Link Fest – October 4, 2007

I haven’t blogged in a while but over the past week I collected a few interesting links I present them to you now in my first “Link Fest” post. Enjoy!

  1. The Worst Recession in 25 years? – A guy named Robert P. Murphy talks about the Fed’s recent rate cut and how it will not only “pave the way for much higher price inflation than Americans have seen in decades, but it will also exacerbate what could be the worst recession in twenty-five years.”
  2. Vancouver’s big squeeze: Unreal estate – This article in the National Post profiles the Vancouver real estate market and its absurdly overpriced it is. Apparently a “psychologist in private practice” with income well above the norm cannot even afford a home.
  3. Dodge warns of inflated housing market – Bank of Canada Governor David Dodge is raising a red flag about housing prices in Canada, saying that increasingly loose lending rules may be helping overheat the country’s real estate market.
  4. Cake Financial – An interesting new website that (by the sounds of it) will calculate your portfolio’s performance based on the transactions you make through your broker. It does so by connecting to you broker’s website. That’s right, no more manually entering transactions manually into some piece of software. Unfortunately I am at E*Trade.ca and it looks like it only works with E*Trade.com. I am not surprised as I literally had to enter a fake zip code just to get into the site.
  5. Give a cheer for these index-beating mutual funds – Or… not. Instead give a cheer for random chance and probabilities. Rob Carrick fails to mention that 1) the performance of these top achievers is most likely due to random chance (just like if 1000 people flip a coin 25 times there is a high probability that at least one person will flip heads 20 times in a row). 2) Survivorship bias means that of all the funds that have lasted 15 years, the ones that actually last that long are quite likely to have beaten the index because the ones that didn’t were killed off. Returning to the coin-flipping example, if you also tell any coin-flipper that flips 5 tails in a row to quit flipping, by the end, the field will be smaller and thus the 20-head flipper will appear to be all the more impressive. As Rob Carrick said himself in his article, “just because a fund beat the index over the past decade and a half doesn’t mean investors can count on it to do so in the future. Again, too true.” So why write the article in the first place? Why celebrate past performance? Still not sure.

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