Evaluating Reports & Surveys: The 3.8 Billion Dollar Question Mark

The New York State Department of Financial Services issued a report on October 17th regarding the state’s public retirement systems. Specifically, the report reviewed the “Common Retirement Fund” from March 31, 2009 to March 31, 2016. That is, the two state pensions over the last seven years. Unique compared to other state pensions, in New York they are run solely by the State Comptroller. The report found that “under the Comptroller’s watch the State pension system has spent large amounts of pension system funds chasing returns and performance that has fallen far short for years. Specifically, over the past eight years, the System has paid over $1 billion in excess fees to hedge fund managers who underperformed to the tune of $2.8 billion.” The report makes several very valid points, and you can read it in its entirety here. Reserving judgement on the overall situation, one major red flag jumped out at me: the dates of the report. As a general rule of thumb, it is never a good sign when a date range starts or ends right before or after a significant crash. This report starts March 31, 2009. The exact market bottom was March 9, 2009; 22 days earlier. That is like conducting a report on the most successful teams in NBA history and starting the report Michael Jordan’s rookie year. It doesn’t make the facts any less valid; however, it frames the situation in a certain way that may distort the picture. If the New York State Department of Financial Services wanted to analyze the Comptroller’s decision to invest in hedge funds, why not look at the entire time these investment were held? Why cherry pick a date close to the market bottom of one of the greatest market declines in U.S. history?

This is what you need to know - whenever a financial report has a starting or ending point right before or after a significant market event, the authors are almost always doing so, intentionally or otherwise, to frame their argument in support of their message. Regardless of the content of the message, it is something to be cognizant of as affecting the conclusions of the report.

Three Years of Reading

From October 1st, 2013 to October 1st, 2016 I kept track of every book I read. The final tally was 211 books. My favorites, in no particular order, were the following:

  1. Quiet: The Power of Introverts in a World That Can't Stop Talking - Susan Cain
  2. The Compound Effect - Darren Hardy
  3. The Picture of Dorian Gray - Oscar Wilde
  4. Atlas Shrugged - Ayn Rand
  5. Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets - Nassim Taleb
  6. Liar's Poker - Michael Lewis
  7. The Tipping Point: How Little Things Can Make a Big Difference - Malcolm Gladwell
  8. The Count of Monte Cristo - Alexandre Dumas
  9. Thinking, Fast and Slow - Daniel Kahneman
  10. Gone Girl - Gillian Flynn
  11. To Kill a Mockingbird - Harper Lee
  12. The Fish That Ate the Whale: The Life and Times of America's Banana King - Rich Cohen
  13. A Tale of Two Cities - Charles Dickens
  14. The Tiger: A True Story of Vengeance and Survival - John Vaillant
  15. The 48 Laws of Power - Robert Greene
  16. East of Eden - John Steinbeck
  17. Master of the Senate: The Years of Lyndon Johnson, Volume 3 - Robert Caro
  18. When Breath Becomes Air - Paul Kalanithi
  19. Sunny's Nights: Lost and Found at a Bar on the Edge of the World - Tim Sultan
  20. Moonwalking with Einstein: The Art and Science of Remembering Everything - Joshua Foer
  21. The Power of One: A Novel - Bryce Courtenay

Here are a few things I learned about reading from the past three years:

  • Read a wide variety of both fiction and nonfiction.
  • If you don’t enjoy reading, you aren’t reading the right books.
  • The problem you are struggling with? Somewhere at some time someone had the same problem and wrote a book on it. Go find that book and read it.
  • Few things create instant rapport like having read the same book as someone else.
  • Kindles are really great but not the same.
  • Certain books deserve rereading.

Money and Happiness

Money can’t buy happiness but it solves 95% of the problems that make you unhappy.  - @gselevator

Money can’t buy happiness. There is a fair amount of truth to this. Research has suggested that the utility of additional wealth starts to significantly decline after about $70,000 of income a year. That being said, a good use of money as it relates to happiness is using it to avoid things that make you unhappy. For example, I absolutely hate doing laundry. It drives me crazy and I don’t like worrying about it. I pay someone about $20 a week to do my laundry. Over one year that is about $1,000, which could certainly be put to better use. However, for me it is worth it to avoid doing something that makes me unhappy. If I can go through life having never to do my own laundry, it will be money well spent. As we have discussed on this blog before, money is not the end; it is the means to an end. And while we all understand the phrase “money can’t buy happiness,” we might consider using money to avoid unhappiness.