Mike: ‘Much as I love mindless pop drivel, it seems unfair for Sheryl Crow to receive credit for a clever quote originally written by Rabbi Hyman Judah Schachtel. Click here. The relevant part is in the next-to-last paragraph: ‘The often quoted thought, ‘Happiness is not having what you want, but wanting what you have,’ was originally written in his book, The Real Enjoyment Of Living (1954).’ Now, if you can’t make a joke out of copyright infringement, a fortune cookie, a pop singer, and a rabbi, I don’t know what to tell you. Perhaps it should start with them all walking into a bar.’
LITTLE BOOK – NOT EVERYONE DID 30%
Jonathan Kaplan: ‘Since investing with the Magic Formula starting late February, 2006, my returns are only 4.25% to date (S&P 500 is about 13% over that period). I bought 12 stocks at quarterly intervals of four each. In selecting from the many stocks on Greenblatt’s website, I picked the ones that schwab.com also thought had a prayer. So maybe Schwab is to blame and random selection would improve my returns. A glutton for punishment, I plan to buy four more.’
☞ Over time, I think you’re likely (though not guaranteed!) to do better than the S&P following this system. Note also, of course, that your money was invested, on average, for less than half the year. So 4.25% isn’t quite as paltry as it sounds.
Ted Graham: ‘I cashed in some Vanguard Index funds in an IRA to try out Magic Formula Investing. On Jan 26, 2006, there was $123k in the account in cash. I bought six MFI stocks (DLX, EGY, HRB, JAKK, NOOF, OVTI). Dividends have been swept to a money market account. As of today, the account is worth $127k, which is well under the ~10% the Russell 2000 and the S&P have gone up. However, my two other MFI groups of stocks are up nicely: 18.48% annualized for the April 06 group and 66% annualized for the September 06 group.’
Professor Dana D. Dlott: ‘As a chemist and a materials scientist, I can tell you the price of diamonds is a joke. This is one of the biggest swindles existing. Diamonds are no longer scarce, the vaults are full of them. Also synthetic diamonds now exist that are more perfect than natural diamonds. The jewelers have some kind of hocus pocus script to tell you how synthetic diamonds are no good because they are ‘too perfect’ or don’t have the flaws of the natural diamonds. If you are willing to spend months of salary in order to get extra flaws you are a fool. I have a friend who makes 10 carat diamonds in his lab. By the end of the decade he is going to be making 100 carat diamonds. Your diamonds are going to be worth nothing unless somehow everybody keeps sticking to the ‘I have to have the flaws’ story. Eventually they will have to come to their senses. In your article you focused on the diamond’s hardness, but it is also the light refraction that makes diamonds special. Quartz and cubic zirconia don’t have this. Two options are moissanite, which is a synthetic silicon carbide. It is about as hard as diamond but it has more light refraction which makes it more brilliant. There are also a variety of cheap synthetic diamonds.’
WHICH DISEASE GETS HOW MUCH MONEY
Eric Batson (MD, PhD): ‘Actually [with respect to AIDS research versus cancer and heart disease], in public health the costs of doing two different interventions are often compared by looking at how many QALYs society can buy with the intervention. A QALY is a Quality Adjusted Life Year. This lets us compare things on two bases. First, the obvious one of just how long is someone expected to live. Curing an acutely ill 20 year old who would otherwise die buys 50+ years of life. Keeping an 80 year old alive after their third heart attack so they can have a fourth, and this time fatal, heart attack in six months, buys one-one hundredth as much lifetime. The Quality Adjustment looks at how disabled the person is. If the 80 year old will be partially disabled because their heart is now very close to ultimate failure (they can’t walk up and down stairs, etc.) then those 6 months may be discounted to 3 months. So, if I can keep a 25 year old with AIDS alive, apparently indefinitely, at a fully functional state, including full employment (paying taxes, etc), I have a way to compare that outcome to a cancer treatment that gives a 75 year old an additional 6 months. The calculation of how much to discount various disabilities can be done many ways, for example by external standards used to calculate disability for workman’s comp or by patient’s own relative valuations of competing scenarios (would you rather be pain free with no doctor’s visits and live six months or live a year with chronic pain and seeing the doctor every week?). This does not mean any individual life is less valuable, but when choices have to be made on how finite resources will be spent, we have an ethical obligation to make those choices wisely. A long way to say that just because it is listed on more death certificates doesn’t mean a disease should get more research funds than another disease.’
Quote of the Day
That I'm their competition.~Famed hedge fund manager Michael Steinhardt, when asked the most important thing an investor could learn from him.
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