September 18, 2017
What We’re Reading This Week
Measuring the ROI of Children
The internet is replete with articles detailing how much children cost. In case you don’t know, I have five kids… so, obviously, reading those articles is very depressing. I’ve always mistakenly assumed that my return on investment for these adorable little money pits was mostly satisfaction in watching them grow. I also plan to get some satisfaction from inflicting their crimes on them in the future. Nothing big; when I visit them as adults I will leave Legos around their house and make small drawings on their walls. When they ask me about the drawings, which I will sign, I will deny any knowledge of the crime. Well, it turns out I was wrong. Apparently, someone took the time to measure kids’ ROI, or at least they attempted to do it.
“Few Americans assign a dollar amount to the worth of their children—they are without price. But as lead author of a new study looking at nursing home cost and use, Hurd can quantify the value that daughters, and children in general, bring to parents facing one of life’s most dreaded prospects: a stay in a nursing home.”
60% of my kids are daughters! This seems like the parental equivalent of stock picking and I did good.
“People with four or more kids spend about 38 percent less in nursing home costs than those without children, the study found, and having daughters brought the costs down further. Those with one to three children also paid significantly less than those without children.”
So, good news all around.
The study did not review how much children cost, nor did it compare “children as long-term care insurance” against actual long-term care insurance, which is probably for the best. I just can’t see my wife doting over a beautiful, baby insurance policy like she does over our other kids. Meet my son, his name is Genworth!
Brain Damage and Investing
In 2005, a study was conducted and subsequently reported in The Journal on brain damage and investing. I read about it again here. It was the subheading that caught my eye: “People with brain damage may make better investment decisions.” After reading the study I can attest that this is a dubious conclusion at best. I suppose headings like that are mostly an attempt to get someone to read something, and this one clearly worked.
According to the study, “Each participant was given $20 to bet on a coin flip. If you were wrong on the heads or tails call you lost $1 but if you were right you won $2.50. Simple statistics would tell us that the expected gain from this game would be $0.75 ((0.50 x -$1) + (0.50 x $2.50)). You will never find those odds in a casino since the reward for being right is much bigger than the penalty for being wrong.”
Evidently, people with healthy brains stopped taking chances and would decline to flip the coin (they had the option). People without fully functioning brains would keep playing and ended the game with larger winnings than their peers. Unfortunately, the study was reviewing very specific brain damage, psychopathy. The garden variety brain damage should not be trusted for investment advice.
Psychopaths tend to lack basic empathy and tend to make less emotional decisions. Naturally, a small amount of cold decision-making is beneficial in the markets. I don’t want to invest with a guy that picks stocks based on his emotions. I guess the lesson here is that all things are good in moderation, including psychopathy?
I take umbrage with the idea that investing in the stock market is akin to flipping a coin. I understand that this is not the total message, there is some extrapolation of data and that data has application in other things, like investing in stocks. Additionally, it would conceivably have application elsewhere. The problem with that line of thinking is that there is no practical application. You can’t give your investment advisor a brain scan. I also think there is some kind of inverse message there. Like, if you read a prospectus for an investment that includes a brain scan, you are also making a mistake.
Avid readers will recall that I hate writing about Bitcoin. Sometimes, though, a Bitcoin will rise from the ether and earn a place in this blog. I’ve often said that Bitcoin is doomed to make the same mistakes modern finance has made, only to arrive at the same place as modern finance. We don’t have a need for new currency because our old currency has already learned the hard lessons. That being said, I also believe that all innovations in modern finance are simply ways to do old things more efficiently. Buying and selling stocks will become more efficient and as such, scamming investors will also get easier. In the world of tomorrow, people will lose more money, faster, than ever before.
Enter First Bitcoin Capital Corp (BITCF)! Formerly Grand Pacaraima Gold Corp., this penny stock “gold mining” company turned its attention to the bourgeoning cryptocurrency market. It’s a natural progression. Building a fake company, filing fake documents with the SEC, and issuing fake stock must be considerably more difficult than creating fake cryptocurrencies (an incredibly low hurdle) from a real company.
The SEC has temporarily (permanently) suspended trading on BITCF but don’t panic! In a letter to shareholders BITCF responded, “The good news is that while our shares have been suspended for 10 business days, our internal growth will continue unabated.” Put differently, the SEC will not stop us from making worthless currencies!
Of course, there have been some really great financial statements and press released, but Bloomberg has already done the heavy lifting:
“BITCF has done both a stock buyback and a dividend in cryptocurrency, using ‘Internet of Money’ XOM tokens to buy back shares in July and dividending ‘TeslaCoilCoin’ TESLA tokens to shareholders in August. (Do not ask me what those tokens are or what they are worth, that is obviously not the point here.)”
“BITCF ‘allows its shares to be mined on its own blockchain and rewards miners with those shares mined based on Proof of Work,’ although it also ‘pre-mined nearly all total mineable shares’ so don’t get your hopes up too much.”
“‘In order to purchase and support WEED anyone that sends 1 President Johnson coin ($GARY) to the Company’s Omni Layer Bitcoin Wallet will receive 1 WEED coin into their Omni Wallet,’ is just a fine sentence right there.”
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