Labor Day Stock Market Thoughts

Labor Day Weekend is prime time for big-picture discussions in the financial press. With the cultural end of summer, and the heightened feeling of seriousness of the back-to-school and back-to-work season, Labor Day is a good time to review where we are and where we are going. Also, articles on broad topics can be written far in advance so that journalists can take the weekend, or entire week, off.

Thus, The Wall Street Journal recently treated us to a spate of pieces on basically the same topic, the wisdom of investing in the stock market.

Brett Arends kicked off this festival of tea leaf reading mid-week with Why Stocks Still Aren’t Cheap. Then over the weekend we got Is It Time to Scrap the Fusty Old P/E Ratio?, covering some of the same ground as Arends but with a less bearish spin, and Thinking Outside the Stocks, discussing off-beat non-stock investments.

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Vacation Week

I’m vacationing with the wife and kiddies this week, so no bitter and curmudgeonly posts. I’ll be back after Labor Day, all rested and acerbic.

The Reality of Saving Energy, Money, and the Planet

Which uses more energy, a recycled glass bottle or an aluminum can made from virgin material? Most people think it is the recycled bottle. Of course, I wouldn’t have brought it up if the correct answer was the popular one. Turns out, recycled and new glass bottles use about the same amount of energy and both use a bit more than a new aluminum can. The energy consumption of recycled cans are an order of magnitude lower.

I got this from an interesting paper recently published on common perceptions versus the reality of energy savings. Much to my non-surprise, they found that perception and reality are only roughly related. “The observed correlations between judged and actual energy values, although positive, may be too small to support sound decision making.”

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Bad Times for Credit Cards

[This Thursday rerun first appeared June 18, 2009.]

On Monday the New York Times ran a piece that, in a better world, would not have been news. Turns out that credit card companies are often willing to settle delinquent accounts for less than what is owed. Golly.

The article did contain an important tip for those in serious credit card trouble. When the card issuer calls you out of the blue and offers to let you settle the whole thing for 80 cents on the dollar, you should, without hesitation or reflection, say no. Then hang up. They’re not calling because they think you’ll pay them eventually. That 80% is what we Wall Street types call a “first offer”.

The Times piece tells the story of a guy who got a call like this, said no thanks, and then when the company called back a few weeks later, offered them 50%.

It’s a deal, the account representative immediately said, not even bothering to check with a supervisor.

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Bad Advice at Any Price

The theme of this blog, which admittedly I often stretch and occasionally just ignore, is that the money advice we Americans get is lousy.

That advice comes from several sources. There are publications and broadcasts of various kinds. Aside from often lacking much wisdom or insight, these sources of information suffer from the fact that they are aimed at a broad and anonymous audience. By their nature, they are one-size-fits-all, leaving individuals to work out for themselves any customizations that might be required. On the other hand, this advice is free or nearly so.

More near-free advice can be had from friends and relatives. Some of this is probably good, but given the general state of PF knowledge out there the chances of hitting on a gifted amateur with sound ideas is low.

At the top of the advice food chain are professionals who give advice to particular individuals, presumably based those individuals’ situations, in exchange for money in the form of fees and/or commissions. In principle, that ought to work best and I have no doubt that there are many paid advisors out there who do a great job. But I am also pretty sure that many others, maybe even most others, are not up to snuff.

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