Research indicates that humans are not naturally wired for prudent, long-term investing. Scott Bosworth, Vice President and Regional Director, with Dimensional Fund Advisors describes common forms of behavioral bias and discusses how these biases influence investment decision making.

These biases go by names like:

• Overconfidence
• Hindsight
• Familiarity
• Regret Avoidance
• Self Attribution
• Extrapolation

These sound like boring academic terms, but I guarantee you, you will recognize yourself in some, if not all, of these Behavioral Biases. You see, these biases are helpful in most of life, just not when it comes to investing. To view this video presentation, go over to Capital Markets U.com Magazine and enjoy a very insightful educational experience into yourself. You will find this story on the front page under the Investing Section.

While you are there, remember to sign up for your free subscription to Capital Markets U.com Magazine. As I mentioned in my last post to Charles' Blog, this blog will be replaced by Capital Markets U.com Magazine in the not too distant future. So, whether you are a client of Charles Stanley or just a friend following these posts, we want to maintain our online relationship so please sign up for Capital Markets U.com Magazine now.

        

Some who are unhappy about the August recess Town hall Meetings have attempted to label the opposition to the Democrat created health care reform plan as uninformed, AstroTurf, Republican minions and much worse. Here I want to share with you an essay by a University of Chicago Graduate School PhD. He is not "uninformed", he is eminently logical and, in my opinion, rather witty. Although I am sure if he and I were to sit down and have some discussions there would be some profound areas of disagreement, I don't find them in this essay.

My favorite saying from talk radio is a foundational principle of the Dennis Prager show. It says, "I prefer clarity to agreement." I believe Clifford Asness PhD does bring clarity in this essay - whether you agree with him or not. So, enjoy reading.

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Will Rogers famously said, “It isn't what we don't know that gives us trouble, it's what we know that ain't so.”  So it is with the health care debate in this country.  Quite a few “facts” offered to the public as truth are simply wrong and often intentionally misleading.  It seems clear that no truly productive solution will emerge when these false facts represent our common starting point.  So, this essay takes on the modest task of simply disabusing its readers of some untrue notions about health care... To read the rest of this essay go to stumblingontruth .

Announcement:

If you have enjoyed receiving posts from Charles' Blog, let me invite you to subscribe to Capital Markets U.com Magazine. At some yet undetermined date, Charles' Blog will be discontinued in favor of Capital Markets U.com Magazine. You are aware that my posting on Charles' Blog has been less frequent lately. That is because I have been dedicating a fair amount of time and effort in the creation and development of Capital Markets U.com Magazine. My intention is for it to replace Charles' Blog. Charles' Blog has certain limitations that are eliminated with the new publishing effort. So, please go on over the Capital Markets U.com Magazine ( the address is http://capitalmarketsu.com). When you get to the home page, you will see a sign up section in the top of the right hand column. I hope to see you over there at Capital Markets U.com Magazine.

        

All sorts of critics of the Efficient Market Hypothesis have come out of the woodwork with the extreme volatility of the markets over the past several months. Professor Eugene Fama, considered the Father of the Efficient Market Hypothesis shares his perspective on these thoughts in a recent interview.

I have posted a link to the interview over on Capital Markets U.com Magazine. I would encourage you to sign up for the free subscription at Capital Markets U.com Magazine. You will get lots more good educational and news items than what I am able to post here on this blog.

See you over at Capital Markets U.com Magazine.

        

Jim Davis, with Dimensional Fund Advisors, puts forth an important piece regarding inflation and its surrounding impact on Americans and our standard of living. This is something to chew on a little. Enjoy and be sure to leave a comment or two about this article.

Investors are concerned about inflation, and rightly so. Average annual inflation in the US between 1929 and 2008 was nearly 3.3%. A dollar at the end of 2008 had about the same purchasing power as eight cents did at the beginning of 1929. Protecting the purchasing power of an investment portfolio is a genuine concern.

Inflation is not the only issue for investors, however. An interesting strand of economic research addresses the idea that people do not simply care about their own standard of living; they are also concerned about how their living standards compare to those of other people.¹ If everyone around me is enjoying a higher standard of living over time, I do not want to be left behind in an economic sense. In the language of the papers that have been written on this topic, I want to “keep up with the Joneses.”

Figure 1 shows evidence that this may be a genuine concern for consumers...

For the rest of the story, go to Inflation, Living Standards, and Returns.

        

This blog is about your financial well being. Right now, as I write, to some degree  your financial well being is being threatened by an out of control congress. They are once again trying to ram legislation through congress without so much as reading the content. By all accounts, this legislation, as it stands now, will threaten your financial well being - not to speak of possibly having negative consequences on your health and personal freedom.

I am asking all readers of this blog to sign a Free Healthcare Now petition. Please, click on this hyperlink, Free Healthcare Now and complete the petition. I believe taking this action is in your best interest and the best interest of America. After  you have signed the petition, there is a link for you to forward the petition to others. I encourage you to do so.

        

Many concerned citizens are wondering about future inflation in America. The following article about Federal Reserve Chairman Ben S. Bernanke at least indicates that he has some kind of plan for continuing to work on growing the economy while fighting inflation at the same time.

Let's raise a glass to his success!

Bernanke May Hold Rates Down by Showing He Can Reverse Course

July 20 (Bloomberg) — To keep interest rates at a record low, Ben S. Bernanke may have to show Congress and investors he can be as creative about soaking up cash from the financial system as he was when pouring it in.

The Federal Reserve chairman will probably outline his strategy for exiting the biggest monetary expansion in history when he delivers his semiannual economic report to Congress tomorrow. Among the options: establishing term deposits at the Fed designed to induce banks to keep money there rather than lending it out, said Lou Crandall, chief economist at WrightsonICAP LLC in Jersey City, New Jersey.

Laying out a plan now may give Bernanke leeway to hold down borrowing costs for as long as it takes to reduce unemployment from a quarter-century high.

Read the full story at Bloomberg.com

        

Wes Wellington, Vice President of Dimensional Fund Advisors (DFA), takes a good look at the effects of Socialism on the markets of various countries around the world with the questions in mind, "Will the new Socialistic bent in America  end our market performance?"

This is a very counter intuitive presentation. I encourage you to take a few minutes and view this presentation.

        

For the past few months I have been working on a book designed to impart both knowledge and wisdom in regard to a subject that has engendered a lot of abuse in the financial services world. That is the sale of annuities. Initially, it will be available as an E-Book only. I am considering publishing in the traditional format after it has been out for a while.

One major goal of this book is to prevent abusive annuity sales through consumer education.  In this book you will learn… The ONE question you must answer correctly before you can make a proper purchase The Two Types and Three Varieties of Annuity Contracts . . . and how to tell which one might be right for you How to make sure the insurance company is one of the strongest in the industry (Since you are buying insurance company guarantees, you want to make sure the company can perform -  especially in our current economic environment)

• How to uncover the real costs of any annuity so you don’t get ripped off by an under-performing annuity
• The key questions you need to ask the salesman (This will make him uncomfortable, but  you need to know the answers in order to make a good decision)

Someone has said that Knowledge is Power, but I disagree. I believe Wisdom is Power. 

The difference is: Knowledge is merely a bunch of facts that you may not use. Wisdom is the proper application of knowledge to real life situations.

“Forewarned is Forearmed” was written with both knowledge and wisdom in mind. 

There is a lot of information but there are also some very specific to do lists for you to take action and apply this information to your own advantage.

If you would be interested in hearing when the book is finally available for sale - which will be very soon - please register below and I will make sure you get the information for how to purchase it.

I am interested in your new book. Please send me an announcement when it is available for purchase.
Name:
Email:
Don't worry, I hate spam too. I will keep you information safe. No one but me and my business will get your information.

        

The current turmoil in the economy and the recent extremes in the stock market has caused many to wonder about their retirement plans and the amount of risk they are willing to take.

David Booth, Co-Founder and CEO of Dimensional Fund Advisors presents an historical perspective on the need to assume an appropriate amount of risk. Most should not assume the full risk load of the stock market but most everyone should assume some. I think you will find this an enlightening presentation. It takes all of about 7 minutes.

Retirement, Risk and Return

        

IRS Tax Scams Video Beware of IRS’ 2009 “Dirty Dozen” Tax Scams IR-2009-41, April 13, 2009 WASHINGTON — The Internal Revenue Service today issued its 2009 “dirty dozen” list of tax scams, including schemes involving phishing, hiding income offshore and false claims for refunds. “Taxpayers should be wary of scams to avoid paying taxes that seem too good to be true, especially during these challenging economic times,” IRS Commissioner Doug Shulman said. “There is no secret trick that can eliminate a person’s tax obligations. People should be wary of anyone peddling any of these scams.” Tax schemes are illegal and can lead to problems for both scam artists and taxpayers who risk significant penalties, interest and possible criminal prosecution. The IRS urges taxpayers to avoid these common schemes: << MORE >>

As a general rule, I try to avoid political commentary on this blog - not that I don't have some fairly strong political opinions - it just that this is not intended as a political discussion blog. However, this post is both political and intended as a protection to the pocket books of all California citizens. A friend of mine forwarded to me the following post from the Howard Jarvis Tax Payers Association and I believe it deserves wide dissemination. Read it and remember it when you cast your ballot in May's Special Election in California. I am not telling you how to vote - although to be honest I would like to - I am suggesting that you be well informed when you cast your ballot. << MORE >>

Bob Veres is a journalist that people outside the world of financial planning have probably never heard of. Inside the financial planning world, however, Bob is somewhat of a celebrity. He is a close observer and critic of the financial services world that touches the consumer directly. For fiduciary advisors he is somewhat of a hero at times - and then like any journalist who is also an opinionist he can get some folks upset now and then. Bob has an email subscription service that we are priviliedged to receive. Today, he shared some sentiments that I think are cathartic and are helpful for all of us to acknowledge both our present emotional state and the reality of a bigger picture. With that introduction, I want to share with you Bob Veres' "The Scream of the Lizard." The Scream of the Lizard I don't know about you, but I'm feeling just a little beat-up at the moment, and not totally because of the stock market. Today's returns, trickling in all day, reminded me of a time years ago when I foolishly allowed my children to talk me into accompanying them on a roller coaster ride at a theme park called Sea World. For most of the day, we had been staring at sharks that were safely housed behind thick glass, and polar bears behind even thicker glass, chilled in the penguin area and splashed while watching the killer whales throw their trainers 20 feet or more in the air. << MORE >>

In this stage of our current financial crisis, I am beginning to hear more often, “What should we do now? Should we pull back from the stock market?” Well, I have had my wisdom I have shared with my clients with whom I have had that discussion, but here I want to share the story from a little different perspective. Inmoo Lee and Garrett Quigley of Dimensional Funds Advisors have written in internal paper for Advisors titled, “What Can We Learn from Past Financial Turmoil?” It was not written for public consumption (the SEC sees all such material as “advertising” and has all kinds of regulatory gobbledygook that ends up prohibiting some good information from getting directly to investors because it doesn’t contain several pages of disclosures and caveats, most of which no investor ever reads anyway) but I can read it and summarize here the ideas and conclusions for your benefit.<< MORE >>

The following post is from the Planned Giving Design Center, a resource site for planned giving professionals. It is one of the finest resources for technical and creative thinking regarding planned giving that does not press the envelope into territories that would fail IRS scrutiny.

The Obama administration has announced in its 2010 budget proposals that it plans to limit the tax rate at which high-income taxpayers can take itemized deductions to 28 percent. For high-income charitable donors, who are subject to higher income tax rates, the result would be a higher cost of giving.

by Marc D. Hoffman

In a ...<< MORE >>

Yesterday, February 24, 2008, the Dow Jones Industrial Average rebounded 236 points following Ben Bernanke’s testimony. Bernanke seemed to bring relief regarding the state of our banking system in the form of a relatively clear plan with assurances that capitalism isn’t going away in the United States any time soon. He outlined a 3 point plan (sound kind of like a sermon outline, 3 points and a poem). Anyway, I digress, here is the plan. ...<< MORE >>

There were several naysayers in the comments section of this article at The Arizona Republic. What do you think? I will have to say, I have the same philosophy as Wes Wellington who is quoted in this article. What are you thinking? Or maybe, what are your questions?

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by Russ Wiles - Feb. 8, 2009 12:00 AM


The Arizona Republic
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The current stock-market climate provides a great opportunity for investors to embrace risk.

Yes, you read that right: More people need a better ...<< MORE >>

It is sad to have to shine light on some dark places since we would like to trust our government. Unfortunately, it appears there are good reasons to not trust our government. It really pains me to write that last sentence since I consider myself very much a pro-America patriot and supporter of the free market capitalism that has allowed our country to be the most powerful economic force in the world. I am afraid that we will all have to take more seriously the adage "buyer beware", even when it comes to what we expect to be regulated businesses. ...<< MORE >>

If ever I posted something on this blog that needs to be spread around - and quickly - this is it. The following article is from  the US News & World Report blog site "Capital Commerce" by James Pethokoukis.

10 Reasons to Whack Obama's Stimulus Plan

Posted by Charles L Stanley CFP ChFC AIF at 1/31/2009 5:03 PM | View Comments (1) | Add Comment