Too clever by half. It's a cute little commentary, but it's bad advice:
"There are lots of opportunities to do this in every day life. Start with your 401K. You've probably got a lot of company stock in it. This is exactly the wrong approach. Instead, you should buy stocks that do well when your company does badly. If you work at Nutrisystem, buy shares in Krispy Kreme. If you're an automotive engineer, short GM and invest the proceeds in Exxon Mobil securities."
Basically you're suggesting that amateurs play the investing game, buffeted by the confidence that their investments are (in their mind) an appropriate hedge on their salary. This makes perfect sense in fantasy land, where a deterministic, predictable relationship exists between booms and busts in different industries. In the real world, however, it doesn't work that way, and even the savviest financial prognosticators can and do lose big bucks on these bets.
Here's another suggestion: throw your money in an index fund, or put it hands in a professional. You won't be as self-satisfied, but you'll most likely be richer (or at least not broke).
I'll collect weak feelings of encouragement from masses of small investors and bundle them into tranches labelled hubris, megalomania, and Bush-Rumsfeld.
I think the lady who commented over there (on NPR in the first comment), was being a little thick and missing the point. Perhaps Megan's Krispy Kreme example was off the cuff, but the principle is sound.
I don't think Megan is trying to offer up precise hedges to us that create dollar for dollar gains against losses. We have brains and imaginations for that.
She is proposing the idea that you look for hedges that bring whatever sort of gains might offset something you value, and you need not limit that to thinking about car, home, and health insurance.
How well your hedges peform, their size, and how they serve to offset your real or psychological losses is up to you.
Finn writes: "I don't think Megan is trying to offer up precise hedges to us that create dollar for dollar gains against losses. We have brains and imaginations for that."
I understand that it's obviously a lighthearted fluff piece, but I've had coworkers tell me in dead-serious tones that they put a substantial chunk of their portfolios into similar "psychic" securities hedges. I work in software development, and a lot of my colleagues a.) listen to NPR b.) have borderline Asperger syndrome (and consequently aren't too good with picking up the "tone" of an article) and c.) think they're smarter than everyone else (_particularly_ financial advisors!), so perhaps I overestimate Megan's influence, but I can see people taking this advice with more seriousness than with it was given.
A guy I was dating (and crazy about) told me that if he
ever got married, he would marry someone like his former girlfriend, NOT another mathematician. (Which I am).
He said that since he was never getting married anyway, it was a meaningless comment.
I was quite irritated, but "hedged" by betting him $500 that he WOULD in fact get married within 5 years. I did not tell him, but
secretly decided I would not make him pay if he married another
mathematician.
We got married about 18 months later and now it's been 13 great years. (He's a lot smarter than he sounds.)
I'm confused about Mr. Lehrer's Christian Scientist comment though it probably explains why you don't find many CSer's doing stand-up... was the punchline accidentially left out? I'm a CS, and if I had appendicitis I would promptly use Christian Science (no deductable!Top THAT) to get rid of it. So I'm not sure how I should "hedge" but would be quite happy to involve Krispy Cremes...
I did this when gas prices started to go up. I purchased a commodities ETF with about enough money so that when gas prices go up, I earn about the same in the fund as I lose at the pump (and of course vice versa). Its not a 1 to 1 hedge, but it made me feel much better when gas hit $3, then $3.50, the $4. But it doesn't feel as good on the way down, even though I am saving as much as the pump as I am now losing on the hedge.
Is a hving achild with him/her a way of hedging your tremendous psychic committment to your utterly significant other?
I listened to your commentary, and followed the MarketPlace link to your blog here.
I've listened to it twice now and still don't get the point (or at least a practical one).
Glad you had a nice dinner in Chicago.
William, really.
Personally I do this with sports. I can't stand the Kansas Jayhawks. I dreaded the thought of them winning the NCAA championship last year.
Knowing this, I picked them to win my pool (the only one amongst my friends). And I won my pool and $300 because the Jayhawks won it all.
I heard that, and thought "oh, so that's what she sounds like!"
nice hair in that picture
Too clever by half. It's a cute little commentary, but it's bad advice:
"There are lots of opportunities to do this in every day life. Start with your 401K. You've probably got a lot of company stock in it. This is exactly the wrong approach. Instead, you should buy stocks that do well when your company does badly. If you work at Nutrisystem, buy shares in Krispy Kreme. If you're an automotive engineer, short GM and invest the proceeds in Exxon Mobil securities."
Basically you're suggesting that amateurs play the investing game, buffeted by the confidence that their investments are (in their mind) an appropriate hedge on their salary. This makes perfect sense in fantasy land, where a deterministic, predictable relationship exists between booms and busts in different industries. In the real world, however, it doesn't work that way, and even the savviest financial prognosticators can and do lose big bucks on these bets.
Here's another suggestion: throw your money in an index fund, or put it hands in a professional. You won't be as self-satisfied, but you'll most likely be richer (or at least not broke).
I think I'm gonna start a psychic hedge fund.
I'll collect weak feelings of encouragement from masses of small investors and bundle them into tranches labelled hubris, megalomania, and Bush-Rumsfeld.
I think the lady who commented over there (on NPR in the first comment), was being a little thick and missing the point. Perhaps Megan's Krispy Kreme example was off the cuff, but the principle is sound.
I don't think Megan is trying to offer up precise hedges to us that create dollar for dollar gains against losses. We have brains and imaginations for that.
She is proposing the idea that you look for hedges that bring whatever sort of gains might offset something you value, and you need not limit that to thinking about car, home, and health insurance.
How well your hedges peform, their size, and how they serve to offset your real or psychological losses is up to you.
Oh, and the picture... delightful.
Finn writes: "I don't think Megan is trying to offer up precise hedges to us that create dollar for dollar gains against losses. We have brains and imaginations for that."
I understand that it's obviously a lighthearted fluff piece, but I've had coworkers tell me in dead-serious tones that they put a substantial chunk of their portfolios into similar "psychic" securities hedges. I work in software development, and a lot of my colleagues a.) listen to NPR b.) have borderline Asperger syndrome (and consequently aren't too good with picking up the "tone" of an article) and c.) think they're smarter than everyone else (_particularly_ financial advisors!), so perhaps I overestimate Megan's influence, but I can see people taking this advice with more seriousness than with it was given.
A guy I was dating (and crazy about) told me that if he
ever got married, he would marry someone like his former girlfriend, NOT another mathematician. (Which I am).
He said that since he was never getting married anyway, it was a meaningless comment.
I was quite irritated, but "hedged" by betting him $500 that he WOULD in fact get married within 5 years. I did not tell him, but
secretly decided I would not make him pay if he married another
mathematician.
We got married about 18 months later and now it's been 13 great years. (He's a lot smarter than he sounds.)
I'm confused about Mr. Lehrer's Christian Scientist comment though it probably explains why you don't find many CSer's doing stand-up... was the punchline accidentially left out? I'm a CS, and if I had appendicitis I would promptly use Christian Science (no deductable!Top THAT) to get rid of it. So I'm not sure how I should "hedge" but would be quite happy to involve Krispy Cremes...
You're sure you wouldn't be tempted to have an appendectomy? Just a little one? You could feel guilty about it afterwards.
I did this when gas prices started to go up. I purchased a commodities ETF with about enough money so that when gas prices go up, I earn about the same in the fund as I lose at the pump (and of course vice versa). Its not a 1 to 1 hedge, but it made me feel much better when gas hit $3, then $3.50, the $4. But it doesn't feel as good on the way down, even though I am saving as much as the pump as I am now losing on the hedge.