Stranger Than Fiction

"It is strange - but true; for truth is always strange
Stranger than fiction; if it could be told"

- Lord Byron, Don Juan

I was browsing the children's section of my local Barnes and Noble yesterday when I noticed a young girl walking up and down the aisles, pulling books here and there from the shelves and putting them into a large basket. She looked like she was about nine or ten years old, so it seemed a little bit odd for her to be organizing the shelves, but I figured perhaps her parents worked there and she was assisting them.

After selecting a children's storybook to be used as a gift, I headed over to the personal finance and investing section and lamented the many, many books giving out very dubious advice. At last it was time for me to leave and I headed to the checkout counter. Directly in front of me in line was the shelving girl with her basket, and standing next to her was her mother and her two siblings, one older and one younger. Each child had a basket with about 25 or 30 books in it. I was confused at first, but then all of a sudden it came to me: They are going to buy all those books!

As you can imagine, there was quite a wait as the clerk rang up about 80 books. And interesting enough, no one in the family acted like the purchase was in any way unusual, so I can only assume that such shopping binges are common for them. When it was finally my turn, I remarked to the clerk that the previous customer sure bought a LOT of books, and she replied under her breath, "Yes, more than seven hundred dollars!"

Now I think it is great that they like books, but is it really necessary to spend $700 on children's books each time you go to the bookstore? This is insane. We have a very fine public library system where nearly all of those books could have been borrowed at no cost for up to 12 weeks at a time. Alternatively, there were many comfortable sofas and chairs in the store - the family could have simply read the books at the store. It wasn't even clear that the girl had given much thought to her selections, as she had been picking up books left and right and just glancing at them for a few seconds before putting them in the basket. (That's why I assumed she was pulling out books that were out of order on the shelves!)

Maybe this family is obscenely wealthy and costs simply do not matter to them at all. Fair enough. Still, it might not be a bad idea to teach the kids a little self-control as they are growing up.

1987 Ford R.I.P.

"A hundred years from now it will not matter what my bank account was, the sort of house I lived in, or the kind of car I drove. But the world may be different because I was important in the life of a child."

- Dr. Forest E. Witcraft, Within My Power

I junked my commuting car recently. I bought the car for $3,250 when it was already 10 years old, and I drove it for 10 more years. That one car saved me a lot of money for a long time.

My co-workers thought I was crazy for driving a "bomb". My relatives said I should have sold it long ago to a poor, starving college student. And considering the status of the paint job at the very end, I'm sure the neighbors were quite happy to see it go as well. My children, however, cried and cried as the tow truck drove away.

Small children are not so impressed by gloss and style and status. They saw only only thing: fun memories of traveling and being together in that car. Many people spend their whole life never really understanding things that are obvious to preschool children...

TIPS Rates Rising Fast

"By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens."

- John Maynard Keynes

I am going to buy TIPS at these levels. (TIPS = Treasury Inflation Protected Securities) My general rule of thumb is that when TIPS real rates are over 2.5%, they are of interest to me. (Pun intended.) TIPS have not been above 2.5% on a sustained basis for a long time, but they've really smashed through that level in the last several days and are now sitting at about 2.7%.

The historical record over the last century is that over time Treasury bills return less than 1% over inflation, and even long term Treasury bonds return less than 3% over inflation. (In some studies, long term Treasury bonds return closer to 2% over inflation.) Thus, a rate of 2.7% plus inflation seems quite good to me.

Many investors and academics consider TIPS to be a separate asset class. I concur with this view, although not merely based upon the empirical fact that TIPS have low correlation with many other asset classes. I believe you can decompose TIPS into two parts: a standard coupon bond plus what is essentially a forward contract on the consumer price index (CPI). One doesn't often find a security directly linked to a macroeconomic number like the CPI, so I agree that TIPS are a different animal than other assets.

You can find general quotes for TIPS rates here: http://www.bloomberg.com/markets/rates/index.html