David M Hood

Benjamin Graham was Warren Buffet’s mentor.  Warren Buffet has plainly stated many times that he has always used Graham’s investing principles as his main guide.  Buffet recommends Benjamin Graham’s Intelligent Investor as the main way to understand Graham’s philosophy and investing in general.

Its a great book.  Graham writes concisely and clearly.  If you’re thinking about investing at all – and probably even if you aren’t – you should read this book first.

Unfortunately, the first time I read it I didn’t really heed one of his biggest pieces of advice.  One of the principles is to be either a defensive investor or an “enterprising” investor.  I tried to be some of both. 

The defensive investor seeks to get the market average with minimal effort and costs At the time he last updated his book, index funds hadn’t been made yet, so its really easy to be a defensive investor.  The problem with being a defensive investor is that its too boring for a lot of people.  Index funds make defensive investing even more boring because no one goes to the party and brags about how they performed exactly like market.

The enterprising investor tries to get extra return on his money by putting in a significant amount of effort studying companies and the market in general to find the best deals out there.  Graham states that it is exceedingly difficult to beat the market and that many professionals with years of education fail to beat the market or, more commonly, lag the market.  However, being an enterprising investor is more fun and interesting.  Also, if you can brag about your big wins – even if you have a bunch of failures.

You can’t be half defensive and half enterprising by putting in a little extra time above being defensive because then your enterprising actions will fail and often do worse than just staying defensive.  I tried to be part enterprising and I think I did a little worse than the market.  Since I’ve just had a baby and have basically no spare time to put into investing research, I’ve switched all my money over into index funds.  My life is much better because of it.

One caution flag that Graham throws up is to make sure you don’t become a “speculator” when you think you’re investing.  If you’re making guesses or hoping or wishing that a company will do great then you’re speculating.  He believes that many people are speculating and calling it investing.  I think he’s right.  All those people who are saying what the market will do in the short-term and all those people who are actually pulling themselves in and out of the market on a regular basis are speculating.  Day traders are speculators.  Speculators tend to lose.  A lot.  A lot a lot.  They don’t all lose and they often have big wins, but those wins usually are outweighed by their losses.  There’s nothing inherently wrong with speculation.  It can be fun and entertaining.  You can guess right and make a lot of money.  The problem is when people speculate and think they’re actually investing.

Now that I’m a defensive investor (at least for now), I’ve just made a simple portfolio that will automatically buy low and sell high.  Graham recommends having at least 25% bonds (and subsequently 75% stocks).  So I’ve got 25% bonds, but it won’t stay that way all the time.  If stocks go up and, typically, bonds go down as people sell bonds to buy more stocks, then bonds may move to be 20% of my portfolio.  In that case I would “rebalance” my portfolio back to 25% bonds.  I’ve just sold stocks high and bought bonds low.  The reverse situation works the same with bonds having risen when stocks go down.  Stocks and bonds don’t always go in the reverse direction, so its not that simple, but by and large that’s how they act.

If its so easy to buy low and sell high, why doesn’t everybody do it?  Well, people tend to get caught up in the enthusiasm of the market when its gone up a lot lately.  They also tend to get caught up in the despair of the market when its gone down a lot lately.  Our instincts and traditional wisdom fails us when it comes to managing our investments. 

Typically when something/someone has done really well lately, the trend will continue.  For example, when a professional athlete has been on the rise lately, its a good bet to guess that they’ll continue to rise or at least not fall back to previous performance levels.  Another example is the relationships we have with people.  When someone comes through for you over and over, its safe to bet that they’ll come through for you in the future.

Unfortunately, the stock market doesn’t work like that because at it goes up and most people want to buy more, they’re not realizing that they’re basically paying more for the same things.  When the market goes down people should be thinking, “its on sale!  Wahoo!”  If the cereal you buy doubles in price temporarily, does that make you want to buy more?  What if it halved in price temporarily?  The same basic concept applies to the stock market because there is a company behind that stock and going up or down significantly in a short period of time doesn’t really change the value of the company (with few exceptions – see banks).

There are so many more easily understood concepts in Graham’s books that reading it really changes your perspective on investing.  However, the basics I just talked about I wish someone had emphasized to me a long time ago.

AutoHotKey (AHK) is a god-send for anyone looking to make their computing faster and easier.  Downloading AutoHotKey and learning the basics, and eventually, more advanced features has opened up an amazing world of computer expediency.

What originally drew me into AutoHotKey’s seductive web was how amazingly easy it was to speed up basic computer tasks.  I have programmed in more languages than I care to count, so you may be skeptical aof my use of the phrase “amazingly easy.”  However, I believe someone with no programming experience could easily do some basic AHK tasks to speed up their interactions with their computer.

Simple AHK Use:

For example, there is a set of websites that I go to frequently and I don’t want to have to open up a new browser window or tab, click the address box, and then type the a website address in to get to my desired website – thats just too slow!  Instead, I can press a 2 or 3 key combination and all of the above is done for me.  The following line opens a new browser tab and goes to ESPN’s main NBA page when I press Control + Alt + B: “^!b::Run http://sports.espn.go.com/nba/index“  To someone new that might look confusing and fancy, but really there are 3 simple parts to it:

“^!b” – The keys to press.   “^” represents the Control key.  “!” represents the Alt key.  “#” and “+” can be used for the Win and Shift key respectively.   “b” represents the B key.  “::” separates the the keys from the command(s).  “Run http://sports.espn.go.com/nba/index” is the command that opens up a new web browser or tab and takes me to ESPN’s NBA page.

If you’ve downloaded AutoHotKey and AutoHotKey.ahk is running (a little green and white H in the bottom right tray bar), you can right click on the green and white H, select “edit,” and add the line I quoted above.  Then save the file and right click on the H again and select “reload.”  Now when you press Control + Alt + B ESPN’s NBA website will open up.  You can easily chang ethe “b” to a different key and the website to any website, folder, file, or program path.

With each Hot Key combination, it may only save you 5-10 seconds each time you use it, but over time that really adds up – especially when you combine it with multiple time-saving scripting actions.

Simple+ Use:

You can do a lot more with AHK than just quickly running or opening something by just adding a few more tools to your arsenal.  You can have more than one command attached to a quick key set simply by going to the next line after the “::” and then ending the command set with “return” on the line after the last line of commands.   There are some sets of files/folders/programs/etc that I want to open all at once.  I can set that up to happen by just pressing a few keys.  For example:

^!b::

Run www.nba.com

Run http://sports.espn.go.com/nba/index

Run C:\somedoc.doc

Run C:\somexls.xls

Run C:\somefolder

return

The previous code will open both the websites, the folder and both files when Control + Alt + B are pressed.

There are other useful commands that you can likely understand and use easily.  For example, “Send blahblah” sends “blahblah” as if you typed it on a keyboard.  This is useful for sending long usernames or passwords (I recommend against really important passwords).

You can also use MouseMove X, Y and Click which are relatively self-explanatory.

Another easy tool is Auto-Replace:  “::btw::by the way” will automatically replace “btw” with “by the way” (you need to type space, comma, or other ending characters after btw to activate).

If you still want to learn more, I’ll post about some useful easy tools later.  Also, I recommend the AHK Forums and the help file that comes with AHK is really useful.

Cable TV is expensive and with many people trying to cut back expenses (like me), many are choosing between no cable TV and paying quite a bit of money per month.  The cheapest I could find that fills my TV requirements (HD and DVR) is DishHD for $40/month.  The hardware and channel selection isn’t as good as if I got cable, but cable costs $50+/month for HD + DVR.  I’ve had no cable for a while before because there are few shows that I actually want to watch on a regular basis.  However, there are a few shows that Jacqueline and I are hooked on and we have a newborn at home that limits our ability to do things together outside the home (not for much longer I hope).  Therefore, it will make entertaining while holding/feeding/taking care of our baby difficult without cable, so we would heavily prefer some form of TV entertainment.  But I don’t want to pay a monthly fee for 3-5 shows + sports.  Luckily there’s a 3rd solution that I’m seriously considering doing – setting up a home media center that plays media from the internet or another computer on my home network.

What has stopped me from setting up a home media center instead of having cable TV was the lack of TV shows that I could legally acquire and the serious lack of live sports available.  Nowadays, almost all my shows are obtainable free and legally with Hulu and its like.  Everyday more shows are going online.  The only hit is live sports – which hurts because I really enjoy watching basketball (there is NBA League Pass online, but a large portion of them are blocked out and the quality is inconsistent).  There are also additional bonuses with using a media center that somewhat offset lack of watching live sports like easily watching shows from current media collection, utilizing netflix online (we have a small subscription), and more.

I’m already paying for internet, so setting up a home media center is really just about up-front hardware costs and maybe some time spent every once in a while updating software or playing with settings (some of which I will enjoy).  After searching around eBay and other sources for “XBMC”, “Boxee”, “Media Center”, and others it looks like this can be done with little to no work for as low as $150 (about 3.75 months of paying $40/month for cable.  I don’t want to spend more than $300 (7.5 months @ $40/month) unless its really awesome.  If I want to put more work in it, I may be able to take an extra desktop computer I have thats barely being used and make it workable for very little to no money.  The only problem with the extra computer is that it may be too big to fit in an aesthetically appealing way in our living room.

[A few days later...]After working on my extra computer, I’ve got it working with a wireless keyboard and wireless network card that we already had.  The wireless network card was necessary because the media center will be all the way across the house from the office where our router is.  After installing XBMC (the extra computer doesn’t have a Media Center version of Windows on it) and setting it up for the local network, I was able to play videos directly off my main computer flawlessly through XBMC.  Total cost $0!  However, even with a wireless keyboard that works just fine from where I sit to watch TV, we still want a remote.  I bought a new one off eBay for $13 (free shipping).  An added unexpected bonus to the remote is that its supposed to be able to control the mouse cursor.  Total real cost to replace cable: $13!  Awesome.

You, dear reader, may not have already had the hardware that I had to make this possible.  If you don’t have a router (I think most people do.  If you have two or more computers hooked up to the internet, then you do.), thats an additional cost of about $50.  I also already had an extra decent computer (it came with a mouse and keyboard) that I was able to get off craigslist for $100 in about September of 2008.  A good search tool for Craigslist is CraigsPal.  I also already had a wireless network card (Linksys wireless-g pci adapter) which can be had for around $20 on eBay.  The XBMC software is free.  That would bring the total to $183 for a whole media center system.  Thats about 4.5 months @ $40/month cable or 3.66 months @ $50/month cable bill.  Most people probably have a router already, so I would expect it to cost to be $133 (3.8 or 2.66 months of cable).

You can also just get a Linksys Wireless Media Center Extender for $80 off of eBay if you have a router and Windows Media Center on one of your home computers.  However, this solution has its own limitations (read the reviews here).  Many of the solutions that are one big package will have similar issues – not being able to play some file formats and not being able to stream off of hulu, youtube, netflix, etc.  Which is why I like that I’ve done it with a computer.  Perhaps someone could design or already has designed a product that is a slimmed down operating system (either a minimal Windows install or some version of Linux) that has a small (in size) hard drive + wireless/wired network connections + appropriate media outputs for $100-$150…

Once the media center is setup and payed for itself, I expect to save $420/year if I cancel my TV completely.  I’m also considering just slimming down to local plus sports channels – which costs ~$11 with DishNetwork – and saving about $350/year.  If you’re paying $50/month for cable, thats $600 or $530 per year.  Putting the costs aside, there are some positives and negatives to having a media center instead of cable.  For example, with a media center I get no live sports, but I can easily display pictures and play music and I have access to a larger selection and wider variety of video.  On top of that, the amount of video available online is growing significantly every year.  Plus, I find it fun to mess around with =)

I’ve just been informed by DishNetwork that I’ve signed a 2 year contract where I have to have at least the minimum package ($20).  Oh well.  At least I can get a little savings with more features.

First, a quick update: Launchy is simpler and quicker than Executor in my experience.  I’m using it happily now over Executor.

If you read more than one blog on even a semi-regular basis, you could save a lot of time by using an RSS (Really Simple Syndication) program.   An RSS program allows you to read any number of blogs all from one place.  An RSS saves time by making it so you don’t have to go to different websites.  You can also scan through posts looking for the interesting ones and you can automatically filter out posts you’ve read before.  With an RSS, I read a lot more blog posts in a lot less time.  I also am able to skip to the next one quickly if I’m not interested.

Most people agree that Google Reader is the best RSS program.   Its really simple to use.  You can organize your feeds by tags/categories/folders.  There are a good amount of customization features, but I don’t really care about that.  I just use it to quickly and efficiently get to the content I really want to read.  Using “j” (next post) and “k” (previous post) make going through a set of blog posts a breeze.  Sometimes I’ll just scan through the titles (while in “list” mode – this shows only the title of the post and you can click on it to see the post) and pick out the ones that sound interesting and mark all the rest as read.  Google Reader also works really well with Evernote…

Evernote is an amazing program that does what it sets out to do extremely well.  I can clip text, pictures, video, and perhaps more from within any program (as far as I know) and press a few keys and its stored into Evernote forever.  I generally tag each “note” so its easy to find when I really want to, but thats not necessary for a lot of things because the search feature on Evernote is super fast and it even searches through text in a picture (aka optical character recognition).Every piece of information that you want to remember is just a few seconds away.  This is very nice and convenient.

To add to the convenience level of Evernote, it synchronizes over the web easily and automatically.  Therefore, if you use more than one computer regularly, you can use Evernote on both seamlessly.  Perfectly seamlessly.  Its really what most programs should aspire to do.

Evernote works well with Google Reader because, highlighting a post is really easy and always works in Google Reader.  Sometimes a blog will be setup to where its impossible to highlight an entire post.  Evernote will even save pictures and video if you highlight it.  I don’t add video because it will take me over my free transfer limit (if you synchronize below a certain amount of info, Evernote is completely free).

Next up: AutoHotKey

I read this article today on MSN money and I couldn’t help but shake my head at the silliness of it.  There are so many issues with it that its difficult to find a place to start.  I’ll describe generic ideas that will support my assertion that many of the ideas put forth in this article are rubbish and then get into the specific quotes from the article.

First, the general ideas:

1. Beginning of year 2008 stock market was near a peak and so the 2008 yearly numbers are skewed.  People seem to keep looking at their % loss values for 2008.  Yet, they continually ignore that fact that around the beginning of 2008 was near the peak of the market.  Of course everyone’s numbers for 2008 are going to look bad.  But I’ve got news for everyone who says “my retirement assets have been chopped in half!”  Much of that value you claim to have lost was never there in the first place.  It was the result of an over exuberant market that was seriously inflated.  Not only that, but its likely that the market is undervalued right now. (Look at current market P/E compared to historical)
2. Buy low, sell high, right? Right?  So, why are people moving their money out at the low point?  Yes, it could go lower, it could always go lower, but buying now is the best opportunity than its been for about 5 years.
3. Retirees don’t (or at least shouldn’t) pull all their money out at once.  There will still be plenty of time for them to allow their assets to come back in value.  Yes, they will take a hit currently on the value they withdraw, but anybody who’s retired for more than 10 years has taken a significant hit at some point.

“But even when workers make good choices, a market meltdown near the end of their working careers can still blow their savings to smithereens.” — Melodramatic much?  See point 3.

“There’s just no guarantee that when you’re ready to retire you’re going to have the money,” she says. “You either put it in a money market which pays 1%, which isn’t enough to retire, or you expose yourself to huge market risk and you can lose half your retirement in one year.” — Right now its “huge market risk.”  A year ago and likely a year or two from now it will be “huge market upside.”  If you’ve done the research, you know that consistently putting your money in a broad index fund instead of a money market will always beat a money market over the long run.  Always.  The key is to not panic like most people are doing right now and sell after a significant drop.

“That seems like such a fundamental flaw,” says Alicia Munnell, the director of Boston College’s Center for Retirement Research. “It’s so crazy to have a system where people can lose half their assets right before they retire.” — Wow…just wow.  She’s the Director of Retirement Research and she’s spouting this nonsense?  See points 1 and 3.

“Some proposed setting up “universal” retirement accounts, which would cover all workers.  One such plan called for establishing accounts that would receive annual contributions from the federal government and would offer a guaranteed, but relatively low, rate of return. Another proposed automatically investing contributions in an index fund that holds stocks and bonds, with the mix getting more conservative as workers approach retirement.” — Oh please god no.  Both of these options would totally kill 401(k)’s usefulness (the first one moreso).  The government shouldn’t handle our personal investments.

How about the computer programmer that decided losing money in options trading (pretty much everybody does) is better putting money in his 401(k).  Yeah, thats smart.  Most people are guaranteed to lose money in options.  Its a complicated financial instrument that should be left to “experts.”  Go ahead and try your luck at it, but the few people that I know who’ve tried it have had the same experiences as said programmer.  See point 2.

“Over the past year, about one in five workers age 45 or older has stopped contributing to a 401(k), IRA or other retirement account, according to a recent survey commissioned by the AARP, an advocacy group for older people.” — Because of uneducated articles like this one.  See point 2.

“Peg Kelley, a 58-year-old small-business consultant in Watertown, Mass., didn’t contribute anything to her 401(k) last year. Instead, she’s focused on paying down credit-card debt and building an emergency fund in case the bad economic times turn worse. She’s also still paying off an $8,000 loan she took from her 401(k) plan four years ago to buy a new car.” — Ok, so she’s 58, has credit card debt and a 401(k) loan…clearly she’s not someone to be taking financial advice from.  Although, paying off credit card debt is almost always a good decision.  Again, point 2 applies.

“Fund companies raced to roll out target-date products, often stuffing them with their own pricey mutual funds and adding an extra layer of fees on top.” This is true.  You have to look at the fees for each fund within your 401(k).  — Luckily, there are some broad-based index funds in mine that have low fees.  See Vanguard.

“As stocks climbed, some fund companies increased the stock allocations of their target-date funds, setting them up for a steep fall if the market headed south.” — Demonstrating that many “experts” don’t know what they’re doing or aren’t acting in the interests of their clients intentionally.

“Boston College’s retirement research center recently ran scenarios that assumed workers had contributed 6% of pay to a plan for 40 years, had invested in a target-date fund, had never touched their savings until retiring and had annuitized the assets at retirement. The chunk of pre-retirement income these savers could replace in retirement varied dramatically depending on when they retired. Those retiring in 1948 could replace just 19%; those retiring in 1999, 51%; and 2008 retirees, 28%.” — Don’t take people’s statistics at face value.  Of course people retiring in 1999 (near a peak) are going to have a higher % than people retiring in 1948 or 2008 (near a valley).  But, its not like they cash out all that money at once, so if they’re smart, they live frugally or work a little longer (an actual good suggestion from the article).  See point 3 again.

Everyone that decides to invest or save money in any manner should read this book first.  Reading Benjamin Graham will stop anyone from being swayed by anything resembling the ignorance of the aforementioned article. The next best authors are Peter Lynch (read his 3 books in order) and John Bogle.

I need to expand on how to minimize the amount of time it takes someone to get the computer to do the task(s) he or she desires.

First and foremost, to significantly decrease the amount of time it takes for you to interact with your computer, learn quick keys and make a habit of forcing yourself to use them.  If you just read them and then try them once but never use them obviously you’re getting no benefit.  The misleading thing about quick keys is that the first several times you use them, it actually takes longer.  I believe many people stop there and conclude that the mouse is better.  What they’re not aware of is the speed with which one can accomplish the task once the quick key becomes ingrained into the brain the same way pressing the space bar or the letter “b” is for people who can touch type.  You don’t think about the letter “b” and where it is and then press the key.  You know what the next character is and then..it just happens.  This is how quick and easy it can be for you to, for example, open an excel file with information you look at frequently once you put a little effort in up front.  Trust me, its totally worth it.

I would say the best place to start learning great quick keys is to press the Alt key in any application and you’ll see the file menu at the top display quick keys by underlining the letter.  For example, generally Alt + F opens the file menu and there are further keys from there.  In excel, I’m often creating AutoFilters.  Instead of doing it the slow way (clicking Data, then Filter, then AutoFilter), I’ve learned to press Alt + D, then F, then F.  Boom its done in 80% less time and doesn’t require me to take my hands off the keyboard.

The 2nd place to go to is this great post.  Look for actions that you take frequently on the list and pick a few to try to force yourself to do instead of using the mouse.  Only pick a few at a time until you’re satisfied you’ve got them memorized.  Then pick more and repeat again and again.  I don’t know a lot of the previously linked keyboard shortcuts.  However, I know most, if not all, of the ones that are most relevant to my computer usage.  Also, I do have the information in that website plus a little more a few keys away =)  One quick key that I would add that I only recently discovered that has made editing text much easier is control left/right to jump to previous/next word near current cursor position.  I combine that with shift often to quickly select what I want to select.

Executor and Launchy are also great ways to make little tasks like opening a program, file, or folder quick and easy.  I’m currently using Executor.  However, it seems to respond somewhat slow, so I’m going to try Launchy again.  I’ve used it before, but preferred my homebrewed hotkeys with AutoHotKey (discussed later).  I now use Executor every once in a while to grab files or run programs I don’t normally use, so I’ll give Launchy another shot.

More later on AutoHotKey, Google Reader, and Evernote.

Computers become much more powerful everyday.  We get new software that performs tasks we didn’t know were possible.  They become faster and are able to hold more information.  New operating systems, new programming languages, and new interfaces are the norm.  All this and yet I see people’s efficiency using computers not change much.  If anything, many people’s interactions with computers have slowed down.  It takes them longer to boot up, open a program, or find a file.

Our computers are central to many of our lives – especially to engineers like me.  Why are we improving computers on so many different levels, yet when I see others using their computer, it takes them forever to actually do the task they set out to do.  For example, once anyone’s had a computer for more than a few months, the Start Menu begins to become a huge unorganized mess. It takes people forever to get to the program they need.  Also, in order to find a desired file, you’ve usually got to click many times.

The operating systems and software programs themselves are not written for quick efficient use. The biggest problem with most computer operations that they’re too mouse-centric.  The mouse is an flexible tool, but it tends not to be the quickest way to do something.  For example, in order to copy and paste a row of text you can highlight it, right click and then click copy.  Then you can click on the other program you wish to copy to and paste it.  This probably took you 15-25 seconds.  Not bad. Except if you do that thousands of times a year, you can really save yourself a lot of time by learning how to use the keyboard shortcuts.  In order to the same actions as above with the keyboard, you can press shift + up/down, then Control C, then Alt-Tab, then control V.  This can take as little as a few seconds if you’re quick and maybe 7 or 8 seconds if you’re slow.  If you do this action 3000 times in a year, and you save about 15 seconds per action, then that gives you back 12.5 hours of your life just to simply learn 4 keyboard options.  If you know a lot of keyboard shortcuts, you can save many more hours.  Keyboard shortcuts just aren’t emphasized enough and so people don’t really take advantage of them.

Microsoft and Apple really need to lead people into these shortcuts because many of the necessary keyboard actions are there (at least for Microsoft products).  I praise Microsoft for making their programs very keyboard friendly, but there’s still a lot of room to grow.  Most importantly, again, the keyboard shortcuts just aren’t emphasized.  People just don’t know what their missing.  Or, more specifically, how much time and effort they’re wasting.

Yes, we’re making improvements. For example, anything like Launchy or Executor is a step in the right direction.  Even better would be using AutoHotKey.  But, those only get us part of the way there and are not widely used.  Accessing the files, folders, programs, and websites is only part of the battle.  Watching someone browse to a folder deep within a hierarchy tests my patience all the time.  I can see what they’re thinking.  “It only takes 20 – 40 seconds to find it.”  My top 40 most accessed programs, files, folders, and websites take literally 1 second to launch by pressing 3 keys at the same time.  From about 40 to 120 most accessed programs, files, folders, and websites take an aditional 1 second to launch with 3 keys at the same time, briefly followed by a 4th.  It really can be that simple if people are willing to put in a little bit of effort up front.  I emphasize the word “little” because its not hard and doesn’t take a lot of effort because earning the quick way of things can be done in small bits and pieces by learning one thing at a time.

In a later post, I’ll give more details on how to set your computer and skill set up to use a computer in an efficient manner.

The other day I heard on NPR that “Jobless claims jumped to 520,00.”  That’s all they said with regards to the number.  There was no background given before or after.  No information on what the jumped from.  What the historical % changes are during recessions…Nothing.  What a worthless statement when given by itself! I see numbers reported like this all the time.  Not just by news organizations, but also by supposedly scientific studies.

If you are reporting numbers like this, please, for the love of all that is good and mathy, stop.

There are two elements that are required to give meaning to a number.  First and foremost, there must be a relative vector.  What I mean is that we must be given not only the direction of the number, but the % change in that direction.  In order for there to be “relativeness,” there must be a before and after state – ideally with one raw number and % change.  For example(I’m making all the following example numbers up), “The Jobless claims jumped to 520,000 - a 5% increase since the beginning of 2008.”  In order for it to have “vectorness”, it needs to be spelled out in multiple dimensions.  For example, “50% of the new jobless claims are related to the auto industry.”

The second element that must be present is environment.  The environment is the background information that frames the number and puts its relative vector in perspective.  This is the area that we, as willing information receivers, are failed the most.  We need to know what has historically happened during similar periods (recessions).  For example, “During recessions, jobless claims tend to jump 8% before falling again.”  Also, “The auto industry tends to where a large % of the new claims come from.”  Not only that, but we should be told what the new jobless claims situation is like across the world.  Are we losing jobs at a faster or slower rate than other large countries?  For example, “Germany has had a 15% jobless claims jump over the last 9 months.”  The enviroment can be expanded upon from many angles and it is up to the data reporter to find the telling environmental numbers and give it to us.

The following is an example statement of a non-naked number just barely fulfilling requirments to give the number meaning:

Jobless claims jumped to 520,000 – a 5% increase since the beginning of 2008.  50% of the new jobless claims have come from the auto industry and 30% have come from the financial industry.  During recessions, jobless claims tend to jump 8% before falling again and the auto industry tends to be where the biggest loss of jobs comes from.  Germany has experienced a 15% jump in job losses.  Japan 10%.  Switzerland 2%.  And Canada has actually experienced a 4% decline in job losses.

It really must be hard for people to look up and give us that information so the number can have meaning.  Or are we expected to get everything after the original number just by tone of voice?  I don’t know, but its frustrating to continue to hear people state a naked number and then act as if they’ve actually told me something.  “Scientific” studies breach the naked number public contract in a different way, but I’ll leave that for another time.

Most people are familiar with the concept of compound interest.  They can put some value in an investment calculator and see how money can grow incredibly over long periods of time – even with small compounding rates.  The results when one first realizes the staggering growth potential are jaw-dropping. Its easy to see the growth rate of money because it can be calculated directly.  There’s no mistaking the fact that your account value has increased by some percentage.  Compound interest principle applies to many other aspects of life – its just easier to see with money.

Why are we able to grow money in the stock market in the first place?  Simply put, our society progresses and when I invest in the stock market generally, I’m investing in societal progress.  On a more micro scale, when I invest in a single company, I’m investing in the progress (ie growth) of that company.  Also, growth begets growth.  The more our society advances, the easier and faster it advances.  Now, there are occasionally set backs to progress.  As a result, the stock market as a whole does not grow smoothly like we want it to.

Let me be more clear on what progress entails.  Mostly progress comes through scientific, engineering or productivity advancements/improvements.  Curing a major disease, such as polio or cancer is an advancement that furthers the progress of humankind.  Discovering sub atomic particles was a major scientific advancement that lead to the engineering and productivity advancement of computers and the internet.  These are just major advancements, but little, daily advancements can grow exponentially into something major.

For example, computers advance a little at a time, but they’re being advanced hundreds to thousands of times a day when someone comes up with something new that improves some computer activity even a little bit.  With that little improvement, it enables hundreds to millions of people to improve their other (not necessarily computer) activities.  The computer improvement process has grown exponentially.  With occasional blips or bubbles, I strongly believe it will continue to grow exponentially for quite some time.

I believe in human progress on a long-term horizon.  I believe we will continue to make significant advancements as time goes on.  Those enhancments will have an exponential growth affect on our society.  Sometimes we will have brief periods that slow or set back progress, but over the long-term we will continue to grow.  This is why I continue to invest in the markets in general index funds (and specific companies) even when investor confidence is beyond low in our ability to continue growth.

Our level of advancement has been huge over the last 200 years.  I think about where we used to be, what we were capable of, and how much more we understand now and I’m amazed.  I believe the next 50 years will easily blow away those 200 years in terms of how much we grow.  This is why I keep investing in the stock market.

The idea of exponential growth can be applied to more micro environments that aren’t directly related to money.  I spend a lot of time automating tasks at work so they take less to no time at all to do from that point forward.  Its a lot of work up front, but eventually I get significant time savings that allows me to automate another task.  Once I’m done automating the 2nd task I now have even more time to automate another task.  The more tasks I automate, the more time I free up to automate other tasks.  This is exponential progress.

For example, lets say I spend 10 hours a week on 3 different tasks – tasks A, B, and C.  However, I decide to spend 50 hours over the course of several weeks semi-automating task A to where it only takes 1 hour a week to run.  After that is finished I have 9 hours a week freed up for automating task B to the same level.  Then I have 18 extra hours a week freed up to work on automating task C.  The more I work to improve the time it takes to complete a task, the more time I have to improve that and other tasks and, as a result of the more time available, the faster I’m able to improve them.  This is exponential growth in my productivity.

To be clear, my growth doesn’t always grow smoothly.  There are often set backs or time wasted going down a path that fails, but over the long run, I still make progress and the more progress I make, the faster I can progress.

This brings me back around to the stock market.  There will always be bumps in the road and the market will not grow smoothly as many people wish it to, but, barring near apocalyptic events, it will continue grow exponentially over the long-term.  Now, some people think the current bank situation qualifies as apocalyptic, but people are still going to work and buying things.