easy to read and drags you along the story. When she doesn't have a good story to tell, it feels a lot like drinking a lot of empty calories, but in this case it's a great story and you feel like you got a lot out of it. I also must say the Neil Gaiman in Anansi Boys had the first non-graphic novel of his that I could read all the way through and find it enjoyable.

Even though he didn't make any of the best books of the year, Charles Stross was a great find for me this year. This versatile writer hasn't found any fiction that he can't write. The style is quite kinetic and can sometimes be a chore to read, but it never fails to entertain.

Saturday, December 30, 2006

Review: Veronica Mars Season 2

Last year's viewing of Veronica Mars Season 1 left Lisa & I blown away by how smart, how intelligently written, and well constructed the TV series was. So when the local library had a copy sitting around we grabbed it.

Unlike last year's DVDs, this year's DVDs had extras like deleted scenes, director's commentaries, and other goodies. The in-box presentation is also unique and holds the DVD more firmly.

This season's story arc revolves around an explosion that kills several of Veronica's schoolmates. As a season arc, it's done very well, with clues scattered around that in retrospect points to who did and why, but the ending manages to be a surprise. The cast changes slightly, with a few additions that I thought was interesting, and also brings back some unresolved stories from last season's plot.

Season Two doesn't have any really obvious plot holes in most of its stories, though a few sub-plots have me wondering if the characters live in the same world as I do. For instance a huge subplot revolves around Veronica Mar's wishes to attend Stanford University, which is apparently gated by her ability to win a scholarship to pay her way. It's as though financial aid doesn't exist in this universe. Stanford, like many other schools, awards financial aid based on need, not academics, so it's doubtful that an acceptance for Veronica would not have left her at least some way to pay for it.

Veronica is slightly less perfect this season, though again, one wonders how she manages to get nearly straight As, and still do everything she does --- there can't be that many hours in the day, even for someone who apparently does not sleep, as she does.

The season ends with a hook for the next season, and I'll look forward to it. Recommended.

Thursday, December 28, 2006

Gapminder's Video on Global Poverty

While debating with Scarlet over on her blog about poverty and what to do about it, I remembered the Gapminder presentation at Google, which was an outstanding and incredibly illuminating lecture on global poverty, global inequality, and what has been done to lift people out of poverty.

It also highlights how poorly the USA does in metrics compared to other developing countries. We have some of the worst infant mortality rates, and among the lowest life expectancies, despite our immense wealth. Most of that, naturally, can be attributed to the fact that we are the only major developing country not to have a universal, single payer healthcare system. So while we spend 16.75% of our GDP on healthcare (according to today's Wall Street Journal article), we have worse outcomes than any other developed country.

Is it surprising, then, that Americans are beginning to turn against trade? The world's most open economy has the least safety net for its citizens. If you're displaced by globalization or technology, you lose your health insurance at exactly the time when you're most likely to need it. All the middle class webmasters, accountants, and soon, radiologists who are displaced by outsourcing will start feeling that pinch soon, and unlike poorer unskilled workers these are people who will actually vote. Things will change, and my hope is that they will change sooner rather than later.

Tuesday, December 26, 2006

Review: MacTech magazine

I got this magazine because MacTech was running a special offer on their magazine. Since I'd just acquired a MacMini, I thought that this would be interesting --- maybe I'd learn a little bit. To my horror, MacTech is an absolutely horrible magazine with no redeeming features whatsoever for technical people.

Here's an example from November 2006: A whole article on Virtual Computing with Parallels Desktop. For any other technical journal, this would be an article about virtualization technology, how Intel's new instructions make software like Parallels possible, easier to write, or run faster. If you guessed that about this article, you would be wrong. This article steps you through how to create a virtual machine, in a dialog-box by dialog-box expose. If you'd never seen a computer before you might need this sort of exposition, but for a technical person? The article is a joke!

The December issue featured an article about vi! This would be like Microsoft Systems Journal having an article about TextEdit and how to use it.

In case it isn't obvious: MacTech is a waste of time, a waste of money, and you are far better reading a for dummies book or any of the classics in Computer Science instead.

Review: The Way to Win

While I'm an economics and public policy junkie, I am not a political junkie, and don't enjoy politics, especially not modern politics. Nevetheless, as I've complained before, all the best public policy you have at your disposal falls apart if you can't win the election, so reading this book was my way of educating myself as to how successful politicians win elections, and what does it take to be one.

This book covers Bill Clinton's elections, Karl Rove's two successful campaigns for Bush, as well as Hilary Clinton's rehabilitation of her public image. It identifies the peculiar brand of modern politics, as epitomized by Matt Drudge, as the Freak Show, which emphasizes partisanism and anything goes, which drives the media cycle, since the Old Media has no choice but to follow the New.

Sprinkled all throughout is various bits of advice to future politicians as to what to do and how to go about doing it. Surprisingly enough, the authors have plenty of emphasis about a mastery of policies:
Truly knowing your stuff allows a candidate to avoid awkward mistakes, but that is not the most important advantage. When Clinton was preparing for a debate or a major news conference, his staff did not have to waste time testing him on substantive answers. The preparation instead was devoted to figuring out how best to present the correct response... This is a luxury not enjoyed by most campaigns, who know that they are always one wrong answer.

The corresponding Bush campaign tactic was to ignore any policy questions they did not care about by answering with generalities but then respond substantively about issues they did care about. As the authors point out, it's quite unlikely that future politicians will be as willing or capable of mastering the policy side of the campaign as Clinton was.

By far the best part of the book has to do with its analysis of Karl Rove. While he's been much demonized by many, this book will leave you with a new found respect for how smart and hard working Rove is. Not only was he the political strategist, he was also the policy analyst, the chief of information technology, and the marketing coordinator. He is the equivalent of a master architect who doesn't hesistate to dive down and write assembly code to optimize an inner loop. I suspect that someone that smart doesn't come along very often, and the fact that he's on the Republican camp means that future Democratic candidates are going to have a really tough time.

The book does point out a few things that are depressing for a staunch progressive:
  1. The inherent nature of freak show politics is more beneficial to Republican candidates than it is for Democratic candidates
  2. Maintaining your Image is everything. This is going to make future presidential campaigns even more vicious than ever.
  3. All future candidates are likely to opt out of the federal financing system, ensuring that wealthy people will have a lot more say about politics than normal people.
This book also covers a lot of the failures the Gore and Kerry campaigns had. When lined up against Rove, it was obvious that these were amateurs playing against a master of the game.

Finally, there's an analysis of Hilary Clinton as a potential future presidential candidate, covering her senatorial elections which have demonstrated her ability as a politician and her mastery of freak show politics.

All in all, I learnt a lot in this book. It seems that while Abraham Lincoln was right in that one cannot fool all of the people all of the time, fooling all of the people just twice (for two election cycles) is all that's necessary to squander a budget surplus, involve the country in an extremely bad war with no good outcomes, while at the same time eliminating traditional political freedoms. I can only hope that the American public has had enough bad policy to step away from freak show politics some time in the future. Not that I'm betting on such an outcome any time soon!

In any case, this book is highly recommended, especially if you don't watch TV, don't read political blogs, and in general is always surprised by how the other 50% of the country always votes against you.

For those readers who think she cannot win, get over your delusion.

If Hilary Clinton chooses to run for president in 2008, she can win. That is not the same as saying she
will win, or even that she is favored to win. But if she decides to run, she will be a formidable candidate, with significant advantages over every other plausible Democratic candidate...

Sunday, December 24, 2006

New Wheels for the Fuji

I'd been riding the American Classic 350 wheels that came with my Fuji Team SL over the last year or so. As wheels go, they work. But they came out of true quickly, and the spokes are so thin that when I try to true them I'll get the wheel true in the truing stand, stress relieve, and they'll pop right back to where they were. And then there are all these stories about rim failures and bearing failures. I'm unconcerned about bearing failures --- you can almost always limp home about those, but the stories about rims breaking loose because they are so thin worry me on my descents.

So I ended up building a pair of new wheels. Front was a Campagnolo Chorus front hub with 36 WS DB15 spokes and a Velocity Aerohead rim (silver), and rear was a Shimano DuraAce hub with 36 WS DB15 spokes and a Velocity Aerohead OC rim. To my chagrin, the front wheel despite my extreme lubrication of the spoke threads had a few nipples seize up during the wheel build, so I did not tighten up the rim as tight as I normally would have. I again overlubricated the rear spoke threads, and the rear wheel came together perfectly.

The front Campagnolo Chorus hub was bought because it was (1) cheaper than the equivalent DuraAce front, and (2) it advertised a very nice, easy adjust cup and cone bearing setup that only needed 2 5mm allen wrenches to take apart and a 2.5mm allen wrench to adjust. Sure enough these were amazing. I could have overhauled this hub even without instructions. While they're not quite mainteneance free, I have no concerns recommending these to people who want an easy to service, traditional bearing hubs. And yes, the hub does roll extremely smoothly.

The rear Shimano DuraAce hub had a traditional cup and cone plus locknut system which required buying 2 14mm cone wrenches. I had a former mechanic at work show me how to adjust them, and they definitely are a major pain. Since you do have to take apart traditional bearing hubs every 3000 miles (which is about 15 weeks of riding for me), this is definitely a hassle. I definitely think that this is one of those things that's worth paying someone else to deal with. Thumbs down for the Shimano. Matt saw us adjusting the bearings and he said, "I'm definitely feeling very Phil Woodish." To make things worse after you ride on them a bit, the labyrinth seals on the hub weeps, leaking grease. This isn't a big deal on the road, but off-pavement it attracts a lot of dirt and you have no easy way of cleaning it off without risking contamination. Needless to say, it looks like bike cleaning is something I might have to do more frequently now.

On the road, the new wheels are just a little (about 200g) heavier than the old ones. This translates to slower acceleration, and just a little bit more honking and standing up on climbs than with the 350s. The wheels do roll along very nicely, and the DuraAce cassette hub is definitely quiet. Because these wheels are quite a bit stronger (and definitely feel more solid!), I take corners a little bit more aggressively on them and feel more confident when riding them on and off road. I'm glad I spent my money, but I definitely understand why American Classic does have a market for those 350s. Those 200g on each wheel do make a difference.

Saturday, December 23, 2006

Review: The Long Tail

I picked up this book when Chris Anderson visited Google quite a while back, and only got around to reading it now. It's a good book, with the topic well explored and easily understood, but perhaps I've spent too much time exploring niche distributions, but the book seems kinda banal. The conclusions seem awfully easy to come by once you see the data. It seems to me that rather than write words to accompany the data, the entire book could have been compressed into about a 30-page technical report, with well-designed graphs and just a bit of commentary.

Ultimately, this book reads too much like a Wired article stretched out to fill 200 pages. Which of course, it is.

Hit-driven economics... is a creation of an age in which there just wasn't enough room to carry everything for everybody: not enough shelf space for all the CDs, DVDs, and video games produced; not enough screens to show all the available movies...; and nowhere enough hours in the day to squeeze everything through any of these slots.

This is the world of
scarcity. Now, with online distribution and retail, we are entering a world of abundance. The differences are profound.

Sunday, December 17, 2006

Review: Rainbow's End, by Vernor Vinge

After winning last year's best fiction, I looked forward to a repeat performance in Vinge's latest novel.

Rainbow's End follows the story of Robert Gu, a poet who is pulled back from the ravages of Alzheimer's only to discover his talent with words gone, replaced by a passion for engineering. If that was the main plot of the book, it would innovative and a departure for him, but of course, that's not it. The primary plot revolves around YGBM (You-Gotta-Believe-Me) technology: an infection and a trigger so subtle that people don't even know that their behavior's being manipulated.

The technology in the book isn't unbelievable, but unfortunately there are still a few plot holes big enough to drive a truck through. For instance, one plot point revolves around a corporation's attempt to scan books by putting them through a high speed shredder. Given that non-destructive scanning methods exist, it seems that this sort of technology would get the cold shoulder from University libraries, so my assumption is that Vernor Vinge didn't get along with the librarian at UCSD.

There's a little attempt to put in some character development in the novel, but nevetheless, I wouldn't read this book for any of that. The vision of technologies is interesting, but about halfway through the book after you've gotten sated, and you'll wish for the conclusion to happen quickly. It's exciting enough for a movie, but perhaps nothing could live up to the build up that had leads to it.

Recommended, but not his best work. Be warned.

The pillars shifted and the library... walked. It was not as spectacular as fake imagery could be, but Huynh was seeing it with his naked eyes. In halting cadence, first one fifty-foot pillar and then another rose visibly from the ground, moved several yeards in the direction of the Greater Scooch-a-mout, and descended with the sound of rock penetrating rock. The rest of the building shifted with them, twisting on the utility core that was the library's central axis.

Rotadent Review

Just on a review tear lately =)

Over the years, I've used many automated all started when the first of my 3 root canals told me that my dental hygiene was really lacking and I really should do something about it. So I've used the Oral-B, the SonicCare, and now, the Rotadent. The Rotadent was recommended to me by my dentist, and I cannot say if it is because they make a lot of money selling the brush heads (they claim they make no money from the brushes themselves, and I'm inclined to believe them), or if it is because it genuinely cleans better than the other power brushes out there. As my sonicare was getting long in the tooth, and I wanted to replace it with something else anyway, I decided to try the Rotadent. Oh yes, I had also gotten orthodontics at this point, and the Rotadent came with brush tips that catered specifically to that.

The rotadent is basically a rotary toothbrush. It doesn't do anything spectacular that other automated rotary toothbrushes like the Oral-B Triumph does, but there is one nice thing about it. It comes with a few different brush heads, 4 of them to be exact. 2 of them are your normal flat head ones, and two of them comes with an elongated tip. It is the brush heads with the tips that kinda made me really want to try them out.

My braces are the normal ones you see in the pictures. Wires with brackets glued onto the teeth...The elongated tips allows me to get underneath the wires, or between the teeth, or point it straight down the gum...and it does feel cleaner. The dentist told me that using the elongated tip is almost like flossing, and I can believe it as it does get to spots a normal toothbrush can never reach.

The bad side of the Rotadent? Its expensive. The unit itself is cheap, 99 dollars and it comes with 4 tips. The tips themselves? 20 bucks each from the dentist. That's why I say I can believe my dentist when she told me she makes no money from the unit. They make it all up on the tips! =) Even online shopping can only get it down to 15 bucks a pop. The same price that pro-dentec, the manufacturers (or distributors) of the Rotadent sells them for.

So I've been using it for a year, and inevitably, it broke. It started to take forever to charge, wouldn't hold a charge (the brushing action would feel slow), and took forever to start up (I believe the record to start up once was over 30 minutes)

Called the support #, went through really basic troubleshooting (its a toothbrush! what else is there to troubleshoot when I tell you it doesn't turn on?). The lady on the line, Rhonda, was really pleasant though, and sent me a replacement power switch. The power switch apparently is just a magnet that flips something on the other side of the brush so that power starts coursing through the handle, spinning the brush tip. It took 7 days for the power switch to arrive, I gave it a chance, switching switches, and still no-go. Another 30 minutes on the phone with Rhonda, and she is sending me a new handle and a/c charger.

Say yay for another positive story of customer service!

Supposedly, Pro-Dentec warranties the brush for the lifetime of it, and I'll see in another year's time if they are serious about it.

One last thing, the only big minus I can see about this toothbrush is that the charging element is exposed. Instead of a conductive base like all other toothbrushes, it is simply a plug that goes into the underneath of the the element that gets charged is exposed. I haven't died or got shocked by it yet, and I'm a shower-brusher....and I'm sure its 50% of the reason why the brush died faster, but for crying out loud. Its a tooth brush. Its meant to get wet, either in your mouth, or when you're washing it.

So I don't feel too bad about getting a new brush head.

All in all, I can recommend this without too much hesitation. Its generally cheaper than a soniccare or Oral-B when you first buy it, but the tips will kill you. Other brands sell 2 tips for the same price Pro-Dentec sells one of theirs for. So you have to make that determination yourself.

Nike+Ipod Review

So I bought this about 5 weeks ago. I have an iPod Nano, so I figure what the heck. Its' going for 25 bucks at, at the worst it'll just be something I ebay for half the price...

Well, after 6 weeks, and 110 miles later, I can say, its great.

My first few runs were a bit wonky with it, so I figure I should calibrate it. I did about 1 mile on the treadmill at 6.8mph and then walked for a quarter mile at 3.5 and the next few runs I did with it was just perfect. My local loop of 2.35 miles came up relatively accurate (sometimes it reads 2.2 sometimes it reads 2.5), and if I average it, it usually is more or less accurate. Like any other pedometer that does not use a GPS, it cannot give you 100% accuracy, but then to get 100% accuracy, you really want a unit that tracks altitude changes too (an altitude change of as little of 100 feet per mile can be significant over longer distances).

The use of it is simple as is demonstrated by the nike+ website (link in title). Plug it in, select the "Nike+ iPod" menu item, slip the sensor underneath your shoe, select a workout, and away you go. You can select from "Basic" which just tracks your distance, and time, or go by "time", "distance", "calories". For the last option, you'll have to input your weight and height, but I can't see why anybody wouldn't do it. Oh yes, select a playlist too, or have it shuffle.

Then you go run. If you have it calibrated correctly and your sensor is in a good position, your iPod should start receiving information from the foot sensor and displaying it on your iPod. You can get some rubbish times at times, but generally it is fairly accurate. Don't use it to measure distances as you should know the distances you are running, but it should give you a good idea of what your pace is.

When you press the center button, a voice will tell you how far you've run, what your current pace is, and how long you've run. Press & hold the center button and your "powersong" comes up...its simply a song that you decide beforehand to give you extra motivation, if that type of thing works for you. =)

At the end of the run, the voice will give you a summary of your workout, plus calories burnt if you have input your weight/height, and if you've reached certain milestones, a congratulatory message from Lance Armstrong and some other lady will be given to you.

Note that you do not need to have an Nike+ shoe, you can buy a Marware Nike+ sensor suit,
and it should work just as well as if you had an Nike+ shoe. For my money, I have just been slipping the sensor underneath the shoe and calibrating it, and that works fine for me. I have purchased the Marware Nike+ sensor suit though, and will be reviewing that when I receive it.

Guu vs PowerGel vs HammerGel

So, one side effect there is of running and biking a lot is that you eat a lot. While you run or while you bike....Its been about 6 months since I began my training regime and I have eaten a lot of gels, but primarily I have experience with the gels in the title (mostly because I was given a lot of them, or they were free, or whatever).

Most of them share the same characteristics, easy to swallow, easy to open container, requires a bit of pushing to get the last bits out of them...nutritionally, they're all more or less the same:

PowerGel (41g serving)

110 Calories (0 from fat)
27g carbs (7g Sugar)
200mg Sodium
20mg potassium
25mg Caffeine

HammerGel (36g serving)

90 Calories (1 from fat)
22g carbs (2g sugar)
21mg Sodium
unspecified caffeine/potassium

Gu Energy Gel (32g serving)

100 Calories (15 from fat)
20g carbs (4g sugar)
55mg Sodium
45mg Potassium
negligible amount of Caffeine

My personal review on them, and my favourite of the three is probably the powergel. Its not so much whats in it as how it is delivered from package to my mouth. Because it is slightly more watery than the other two, it goes down easier and I also don't require as much water to down it. The latter is more critical to running when really all you have is a few seconds to get your nutrition and water...the other two gels requires quite a bit more water as it is dryer so to get it down into your throat requires really a water and nutrition stop.

Flavors for all three are more or less comparable, I prefer stuff with caffeine in it, others don't, i tend to get my flavors in some variant of coffee or chocolate...the citrus stuff just never goes down as well flavor wise.

You really can't go wrong with all 3, but if prices were equivalent I'll probably go for the powergel. Note that it comes in a bigger serving, but I believe that is mostly water weight. Strip out the extra water weight and it'll probably weigh in the same. It does have more sugar too, but when you're ingesting it, they all taste just as sugary.

Saturday, December 16, 2006

The New York Times magazine about Philantropy

After reading this article, I feel like I'm a selfish bastard. But I still find it difficult for me to consider poverty relief a compelling goal. I feel that environmental problems are tougher and more prevailing, and if there's no habitable planet left for us to live in, it doesn't matter if everyone's wealthy --- we'd all be dead.

But you'd still be right to say that I'm a selfish bastard. After all, the biggest beneficiary of a nice planet to live on would be me --- I enjoy the outdoors significantly more than the average person, and clearly preserving the current outdoor environment is of high value to me.

So be it. Lots of people seem focused on global poverty for now. Far fewer seem concerned about global warming or climate change. Until that changes, I feel that I am justified in remaining a selfish bastard.

Brad DeLong tears Alan Reynolds apart

Brad DeLong's Semi-Daily Journal: Fair and Balanced Almost Every Day: Intellectual Garbage Collection: The Unreliability of Alan Reynolds

I know better than to sully my brain with the contents of the Wall Street Journal editorial page. The rest of the newspaper is actually a first rate newspaper. It has replaced the New York Times as my must-read newspaper, mostly because of the disasters the Times have had with its Iraq coverage, as well as just plain inability to comprehend science. I'm a subscriber and will very likely renew. I just don't read the editorial pages, unless it's something written by Al Gore.

Friday, December 08, 2006

Review: Warped Passages, Unraveling the Mysteries of The Universe's Hidden Dimensions

This turned out to be a really tough book to read. I'm sure it was hard to write too, since Lisa Randall carefully managed to write the book without equations (though there's a mathematical footnote here and there in a separate appendix). The first few chapters introduce you to multiple dimensions of the type and size that's being discussed in physics today. It is then followed up by an introduction to Relativity and Quantum Mechanics that is as well explained and understandable as I've read anywhere (note that I'm not quite a Physics junkie, so this doesn't say a lot).

The Standard Model of particle physics is explored thoroughly, and it's great to understand a few terms that you see in Stephen Baxter's science fiction novels, for instance. Then a discussion of string theory and the current areas of research is explained, including Lisa Randall's own research, which she does a good job of explaining without aggrandizing her role. (She is already one of the most cited Physicists in the field)

The most important reason to read this book, however, is that it actually does explain why you and I might care about string theory or high energy physics. The nature of the universe is what draws her to this research, and her enthusiasm and insight comes shining through. And unlike the speculative nature of religious inquisition, her theories can be proven or not by later generations of particle accelerators.

This is a book worth reading. Buy the paperback, since you won't be able to finish it in the time typically alloted for a library checkout. It is tough going but worth the effort.

An article about Passive Investing

San Francisco magazine had a great article about investment and investing advice. It also has several interesting bits about how Jonathan Rosenberg inoculated Google employees against the flock of vulture capitalists who wanted desperately to manage soon-to-be wealthy employees' money. I wish I could say that most employees paid attention to Bill Sharpe and Burton Malkiel, but my impression is to the contrary.

There is, in addition, a great section in the article about that rare breed, the honest financial planner:
It took Solli a couple more painful meetings and a few dozen trades to clean the parasites out of my account and reinvest the proceeds in index funds, the lifeblood of his business. Without exception, he moved me into funds that have outperformed the ones I was in, like the Vanguard REIT Index Fund, some Pimco bond and stock funds, and Artisan International. And he did it for an annual fee of .5 percent of money under management, saving me over a full percent in overall costs and a lot of taxes in the future. Then he did something I doubt any other financial manager would have done. He fired himself.

“You really don’t need me anymore,” he said, and closed my Aperio account that day, ending his fees, but not our relationship.

I will say that if you really are uneasy and need hand holding while you handle your investments, you can do much worse than some like the Aperio group. A 0.5% management fee is high, but someone who will fire himself after he's done fixing a mess demonstrates a high level of integrity that one simply does not see in the financial industry.

This is an article very much worth reading, and comes highly recommended.

Saturday, December 02, 2006

I can tell that the end of the year is approaching...

The number of investment questions coming to me keep going up, and some of the questions are kind of poignant, indicating a lack of attention to important financial decisions that need to be made. Other comments reflect a blissful ignorance, the kind that I am almost sad to burst. In any case, here's some problems I've discovered recently.
  1. It's not enough to save. (Though apparently most Americans don't save) Once you've saved the money, you must get off your butt and actually invest. Keeping money in say, a Tax Exempt Money Market account will at least keep you from losing the value of the money due to inflation. But if that's all you did the last year, you missed out on the 14.24% return that Vanguard's Target Retirement 2045 did over the past year.
  2. Cost matters. The more money you have, the more it matters. If all you have is $100, a 1% fee is $1. When your portfolio is $1 million, the 1% fee has ballooned to become $10,000 a year! That's money going into a financial adviser or broker that should be going into your pocket. I consider an aggregate fee of more than 0.3% (that's right, 1/3rd of a percentage point) to be unconscionable. Go with a fee-only adviser if you can, and avoid wrap fees/wrap accounts like the plague.
  3. The S&P 500 should no longer be your benchmark! When you're looking at an overall portfolio, the S&P 500 is only one asset (domestic stocks), which should be around 30-40% of your total asset allocation. Benchmark against something like the Vanguard Target Retirement fund, which has a reasonable allocation of international stocks and bonds. I even consider that insufficient, since that Vanguard fund does not include REITs, which as Brian says, should be a significant proportion of your portfolio. For those of you who think that wealthy people find it easy to get good financial advice --- a wealthy person I talked to recently told me proudly that his financial adviser got him a 13% return this year, beating the S&P 500. He didn't realize that Vanguard's International Index fund returned 22% this year, for instance. Or that the REIT Index returned 37%. Precious Metals also returned astounding results, but you may or may not want to havethat in your portfolio. To add insult to injury he was paying more in fees than a Vanguard investor would have, reducing his relative performance even further from that of the appropriate Vanguard Target Retirement Fund for would have been. Compound these losses year after year, add in the fees, and you'll realize why Investment Bankers get multi-million dollar bonuses while you get stuck holding the bag.
  4. Figure out an appropriate asset allocation and stick to it! As with most things in life, the tough part isn't knowing what the right thing to do is, but doing it. The difference between those who excel and those who don't is that those who excel not only know what the right thing to do is, but they actually do it. Even if it's hard. Especially if it's hard. I find that lack of discipline is a major reason for portfolio under-performance.
I anticipate that next year will be a challenging environment to invest in. Buying a hot stock is not an investment strategy. Do your research, understand what an appropriate asset allocation is for you, and buy low cost indexed funds. It will not be exciting, and nobody will ever ask you for the hot stock tip, but that's the price of unconventional success.

Friday, December 01, 2006

The Worst Investment Strategy

The Worst Investment Strategy

By James Freeman

The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the author and do not necessarily reflect the views of the Commission or of the author's colleagues upon the staff of the Commission.

Should I invest my retirement savings in a mutual fund? What's the best way to select stocks for long-term growth? People naturally ask these questions when they meet the staff of the Securities and Exchange Commission's Office of Investor Education and Assistance. These are tough questions to answer, especially because, as the official referee of America's financial markets, the SEC rightly avoids rooting for particular teams. And no, we don't draft money managers to compete in a financial fantasy league.

However, while we can't tell you which investment option is the best, we're free to tell you which one is the absolute worst. We can also tell you which one is the second worst. Let's discuss that one first. The second worst investment strategy ever devised is to hand over your hard-earned savings to anyone, without first checking out the person's background and credentials. And checking out a potential investment adviser or broker does not mean simply listening to her describe how she shares your religion, ethnic background, and values. While those may be interesting things to know, you'll want to dig a little deeper. Every year at the SEC, we receive thousands of complaints of investment fraud, and while the victims who write or call us represent far less than one percent of the investing public, you don't want to be one of them.

The SEC's website has a guide to checking out the background and disciplinary history of brokers and advisers at Here you'll learn how to check our database of registered investment advisers, the NASD's broker database, and the information maintained by state securities regulators. The North American Securities Administrators Association website at can direct you to your state contacts, and also provides useful tips on avoiding scams. You can also call us toll-free at 1-800-SEC-0330. All of these resources should help you avoid the world's second worst investment strategy—being careless when selecting people to entrust with your money.

What could possibly be worse than that? Well, in fact, there is one approach that is even less likely to result in a secure retirement and financial freedom. While no one can guarantee the success of any particular investment, there is one investing approach that is guaranteed to fail. And sadly, it is an approach that we as a nation increasingly favor. This disturbingly popular option is to not save at all.

For reasons that are not entirely clear, America's savings rate has been declining for more than half a century, but since the spring of 2005, according to the Commerce Department, we've actually moved into negative territory. Not only are we as a nation not saving; for the last several quarters we've actually been spending beyond our income. For August and September of this year, personal outlays exceeded disposable personal income by more than $60 billion. This is really not a good time to hit rock-bottom -- or just below it, actually -- with our savings habits, given the expanding need for these savings. Thanks to advancing medical technology, we're all living longer, which means we will need to fund longer retirements. U.S. life expectancy inches up with each new report from the National Center for Health Statistics, and has now reached almost 78 years. For females, the news is especially bright – today's baby girls are expected to live to age 80, on average. Truly a blessing, and also a new financial challenge -- and it is not simply a challenge for retirement planning. According to the College Board, the average cost of attending a public college or university for just one year is over $12,000, and the average cost for just one year of private college is more than $29,000. These costs continue to rise faster than inflation.

Federal Reserve Chairman Ben Bernanke spoke recently on the need for increased personal saving, but lamented, "Unfortunately, many years of concentrated attention on this issue by policymakers and economists have failed to uncover a silver bullet for increasing household saving." OK, this may not be a silver bullet, but a look at the history of America's capital markets provides a very powerful reason to save today's income and invest it for tomorrow's wealth.

Over the last 80 years, long-term investors in U.S. stocks have earned, on average, a little more than 10 percent per year. For those not investing in tax-advantaged accounts such as 401(k) plans and IRAs, this works out to an average after-tax return of about 7% per year. There is absolutely no guarantee that this trend will continue, although, interestingly, the long-run real returns on U.S. stocks have remained fairly steady for a full two centuries, according to Jeremy Siegel of the University of Pennsylvania's Wharton School.

So, understanding that we cannot predict the future, let's look at what investing in America's equity markets has traditionally meant for U.S. investors. A person who managed to save $1,000, invested this money in U.S. stocks and also managed to leave it alone for 20 years would end up with more than $3,800, after taxes. If this investor could manage to avoid tapping into it for a full thirty years, the total would rise to more than $7,600. If this wise investor had the money in a tax-deferred account, her $1,000 would turn into more than $6,700 in 20 years, and a whopping $17,449.40 at the thirty-year mark. If our hypothetical long-term investor could step up and commit to saving and investing $1,000 in stocks each and every year, the long-run average says she would end up with almost $44,000 after-tax in 20 years, and more than $101,000 after thirty years. Using tax-advantaged accounts, the figures run to $63,000 and $180,000. All of these figures do not include broker or mutual fund fees, which you should watch carefully, as they can have an enormous impact on your returns. Still, history shows that for the average participant in the U.S. markets -- that's right, average, not lucky or exceptional -- long-term investing in stocks has meant enormous gains, even after paying taxes. Isn't that a great reason to save?

To help you get started please read "Get the Facts on Saving and Investing" which is available online at Or call us toll-free at 1-800-SEC-0330 and we'll send you a copy.

James Freeman is the Investor Advocate at the U.S. Securities and Exchange Commission.

[Piaw's Note: This article re-published with permission. I'd link to it, but I couldn't find it anywhere else on the internet.]