Insider trading and other nefarious stock market operations seem to be on our minds lately. I guess this is natural. Despite eye-popping returns since March we are still living in the aftermath of disaster and periods of market stress have historically been periods of concern about an unequal playing field.
For example, the SEC was established in direct response to the 1929 crash in order to enforce a new set of rules that would make the stock market a fair game for all. I can’t believe that very many people thought that the crash was due to insider trading and its ilk, but I guess it seemed like a good time to clean up the the street.
One reason why we worry more about fairness when the market goes down may simply be that when the market is chugging along to new heights it is hard to see flaws in it of any kind. Everybody is fat, happy, and getting richer. It is only on the inevitable downswings that the scales fall from our eyes and we notice problems that were always there.
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Because it can.
This week the College Board (the SAT people) released their annual survey of college tuition and found what they always find. College got more expensive 
last year. This time ’round public colleges went up 6.5% and private ones 4.4%, both of which are pretty steep increases when compared to the 2.1% decline in the CPI over the same period.
This was a particularly bad year for the tuition vs. inflation comparison, but the overall trend is striking. According to the College Board, over the past thirty years the average tuition cost has tripled in real inflation-adjusted terms. It’s hard to think of anything else we buy that has gone up as much. It would be like paying $12 a gallon at the pump.
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The buzz article of the month seems to be Time’s Why It’s Time to Retire the 401(k) which came out October 9th. It is not to be confused with Time’s Should the 401k Be Killed? from last winter. And I am sure the serious print 
journalists at Time would be offended if I likened their work to the 60 Minutes piece from the spring Retirement Dreams Disappear With 401(k)s. (See my comments on that here.)
I suspect there are many more such articles and TV news segments out there telling us how 401(k)s are terminally broken. I don’t have the heart to search for them. These particular three say roughly the same thing, with similar quotes from experts and profiles of folks in their sixties who are poorer than they expected to be and, we presume, than they deserve to be.
There is an unavoidable, and I think completely unhelpful, undercurrent in this genre that the 401(k) is not a good idea with some serious implementation issues, or even a noble experiment that failed, but a scam perpetrated on workers by Evil Big Business. 401(k)s, we are told, were designed by our beneficent law givers in Washington as a nice side dish to the main retirement course of corporate pensions. Somehow, when we weren’t paying attention, employers pulled a switch on us and passed off the side dish as the whole meal.
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This is the second in a series inspired by a simple toy at CNNMoney that probably doesn’t deserve the attention. (See the first post in the series here.)
Question three in the financial health quiz is "How many months of expenses do you have in an emergency savings account?" The right answer is pretty 
simple:
You should keep three months’ worth of living expenses in a bank savings account or a high-yield money market fund for emergencies. If you have kids or rely on one income, make it six months.
In other words, you should have six months expenses in cash unless you are a two income household with no kids, a.k.a. DINKs.
Now I happen to think that six months is generally too much, but what makes this sort of conventional wisdom truly infuriating is its one-size-fits all nature. I am sure its defenders will say it’s just meant as a guideline or rule of thumb, but that just begs the question of why we need such a dumbed-down guideline to begin with. Can’t some things in our lives be just a little complicated?
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Free Money Finance last week pointed me to an AP article from the end of September headlined “Income gap widens as poor take hit in recession”. (Your 
local news outlet may have used a different title.)
The piece recounts how the recession has lowered incomes across the board but hit the deserving poor and ever-wholesome middle class harder than the fat cats on the top. Kinda ho-hum as mainstream media reports on the Great Recession go. The AP story was run in a few places (see link above and here and here too) but hardly made a splash. Why would it? It just confirms what everybody knows to be true.
But it isn’t true. Or, at least, the conclusions in the article are completely unsupported by the data it pretends to be based on.
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For example, the SEC was established in direct response to the 1929 crash in order to enforce a new set of rules that would make the stock market a fair game for all. I can’t believe that very many people thought that the crash was due to insider trading and its ilk, but I guess it seemed like a good time to clean up the the street.
Investing | Frank Curmudgeon | 
October 26, 2009 12:29 pm | 
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