I agree with the article that the most efficient mechanism to deal with scare resources is via price. I also like the idea of ensuring the poor still have access to a reasonable amount of water: a fixed price baseline low-cost allocation then a per-unit fee for anything above that.

I am not a farmer but the notion of higher water prices shifting growers away from water intensive crops to less water intensive makes sense. Living in the state capitol, I can’t help but think agriculture lobbyists are hard at work keeping the cost of water down so farmers don’t have to make any adjustments (and maximize their profit). Can lobbyists reeducate and retool themselves to become crop and water use optimization consultants? Or, will thy just focus energy on maintaining the inefficient status quo?

http://www.forbes.com/sites/timworstall/2015/04/05/memo-to-california-if-youve-a-shortage-of-something-then-change-the-price/

An interesting quick read. Keep an eye on housing prices…

http://www.unionleader.com/article/20150403/OPINION02/150409734&template=mobileart

In the comments of my previous post I mentioned financial advisors can charge more if their clients are uninformed. Well, this article on Warren Buffet hypocrisy (but profits) echo the same wealth transfer associated with being uninformed:

Customers said in interviews that dealers misled them to take on unaffordable loans, with tactics including broken promises, last-minute changes to loan terms and unexplained fees that inflate loan balances. Such loans are, by definition, predatory.

“They’re going to assume the client is unsophisticated, and they’re right,” said Felix Harris, a housing counselor with the non-profit Knoxville Area Urban League.

Even if you think you are more sophisticated than the clients referenced in the article, please recognize that those trying to extract wealth from you devise increasingly sophisticated schemes. You must be aware. You must be mindful. A friend of mine once said: “proceed as if everyone is trying to f*** you.” That may be a little harsh, but the reality is real estate agents, mortgage brokers, insurance salespeople, financial advisors, car sealsepeole, etc. are all trying to make money off of you, your money, and your family’s land.

Stay sharp my friends…

-Dr. Moore

http://www.publicintegrity.org/2015/04/03/17024/warren-buffetts-mobile-home-empire-preys-poor

I have been preaching this for years: be mindful of mutual fund fees, index funds outperform 70% of actively managed funds, and there is no way to reliably identify the winning 30% in advance. Fortunately, for FIN101 students, you are taught what these “advisors” are doing and how to minimize exploitation. For those who haven’t had the pleasure of taking FIN101, take a look at my “Personal Finance Overview” presentation in the “Seminars” drop-down.

-Dr. Moore
http://www.marketwatch.com/story/conflicted-financial-advice-hurts-ira-investors-2015-04-01?reflink=MW_GoogleNews&google_editors_picks=true

For all the Mather lovers out there, celebrate Pi day tomorrow at 9:26am.

http://abcnews.go.com/Technology/pi-day-circle-calendar-century-day-coming-weekend/story?id=29623233&google_editors_picks=true

While I understand the need to protect your intellectual property, conspiring to restrict people from changing companies is very un-American. Or maybe such practices are standard capitalism since they yield more profits via less pay?

Some question the need for regulation and praise free markets. I agree we don’t need a big government but we don’t need free markets either. “Free markets” enabled Apple and others to conspire and make the labor market less free. How ironic.

Keep your eyes and minds open my friends…

http://www.theregister.co.uk/2015/02/06/whos_the_auto_tycoon_that_makes_apple_employees_swoon_musk/

Three articles over the past week regarding S&P and Moody’s have caught my attention:

1. Justice Department To Probe Moody’s Over Rosy Credit Rating
2. S&P paying $1.4B over crisis-era ratings
3. Standard & Poor’s Settlement Shows Futility Of Fighting Government Policy

All three reflect something I have been saying for years to my finance classes: don’t trust ratings companies, especially when they are paid by the firm receiving the rating.  When discussing bond ratings in class I pose the question: “Did Moody’s acquire KMV to improve the accuracy and timeliness of their ratings or to shut KMV up?”

Lets look at a little history.  Moody’s acquired KMV in 2002 after the Enron scandal.   KMV’s analytics could inform investors of  upcoming implosions (increased default probability).  That was 2002.  Now fast forward to 2008.  KMV is now part of Moody’s.  Where is the warning of the upcoming mortgage implosion?  Buried in the company that assigned misleading ratings to soon-to-implode toxic mortgage backed securities.

The three articles referenced above point out that the chickens have come home to roost.  They also point out that one must do their own research.  KMV’s approach of computing bond default probabilities based on option and stock prices is published in academic textbooks, including my own.  (how’s that for a plug?)

Be mindful my friends.

-Dr. Moore

For those who question why I have yet to adopt “adaptive learning interactive ebooks” or similar “innovations”…

You can’t microwave education. I encourage students to spend time in the library “oven” baking in understanding. Enjoy the cake…

http://mobile.nytimes.com/2015/01/30/opinion/can-students-have-too-much-tech.html?_r=0&referrer=

Today I mentioned in class that you want to buy from places that do not make money and own stock in companies that do. I have been naysaying Amazon for years. They don’t make money. When they do, it is not much. In this article Amazon is cited with expecting to lose money Q1 2015. However, their stock shot up after just a slight glimmer of a profitable quarter. Go figure.

So, buy Apple stock (they make money) and shop at Amazon. For example, the food based multivitamins I like are $34.99 at Whole Foods. The exact same vitamins on Amazon are $19.

Just some food for thought…

http://www.usatoday.com/story/tech/2015/01/29/amazon-earnings/22532327/

Very important reading for students today. If you have a federal student loan you may be eligible for income based repayment capped at 10% (or so) of income and forgiveness after 10 years. If you do not have any federal student loans now, but are planning on some sort of student loans in the future, I recommend you consider the federal route given the information in this article.

http://www.nytimes.com/2015/01/25/upshot/a-quiet-revolution-in-helping-lift-the-burden-of-student-debt.html?abt=0002&abg=0