Recently I mentioned, almost in passing, a SmartMoney item that alleged that relatively young used cars were no longer the bargain they once were and that in some cases a new car is actually cheaper. This inspired considerable commentary, much of it of 
the thoughtful and fact-based variety.
The relative prices of new and barely used cars is a bit more significant an issue than it may at first appear. Conventional wisdom, which until recently I shared with some certainty, is that new cars depreciate violently the moment they become used ones. The consensus seems to be that they lose something like 30% of their new value.
That sort of instant depreciation underlies the argument that used is, in general, a better deal because people place an irrational premium on the new status of cars and attach an irrational stigma to used ones. If the instant loss of value turns out to be untrue, if it turns out that young used cars are only a little cheaper, then perhaps the larger argument that used cars are the smart way to go stops making so much sense.
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The latest manufactured outrage to fill the media and blogosphere is that Social Security will not have a cost of living adjustment in 2011. This is only the second time this has happened in the 35 years that cost of living adjustments (COLAs) have been in place. The other time was in 2010.
The AP led off its reporting on this tragedy with:
More than 58 million retirees and disabled Americans will have to go another year without an increase in their Social Security benefits, the government is expected to announce this week.
The blog WalletPop, always a little more colorful, started its post thusly:
The prediction from scholars that the Social Security Administration will announce zero cost-of-living adjustment, or COLA, to Social Security recipients in 2011 is a blow that many older and disabled Americans can ill-afford.
I think that they meant that the lack of a COLA, not the prediction of one, is an ill-affordable blow. But apparently, it is an even wider problem.
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The other day The Wall Street Journal introduced me to a new word. From German, it is fremdschämen, meaning “a feeling of cringing embarrassment for the actions of others.” If only to discuss reality TV shows, English really needs 
to adopt this one. We can spell it without the umlauts. It is pronounced something like FREM-shame-in.
I bring this up because there is a minor scandal brewing that has just inspired fremdschamen in me. The Consumerist has taken to calling it the Foreclosure Fracas. Wednesday’s update on it in The New York Times began:
The uproar over bad conduct by mortgage lenders intensified Tuesday, as lawmakers in Washington requested a federal investigation and the attorney general in Texas joined a chorus of state law enforcement figures calling for freezes on all foreclosures.
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Earlier this week The Wall Street Journal ran a piece on, of all things, the importance of the correlation coefficients between the returns of investments. I have mixed feelings about it.
On the one hand, correlation between asset returns is a neglected subject of great importance. The mid-Twentieth Century realization of its central role was the start of modern financial theory as we now know it. A professional level understanding of risk begins and ends with correlations, so it would make some sense for amateur investors to know at least the basics.
On the other hand, the article serves as a good reminder of why they know so little. Despite being called Why the Math of Correlation Matters, it contains no math. This might be because the author worried that her readers would find the math scary and hard, but I fear it is because the author herself finds it scary and hard.
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Time to follow up on a few topics I have written about in the past and mention a few more tidbits not worthy of entire posts.
Bad Books
On Friday, the Consumer Product Safety Commission recalled another half million electrical DIY books to add to the million or so recalled from the same publisher in January. Some of the books were originally published in the 1950s. No explanation of why this batch was overlooked nine months ago. Also still no word on what, exactly, is wrong with them.
I had some fun with this in January, but darker thoughts are now creeping into my head. Is it just me, or is anybody else uncomfortable with the idea of a government agency recalling “dangerous” books?
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the thoughtful and fact-based variety.
Cars | Frank Curmudgeon | 
October 13, 2010 12:59 pm | 
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