Financial Planning

A Buying Opportunity of the Century

From this week’s Barron’s interview with Ray Dalio, Chief Investment Officer, Bridgewater Associates:

Q. Given this outlook, what is your view on stocks?

A. Buying equities and taking on those risks in late 2009, or more likely 2010, will be a great move because equities will be much cheaper than now. It is going to be a buying opportunity of the century.

Financial Planning

Increasing Signal and Reducing Noise in Personal Finance

There’s so much noise out there in the personal finance news “space” that the real trick comes down to establishing some sort of decent “signal to noise” filter so that you can learn what’s most important – and then just ignore the 98 percent of the rest that is truly just drivel designed to fill air time or print/web space. God help you if you’re into watching CNBC all day – IMHO that’s the ultimate in noise! 😉

Among the most important “signals” I’ve found are the weekly writings of Jonathan Clements and James Stewart – both of whom write for the Wall St. journal on Wednesdays each week. As far as I’m concerned, you can shred the bulk of the paper the rest of the week and just focus and reflect on the teachings of these two writers. Both are found in the Personal Journal section of the paper – Clements’ column is titled “Getting Going” and Stewart’s is titled “Common Sense“.

Clements, as a staff writer for the WSJ, also has been doing video’s along with his columns recently. He also does a Sunday column that’s often on the WSJ web site over the weekend.

Stewart’s actually a writer for sister publication SmartMoney – and can be followed regularly there as well. But his Wednesday WSJ columns seem to feature his best thinking and I find them great reading.

And, then, there are Warren Buffett’s annual letters to shareholders of Berkshire Hathaway…

Books Financial Planning

Fortune’s Formula

I just finished William Poundstone’s latest book Fortune’s Formula – it’s a great read!

One of my favorite books as I was turning 21 many years ago was “Beat the Dealer” by Ed Thorp, a card counting approach to winning at blackjack. I read and re-read the paperback edition, and had the book’s tearout cards detailing Thorp’s system in my wallet for years (just in case I ended up in Reno or Las Vegas!).

Poundstone tells the full story of Thorp’s later success as an investor applying a technique developed by John Kelly, a colleague of Claude Shannon at Bell Labs. Called the “Kelly formula”, Kelly’s approach involves proportional betting (or investing) where the amount you should bet is in proportion to the odds of winning.

If you enjoy this kind of stuff, this is a great read.

Financial Planning

Buckets of Money

Ray Lucia and his Buckets of Money BrainTrust roadshow came to town today.

Ray’s a certified financial planner based in San Diego who’s built a significant business out of providing advice as to what you should be doing with your money. Among other things, he spends four hours a day on a nationally syndicated radio show where he and the BrainTrust take calls from listeners.