Happiness is reality minus expectations

David MoonBlog

Tom Magliozzi, co-host of NPR’s Car Talk show, described the formula for happiness as reality minus expectations. The equation is simple; people are generally happy when the reality of life is better anticipated. Unreasonably high expectations are often a recipe for disappointment. This same formula can be loosely applied in the evaluation of investment outcomes. Too often, investors flock toward the strategy of owning the most high-flying growth stocks, choosing to avoid pesky details such as price. The problem with this approach is that it rejects any acknowledgement that all investments should be measured against expectations. Being the first to … Read More

First rule for Zooming: wear clothes

David MoonBlog

A young friend of mine recently interviewed for a job via Zoom. His suspicion that the interviewer was conducting the meeting from a bedroom was confirmed when from underneath the comforter behind the interviewer crawled a t-shirt clad female, who walked out of the frame – followed by the sound of a toilet flushing. A congressman in Argentina wishes that’s all he had broadcast to the outside world. During a virtual debate about pension fund investments, Chamber of Deputies member Juan Ameri was seen onscreen kissing his girlfriend’s bare breasts, explaining afterwards that he thought he’d lost his internet connection and … Read More

A couple of lessons from 2020

David MoonBlog

Let’s look back at the good ole’ days … say about nine months ago. (Just humor me, okay?) Unemployment was a paltry 3.5 percent, the lowest since the 1950s. Real personal income was increasing at rates not seen in more than 20 years, most rapidly among low and middle-income wage-earners. As far as we knew, the U.S. hadn’t recently started or joined a new war anywhere on the globe. Not surprisingly, the Dow Jones Industrial Average was at an all-time high and would finish 2019 with a 22 percent gain. The tech-heavy NASDAQ would finish even higher. If you are … Read More

A college education is more than classroom instruction

David MoonBlog

When I hear someone tell a young person that “college is the best time of your life,” I wince and think how sad it must be for a person’s life to peak at 22. College was fun, but, fortunately, it was not the best time of my life. It was however, the most important time in my life – a fact that had little to do with classroom instruction. Almost all the memorable value of my years in college is related to relationships. I forged lasting friendships with a number of my professors, such as Bruce Wheeler and Dick Townsend. … Read More

Lockdown effect on housing becoming more complicated

David MoonBlog

The COVID-19 economic shutdown has never been easy, but it was certainly easier in April than it is now. Initially, practically everyone was willing to sacrifice when we assumed the shutdown was a temporary measure to protect the healthcare system (“15 days to flatten the curve!”). And for many people, the early days of lockdown imposed little-to-no financial loss. In the first months of lockdown, U.S. personal income actually increased, thanks to $3 trillion in federal stimulus spending. Two rounds of Paycheck Protection Program loans helped support about a third of all jobs in the country. Unemployment benefits, aided by … Read More

Birthday presents from Warren Buffett

David MoonBlog

There were two notable Warren Buffett events on August 30. The famed investor turned 90 years old and he disclosed a $6 billion investment in five Japanese conglomerates. The move surprised many Buffett watchers, especially given his history of investing almost solely in U.S. companies. Buffett’s foray into Japan shows us that it is possible to teach an old dog new tricks, but only if the dog really wants to learn. Researchers tell us that when a person reaches the age of 25, the default condition is for the brain to become lazy. People tend to transition from being learners … Read More

The demographics of poverty

David MoonBlog

A recent KnoxNews article featured a group of Knoxville women who are working to address local poverty by helping would-be business owners access startup and working capital. I am a huge fan of small business and entrepreneurism, and I wish the ladies much success. But most not-poor people don’t get that way by starting a business. The cause of poverty is not a lack of access to capital. If not a lack of capital, what are the best predictors of poverty? Some of the answers are complex. Some are obvious. Almost all are very uncomfortable to discuss – but ignoring … Read More

Every generation questions the next one

David MoonBlog

A recent discussion between CNBC guests focused on the surprisingly healthy demand for cars in the $500,000 to $1 million price range. My first thought was that this must be a sign of the coming apocalypse. These crazy people clearly have more money than they have sense. My second thought was about the first house my wife and I purchased in 1987, specifically, my father-in-law’s reaction. He thought we were being frivolous. We were new college graduates, in our first grown-up jobs. We had saved enough for a down payment, but otherwise didn’t have a nickel to our names. My … Read More

Who should bear the cost of a public good?

David MoonBlog

I watched with passive curiosity as the Knox County Board of Health closed local bars, then allowed them to reopen with a 10:00 pm curfew. If Knoxvillians understand that our public health requires the complete or partial closure of bars, it is a great opportunity to put our collective money where our mouth is. A person may feel virtuous when he proclaims that COVID-19 is health or science issue, not an economic one, but money is simply a tool we use to express our values. Of course, this is an economic problem. For a moment, forget about infection rates, case … Read More

Everyone is a risk manager

David MoonBlog

Prior to this year, the Dow Jones Industrial Average (DJIA) had never declined more than 1,000 points in a day. Then came COVID. Within a single week in March of this year, the index dropped more than 2,000 points three times, culminating with an almost 3,000-point drop on March 16. In three miserable days, the index dropped a total of 30 percent. By the end of July, the DJIA had recovered 6,240 points, or more than 30 percent. Quiz: at which point were stocks riskier, March 16 or July 31? If you answered March 16, you don’t understand risk. For … Read More