This Week's Carnival of Personal Finance is up at All Things Financial. Here are some of the ones I found interesting and/or helpful (of course, your mileage may vary):
Tips for Deducting Donations from BluePrint For Financial Prosperity breaks down the what, when , how, and why of charitable deductions (the section on what to document is particularly good - save it in your "taxes" file)
TheHappyCapitalist explains the many designations in the financial field.
Credit Protector - The Good, Bad and Ugly from Savvy Saver goes through the various services that offer help in protecting you from identity theft.
As always, look around. In addition to finding a whole lot of information in one place, you might find a new blog (or two) to add to your list.
Happy Independence Day!
We just finished lighting of fireworks in front of our house (thankfully, nothing ingnited that wasn't supposed to, and we managed to get all our fireworks lit before the neighborhood busybody complained to the local police). This was the first year that both children were old enough to appreciate it, so we stopped by a fireworks stand on the way home from the Unknown Wife's family reunion.
It's the first time we've done the fireworks thing in a while. So, we spent about $75 for some good ones for the kids. The "Weeping Willows", "Bling" and "Purple Haze" were the hands down favorite, but the younger barbarian (the Unknown Daughter, age 4) got just as much kick out of a string of Black Cats as she did from the more expensive variety. The Unknown Son (age 6) got bored after a while, and went inside to listen to his CDs. We'll have to work on him, I guess.
When putting my children to bed, my daughter asked me why we do fireworks. So, I told her about how long, long ago the brave heroes fought a war with the evil king so that they could be free. Five minutes after the lights went out, she ran into my room and asked, "Hey Dad - I need to know - Did the heroes win?". When told, "Yes honey, they did.", she went to sleep easily.
So, all's well that ends well.
My kids keep e tired, but seeing old things through new eyes more than makes up for the exhaustion.
It's the first time we've done the fireworks thing in a while. So, we spent about $75 for some good ones for the kids. The "Weeping Willows", "Bling" and "Purple Haze" were the hands down favorite, but the younger barbarian (the Unknown Daughter, age 4) got just as much kick out of a string of Black Cats as she did from the more expensive variety. The Unknown Son (age 6) got bored after a while, and went inside to listen to his CDs. We'll have to work on him, I guess.
When putting my children to bed, my daughter asked me why we do fireworks. So, I told her about how long, long ago the brave heroes fought a war with the evil king so that they could be free. Five minutes after the lights went out, she ran into my room and asked, "Hey Dad - I need to know - Did the heroes win?". When told, "Yes honey, they did.", she went to sleep easily.
So, all's well that ends well.
My kids keep e tired, but seeing old things through new eyes more than makes up for the exhaustion.
Betting On The Next Supreme Court Justice Nominee
There are more than enough bloggers making their case for one person or another to fill the O'Connor vacancy for the Supreme Court. Most of them are far smarter (and better informed) than me (in the case of Ann Althouse, better looking, too).
So, rather than add my $0.02 and stump for one or another, I'd rather give the Finance Professor's spin on things. Markets are wonderful tools for processing information. Tradesports.com has just opened up prediction markets for contracts based on who will be the next nominee for the Supreme Court.
Prediction markets don't work well in predicting outcomes when information is centralized (like the recent papal election, which took place under very closed conditions). However, the information associated with the nominating process is much more dispersed in this case than it was for the passing of the papal title -- in the SCOTUS nominating process, there are a lot of individuals that each possess some piece of the puzzle. Prediction markets serve as a useful tool for aggregating all this information. So, it'll be interesting seeing how accurate they turn out to be.
For those of you that aren't familiar with how a prediction market like Tradesports works, the contract for a given nominee pays $1 if he's nominated, and $0 otherwise. With some pretty simple math, it's easy to show that the price that an individual would be willing to pay for a contract like this is the individual's subjective probability that the event will occur.
Let's take the contract for Emilio Garza as an example. It currently sells for $0.28. If an individual believes that there's actually a 35% chance of Garza being nominated, this contract is undervalued. So, the individual would purchase the contract. As they make purchases, the price will increase. As long as the price remains below $0.35, that individual would consider it a good investment, and would keep buying. Buying would continue until the price exactly matches the subjective probability of the investor "at the margin".
Likewise, if an investor thought the contract was overvalued (i.e. that the probability implied by the price was too high), they'd sell it (i.e. take the other side of the bet). This would drive prices down and would continues until the price was "fair" to the marginal investor. In other words, purchases and sales take place until both sides are "balanced".
At present, Garza leads the field at $0.28, with Luttig at $0.16 and Gonzales at $0.18.
Stay tuned. Unlike the last time there was a vacancy, there will almost round the clock coverage of the process (both in mainstream media and the blogosphere). As information changes, prices on the contracts change to reflect traders assessments of each candidate's chances. So, these contracts serve as good bellwethers as to how the candidates perceived chances are changing.
Remember - unlike polls (formal or informal), these contracts require people to "put their money where their mouth is). That's their advantage as a predictive tool.
Update:
Welcome to all the folks stopping by from ProfessorBainbridge.com . Look around a bit and see if there's anything you like.
Also, since there seems to be a bit of interest on the topic, I'll be posting more about how to interpret the information you find on Tradesports (i.e. what are the "bid and ask prices, how do you interpret the order book, and so on).
So, rather than add my $0.02 and stump for one or another, I'd rather give the Finance Professor's spin on things. Markets are wonderful tools for processing information. Tradesports.com has just opened up prediction markets for contracts based on who will be the next nominee for the Supreme Court.
Prediction markets don't work well in predicting outcomes when information is centralized (like the recent papal election, which took place under very closed conditions). However, the information associated with the nominating process is much more dispersed in this case than it was for the passing of the papal title -- in the SCOTUS nominating process, there are a lot of individuals that each possess some piece of the puzzle. Prediction markets serve as a useful tool for aggregating all this information. So, it'll be interesting seeing how accurate they turn out to be.
For those of you that aren't familiar with how a prediction market like Tradesports works, the contract for a given nominee pays $1 if he's nominated, and $0 otherwise. With some pretty simple math, it's easy to show that the price that an individual would be willing to pay for a contract like this is the individual's subjective probability that the event will occur.
Let's take the contract for Emilio Garza as an example. It currently sells for $0.28. If an individual believes that there's actually a 35% chance of Garza being nominated, this contract is undervalued. So, the individual would purchase the contract. As they make purchases, the price will increase. As long as the price remains below $0.35, that individual would consider it a good investment, and would keep buying. Buying would continue until the price exactly matches the subjective probability of the investor "at the margin".
Likewise, if an investor thought the contract was overvalued (i.e. that the probability implied by the price was too high), they'd sell it (i.e. take the other side of the bet). This would drive prices down and would continues until the price was "fair" to the marginal investor. In other words, purchases and sales take place until both sides are "balanced".
At present, Garza leads the field at $0.28, with Luttig at $0.16 and Gonzales at $0.18.
Stay tuned. Unlike the last time there was a vacancy, there will almost round the clock coverage of the process (both in mainstream media and the blogosphere). As information changes, prices on the contracts change to reflect traders assessments of each candidate's chances. So, these contracts serve as good bellwethers as to how the candidates perceived chances are changing.
Remember - unlike polls (formal or informal), these contracts require people to "put their money where their mouth is). That's their advantage as a predictive tool.
Update:
Welcome to all the folks stopping by from ProfessorBainbridge.com . Look around a bit and see if there's anything you like.
Also, since there seems to be a bit of interest on the topic, I'll be posting more about how to interpret the information you find on Tradesports (i.e. what are the "bid and ask prices, how do you interpret the order book, and so on).
The Psychology Behind Common Investor Mistakes (via The Big Picture)
Classical finance theory assumes that investors are purely rational (i.e. calculate the costs and benefits, risk and return, etc... in a completely dispassionate manner). On the other hand, followers of the "behavioral finance" camp take an alternate tack: they bring in the possibility that investors act like ,well, normal people. In other words, they assume that investors could be prone to things like cognitive biases, overconfidence, short-sightedness, and so on.
Barry Ritholtz at the Big Picture examines the implications of this approach for investors. He looks at the psychology behind investor mistakes, and shows how six common errors of perception and judgment can hurt investment performance. In short, they are :
- Overconfidence
- Fear of regret/pain of regret
- Cognitive dissonance
- Anchoring
- Representativeness
- Myopic risk aversion
Auctions For Condos
When a new real estate development pops up, demand for the units often exceeds supply. So, the units have to be "rationed" using some mechanism. The most typical setup is that the units go for a set price, and they're allocated on a "first come, first served" basis.
Unfortunately for the developer, if it's an attractive community, the price of the units increases rapidly, so the speculators sell the units in the aftermarket. This means that the developer leaves money on the table (he could have set the price higher at the start.
Here's an alternate setup - an auction. In this condo development (on the Florida Gulf Coast), condos go to the highest bidders in a sealed bid auction. The developer has a website that lists the number of bids (but not the amount of the bids) for each parcel.
Hat tip to Market Week for the link.
Unfortunately for the developer, if it's an attractive community, the price of the units increases rapidly, so the speculators sell the units in the aftermarket. This means that the developer leaves money on the table (he could have set the price higher at the start.
Here's an alternate setup - an auction. In this condo development (on the Florida Gulf Coast), condos go to the highest bidders in a sealed bid auction. The developer has a website that lists the number of bids (but not the amount of the bids) for each parcel.
Hat tip to Market Week for the link.
Loan Calculator
The other day, a friend asked me some questions about loans (i.e. how much is the payment for a 15 year vs. a 30 year term, etc...). If he'd known how to use Excel (a popular spreadsheet program), he could have done it himself. Now, thanks to Political Calculations he's got a simple online calcualtor that does the job.
I know there are a lot of other ones online also, but it's worth checking out. He's also got a few other calculators you might want to try.
I know there are a lot of other ones online also, but it's worth checking out. He's also got a few other calculators you might want to try.
Off For The Weekend
I'l be traveling (once again) to yet ANOTHER of the Unknown Wife's family functions. So, I'll post what I can. I don't think they have much in the way of internet connections in the backwoods...
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