asshole freepers on jill carroll

Speaking of assholes, the commenters here make me concerned about the future of civilization — not to mention the American educational system that presumably prepared them for such an adulthood of callous ignorance.
Since I am a journalist, I’d like to point out I don’t think the commenters are assholes because of their political point of view. They’re just stupid, heartless assholes.

sma equals ripoff

I continue to be amazed — although by this point I shouldn’t be — by the innovative methods the brokerage industry comes up with to take money from investors.
Today’s DMN features a Pam Yip story on separately managed accounts (SMAs), the latest financial vehicle brokerages are pushing. It’s generally for those with $100,000 or more to invest.
Starting an SMA means hiring someone from a brokerage firm to take the investor’s money and run it as if it were a little one-person mutual fund. The investors gets to set certain guidelines on how the money will be invested — say, “I want to be aggressive” or “I want a lot of international exposure” or “I don’t want to invest in icky tobacco companies.” But beyond that, the investor essentially cedes control of his money to the manager, who invests it as he sees fit to maximize return.
The major selling points: Managers can personalize the investments based on the investor’s goals. They can also give personal attention to investors and tailor transactions to investors’ tax needs.
What a load of bullshit.
In the story, Pam points out the major reason brokerages are pushing SMAs: It’s a response to their shrinking market share in money management. An increasing number of people have realized that brokerages are, at their core, a scam designed to maximize returns to the money managers at the expense of the actual investor. As a result, more people have been hiring fee-based financial advisors — the ones who charge a flat fee for advice instead of taking a cut of all your assets — and firing brokerages who have 1,000 different incentives to give investors bad advice.
But SMAs don’t fix any of the problems with brokerages. In some ways, they make the worse.
– First of all, they’re hella expensive. Fees for SMAs average 2 to 3 percent a year. In other words, if you have $100,000 to invest, you’re paying your broker, say $2,500 a year to manage it. That’s outrageous. Even mutual funds on the expensive end should never cost more than 2 percent, and you shouldn’t be on the expensive end. You can buy a very good index fund that buys the entire domestic stock market for a cost ratio of 0.09%. In other words, your investing costs can be cut from $2,500 a year to $90 and your money will be invested with lower risk and, most likely, produce higher returns.
And if your SMA manager chooses to buy any mutual funds with your money — and with only $100,000 invested, he almost certainly should to reduce risk — those mutual funds’ expenses are on top of the SMA’s. And I doubt he’ll be buying cheap index funds, since that would illustrate how unnecessary he is to the operation. He’ll be buying expensive crap, bringing your expense ratio up to an unconscionable 4-5%.
Maybe 4-5% doesn’t seem like a lot. But if your $100,000 is invested for 30 years at an annual return of 6%, it’ll become $574,000. At 10%, it becomes $1.7 million. The expenses brokerages add to your costs are a major, major drag on returns.
– You’re highly unlikely to get market-beating returns. Research going back decades show active managing of stock funds reduces performance, not increases. Index funds that just buy the entire market beat an average of between 70% and 80% of all stock funds each year. In other words, the “smart guys” you hire to invest your money, on average, take your money and lower your returns. It’s efficient market theory at work, Econ 101.
And while it is certainly possible for a given stock fund to beat the market in any given year, over the long term, indexes win. In the 1990s, despite a slew of funds throwing money at tech stocks (and we’re talking before the crash in 2000), the S&P 500 index beat 90% of all domestic managed funds, often by wide margins. As the great Burton Malkiel has written, if you’d put $10,000 in an average domestic managed fund in 1969, 30 years later, it would have turned into $171,950. But if you’d just bought an S&P 500 index fund — just bought the entire market and leave the stock picking to the fools — you’d have had $311,000.
And let’s assume for a moment that a brokerage really does have a money manager who can consistently beat the market — an extremely rare creature like Bill Miller at Legg Mason. Do you really think they’re going to be pulling the strings for some schlub’s $100,000 SMA? No, he’s going to be put on the biggest mutual fund the firm offers, like the $12 billion fund Miller runs. SMAs are going to be run by either the low fish on the food chain or as a part-time, no-attention job for more experienced types — which would put the lie to the “personalization” SMAs are supposed to be good for.
SMAs try to get around this underperformance by reporting their returns without taking into account expenses. That’s atrocious and unethical. To cite the example Pam does in her story, large-cap growth SMAs reported 13.7% returns through Q3 2005, versus 13.4% for mutual funds in the same sector. Sounds nice, doesn’t? Well, that 13.7% doesn’t include the 2-3% shaved off the top for the brokerage’s pockets. So what looks like overperformance is actually underperformance.
That’s fundamentally dishonest, and a symbol of the rank dishonesty that fills the whole business. The excuse an SMA-industry rep gives in Pam’s story — that some brokerage firms don’t know math well enough to be able to figure out real returns with expenses! — is the biggest load of crap I’ve heard in weeks.
– SMAs give brokerages incentives to be evil. If they’re given a free hand to do whatever they want with your money, that means they have a free hand to buy a bunch of crap. They can buy their own brokerage’s overpriced funds instead of others with lower expense ratios. Don’t like it? Too bad!
Brokerages have gotten into SEC trouble again and again for sketchy financial deals with mutual fund companies. The fund companies pay the brokerages — through marketing fees, i-banking arrangements, or other nefarious plans — to push their lame funds on customers. It happens all the time: Brokerages are given financial incentives to sell you bad product.
At least with a normal brokerage account, you’re free to ignore your broker’s crappy advice. But with an SMA, it’s not your call any more, and plenty of brokers will make decisions that feather their beds at the expense of yours.
Anyway, I get mad about this sort of stuff because this is a clear-cut case of big companies exploiting the ignorance of consumers to take their money. SMAs add precisely zero value to the world, and we’d all be in a better place if we could collectively fire the brokerage industry, buy a bunch of cheap index funds from Vanguard, and stop funding summer homes in the Hamptons with the savings of individual investors.
(As an aside: I’m considering starting a web site that would codify, in a user-friendly way, how to invest your money to maximize your returns, avoid the profit-rapists of the brokerage industry, and not have to concern yourself with stock picking. If any of you are interested in the subject — which I know falls outside the bounds of normal content — I’d love any suggestions or thoughts you might have.)

early pink floyd videos

When I was a big Pink Floyd fan (c. 1987 to 1995 or so), I was more into the bloated later Floyd, after Roger Waters took control and started making rock operas and concept albums about the Falklands War and George Orwell. But, like many indie types, I’ve evolved a much greater appreciation for the strangeness of early Floyd — basically from the earliest Syd Barrett days through to Dark Side of the Moon’s steps toward the mainstream.
And now, thanks to the recent increase in the ease of posting videos online, a budding early Floyd videography is budding. They were a visual band from the beginning, and here are some of the video highlights I’ve found online.
Arnold Layne, their first single, featuring fun with mannequins, masks, and sand.
See Emily Play, the gloriously amateur video for their second single, complete with Nick Mason’s rubberlimb drumming. (Apparently taken from Chinese state-run TV, if the logo in the top left is to be believed.)
Scarecrow, an ode to primitivist, hippie-back-to-nature culture.
Jugband Blues, one of those man-Syd-probably-does-hear-voices songs. Listen to those lyrics (“It’s awfully considerate of you to think of me here / And I’m much obliged to you for making it clear that I’m not here… / And I’m wondering who could be writing this song”) and it’s not to imagine him turning out to be nuts.
Flaming, a nifty bit of psychedelia, sort of a Doors-for-children.
Careful With That Axe, Eugene. Now that’s early Pink Floyd, the sort of spacy song that demanded drug use. Featuring some quality tire-squeal shrieking from Roger. (It wakes up around five minutes in.) Here’s a visually better version from the Live in Pompeii video. For the lava fans out there. And another, from Australia.
Let There Be More Light, a structurally awkward early Waters composition, featuring David Gilmour (Syd’s replacement) on guitar and complete with groovy chicks in the audience.
Astronomy Domine, also featuring early Dave. A reminder that Nick’s drumming wasn’t always so limp. Maybe my favorite early Floyd song, although this performance is truncated and not that great. Another version, slightly fuller sound, and looking in spots like it was lit by D.W. Griffith.
Set the Controls For the Heart of the Sun, another classic. I imagine heroin feels a little bit like this song.
Point Me At The Sky, an early single (“And if you survive till 2005 / I hope you’re exceedingly thin / For if you are stout you will have to breathe out / While the people around you breathe in”).
One of These Days (I’m Going To Cut You Into Little Pieces), off Meddle, featuring growly guitar and one of the all-time great monotone bass lines. An instrumental classic.
Bike, an early Barrett song, set to some Cartoon Network visuals.
Best of all: A great video of Syd and Co. playing Interstellar Overdrive, the band’s first great epic. (And one of the first songs I ever learned to play on guitar. That opening bass line is great.) Taken from 1967’s Tonite Let’s All Make Love in London, an idea I can endorse. (Warning: Hippie nudity.)

how to do what you love

Paul Graham on how to do what you love.
Paul, for those unfamiliar, is an unusually thoughtful geek who, among other things, seems to have a strong philosophical understanding of work issues and childhood. “If you think something’s supposed to hurt, you’re less likely to notice if you’re doing it wrong. That about sums up my experience of graduate school.”
He also writes too long. Then again, that might be my newspaper background talking. His book, Hackers & Painters, has been on my wish list for a while, but the thought of Graham stretched to book length keeps me from clicking Add to Shopping Cart.
Also recommended, for capable people who fear they’re not meeting their potential: Good and Bad Procrastination (“What’s the best thing you could be working on, and why aren’t you?”), the related Richard Hamming talk You and Your Research, and Graham’s What You’ll Wish You’d Known.

city field mp3s

For the Matt Murphy fans out there in readerdom — and I know I’ve converted at least a couple of you — his band City Field has two songs up on their new page. I remain disappointed that City Field isn’t putting Matt front and center, which is where a man of his frontman greatness belongs.
(He shares vox with at least two other members. The female lead sounds a little too early Linda McCartney, if you know what I mean, and the other male lead sounds like a self-conscious Mark Mothersbaugh. As if there’s a non-self-conscious Mark Mothersbaugh.)
Anyway, Matt doesn’t sing on either of the posted tracks, but they remain nonetheless candidates for continued improvement.