It’s widely believed that the U.S. government bailed out the bankers who caused the financial crisis just over a decade ago and left the American people to suffer. President Obama’s secretary of the Treasury, Timothy F. Geithner, defends his team’s actions in his book Stress Test: Reflections on Financial Crises . What makes the book so believable are his admissions of mistakes and how uncertain they were about the correct actions to take throughout the crisis. However, he is very clear that protecting banks was a necessary evil to avoid cascading failures that would have led to meltdown in the greater economy. There was a very real possibility of a depression and massive unemployment. “Our only priority was limiting damage to ordinary Americans and people around the world.” We’re familiar with the anger over bailing out the bankers who caused the problems in the first place, but less well known is the anger banks had for the government. “Conventional wisdom holds that we aband...

It’s gift-buying season. Each year, more of my Christmas shopping shifts online. It’s still tough to come up with good ideas for presents, but at least I don’t wander aimlessly in malls much anymore. Here are some short takes and some weekend reading: Tom Bradley at Steadyhand says that the profits Canadian banks earn from their individual customers (all of us) is the highest in the world. This reminds me of a scene from Wolf of Wall Street where Canadians are on the phone and DiCaprio plays the banks. Ryan Krueger explains how we lose huge amounts of money in everyday banking. Robb Engen at Boomer and Echo gives an overview of his financial life for the past decade. He definitely worked harder than I did during the 2010s. After quitting his day job, that’s going to change. Preet Banerjee explains new research showing that people tend to pay down debts by “balance matching,” which has none of the benefits of the debt avalanche method (pay highest interest first) or t...

Here are my posts for the past two weeks: Useless Activity The Most Important Thing Am I Fixing a Mistake or Making an Active Decision? Here are some short takes and some weekend reading: Tom Bradley at Steadyhand gives three potential sources of illusory wealth in the markets today. Along with his thoughtful commentary, he uses the great terms “bezzle” and “psychic wealth.” Justin Bender goes into detail about tax-loss selling strategies. This stuff can get tricky. Fortunately, it’s only relevant in taxable accounts. Even people with million-dollar portfolios often don’t have enough in their taxable accounts to bother with tax-loss selling. Dan Hallett says Bitcoin is for speculating, not investing. I agree (https://www.michaeljamesonmoney.com/2018/04/bitcoin.html). Ellen Roseman says phone scams are on the rise.

I recently discovered a mistake in my spreadsheet related to my fixed-income allocation during retirement. Fixing it will involve selling off a sizable chunk of stocks. But I think this may be more of an active portfolio decision than just fixing a mistake. For years I’ve been striving to come up with mechanical decisions about how to handle my portfolio rather than making active decisions that amount to a form of market timing. One of my rules now that I’m retired is to maintain 5 years of after-tax spending money in fixed-incomes investments, including short-term government bonds, GICs, and savings accounts. Poking through the spreadsheet that holds my mechanical rules, I noticed a problem with the 5 years of fixed income calculation. I didn’t factor in CPP and OAS pensions properly. I treated these pensions as though I’m receiving them spread out over my whole retirement instead of just getting them later in life. So, my 5 years figure is too low now and will be too high o...

It’s a compelling recommendation when Warren Buffett says “This is that rarity, a useful book.” He said this about The Most Important Thing: Uncommon Sense for the Thoughtful Investor , by cofounder of Oaktree Capital Management, Howard Marks. It turns out that “investor” in this book means active investor. The lessons on risk management and other topics are top-notch for those trying to beat the market, but passive investors won’t get much out of it. One lesson for active investors is to seek out inefficient markets and be better than others at assessing value. This makes the S&P 500 a poor place to look for undervalued stocks. Another lesson is that risk is the possibility of losing money, which is different from volatility. Risk comes mainly from high prices. Markets always seem riskier after they decline, but in reality, stocks are riskiest when their prices are highest. To be a successful investor, it’s necessary to be skeptical. This means being skeptical of bot...