Archive for June, 2010

What Can We Learn From the Goldman Sachs Affair?

Sunday, June 13th, 2010

Investment-banking giant Goldman Sachs is facing a federal indictment.
By far the most significant thing about this indictment is the public reaction to it. Press accounts have not focused on the issue of fraud, which is what Goldman Sachs is actually charged with. Instead, the headlines screamed that Goldman Sachs’ managers “gloated” when housing prices plummeted in 2007 because the firm had sold mortgage securities instruments short – essentially betting that their value would decline. The clear implication in the news stories was that millions of people were economically devastated by the price declines and that Goldman Sachs employees were rejoicing [...]

Happiness Is a Reliable Income Source

Sunday, June 6th, 2010

The content of human happiness is a subject for never-ending speculation and wonder. One aspect of this picture seems to have clarified, however. Retirees consistently say that they are happier when they have a reliable source of income than when they don’t.
Unfortunately, retirement is, by definition, that time of life when earned income ceases. How, then, should a prospective retiree find a reliable income source?
What is a Reliable Source of Income, Anyway?
Surveys of retirees are valuable but potentially misleading. Reactions to the phrase “reliable source of income” will vary not only because people have different needs for security and growth, [...]

To Bail or Not to Bail

Tuesday, June 1st, 2010

That is the question. Whether ‘tis nobler in the mind to endure the slings and arrows of outrageous equity markets, or to take rise against a sea of portfolio fluctuations – and, by opposing, end them.
Shakespeare’s portfolio decisions are not recorded. Nonetheless, his protagonist in Hamlet displays a psychology remarkably like that of non-professional equity investors. They can’t make up their mind, either. On the one hand, they can still feel the terrifying sensation of the equity downdraft in late 2008 and early 2009. On the other hand, they are obsessed with “getting back” what they lost – and how [...]