Friday, February 22, 2008

This Week's News

Here's a few New York Times articles that caught my eye this week:

Investment advice from Yale's portfolio manager: Keep It Simple, Says Yale’s Top Investor

What should an individual investor do?

Don’t try anything fancy. Stick to a simple diversified portfolio, keep your costs down and rebalance periodically to keep your asset allocations in line with your long-term goals. That is the advice of David F. Swensen, who has run the Yale endowment since 1988, relying on a complex strategy that includes investments in hedge funds and other esoteric vehicles. The endowment earned 28 percent in its last fiscal year, which ended June 30, beating all other endowments. It finished the year with $22.5 billion....

For most individual investors, he said, copying the strategies of institutions like Yale is virtually impossible: big investors have access to fund managers and arcane strategies that are beyond the reach of most people....

So he advocates another approach, which he outlined in the book “Unconventional Success: A Fundamental Approach to Personal Investment” (Free Press, 2005). He proposes a portfolio of 30 percent domestic stocks, 15 percent foreign stocks, and 5 percent emerging-market stocks, as well as 20 percent in real estate and 15 percent each in Treasury bonds and Treasury inflation-protected securities, or TIPS.

The real estate investment can be made through real estate index funds. Though the real estate market has declined and your portfolio is below its target allocation to it, he said, don’t try to time the market. Go ahead and rebalance because no one really knows where the market’s bottom is.

A peek at the financial life of Sandra Boynton, creator of greeting cards galore: The Power of Whimsy

As an entrepreneur, Ms. Boynton maintains a firm grasp on market realities and her finances, but she says she has succeeded by refusing to make money her main objective. Instead, she says, she has focused on the creative process, her artistic autonomy, her relationships and how she uses her time.

“I don’t do things differently to be different; I do what works for me,” she says. “To me, the commodity that we consistently overvalue is money, and what we undervalue is our precious and irreplaceable time. Though, of course, to the extent that money can save you time or make it easier to accomplish things, it’s a wonderful thing....”

When Ms. Boynton was 14, a local newspaper printed drawings from an exhibit of her school artwork. She used the $40 she earned from her first published work to invest in two shares of AT&T — though she mistakenly thought she was buying shares of I.B.M. She still has the stock but has no clue how much it is worth.

Stocks held a special glamour for her: Her grandfather worked at a silver company, rising from the mailroom to the vice president’s perch. “Family legend has it that the company offered penny-a-share stock to employees, and he bought as much as he could afford,” she says. “And he became a wealthy man. That stock eventually put most of his 17 grandchildren through college....”

In 1974, Ms. Boynton met Phil Friedmann, a partner in Recycled Paper Greetings, a greeting card company based in Chicago, at a stationery trade show. After Mr. Friedmann and his business partner, Mike Keiser, saw Ms. Boynton’s work, they asked her to start making cards for their company.

They wanted to pay her a flat rate. Though she was only 21 and unknown, Ms. Boynton, who had learned a lesson or two from her father’s other careers as a writer and publisher, demanded royalties.

“We quickly relented,” Mr. Keiser recalls of the royalty negotiations. It was a shrewd move on his part, too. He says that over about a decade — from the mid-1970s to the mid-1980s — revenue at Recycled Paper went from $1 million to $100 million, largely because of the popularity of Boynton cards. Ms. Boynton has made 4,000 different cards for Recycled Paper, including the still popular “Hippo Birdies 2 Ewes” birthday card.

By Mr. Keiser’s rough estimate, Ms. Boynton has sold around a half-billion cards, which, he says, makes her one of the best-selling card creators of all time.

Artists on the move in NYC, for reasons of money, of course: Moving Soon to an Apartment Near You

Having lived in more than 30 apartments in 20 years — three of them in the last six months — [Brooke] Berman is skilled at making herself comfortable almost anywhere very quickly.

“I can make anything home,” says Ruth, Ms. Berman’s proxy and the central character in her latest play, “Hunting and Gathering,” presented by Primary Stages through March 1. “A couple of books, a scented candle in a tin, some fresh flowers, and we’re good....”

Living on money from the odd grant, temp jobs and teaching positions, she is emblematic of her Gypsy tribe — theater people are the original urban nomads — and a vivid example of the increasingly precarious domestic life of an artist trying to live in New York.

Rent for a studio or a one-bedroom in the East Village, for example, has more than doubled in 10 years, said Douglas Hochlerin, a broker with Bond New York, a firm specializing in Manhattan rentals. Last year, when the rent on Ms. Berman’s Mott Street one-bedroom, where she had lived for three years, rose to $1,550 from $1,350, she gave up her lease, beginning another bout of itinerancy, as she described it.

“It’s all about money,” Ms. Berman said cheerfully. “It’s not like I have a penchant for the transient life.”

According to Emily Morse, the director of artistic development at New Dramatists, “two major things have changed as far as this city is concerned: the real estate market and the fact that very little money is going directly to artists.”

She continued: “You used to be able to work a 20-hour week, pay the rent on your tiny studio, and still write your plays. That’s no longer possible.”

And finally, from today's paper:

Rescues for Homeowners in Debt Weighed:
Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody’s

Go On a Savings Spree:

Why not ... try to stimulate investment by all Americans? The simplest approach would be to seed universal mutual fund accounts for low-income Americans. The best way to do this would be through a so-called refundable tax credit deposited directly into a special investment account for each taxpayer. In future years, the government could contribute an additional 50 cents for every dollar the taxpayer deposited into this account. Think of it as a universal 401(k), but one that could be used not only for retirement but also for things like a down payment on a house, college expenses or unexpected health costs.

Don't Rerun That '70s Show!

Jimmy Carter’s overall economic record was much better than most people realize — the average economic growth rate under his administration was 3.4 percent per year, slightly higher than the growth rate under Ronald Reagan and far better than growth under either Bush.

Reagan famously asked Americans whether they were better off than they had been four years ago; the answer, actually, was yes — most families had higher real income in 1980 than they did in 1976.

But the good economic news came in the Carter administration’s early years, while its final year was marked by rising unemployment and soaring inflation, largely caused by a surge in oil prices.

And once again we have a weakening economy coupled with rising inflation, again thanks in large part to a surge in oil prices.


Noel Larson said...

Wow...Thats an uber-post! Great information.

You are right in that it is starting to feel like the 70's again. The Fed on Wednesday admitted in their meeting that this has come on faster and heavier than imagined. As they continue to cut rates to spur activity, it also fuels inflation!

Andrew Stevens said...

Just to point out on the Carter thing, it takes a couple of years for federal economic policy to influence the national economy (if it does at all). So it's really Ford who should get credit for Carter's early years and Carter who should get the blame for the awful 81-82 recession in the early Reagan years.

Actually, I don't think Presidents have a whole lot of effect on the economy at all and Carter (and early Reagan) were clearly victims of circumstances out of their control. Krugman knows all this, of course; he's just being partisan.