Tag Archives: Wall Street

Women Make Better Money Managers

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If you’re of the male persuasion, slowly step back from the check book or computer, and find a woman to take over your financial decision making.

According to Ronald T. Wilcox, a growing body of research reveals distinct differences in how married men and women approach money and investing. Because men tend to be overconfident, they trade stocks and bonds more actively because they think they know what the next market movement will be. As a result, they incur various transaction costs associated with trading but don’t pick assets any better than women. They’re also less likely to listen to financial advice.

Women are less confident than men about their financial abilities, switch investments less often, and are more likely to listen to financial advice. As a result, they generate risk-adjusted returns superior to those of men.

The Wall Street Journal summarizes Wilcox’s findings thusly, “Men may think they know what they are doing when it comes to investing but often do not. Women may think they don’t know what they are doing but often do.”

Truth be told, you can plug in anything you want for “investing” in the last paragraph. Now if you’ll excuse me, the market is about to close and I have some trades to make.

Bonus link—a couple that has figured out how to enjoy a better quality of life despite making considerably less money.

My “not motivated by money” award nomination double bonus link—and favorite 2012 US Olympian and favorite youth sport parents—Missy Franklin, Dick Franklin, and D.A. Franklin.

Chelsea Clinton and the Meritocracy Myth

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Yes, I'd be happy to join your board.

After reading a few accounts of Chelsea Clinton’s recent appointment to the Board of InterActiveCorp (IAC), a company that runs sites including Match.com, Ask.com, and Dictionary.com, here’s what I think we’re supposed to conclude.

There’s one winner and one loser.

The obvious winner? C-squared herself. The Wall Street Journal explains. Ms. Clinton will receive an annual retainer of $50,000. In addition, she will receive a $250,000 grant of IAC restricted stock.  

IAC’s stock is up 41% this year. Say she serves for ten years. With stock appreciation that will be well over $1m in income for attending what I suspect are quarterly meetings. Winner, winner, several very nice chicken dinners. She’s currently working on a Ph.D at Oxford. Sure hope they reimburse her for her airfare.

The loser is actually losers. From Alyce Lomax in Daily Finance:

This new appointment is a big — and possibly bad — deal for IAC shareholders.

Boards of directors are charged with protecting shareholder interests, whether many investors realize it or not. These days, plenty of corporate problems — such as out-of-control CEO pay — can be correlated with dysfunctional or flimsy boards that have nothing near an independent spirit that’s willing to challenge management teams.

Now 31, Chelsea Clinton was in her teens during the dot-com bubble and only about 20 years old when it burst, for example. That was a make-or-break time for companies like IAC, but she was probably still pretty preoccupied simply with the process of growing up.

GMI’s Nell Minow commented on Clinton’s appointment on PBS’sNightly Business Report, arguing that the best directors have decades of achievement to speak for them. She also pointed out that IAC’s Diller has a tendency to populate his board with “cronies,” which is just one reason The Corporate Library gives that company a near-failing “D” grade for its corporate governance.

In addition, Diller supported both of Clinton’s parents’ campaigns, which gives shareholders no reason to believe this is the kind of independent director that helps make a robust boardroom. In fact, she sounds a bit dependent on her parents’ careers at this point.

Name-dropping “important” or “known” appointees instead of adding truly experienced directors indicates weak corporate governance and madly waving red flags for shareholders. 

The unreported loser is the notion of meritocracy that the right loves to trumpet. This is the idea that the relative work ethic of U.S. citizens determines their success instead of the color of their skin, their gender, or their parents’ connections. Ironic that a first family of the left disproves one of the right’s foundational ideas.

C-squared’s appointment proves the playing field, that is life in the U.S. in 2011, isn’t level, the starting line of life is staggered, and an individual’s personal capital sometimes trumps others’ smarts and work ethic.

Market Volatility and the Invisible Gorilla

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Familiar with the invisible gorilla social science research? Learn about it here. It demonstrates that although we think we see ourselves and the world as they really are, we’re missing a whole lot.

The personal finance invisible gorilla is the precise difference between your average monthly income minus your average monthly expenses. Understandably, right now, with the stock market fluctuating wildly and ultimately losing value, many peeps are obsessing on the declining value of their stocks and bonds.

Meaning they’re not paying nearly enough attention to the two things that will determine their financial well-being medium and long-term. (1) The relative difference between their average monthly income and expenses and (2) their time horizon.

Forget investing altogether until your average monthly income exceeds your average monthly expenses ten to twelve times a year every year.

A friend bought some AAPL shares during last week’s roller coaster ride and I’m probably to blame because I’m a fanboy, I own it too, and occasionally talk it up (everyone talks about their gains, not their losses, my term for this is”gain bias”). His first day of ownership just happened to be a good one so he emailed me, “Nice amount of returns in 24hrs.” To which I replied, “Dear Usain, It could hit 300 before 400. Financial independence is a marathon.”

Should probably trademark that line before I start hearing it on MSNBC. I’m learning not to sweat large paper losses during market corrections because I know that overtime, my modest income/expense differential, which translates into monthly cost-averaged investing, will lead to greater wealth in five, ten, twenty years.

Taking the long view is not a panacea because there are two other vexing challenges: 1) increasing one’s average monthly income and 2) reducing one’s average monthly expenses. People focus too much on 1 (offense) and not enough on 2 (defense). If only we could all find jobs that paid mad money or find more hours in the day to work or get others in our orbit to kick in more on the income side. Defense isn’t that complicated. Resolve to eat out less. Camp out. Buy movie tickets at Costco^. Commute by bike. Buy clothes at Costco^. And most importantly, quit bringing sh*t home you don’t need.

And speaking of gorillas, not a sci fi guy, but still loved really liked (moms says you can’t love something that can’t love you back) The Rise of the Planet of the Apes.

^ Full disclosure, should of held them, but I sold my Costco shares awhile back. For a loss.

My new old lunch box

Ominous Clouds on the Horizon

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1) Obama’s statement last week about studying BP’s liability not as a topic in a university seminar, but to figure out “whose ass to kick.” Red flashing lights. Somewhere in the West Wing a small group of 30-something Ph.D’s with expertise in focus group research is handling him. Their sole focus is getting him re-elected. He couldn’t have sounded less authentic or genuine if he tried. Save the faux swagger for the pickup game or 19th hole.

2) Also last week (on Tavis Smiley’s NPR show), Cornel West’s excoriating criticism of Obama’s handling of the B.P. oil crisis, his temerity in the face of Wall Street, and his neglect of the poor.