Inaccurate Knowledge Is Worse Than No Knowledge

I hate bad nonfiction books—by bad, I don’t specifically mean boring (though I’m not fond of boring books, either), but books that contain major inaccuracies. I also hate it when people condescend to women, especially when it comes to finance. Unfortunately, I encountered both inaccuracies and condescension in a book I read recently. I had to trash it on Goodreads, but I’m sure there are many of you out there who don’t follow my Goodreads review. (I don’t follow most of the blogger I read on Goodreads, so I certainly don’t blame you!) Therefore, I just had to post this review on here in all its ranty glory. Enjoy!

The Financial Diet: A Total Beginner's Guide to Getting Good with MoneyThe Financial Diet: A Total Beginner’s Guide to Getting Good with Money by Chelsea Fagan
My rating: 1 of 5 stars

If this book were simply useless to me, I could have given it two stars. I know it’s marketed towards young women who don’t know much about money. And that’s fine, because there are people who don’t know much and everyone’s got to start somewhere. I get that.

What made me give this book one star (i.e. the lowest rating allowed—I’d give it negative stars if I could!) was how some of the information was just plain wrong. Like criminally wrong. So wrong that if you followed it, other poor fellow unfortunate readers, you’d find yourself in deep trouble.

The first major error I’m going to talk about comes in chapter 5. Do not, do not, DO NOT ever buy a house with a down payment of less than 20%. One of the so-called “experts” “interviewed” (I use both those terms, experts and interviewed, loosely) says you can put 3.5% down for your house. NO. Do not ever do that. PMI (private mortgage insurance) will eat you alive. Your finances will be so messed up it isn’t even funny. I will note that other reviewers pointed this out, too, so it makes me feel a bit better that this mistake did not go unnoticed.

The next, and in some ways more egregious error (because you probably start investing before buying a house) occurs in chapter 2, the chapter about investing. This quote is so misguided that it’s obvious the author, Chelsea Fagan, has zero idea what she’s talking about:

Explore other low-risk investment options, such as mutual funds and index funds.

Continue reading “Inaccurate Knowledge Is Worse Than No Knowledge”

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Review: Petrostate: Putin, Power, and the New Russia

Petrostate: Putin, Power, and the New Russia
Petrostate: Putin, Power, and the New Russia by Marshall I. Goldman
My rating: 4 of 5 stars

Overall, this was a REALLY good book. I appreciated how fair and balanced it was towards Russia. Usually, books written by Westerners are so anti-Russian that they ignore facts. (See: Edward Lucas’ work and Masha Gessen’s work, among others.) This book was overall very fair and balanced.

In particular, I wish I could force every Russia-watcher to read Chapter 5, titled “Putin Takes Over: The Return of the Czar.” Specifically, the section starting at “The Attack on Yukos” is very, very informative and important. This section makes some important points, namely: 1) Pretty much everyone who got rich in Russia in the 1990s did so illegally, so in this sense Putin’s prosecution of Yukos head Mikhail Khodorkovsky was unfair, and 2) Khodorkovsky certainly was not the angel he’s been portrayed as in Western literature. He stole people’s money in the 1990s when his Menatep Bank folded (I’ve had Russia watchers tell me this never happened, but it did. The author of this book, who is definitely not pro-Putin, agrees with me and cites actual sources.) He was probably involved in some contract killings—if not directly, then by turning a blind eye to his subordinates who perpetrated them.

The author also dis-spells the myth that Khodorkovsky wanted to reform Russian business and make it transparent and “normal,” for lack of a better term, as it is in the United States. Westerners think this means he was a good businessman, crusading against corruption. Not so, according to the author. Instead, he says Khodorkovsky embraced rule of law so that no one could do to his business empire what he did to acquire it (i.e. steal it). For reference, this passage is at location 2136 in my Kindle edition of the book. I don’t have actual page numbers, unfortunately. In a somewhat delicious irony, this didn’t help, and Khodorkovsky was arrested and his business broken up and sold.

Anyway, that’s just one example of many from this book that’s so fascinating. The author really does a good job of keeping balanced. To continue the Yukos example, he criticizes the Russian government for jailing Yukos lawyer Svetlana Bakhmina, which I don’t fully agree with either.

The only criticism I could mount is the author’s position about the 1999 apartment bombings that let to a re-ignition of the Chechen War. He gives more credence to the theory that the FSB planted the bombs in order to blame them on the Chechens than is warranted. I am familiar with the theory and think it’s completely wrong. I suppose the author and I would have to agree to disagree on this. It is because of this that I downgraded the book by one star—otherwise, I probably would have given it five stars.

View all my reviews

Bank of Finland’s Russia Forecast

I’m subscribed to a newsletter put out by the Bank of Finland’s Institute for Economies in Transition. Don’t ask how I found it, because I can’t remember, but it’s the perfect thing for someone interested in Russia and economics. (My philosophy in life is if it relates to Russia, it’s probably at least somewhat interesting.) You can sign up for the newsletter here. And never fear, it’s all in English. If you sign up, you’ll get a weekly report with economic analysis on Russia and China. I’m not that interested in China, so I usually just read the Russia stuff. 🙂

Anyway, the annual forecast (this is different from the weekly report I get) just was mailed out last week. It was so interesting, so I thought I’d provide a link so you can read it. Basically, Russia’s economy is due to contract because of lower oil prices. No surprises there, but the analysis has some interesting nitty-gritty stuff about imports and exports, etc.

An Open Letter To An MBA Program Reject

This afternoon, while browsing the internet, I came across a person who has been blogging about his experiences applying to top MBA programs this year. He didn’t get into a single one. Granted, they were extremely selective schools, but I feel really bad for him. Not only is it disappointing not to get something you’ve wanted for a long time, but he shared this disappointment with the world. That takes courage, so I thought I’d offer some advice that will hopefully be helpful.

Dear Grant [the blog is called Grant Me Admission, so I’m going to do what another website did and shorten it to Grant],

You don’t know me, and I don’t know you, so it might be a bit strange that I’m writing this. I saw your latest blog post today and wanted to offer you some advice that popped into my brain after an admittedly cursory glance at your website.

First off, I think it’s great you applied to such a high-ranked cohort of schools. Seriously, grad school applications are not easy—I know this from personal experience—so good for you for actually sending in five of them. You also chose very high-ranked schools, which I do think is the right thing to do if one is applying for an MBA in this day and age.
Continue reading “An Open Letter To An MBA Program Reject”

Young People Don’t Save (No Surprises There)

Warning: rant against financial stupidity ahead!

Apparently it’s news that young people aren’t saving their money. In fact, they have a savings rate of negative 2%, which means they’re using up their assets and/or going into debt.

Now, as a young person who spends my days with other young people, this doesn’t surprise me in the slightest. Listen to what one of the foolish young women mentioned in the article spends her money on:

“I’ve been saving almost exclusively in my mind,” said 26-year-old Emily Turner, a 2010 graduate of Villanova University who lives in southern Maryland. Most of her paycheck from the digital consulting and web-design firm she works for “doesn’t even make it to a conventional bank account. I’ve certainly not had the opportunity to invest in stocks or anything.”

The money mostly went to her social life and travel, she says: a trip to Central America, a wedding in Southern California, a bachelorette party in Austin, Texas, trips to Atlanta and Charlotte, N.C., to see friends, another bachelorette party in Austin.

Here’s a tip, sweetheart: the trips are unnecessary. There are few things in life that are as useless and stupid as a bachelorette party. (Especially the destination ones where the foolish bride and her friends drop a fortune on plane tickets, hotels, and various assorted crap.) The wedding may have been unnecessary: unless it was for a best friend, there’s no shame in gracefully declining the invitation and sending a nice gift in the mail. (Gifts can be expensive but not as much as plane tickets and hotels!) And I’m all about going to see friends who don’t live close to you—but if it cuts into your ability to actually save money and even puts you in debt, then I say stick to Skype for now.

“But Natasha,” you say, “you’re no fun at all! You sound like some bad-tempered old person railing against the young generation.” Well, yes, I guess I am railing a bit. I’m not old though, nor bad-tempered (and let me say that I don’t think older people are, as a rule, bad-tempered, just to be clear). I’m just all about fiscal responsibility. Let us examine what Ms. Turner’s financial situation is, as described at the end of the article.

For Ms. Turner, debts include $5,000 in student loans, $3,000 on credit cards and $6,000 borrowed from family. “There’s no formal note for that, but it resides in my psyche that I will pay it back at some point,” she said.

“I know I shouldn’t have accepted credit so freely,” she said. “But part of youth, the wiring of a young person, is the focus on really short-term gratification.”

Compared to what some people owe, $5,000 in student loans isn’t bad. But $3,000 in credit card debt? Are you joking? I can’t even imagine. Does she not know how high those interest rates are? Does she not know how to calculate the incredibly large amount of interest she’ll pay? If she doesn’t, someone at would be more than willing to show her the calculation, I’m sure.

Let me just put it this way: if you have $3,000 in credit card debt, you should not be traveling until you’ve paid it off. It’s as simple as that.

And people wonder why the country is in such a crappy situation politically. Though the answer to that is complex, part of it is because people like Ms. Turner, who possess absolutely no common sense whatsoever, are voting in our elections. Apparently the lack of common sense extends to politics.

Seriously, if you don’t know how to save money, I am going to give you my main tip for doing so. Keep in mind that I can save money like nobody’s business. Are you ready? Here is the single most important thing you can do to keep more of your paycheck in your bank account:

Stop spending money on alcohol.

I observe what my coworkers and friends spend their money on and that is the single biggest drain on their finances. Alcohol is really expensive. And buying it adds up really, really quickly, especially when you go out for drinks three or four nights every single week. (Don’t believe me? Read this blog entry in which a young woman keeps track of what she spends her money on for a week. Yes, I know she lives in New York, but the amount spent on alcoholic drinks is just insane. Food is a close second, though.)

Of course, people are free to spend their money on what they want. If you love going out on the weekends, by all means do so. But don’t go around whining when your bank account has no money in it, you’re up to your ears in credit card debt, the debt collection agencies are harassing you at all hours of the day, and you just got denied at that new apartment complex you want to live in because your credit score is in the toilet.

Running A Bank Is Hard Work

I’ve survived another week at work, people. This one was particularly grueling: we started pretty early and worked really hard. We’ve been learning about how banks are run and have even done a bit of “running” banks ourselves in groups. Obviously these aren’t real banks—it’s a project in which we can change various aspects of management at a hypothetical bank, then a computer program does calculations and based on economic changes, we are able to see how the bank is performing.

I never thought running a bank was easy, but I don’t think I realized prior to this week exactly how difficult it was. There’s just so much to think about. Thank goodness I won’t be appointed to the management team anytime soon…

The Eurasian Union

On May 29, the presidents of Russia, Belarus, and Kazakhstan finally signed an agreement to create the Eurasian Union (the proper name is the Eurasian Economic Union), a massive conglomerate of post-Soviet countries. There may be only three members right now, but there are other countries that plan on joining.

Predictably, the Western media has savaged the Union already, even though it’s too early to tell if it’s a bad idea or not. From the article I linked to above:

“Three weak economies getting together and integrating: How much good can come out of it?” said Nargis Kassenova, the director of the Central Asian Studies Center at Kimep University in Almaty, who is part of a small but vocal opposition to the union in Kazakhstan. “Now, it is even worse because one is under sanctions and drifting away from the West,” Ms. Kassenova added, referring to Western economic sanctions against Russia.

Although the presidents of Armenia and Kyrgyzstan attended the signing ceremony and expressed an interest in joining, the missing guest at the party was Ukraine. That country’s previous government in Kiev tacked back and forth on whether it would join the European Union or the new Eurasian group, eventually choosing Mr. Putin’s offer and igniting a public uprising that ended up bringing down the president in February.

Bloomberg Businessweek also joined in the bashing:

Alas for Putin, the new bloc comes nowhere near the big leagues. Even after Armenia and Kyrgyzstan enter, its total gross domestic product—about $2.6 trillion—will be less than one-fifth that of the European Union or the U.S. and less than one-third of China’s. Russia will account for more than 80 percent of the bloc’s GDP and a similar share of its roughly 178 million population. Creation of the union “won’t really register on the radar of the global economy,” says Nicu Popescu, an analyst at the EU’s Institute for Security Studies in Paris.

Personally, I think those EU analysts should worry more about the dismal state of the European Union than another economic union, but I digress.

I want to share this map from Business Insider (yes, I know it’s old, but I’ve kept forgetting to blog about it). It shows the sheer size of the Eurasian Union:

Click on map to see larger.
Click on map to see larger.

The three countries that signed the agreement are in red. Prospective members are in pink (Armenia, Tajikistan, and Kyrgyzstan). Dark blue and light blue are current and prospective European Union members, respectively. Green are countries that could be either in the the European Union or the Eurasian Union: Ukraine and Georgia.

Considering that the proposed Eurasian Union has territory incredibly rich in natural resources, I do not think we should discount it as a formidable power.

Latin America on the Rise?

Recently I told my mom that I think Latin American countries have great potential and could possibly play a very influential role in the twenty-first century. She didn’t see this happening and admittedly I didn’t have much evidence to support my idea.

Apparently, I’m not the only one with this idea: The Atlantic has an article called “The Most Important Alliance You’ve Never Heard Of” in which the author explores such an idea. It’s a long article, but an interesting read. I’m not a Latin American specialist, so I don’t know as much about the region as I’d like, but am eager to learn more.

Rebel

I’m being such a rebel today, everyone. I skipped my economics class. I’m not overly fond of this class right now. Not only have I not learned anything new so far (in the second half of the semester; the class is split into two parts and I learned a lot in the first half), but it is scheduled very late. The professor was sick for the last session, so a “double session” was scheduled for tonight.

I didn’t want to deal with a double session, so I skipped. If I had gone, I wouldn’t have learned anything new (I can do supply and demand in my sleep) and I would not have come home until 9:30 or so. I didn’t sign on to have a night class, plus I have an interview coming up tomorrow.

I actually got a lot done this afternoon. It was nice.

Some Frightening Economics Graphs

Since I have taken an economics class and actually understand some economics now, I’ve been reading economics-related stuff in order to learn more. I found this fabulous report on emerging markets from State Street Global Advisors – you can access it in PDF format here (I clicked on an ad in the sidebar of The Economist – who knew those ads could actually yield useful information?).

I haven’t read the entire thing yet, but I found some truly frightening charts. First, here’s how the monetary base of the US, UK, Japan, and Europe (i.e. the euro zone) has changed from January 1999 to April 2012:

Click to see larger
Click to see larger

That is just scary (aside from the UK statistic). The monetary base is the sum of currency in the hands of the public and commercial banks’ deposits held in the central bank’s reserves. Basically, you don’t want to have too much currency in circulation, or else inflation will occur. (And for those who don’t know or don’t remember their history, rampant inflation can easily wipe out your entire life savings. It happened in Germany after World War I and it happened in Russia in the late 1990s. Neither experience was pleasant for the people living in those countries.)

The next chart was interesting because I hadn’t known this fact before (regarding the prior chart above, I was aware that the monetary base had increased, but had not seen it in chart form before).

Click to see larger
Click to see larger

That chart shows the government budget deficit as a percentage of GDP. Brazil, of course, has the lowest value (it has a surplus – go Brazil), followed Russia, China, and Germany. Notice how high the United States is – a whopping ten percent. I don’t like high budget deficits because, the way I see it, someone has to pay that off at some time in the future. That someone will be citizens of those respective governments’ countries, in the form of insanely high taxes.

So, there are the two most interesting charts I’ve seen in that report. I’ll post more later if I find other ones that strike me as important.