The Fundamental Problem With Financial Models

I know you're in a real estate mood now that the election is done with... so let's talk about it more, if only tangentially. Hey DQYDJ readers, remember that whole real estate bubble popping thing which started a few years ago?  Now, there is plenty of blame for that little incident to go around, but one of the largest issues with the bubble and … [Read more...]

When Stupid Ideas Go Mainstream: Algebra on the Chopping Block

When you own a website, sometimes you need to type out an article and complain culture.  Usually, this coincides with hitting a certain age and believing "that wasn't the case when I was a kid".  I don't have any excuse like that; my cynicism is a reaction to a perfect storm of articles over the last few months which, far from moving the Overton … [Read more...]

Are Incomes in the United States Becoming More Unequal?

Today we're going to delve into Income Equality, a topic which has been fresh in the American collective consciousness ever since the Great Recession ended. Gini Index If you click the above image, you'll see a graph from the St. Louis Fed (Census Bureau Data) showing a measure known as the 'Gini Index' headed up and to the right.  A Gini … [Read more...]

Optimizing Bet Sizes with the Kelly Criterion

Remember a few weeks back when we discussed stock market investing using the Kelly Criterion to determine asset allocations? Today we're going to go in a different direction and use Kelly for what it was intended - betting! The Kelly Criterion is a formula you can use to determine the proper size of a bet when there are known odds and a … [Read more...]

S&P 500 Return Calculator

Ed: Fixed a bug with some October data (Shiller's sheet has October as '1' instead of '10', and January as '01').  Please retry - thanks for those who emailed. Below is a calculator with a benefit not seen on any other calculators I've seen online - one which includes dividend reinvestment.  It uses data from Robert Shiller, available here.  For … [Read more...]

Is It Possible to Beat The Stock Market?

You recently completed a very verbose series here at DQYDJ on investor psychology, the failure of the Efficient Market Hypothesis, and how to improve on buy and hold.  If you survived all of that, you're probably wondering: "hey PK!  You mentioned in the EMH article that you trade stocks on valuation.  How do you know that you're doing the right … [Read more...]

Would You Lie to Your Partner About Money?

Let me start by telling you ('you' might mean my readership, or 'you' might mean Mrs. DQYDJ!) that if I did I certainly wouldn't write an article about it! Still, I enjoy living on the edge.  This is an interesting question - is it ever okay to lie to your partner about finances?  We've all heard that "money is the leading cause of divorce".  … [Read more...]

How Did Mitt Romney Get a $20.7 Million IRA?

You've got an IRA, right?  This site has been preaching the tax benefits of both traditional and Roth IRAs since the beginning... and we aren't going to stop now.  So hopefully you've been diligently saving in your IRA, with the hope that some day you'll have a couple million dollars in there (or at least a good amount of funds you can tap in … [Read more...]

Uncle Sam the CEO: Visualization of IRS Revenues Collected 1960-2010

"If you drive a car, i'll tax the street. If you try to sit, i'll tax your seat. If you get too cold, i'll tax the heat. If you try to walk, i'll tax your feet." - Stevie Ray Vaughan in Taxman (Ed note: I may like the SRV version better, but, as Jeff points out, George Harrison wrote this song. Go find the Beatles' version if you're … [Read more...]

Are College Graduates Better Off Today Than in the Past?

Time may only move in one direction - but just like a faster than light neutrino, let's ignore physics for a bit!  Inspired by this comment from an anonymous author, we will take you to the years 1976 and 1989 and look at life through the eyes of a recent college graduate. Methodology For our income data we visited our trusty stalwart of a data … [Read more...]