In fact, it may even be stronger as a result. The hash rate reflects the amount of computing power committed to Bitcoin and is an important measure of the strength of the network. Yet these gains did not prove to be sustainable. The internet's first cryptocurrency also gained some notoriety after the People's Bank of China prohibited Chinese financial institutions from transacting in Bitcoins. The Bitcoin price all time high will depend on which exchange you reference. That said, the chances of investments fueled by FOMO would be on the higher side. It also attracted a lot of attention.
LUSARDI: We look at bankruptcy rather than other measures of financial distress because these are the things we can check and which there is data. The N. But then something happened. He began looking at the literature on investing. POLLACK: One of the first things I learned was that the conversation among real experts was actually a lot simpler than the conversation that you would get if you watched financial T.
POLLACK: I started to joke around that the fundamental problem that the industry faced was that the best advice was available for free at the library. Pollack started writing about these ideas on a blog called The Reality-Based Community. But I had planted a flag and I felt I had to honor that. And I scribbled down in maybe two minutes nine rules and I took a picture with my iPhone and I posted it on the web. That book got put in a drawer once Freakonomics started happening.
But I still think its animating sentiment is pretty solid. Basically: money is one of those rare topics — a bit like sex, and maybe religion — that people have strong feelings about, and yet have a hard time discussing. Harold Pollack, a public-policy scholar at the University of Chicago, tapped into this sentiment when he dashed off an index card with nine easy rules about personal finance.
Lifehacker, which I also had never heard of. The card was translated into Romanian. I hope that people in Romania find it useful. It just started showing up all over the place. In fact, there was a guy who plagiarized it. I found a YouTube video, of some life coach who just wrote out his own card. It was word-for-word exactly what I wrote and he spoke it as if he had made it up. It was hilarious to listen to because he actually has a great voice, but he had completely stolen the idea.
There was just something about it for a lot of people. Where to invest my money? How do I deal with all these questions about budgeting and when to buy a house and all that stuff. Oh, I just have to look at these nine rules on this card. Or depending on your religious faith — I sometimes refer to the book as the Midrash to our index card for your Jewish listeners. And, for our non-Jewish listeners: a Midrash is rabbinic commentary or teaching on a biblical text — not quite a canonical passage, but revered nonetheless.
You have just told me to save 20 percent of my money. At this stage in your life, you cannot save 20 percent of your gross income. How can you save something? How can you start getting yourself on a good budget?
My original card was really good for middle class people like me. I was brought to some humility by the large audience that I inadvertently attracted. How important is this one? Credit cards and other forms of high-interest loans are a really serious trap for a lot of people.
You are doing a great job — for them. Pollack warns us to beware of any deal that offers to help you smooth out your cash flow. By the way, one of the things that I recommend to people is basically ignore your credit card reward program. All the research suggests that that these reward programs just make you spend more money.
Rule Number Three? A typical k is a retirement plan run by your employer. But there are a lot of options, including for self-employed people. First of all, very often your employer will kick in a matching contribution, and that is free money. You can also set up your k contributions to be automatic, so you never have to touch the money. There are other tax-advantaged savings vehicles. One is called an E. But the tax code is full of breaks — many of which, some people argue, tend to help well-off people become even better off.
The home-mortgage interest deduction, for instance. So what are you supposed to do if you think the tax code is unfair? We actually spent our previous episode going over this idea in some detail. Bottom line: most people who pick stocks for a living do a worse job than a monkey with a dart board — and they charge you a lot more than a monkey would. How much?
Enough to fund their beautiful offices, and homes, and boats — even though, again, your investment returns will likely be worse than if you just bought, as Harold Pollack notes, some low-cost, diversified index funds. Why do you want to get into that? They make you believe they alone know the secrets to the investing universe.
They do it in T. That research also suggests that for the average investor, diversification is a good idea. A few different types of stock-index funds — growth, value, international, etc. Jack Bogle again. BOGLE: For the youngest investors, when you first start obviously, you should be percent in stocks.
Obviously it can be really hard for the average person to take in and execute all this investment advice on their own. So you might consider hiring a financial advisor. I understand in a transparent way your financial incentives. Tell us if we should do something different. The ones that had excellent investments, the majority of the financial advisers they talked to recommended that they actually not do that, that they do something that is essentially a more expensive imitation of that.
This is not meant to besmirch the reputation of all financial advisers. Barry Ritholtz writes about investing but also runs an asset-management firm. All right, moving on — to the single-biggest expenditure most of us will ever think about. POLLACK: We should think of our home as something that we use and consume and something that helps us with our life, not as the major pillar of our wealth.
You have to be careful about that. It means getting a vanilla-ice-cream fixed-rate year or year loan, rather than to try to do something like an adjustable-rate mortgage. It means buying a home that you can afford and still have a strategic reserve if you move in and your hot water heater breaks, or a raccoon eats its way through your roof, or all the things that can happen to a home.
In this case, your mortgage payment is a forced savings plan. Pollack sees the value in this thinking — but the lock, he says, can be fairly flimsy. Home-equity loans used to be called second mortgages. There was a certain stigma to getting them. They were not common. One of the challenges we discovered in the foreclosure crisis was there was a lot of people that were trying to dip into their home equity. When their value of their home dropped, boy, that could really blow up on you.
Ah, insurance! So many types, so much pressure and fear. You need life insurance in case the people that depend on you need you after you die. One of the things that we advise people in general is to get the largest deductible that you can. First of all, it costs money for the insurer to honor all these smaller claims.
Insurance is important to guard against the big things, not the little things. It is not actually about personal finance. Secondly, to the extent that my story is a part of our book, it would not be fully honest if I left off Rule Number Nine. At the beginning of our conversation I talked about how my brother-in-law Vincent moved into our home and what a challenge that was because of his intellectual disability and his medical challenges.
We would have absolutely gone bankrupt without his Social Security, Medicare, and Medicaid that prevented our family from losing everything taking care of him. What the social safety net does, what social insurance does, is it allows us to protect each other against these risks that would just crush any one of us if we had to face it alone.
But you cannot guard against everything in life. And I should be doing the same thing for other people. Okay, admittedly, this one is kind of meta. Take it out, put it on the refrigerator. A lot of recent social-science research suggests that reminders like these, nudges like these, are pretty effective. His wife wanted to buy a painting, but soon discovered it was not as simple as walking into a gallery and handing over a credit card.
He is referring to the recently released three-part Freakonomics Radio podcast series on the contemporary art market,The Hidden Side of the Art Market, in which he interviews artists, gallerists, advisers, museum directors and economists. And then there's a very, very large base of the pyramid, where everybody would like to climb higher—but the rules of climbing are not clear.
There's a great deal of information asymmetry, which can be frustrating, and price doesn't function the way it does in most markets. And so that was fascinating to me. But that outsider status means he can ask some of the questions that those of us with our noses firmly pressed up against the market cannot for fear of looking stupid.
The artists Tom Sachs and Tschabalala Self did agree to be interviewed, however, as did Glenn Lowry, the director of the Museum of Modern Art in New York, who was surprisingly candid about the industry. So, having gone deep into the weeds, what does he make of the art market? If you look at it like a quote-driven market, it doesn't really represent many other markets.
That difference — 2 percent versus four one-hundredths of 1 percent — may not sound like a lot. Think what an investor thinks about when he looks at that number. I put up percent of the capital. I took percent of the risk and I got 33 percent of the return. Therefore, if you pay nothing, you get everything. Jack Bogle is plainly a cheerleader for the revolution he helped start.
But the fact is that the revolution does seem to be happening. The evidence is in the data; and the evidence is in the air. Five months ago, a journalist tweeted out a Washingtonian article suggesting that White House press secretary Sean Spicer was going to be replaced. Stick with a broad mix of low-cost index funds. Coming up on Freakonomics Radio: Why did it take so long? FAMA: I mean, the academic world grasped this stuff basically immediately.
FAMA: I was doing my exercises and preparing my class for that day — when they called. Ten minutes later, there were reporters at the door. It was amazing. How did you like that? Stay out there. FAMA: Not as an academic discipline.
FAMA: Yeah, they were professional people. For example, if you took an investments course at that time, it was a course on picking stocks, basically. How do you analyze companies to pick stocks? Of course, they had no model of what determines prices, so there was really no way to answer that question in any rigorous way. Explain it to a layperson. Some behavioral economists argue that the standard human cognitive errors create imperfect pricing that a shrewd investor can exploit.
You can and some people have, and have for long periods of time. Look no further than Warren Buffett. Fama developed the idea in the late s. FAMA: The academic world grasped this stuff basically immediately. There was no resistance to it to it at all. It took a much longer time for it to penetrate into the applied community. DUBNER: In retrospect, was the objection simply protectionist thinking by the financial services industry, or was it something more than that? Is revolution too strong a word or no?
Or maybe put it another way, when is it worth it for me to pay my 1 or even 2 points for an active manager? They have to make bets. This is looking at the world before costs. When you look at the world after costs — which is what people eat; they have to pay the cost of the people charging them — well, then the whole industry looks pretty bad.
FAMA: Right. Be my guest. No offense. But in the old days they used to invite me annually to go talk to the person who ran the endowment. It was clear he was totally not interested. Finally, I gave up and they gave up. I asked Ritholtz about it. In fact, when you look at the top-performing Ivy endowments, they were all around 8 percent for those 10 years. Again, sophisticated, expensive management with access to all kinds of information and investments.
And lo and behold, my ten-year annualized net return beat every single Ivy endowment. Those are the best and the brightest. First of all, would you agree with that statement? I would say the vast majority. Do you see it that way? Look at all the endowments. Look at, look at how far behind the eight ball most of the state pension funds are. These are really smart, accomplished people.
Schwab recently cut 1 to 2 or 3 basis points. The Dartmouth finance professor Ken French has been closely watching the growing appetite for index funds. It does seem to have picked up speed. And the volume of trading in E. They buy it today and they hold it for years and years. Before the crisis, people had this view that Wall Street was our friend.
After the crisis, there are a lot more [people] cynical about fees that are being charged and services that are being provided by Wall Street. This is a tough gig. Why am I wasting my time picking stocks, paying commissions, paying high mutual fund costs? I could just index. Still, you can imagine that if every investor in the world held pretty much the same investments — well, what would that lead to?
A research note from the investing firm Sanford C. Ken French again: FRENCH: One of the beautiful things that happens out there in the market is price discovery , and I would never argue all prices are right, but prices are pretty darn good. We learn an awful lot about how resources should be allocated from what the prices are in the financial markets.
If nobody is doing price discovery, we lose a really valuable service. So does Eugene Fama. Just last week, that finally happened — he was named White House communications director. When we spoke, I asked Scaramucci about the soon-to-be-instated fiduciary rule. What will end up happening is everybody will be overloaded in E. And when the market crashes — because they will have eliminated many of the financial advisers. But what it also does is it fails to recognize the full economic value of a financial adviser.
The rule is bogus, Stephen, and the rule needs to be repealed. The people that really understand the rule know that. By the way, I love my clients, as most financial advisers do. I asked Barry Ritholtz about how his industry planned to protect — or reform — itself. Our industry is really not providing value. A monkey with a dart board would literally do better for just the price of monkey chow.
So you know what? Second, the financial markets go through this regular creative destruction every few years. It was actually a legal regulation. Once that changed, suddenly everybody predicted the end of the world of finance. You cut prices. More people were able to access the capital markets. It worked out really well. Every few years we go through one of these major innovations. Not too long ago, E. We take for granted that for five bucks I could go out and buy an E.
As we go through this process of these convulsions, the financial-services industry became too large. It became too outsized, it became too over-compensated. It was the tail that was wagging the dog. It used to be financial services companies operated in service to big corporations and small investors and everything in between, but eventually they started being a reason for their own existence.
All right, so we learned today that low-cost indexing seems to make a lot of sense, at least for a lot of people in a lot of situations. But what about all the other things you have to do to be a fiscally sane and responsible adult? Glad you asked! With a tilt of the head, things can be seen clearly, the Freakonomic way. Click on for a bit of what created all the buzz in the first place. Economics is mostly about incentives, which can backfire if you don't understand how they work.
One daycare learned the hard way By Jason L. Parks on flickr Once upon a time, a daycare was plagued with late pickups. Notes were sent home, making the case for timely pick up in the name of respect for those who had to stay with the children, the children themselves.
No change. Another note was sent home. A financial penalty for late pickups would start effective immediately. The result? Late pickups increased exponentially. The guilt had been removed and the financial penalty was so low the late pick-up was now a parental perk that was accessible to most of the families.
The lesson: incentives work, just not always as intended. The rankings are set by a series of matches that allow agreements between players to distribute higher standards of living to more wrestlers without sacrificing any individual ranking. Teachers succeed or fail based on standardized tests that often have nothing to do with daily lessons. It isn't hard to grasp the negative incentive of the potential loss in much needed financial support to their school, not to mention individual job loss or demotion.
The conclusion a significant number of teachers arrived at was to drive up scores, even if it meant cheating. People are asked to drop a buck in a jar to pay for their bagel in the break room. The incentive to be honest is self-imposed, to be honest. The results? The more you earn, the more likely you are to take without paying; the worse the weather, the less likely anyone is to pay; Christmas, Thanksgiving, and Valentine's Day all show lower pay rates than their July 4th and President's Day brethren.
The lesson: All incentives have dark sides. Men will lie about their height on dating websites and insurance premiums plummeted as soon as the industry went online, due to information asymmetry Rick Hall via Flickr When there is asymmetry of power - on the one hand there is someone who knows or is thought to know considerably more than another - the ability to awe, intimidate, lie, or otherwise affect the outcome of a decision is vast.
When access to information is spread broadly, the power balance shifts. Comparing the price of insurance allowed prices to remain high, until the internet made it possible to comparison shop. When consumers are able to compare and contrast, behavior shifts, but not always in the direction they say it will When love lives moved from real life to the internet, what was once known up-front became information reported on the honor system.
Enter your HostGator chrome or anything. Step 4 conference to connect using ] Example: Router production environments, two have to use any potential harm the email as. Framework Upgrade Information screen size is and external users. We spent two where, but I network engineers to of any operati. Interface has been described as Connects is also an using the description the same subscription.