Financial Advice – Market Earthquakes
When I first read this I KNEW I had to post it, but think about the market instead of earthquakes as you are reading it and see if you can see the uncanny parallels. —John Pollock
Two earthquake-related thoughts about human nature
by Seth Godin
1. The first thing that happens after we encounter an earthquake is to wonder if anyone else felt it. The need for group validation is widespread and happens for events that don’t involve earthquakes as well.
If those in the tribe feel something, we’re likely to as well. That’s why people look around before they stand up to offer an ovation at the end of a concert. Why should it matter if any of these strangers felt the way you did about the event? Because it does. A lot. Social proof matters.
2. Organizations are busy evacuating buildings, even national monuments. Even though experience indicates that the most dangerous thing you can do is have tens of thousands of people run down the stairs, cram into the elevators and stand in the streets, we do it anyway. Why? Because people like to do something. Action, even ineffective action, is something societies seek out during times of uncertainty.
Retirement Planning – Poverty with Capitalism
John Pollock discusses on what average american poor has, compared to the European middle class. He tackles what are the common things that are found on average american poor. He describes what are found on most of the average american poor.
Today’s Lesson in Economics
Almost Everything We’re Taught Is Wrong
By John Stossel
Published August 24, 2011
We grow up learning that some things are just bad: child labor, ticket scalping, price gouging, kidney selling, blackmail, etc. But maybe they’re not.
What I love about economics is that it can show that what seems harmful is actually good for society. It illuminates what common sense overlooks.
This was the subject of my Fox Business show last week. It was inspired by the eye-opening book “Defending the Undefendable” by economist Walter Block.
Most people call child labor an unmitigated evil. But my guests, David Boaz of the Cato Institute and Nick Gillespie of Reason.tv, said that’s wrong.
“If we say that the United States should abolish child labor in very poor countries,” Boaz said, “then what will happen to these children?
… They’re not suddenly going to go to the country day school. … They may be out selling their bodies on the street. That is not an improvement over working in a T-shirt factory.”
In fact, studies show that in at least one country where child labor was suddenly banned, prostitution increased. Good economics teaches that as poor countries get richer and freer, capital investment raises the productivity of labor and child labor diminishes. There’s no shortcut through government prohibition — unless you like starvation and child prostitution.
What about price-gouging? State laws attempt to prevent people from charging “unconscionable” prices during emergencies.
“If I’m in the neighborhood of Hurricane Katrina,” Boaz said, “what I want is water and ice and generators. … If you are in Kentucky (and) you’ve got 10 generators in your store, are you getting up at 4 a.m. to drive all day to get to Louisiana to sell these generators if you can only sell them for the same price you can sell them for in Kentucky? No, you’re going to go down because … you can sell them for more.”
Also, if prices rise during an emergency, that’s a signal for people to buy only what they most need. That leaves more for everyone else.
If the price remains low, an incentive to conserve is lost.
Ticket scalpers are seen as sleazy guys who cheat you by marking up the price of tickets. Profits go to middlemen instead of the performers.
What good could they possibly do?
“I like to think of ticket scalpers as the guy who stands in line so that I don’t have to,” Gillespie said.
Time spent in line is part of the ticket cost. Scalpers let you pay entirely in money, rather than partly in valuable time.
Most people say that selling body parts is wrong.
“It also seems wrong to have people dying because they can’t get a kidney,” Boaz said.
Some 400,000 Americans are on a waiting list now for a new kidney, and they are not allowed to pay for one.
“We sell hair. We sell sperm. We sell eggs these days.” Boaz added.
Gillespie added, “The best way to grow the supply and allow more people to live is to allow the market to price those organs.”
Maybe the most counterintuitive position argued on my show was that blackmail should not be a crime. Blackmail (unlike extortion) is the demand for money in return for withholding information. Robin Hanson, a George Mason University economist, defends blackmail.
“The thing you’re threatening when you’re threatening blackmail (is) gossip,” Hanson said. “If it should be all right to tell people, it should be all right to threaten to tell people.”
What we don’t like, however, is the blackmailer saying, “Pay me to keep quiet.”
“But the effect of that is to make people behave,” Hanson said.
“If we (allow) blackmail, people behave even more because they are even more afraid of what might happen if they don’t.”
Maybe Ponzi-schemer Bernie Madoff would have been caught earlier?
“That’s right. … Blackmail is actually a form of private law enforcement.”
Also, since gossip is free speech, blackmail is simply selling the service of not engaging in free speech. Why should that be outlawed?
I subtitled my last book, “Everything You Know Is Wrong“. I was exaggerating, of course, but many things we’re taught are fallacies. That’s why I like economics. It explodes fallacies.
John Stossel is host of “Stossel” on the Fox Business Network. The show airs Thursdays at 10 p.m. and midnight ET. It re-airs Fridays at 10 p.m., Saturdays at 9 p.m. and 12 midnight, and Sundays at 10 p.m. (all times eastern). He’s also the author of “Give Me a Break” and of “Myth, Lies, and Downright Stupidity.”
To find out more about John Stossel, visit his site at johnstossel.com. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.
Retirement Advice – Retirement Savers Who Didn’t Blink Saw Big Gains
August 23, 2011
Retirement Savers Who Didn’t Blink Saw Big Gains
For 401(k) investors who kept with their equity allocation and continued to contribute to their plan as the financial markets went into free-fall in late 2008, their average account balance grew by 64 percent in the period from October 1, 2008, through June 30, 2011. The average account balance grew just 2 percent in that time period for retirement savers who moved their money entirely out of equities between October 1, 2008 and March 31, 2009, and stayed out of equities through June 2011, according to a Fidelity Investments study, says Andrea Coombes, MarketWatch’s personal finance editor.
- Some savers exited equities during the 2008 downturn, but then jumped back in at some point: Their account balances grew by 25 percent on average.
- The percentage change in average account balance includes the workers’ contributions plus market gains and losses.
- The majority of plan participants stuck with their game plan — just 1.6 percent of the participants studied shed their equity positions, according to the study.
- Another 1.4 percent of people stayed in equities but stopped contributing to their plan in the October 2008 through March 2009 period.
- Account balances for those plan participants rose 26 percent on average, through June 30, 2011.
Source: Andrea Coombes, “Retirement Savers Who Didn’t Blink Saw Big Gains,” MarketWatch, August 18, 2011.
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