Economics & Finance

My Investing Side Project

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In addition to blogging I have some other side projects. One of my side projects is the web site www.trustfundsforkids.com (I’m not really plugging anything because there are no advertisements on the site and it is a simple, single page site with down loadable schedules) which describes the process of setting up a trust fund and the performance of the three trust funds that I have set up (so far) for my nephews and nieces.

The three portfolios invest in stocks. Portfolio one has a market value of about $16,000, Portfolio two has a market value of about $8500, and Portfolio three has a market value of about $1500. The size of the portfolio is driven by how many years of contributions have been made (7, 4 and 1 respectively).

About half way down the page (or you can use this link and jump there) each of the three portfolios has a single page that summarizes the key information. I put these schedules together manually from a variety of sources and have refined it annually.

How to Organize Your Stock Portfolio

It is actually quite difficult to put together a simple, single page worksheet that tells you what you want to know about your portfolio. While investing firms are getting better and better each year in formatting information and adding new organizational layouts (and of course it is so much better to download forms rather than have reams of paper), they still don’t easily tell you what you want to know, which is why (for now) I am creating my own formats. Here is what is contained:

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Return Assumptions and the Bear

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A lot of people throw around terms and assumptions without questioning them deeply. One of the most common assumptions is that stocks beat bonds (and beat the heck out of cash) “over the long haul”.

The basis in fact for this assumption is the long term equity records in the USA, the UK and Canada. These markets, over the long haul, have provided returns beyond bonds and cash.

Why only these markets? Because the rest of the markets (Germany, Japan, China, etc…) had some sort of cataclysmic event (World War, hyperinflation, or takeover by non-capitalist regimes) that make comparisons “over the long haul” useless. Even in these markets it is hard to see how wealth could have been preserved; cash (currency) was debased and debts were reneged upon, so all bets were off.

One key element of the “returns beat bonds and cash” is the assumption that you stay the course through horrendous market periods, hold on to equities, and then ride the upward ticks. If you act as many people do and sell when the market gets difficult, you are apt to be out of the market when it shoots upwards. Some of these bear markets are very lengthy and you have to have nerves of steel to ride them out.

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P.J. O’Rourke on the Daily Show

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Viacom put the entire archive of Daily Show with Jon Stewart online last October. I haven’t seen many bloggers mention this, and no conservative blogger, so at least part of our readers may not heard about this yet. The Daily Show may be a bit too liberal for the taste of most Chicago Boyz contributors and readers, but there is a lot of good stuff there.

For example, there is this clip of P.J. O’Rourke presenting his new book, On the Wealth of Nations. O’Rourke has done something many eminent economists never managed or got around to, he worked his way through Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, or ‘The Wealth of Nations’, as it is more commonly called. And O’Rourke actually managed to get such a good grasp on this difficult subject matter that he was able to write a book of his own that makes it accessible to the general public.

The book is highly recommend, an excerpt from the first chapter can be found here.

(The first link to the Daily Show leads to the index page there, but it directly leads to the clip with P.J. O’Rourke, too, at least when I click on it).

And With Whom Do We Agree?

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Here’s a test on opinions. I think it is interesting but I’m too lazy to do this in a very thorough or thoughtful way. (The fact that I seemed to agree with Ron Paul as often as with Romney and more often than with McCain does make me wonder a bit about my sanity.) Another, which requires less thought, was taken by my daughter’s economic class today.