Three

In the spirit of the Rule of Three, this week I am recommending three reads from three reputable financial blogs which I find to be highly useful.

28 Gift Ideas that Save Money for the Recipient
[This is a great post, and the title speaks for itself.]

The 12 Biggest Financial Mistakes People Make Over & Over Again
[This blog brings you back to basics to sort out the chinks in your finances.]

The Rule of Three
[And of course, the rule of three. Call me a cheapo if you must but this is essential reading!]

There! 3 quality posts for the time/effort of browsing through 1, no reason why you should not stay glued to this blog!

Next Shock to the Economy

In light of the recent doom and gloom of the markets, watch this video to see where the next shock is coming from. Federal bailing not included.


Economists Warn Anti-Bush Merchandise Market Close To Collapse

More Sex is Safer Sex

Read a book by Steven Landsburg called More Sex is Safer Sex, and Other Surprises. It was a really refreshing take on application of economics into everyday life, situations and problems and how having more sex can prevent the spread of AIDS.

The main story which Landsburg wrote was:

Imagine a country where almost all women are monogamous, while all men demand two female partners per year. Under those circumstances, a few prostitutes end up servicing all the men. Before long, the prostitutes are infected; they pass the disease on to the men; the men bring it home to their monogamous wives. But if each of those monogamous wives were willing to take on one extramarital partner, the market for prostitution would die out, and the virus, unable to spread fast enough to maintain itself, might well die out along with it.

More interestingly, as I was surfing around for more information about the book, I found a post by Alex Tabarrok on June 19, 2008 regarding another book which validate's Landsburg's theory:

In The Wisdom of Whores (see also my earlier post) Elizabeth Pisani says that such a country exists, it's Thailand, and the results of more sex were safer sex - exactly as Landsburg argued. Here's Pisani's story:

Thailand used to fit the the classic 'virtuous girls, philandering boys' model. At the start of the 1990s, 57 percent of twenty-one-year-old men in Northern Thailand trooped off to the brothel to do their philandering. More than half the sex workers who soaked up their excess energy were HIV-infected....

Then...the Thai economy boomed. Girls were getting better educations than ever before...Educated girls were waiting longer before getting married, but not before having sex. By the end of the 1990s, 45 percent of girls aged 15-21 in northern Thailand admitted to having sex with boyfriends before marriage, compared to less than a tenth of that in a nationwide survey in 1993.

...So at the end of the decade, we have a lot more premarital sex and not all that much condom use with girlfriends. But now that these young, cash-strapped guys can have sex without paying, they've stopped handing over cash for sex. By the end of the 1990s, only 7 percent of young men were paying for sex, and HIV prevalence in sex workers had come down too.

....In short, more women having premarital sex equals less HIV.

Pisani cites neither Landsburg nor Kremer so I believe her account is independent. Note that Pisani also credits Thailand's successful condom program.

Hence more sex is safer sex! Really quite the interesting read, even for non economically inclined people as it is written in a easy to understand way and the issues discussed are easy to relate to, from sex to pollution and clearing up fallen leaves on your porch.

Besides wanting to share an interesting book in this post, I would also like to share a method to be more financially efficient.

I read the book at the bookstore....

The WHOLE book.

Free(to me).

So in a world where knowledge is power, I gained some knowledge for which I did not have to pay for in money.

But is it really free?

Next up!

I will dissect the costs involved in spending an afternoon at the bookstore readings books!

Stay tuned!

Beware the Old Lady

I love riding on buses. The humming of the engine, the people-watching and the opportunity for personal reflection is something I've come to enjoy. Not to mention the occasional inspirational event that occurs. This post is about one of those.

I was doing my thing, sitting comfortably and enjoying my music when this old lady boarded the bus. She walked over in my direction, slowly looking around before noticing there were no seats available and began to look down.

At this point in time, I was ready to do what any able-bodied young man should do: give up my seat. Yet in the split second before I did it, I glanced around and noticed every other passenger was looking at me. Then it hit me that I seemed to be the youngest male around hence I was the natural choice to be sacrificed so that the old lady can rest her legs. There was this pressure in the air created by this accumulation of intense eye-power and I could not help but spring to my feet and give up my seat.

The tension in the air was immediately alleviated.

I felt that I had done the right thing yet a nagging thought persists: did I succumb to the mass pressure? Were I to put on the disguise of an old lady, would anyone give up their seat for me? Well, maybe not because everyone can see clearly that I am wearing a wig and do not have a very lady-ish face.

How about in the markets? Can you tell a real old lady from a disguised one?

Which index or model can best predict an accurate rise or fall? Will you be able to time your 'giving up of the seat' perfectly to the real old lady? Or will you give up your seat too readily only to find that you gave up your seat to me?

This habit of timing the markets often results in the investor making lesser than if he had just invested regularly over a period of 5 to 10 years. This episode of the old lady reminded me that I should always filter out the noise, stay invested and invest regularly. This is a much easier method of accumulating wealth than constantly monitoring the markets, looking over your shoulder for the old lady.

In a nutshell, invest regularly with a wolf strategy, and stay invested.

Related Posts:
To Ride a Bus
Fooled by Randomness
Freekonomics

Economics of little monsters and noise

So a little background story, I'm staying with my uncle and his family... Two bickering kids and lotsa noise. Sometimes its the melodious sound of joyful laughter but at others, the awful screeching of angry screaming.

I found that if i applied a little economics to this situation...
I would be able to affect abit more joyful laughter and lots less awful screeching.

Lets say an eminent fight is on the brink of bubbling out of control...
I can take 2 actions:

1) Do nothing - do nothing.. pretend I am the three monkeys...
Let the house collapse with the earth shattering ground breaking noise.

I'd go hide in the room and so not be any less happier nor sadder, where as the kids will not be any happier or sadder because... they are kids who like to quarrel... and the parents will be unhappier, thus made less well off in term of the economics of happiness, and thus my taking this option of social non-chalance leads to an overall decrease in happiness level.

Assuming my not taking action would lead to a parent taking the kids
to task anyways, so no matter which option I choose, it can be taken that they would be that they would be unhappier(due to a scolding)

2) Shout and be the loudest - Show who's boss. Shout louder and longer and WIN. Survival of the fittest. Primal Rage.

Economically, I would be a little less happier as I would have to go primal and raise my voice a little... to get some peace... the kids... would be a little unhappier(but not much sadder than if i did nothing) but the parents get alittle peace and quiet and are thus better off in the happyness economic pie chart.

Assuming at any one time, there would be only one 'unit' of unhappiness among the adults: only one parent or me would be a little less happy from having to take action whereas the other 2 take the do nothing option, and are no better off.

So by utilitarian rule, I must do the greatest good for the greatest number... So I should take action which would lead to two other ppl being no less worse off.

The looking out for number one rule, states that I should just disappear into the wallpaper and slide up to my bedroom.....

Going by the faithful rule of three, I'm going to come up with a third solution.

3)Diffuse the situation - there are many ways to fight the seeming ineminent fire... Kids are really easy to distract and appease.
try tickling... telling a joke, dispersing them...

yea.. mainly just pulling them apart... and saving the house from collapsing...

who's happyer? me, parents and prob even the kids are a little well off.. assuming that the diffusal was a success....

So.. first point:
there is economics involved in everything! everyday life!

second point:
there are three sides to the coin! it's not always black and white.

third point:
based on economics, what would you do in a burning balloon?

Fooled by Randomness

Honestly, the title did not appeal to me all that much at a glance. However, what caught my eye was the comment at the corner of the book cover that whispered 'Fortune: Selected as one of the smartest books of all time'. Now if there was any way to prove that I'm smart, it is to read a smart book.

What it is about:
How economists and traders consistently ignore the role of chance and rely on their increasingly unreliable models and charts to 'predict' the market.

Who is it for:
Anyone with a slight interest in the markets should read this! Nassim Nicholas Taleb is very convincing with his arguments though he does come across as quite arrogant at times. He does make occasional references to the role of chance in everyday life but most of it is centered on trading, which is his area of expertise, so I have no qualms with that.

Conclusion:
This book is definitely essential reading, your views on the markets and everything else will be drastically altered. You will find yourself labeling market volatility as 'noise' and be more focused on the things that really matter. Besides, you would definitely want to be seen reading one of the smartest books of all time.

Note: This book was so influential that the author decided to do a chapter by chapter review but at the time of writing, this author cannot find this book anywhere. So much for the smartness proof.

Related Posts:
The Warren Buffett Way
Lessons from Babylon