Back In The Saddle

Just to let y'all know - I'm back from vacation (10 days at the Unknown In-Laws in Connecticut). A good time was had by all - lots of cycling along the Connecticut shoreline, good seafood, and catching up with family and colleagues in the area.

Regularly scheduled blogging will continue tomorrow. I'm eager to get back in the swing of things, and to get back to my research. I have another two weeks before classes start, but unfortunately my school has a number of "ceremonial" activities I have to go to in the next fortnight (by "ceremonial", I mean events that serve no real purpose but to make the administration feel like they're doing something useful by putting them together). For example, there's a required two-day series of talks that all faculty on campus have to attend before classes start each year. Supposedly, it helps us all get on the same page on the "critical" topic of the year (I think this year's theme is "assessment"). Unfortunately, the page it puts us on is one where we make snide comments to each other about what a colossal waste of time the whole thing is - my experience is that a half day would be enough to cover the important stuff. The rest is just filler to stretch it out to two days.

After all, a longer meeting must be better, right?

This Week's Carnival of Personal Finance

I'm a bit late to the party, but this week's Carnival of Personal Finance is up at Consumerism Commentary. Here are my picks of the week:

Jim from Blueprint for Financial Prosperity gives a great resource for figuring out which home renovations pay of (and how much) in Best Value Home Renovations.

Changing employers? You'll have to figure out how to roll over your 401k. Jonathan at MyMoneyBlog has a mulitpart series on his options for rolling over his account. In Part One, he weighs the pros and cons of sticking with Fidelity.

Jon at Smart Money Daily talks about the problems associated with investing with your emotions.

Dan Melson at Searchlight Crusade has some nice resources explaining how to qualify for a house or mortgage.

There's plenty more good stuff there - look around.

Narrow Research Can Lead To Generalized Teaching

BizDeansTalk is quickly becoming one of my favorite blog reads. It's unique in that it's run by two top B-school deans (Paul Danos of Dartmouth and Santiago Iniguez of Instituo de Impresa). In the latest installment, Danos takes on the common complaint that research-oriented faculty have a hard time generalizing in their teaching. He writes:

Sometimes we assume that our academic researchers are narrowly focused and that non-researcher teachers give a broader perspective, but I believe that it can be just the opposite. The top researchers give generalizations based on sampling of populations and/or very general principles. So, for instance, when they generalize about the effects of promotions on subsequent sales, they are not talking about one company or one person's experiences but about the class of companies under study.

Click here for the whole thing.

One of my mentors had an amazing breadth of knowledge about pretty much every sub discipline in Finance. I asked him once (over coffee) how he got that way. His response was that as an assistant professor, they made him teach a lot of different classes. Before each new prep (even though they were often undergrad courses) he'd read some of the journal articles in the discipline to make sure he was on proper footing (being a cynic, he often didn't trust the textbooks). So, he'd get an overview of whatever topic he was teachings from a rigorous perspective. Then he could boil it down for his students.

I talk a lot with business people. My experience echoes Danos' comments - most successful businessmen have a deep understanding of their specific circumstances. However, as deep as it is, it's often also very narrow. While a researcher's own interests may also be very focused, the best ones are in the habit of reading a diverse selection of journal articles that are not directly related to their specific topic. This gives them the "broad sample" exposure that makes them good teachers.

Now if only these two guys would post more often.

This Week's Carnival of The Capitalists

This week's Carnival of the Capitalists is up at View From a Height. My picks for the week are:

Political Calculations has some nice charts showing historical stock market data

Roth & Company breaks down recent changes in SEC rules regarding stock options granted to corporate insiders.

All Things Financial goes through how much you'll need to save to send your kids to college

Real Returns makes the claim that large-cap indices (like the S&P) aren't necessarily overexposed to large-cap stocks, since large companies are themselves pretty well diversified.

There's other good stuff there too, but this'll get you started.

Some Options Strategies are Not As They Seem (from Forbes)

A call option gives the holder of the option the right (but not the obligation) to purchase the underlying stock at a given price within a given time period. The price the holder pays for this right is called the call "premium". People who sell (or "write") calls do so to collect the premium.

The last few years, interest rates have been relatively low by historical standards. At the same time, the stock market hasn't exactly overwhelmed either. So, in an attempt to gain more income , some investors have taken to writing call options (to collect the premiums).

Forbes has an article titled "Some Options Strategies Are Not As They Seem" which gives a good and relatively low-tech discussion of this practice. Here's what's probably the best quote in the article:

"...There's a disconnect between what people are doing and the reason for
buying stock in the first place," Schaeffer said. "Why are you risking your
money if you're not expecting, potentially, some very attractive appreciation
down the road?"

For the full piece, click here.

Once again, let's review what the principle of Efficient Markets would say -- thatprices and returns of publicly traded investments are "fair". In other words, they accurately reflect the risk of the investment. So, there's no such thing as a free lunch. If an investment strategy looks like a way to make more return without taking on more risk (or without giving up something else in return), you're missing something.

Summer Time and The Livin is Easy

No, I haven't fallen off the face of the earth.

We're now at the Unknown In-Law's house, and I doubt I'll get much more than the occasional post in. Ther're very much with it. Mom-in-law is 76 and Dad-in-law is 84. He still runs an occasional 5k road race (was a very good miler in his 20s), and they regularly drive up and down the east coast - he's from Maine, and they were just in West Virginia for a family reunioin.

They even finally got broadband after many months of my suggesting it. Now, they're hooked --when it goes down they can't stand it. So, I can now keep up with what's going on in the larger world.

For those who care (I know I have at least three avid cyclists among my readers), I just got back from a 90 minute bike ride along the Connecticut coastline - saw the ocean a few times, and a LOT of New-England scenery.

Net Roundup

I'll be traveling today to the Outlaws (the Unknown Father-In-Law and the Unknown Mother-In-Law). Since we head out shortly, I thought I'd "flush the buffer" and do a quick list of some interesting posts I've seen recently:

Tyler Cowen at Marginal Revolution relays an interesting example of a market-based system for setting cab fares - they bid for your services on line.

The Motley Fool has an article titled 9 Ways to Pay Off Debt. I know it sound like I beat on this drum a lot, but good advice bears repeating.

Arnold Kling attempts to explain the CAPM without using numbers in his Tech Central Station column titled One Price For Risk. The article is part of an extended series explaining financial markets using the anaogy of a food court (mmmmm, donuts!).

Keith at To Done gives 10 Tips To Better Meetings. Give this to the members of any committee you serve on (and to your department chair)

Jim Garven (a finance/insurance prof at Baylor). Explains catastrophe (or "cat") bonds. For the uninitiated, they're a cross between a plain vanilla corporate bond and an insurance policy.

This should keep you all busy while we drive up the East Coast.

Better Conference Presentations (from The Program)

I've written previously on how many academic conference presentations are (put mildly) somewhere between sleep-inducing and cringe-inducing.

This post at The Program lists an impressive collection of advice on how to do a better job at it. Of the ten pieces, I've only read a couple so far, but they're worth the time spent checking them out. Definitely read them before your next conference presentation.

BTW - the worst presentation was a job market presentation someone made at my school while I was still a grad student. It was a highly technical one - on option pricing. The candidate's slides consisted of page after page of calculations (with little intuition), and his transparencies were photocopies of hand-written notes ON LINED PAPER. What's more, they had obviously been done on a copy machine that was both running out of toner and was very, very much in need of a good cleaning.

In fairness, this was in the days before widespread use of presentation software. But really - for a job talk at a fairly respected research school, is it too much to ask that you wipe the glass on the copier off with some Windex?

This Week's Carnival Of Personal Finance

Monday is Carnival Day - this week's Carnival of Personal Finance is hosted by In Cash Flow We Trust. There are a couple of other posts of note that were also mentioned in the Carnival of The Capitalists this week, so I won't repeat those here. My picks are:

The Real Returns discusses current bond yields and how they don't put investors ahead of inflation.

Jim at Blueprint for Financial Prosperity talks about some of the ways some various ways some banks and credit card companies use to take advantage through fees or other charges.

Dan at Searchlight Crusade has a great list of indicators that you might want to choose another mortgage provider.

Frank at Hello, Dollar gives a half-million reasons for brown-bagging your lunch. Brown bagging my lunch, o.k. - but hands off my StarCrack habit. Gotta have my lattes.

Of course, your tastes may differ. Look around and check out the others, too.

This Week's Carnival Of The Capitalists

This week's COTC is up and running at Local Small Business Marketing And Advertising. As you know, I'm a finance/econ kinda guy. Most weeks, I find that the Carnival has a few posts I like, and a lot of stuff that I'm not interested in. However, this week's selection was pretty target rich. Here are my picks:

I've blogged repeatedly on the unintended consequences of Sarbanes-Oxley. Frank Scavo of The Enterprise System Spectator: has an interesting post titled Sarbanes-Oxley: Stop The Insanity. He goes into some of the ways companies are trying to comply with SOX, sometimes through some pretty bizarre policies. It's more from a software perspective than a financial one, but worth reading.

Tom O’Neill of Buyout Blog talks about "overshopping" a firm when trying to attract money form banks and private equity groups in Laser vs. Shotgun in Raising Capital. Good advice for entrepreneurs.

Warren Meyer of Coyote Blog talks about the common but misplaced idea that “wealth is somehow zero sum - that it can be stolen or taken or moved or looted but not created" in Physics, Wealth Creation, and Zero Sum Economics. Last night, the Unknown Brother and I were talking about how businesses make money by making other people better off. He's a small business owner who's done pretty well for himself, so he understands this from a practical level.

Joshua Sharf of View From A Height talks about how how markets process information in Can Markets Both Be Efficient and Make Mistakes? He discusses how markets aren't perfect, just better than the alternative.

Free Money Finance has been asking personal finance bloggers what their favorite (personal finance) books are, and why. Here's their answers in The Best Financial Book I’ve Ever Read, Part 1.

Flexo from Consumerism Commentary goes into all things 401 - both plain vanilla and the new Roth 401(k) in Hands of the 401(k).

Big Cajun Man of Canadian Financia Stuff talks about putting his kids allowance on auto-pilot in Real World Example: Kids Allowances. I wonder if this would work for my kids ($2 and $3 per week each). Nah - they like counting the quarters.

JLP at AllThingsFinancial points us to the CNN/Money series called Money 101 in JLP Looks At The Money 101 Series. Scroll down and read them all when you have the time.

And, for somethingcompletely different:

Mike Pechar, the Interested-Participant, writes all the British government trying to regulate beer advertisements in Brits Ban Hunks in Beer Ads. Oh, the humanity. You can watch this to see how it might play out if Burger King had folowed their guidelines in the infamous Paris Hilton BUrger King commercial (caution - may cause fluids like milk, coffee, or soda to fly out of you mouth at high speeds). Unfortunately, after watching it you might need some "mental floss".

That's all for this week, folks.