Thursday, January 20, 2011
On the Bloomberg website today the following article was written "Public-Worker Unions Battle U.S. Governors Over Benefits in Change of Role". This article seems to support the questions I was asking. I thought you might find it of interest. The link to the story is:http://www.bloomberg.com/news/2011-01-20/public-worker-unions-battle-governors-on-benefits-in-role-shift.html
Tuesday, January 11, 2011
On August 27, 2010, we said in a blog that "Almost every significant unionized industry in America has failed. Now the largest unionized segment in America is government."
In the January 8, 2011 issue of the Economist magazine the lead story is titled "The battle ahead - Confronting the public-sector unions."
If you accept the thesis that I'm even partially correct about the negative effect of unions and their inflexible total compensation costs being responsible for destroying the competitive condition of significant industries, you will be well advised to ask "Are unions likely to destroy the government?"
Isn't it only a matter of time before some union representing the fire department, police department or the post office, goes on strike? Obviously it will happen. It's tough to change people. Note carefully the behavior of certain union members during the recent New York City snowfall.
Friday, January 7, 2011
We have been asked to say more about the investment rules we published on December 6th. Let's start with "KNOW YOUR RISK LEVEL."
If you define risk as what the overall market is going to do, you will never get it right over a period of years. No matter what you do most portfolios will be plus or minus 3% from the average over almost all periods.
The return of the market is what the average portfolio made or lost in the time period you are referring to. The only way to beat the market is to concentrate your investments or use leverage. If you significantly overweight any sector, industry or company you are concentrating your investments. If you pick the best performing sector and put all your money in it you will undoubtedly outperform the market. If it does worse, you will do worse. Let's say you picked the natural resource sector, "energy sector" and you picked the best performing stock and put all your money into it, you will do great. But if energy does well and you pick the wrong stock, even sector strength won't help you out.
If you pick a strong sector and the best stock and add leverage you will win big. Obviously the reverse is also true. This is one of the reason most professional money managers run diversified portfolios. Their objective is not to make you rich, at best it's to keep you from getting poor. You can add you own thoughts to the rest of this.