Why is it so difficult to teach people to manage money?

[sydboy007]

After reading the letter I doubt anyone will be willing to speak to a financial advisor again. I'm not sure what comes after psychopathy, but Deeb certainly seems to be way out there in his lacking of empathy. The below is just an extract, the whole letter is even more disturbing. To think he's trying to pimp out his mother, but hen it sounds like she'd do it for him

http://www.smh.com.au/business/mark...chs-traders-twilight-zone-20140709-zt1fr.html

I write to report a tragedy: My notional superiors have failed to award me the $US13 million they promised to me. I told you of this promise over Christmas, as you will soon remember. My spectacular decision to short the subprime mortgage market, after manipulating that market so that my short could take place at artificially high prices, is the stuff of legend. In spite of what many refer to as "The Triumph of Deeb," they have elected to pay me the disgraceful sum of $US8.25 million, making vague promises to "make it up to me in the future."

I can hear you saying, "Deeb, what is the matter with you? I raised you to take what is yours plus some of what belongs to others and you are failing me," or "Deeb, when will you learn to guard your narrow interests in spite of any social consequences, as I have taught you?" Before you lambast me, and my character, I will tell you that I will not be taking this lying down. I will soon go to battle with Goldman Sachs. In this battle, I will require your assistance.

Next, we must accept the risks of this communication. I know enough about "ordinary folk" to know that they will never understand what it feels like to be me. They can have no idea how difficult it is for me to make bets with billions of dollars of other people's money, knowing that, if the bets work out, I will receive only tens of millions. They may even seek to ridicule my plight, if you can believe that. Do not worry: I will crush all detractors, in time.

 

[Tyler Durden]

After reading the letter I doubt anyone will be willing to speak to a financial advisor again. I'm not sure what comes after psychopathy, but Deeb certainly seems to be way out there in his lacking of empathy. The below is just an extract, the whole letter is even more disturbing. To think he's trying to pimp out his mother, but hen it sounds like she'd do it for him

http://www.smh.com.au/business/mark...chs-traders-twilight-zone-20140709-zt1fr.html

I write to report a tragedy: My notional superiors have failed to award me the $US13 million they promised to me. I told you of this promise over Christmas, as you will soon remember. My spectacular decision to short the subprime mortgage market, after manipulating that market so that my short could take place at artificially high prices, is the stuff of legend. In spite of what many refer to as "The Triumph of Deeb," they have elected to pay me the disgraceful sum of $US8.25 million, making vague promises to "make it up to me in the future."

I can hear you saying, "Deeb, what is the matter with you? I raised you to take what is yours plus some of what belongs to others and you are failing me," or "Deeb, when will you learn to guard your narrow interests in spite of any social consequences, as I have taught you?" Before you lambast me, and my character, I will tell you that I will not be taking this lying down. I will soon go to battle with Goldman Sachs. In this battle, I will require your assistance.

Next, we must accept the risks of this communication. I know enough about "ordinary folk" to know that they will never understand what it feels like to be me. They can have no idea how difficult it is for me to make bets with billions of dollars of other people's money, knowing that, if the bets work out, I will receive only tens of millions. They may even seek to ridicule my plight, if you can believe that. Do not worry: I will crush all detractors, in time.

I saw that. Aside from the disgust I felt, I thought it showed that everyone's problems are relative.

Someone on $30,000 pa might think they are struggling. Someone on $70,000 pa might think they are struggling. Someone on $250,000 pa might think they are struggling. And indeed, someone on millions of dollars a year could think they are struggling.

Guess grass is not always greener on the other side.

 

[sptrawler]

I saw that. Aside from the disgust I felt, I thought it showed that everyone's problems are relative.

Someone on $30,000 pa might think they are struggling. Someone on $70,000 pa might think they are struggling. Someone on $250,000 pa might think they are struggling. And indeed, someone on millions of dollars a year could think they are struggling.

Guess grass is not always greener on the other side.

The problem with more money, comes bigger expectations and goals. This then leads to more stress of failure, as a bigger loss is at stake.
There is a lot of truth in the old saying, money can't buy happines.

 

[ROE]

I saw that. Aside from the disgust I felt, I thought it showed that everyone's problems are relative.

Someone on $30,000 pa might think they are struggling. Someone on $70,000 pa might think they are struggling. Someone on $250,000 pa might think they are struggling. And indeed, someone on millions of dollars a year could think they are struggling.

Guess grass is not always greener on the other side.

Doesn't matter what you earn whether it is a million or 10K if your out going > income you will live on struggle street

granted the one with smaller income has less wiggle room but the guys on big bucks and they are struggling they have an expensive habits no amount of money can fix

 

[Craton]

Re: http://www.smh.com.au/business/marke...709-zt1fr.html

Is this for real? I read it and wept.

OMG! Quoting Deeb, "....I will crush all detractors, in time." Surely he is just a product of how the Street's chasing of the almighty dollar with continued and every increasing profits is simply ludicrous and yet, it affects every last one of us.

This, the letter, is a great reflection of what ails our world in so much that we are losing our ability to connect with our humanity and the links that bind us, all for more and more $$$'s. In time, it will be Mother Earth, or the market, that will crush all detractors but until that happens, who cares?

Shame on us for allowing such a system to function or even exist in this way, no wonder for the great majority its a struggle to get ahead. Can't they see the harm when people allow themselves to work for such institutions that nurture such a culture, CBA locally comes to mind, obviously not.

No, nothing wrong with profit but the blatant manipulation stated in the letter is really troubling and I'm sure it is endemic within not just the financial system. With plicks like these working in the marketplace, we are surely doomed and no wonder we had the GFC. No doubt too, this sort of thing is still going on so the question now is, how long before the next variant of the GFC?

Maybe I have a too simplistic view of the world, maybe I'm not that different but I know one thing for sure, I do have a conscious and that conscious is revolted to learn that such a thing can exist and have such an influence on my own life.

 

[Wysiwyg]

The necessities of life?

Food - Woolworths, Coles, ALDI, IGA, Grow Your Own
Clothing - Target, Myers, David Jones, St. Vincent De Paul etc., online, multiple other specialty outlets
Shelter - Mortgage, Own, Rent, live in the bush (alter food source there)
Transport - Bicycle, Motorcycle, Car, Truck, Feet, Skateboard, Plane, Train

How much one allocates or has available to allocate to each necessity is infinite and varied as human beings on the planet.

 

[qldfrog]

am I the only one to find this letter too caricatural to be true?

 

[Craton]

am I the only one to find this letter too caricatural to be true?

+1 but truth can be stranger than fiction besides, after more spying allegations by the USA in Germany today, them Yanks are capable of anything...

 

[Calliope]

Why is it so difficult to teach people to manage money? I think everybody knows the answer. Since the advent of the credit card and later the mobile phone, parents have stopped instilling into their children the value of money.

 

[Tyler Durden]

I write to report a tragedy: My notional superiors have failed to award me the $US13 million they promised to me. I told you of this promise over Christmas, as you will soon remember. My spectacular decision to short the subprime mortgage market, after manipulating that market so that my short could take place at artificially high prices, is the stuff of legend. In spite of what many refer to as "The Triumph of Deeb," they have elected to pay me the disgraceful sum of $US8.25 million, making vague promises to "make it up to me in the future."

I can hear you saying, "Deeb, what is the matter with you? I raised you to take what is yours plus some of what belongs to others and you are failing me," or "Deeb, when will you learn to guard your narrow interests in spite of any social consequences, as I have taught you?" Before you lambast me, and my character, I will tell you that I will not be taking this lying down. I will soon go to battle with Goldman Sachs. In this battle, I will require your assistance.

Next, we must accept the risks of this communication. I know enough about "ordinary folk" to know that they will never understand what it feels like to be me. They can have no idea how difficult it is for me to make bets with billions of dollars of other people's money, knowing that, if the bets work out, I will receive only tens of millions. They may even seek to ridicule my plight, if you can believe that. Do not worry: I will crush all detractors, in time.

Tying this back to the thread topic, I think there is a general consensus (rightly or wrongly) that someone who makes a lot of money would be able to decently manage it. It's hard to distinguish between making/earning money and managing it, and most people seem to blur the two together. That's why it's so surprising when we hear about 'rich' people having no money left because they've spent it all.

I suppose the logic seems to be, if someone can make that much, why can't they manage it? What prevents someone with such high earning capacity to manage what they earn?

I think one aspect of the whole problem comes down to emotions. A lot of decisions made in spending money are emotional decisions, rather than logical. Money is power, and power is closely related to emotions. It takes a lot for people to have power and not to exercise it. Most people who have power will exercise it, if not abuse it.

I think those who are good at managing money understand this, and are able to separate their logic from their emotions when making a decision.

 

[Calliope]

I think those who are good at managing money understand this, and are able to separate their logic from their emotions when making a decision.

You would expect that those managing other people's money would be rigourisly regulated. Not so;

If you take a look at most of the member trustees in the industry super funds, they are generally union officials with no financial expertise or qualifications whatsoever. One I came across that I particularly loved was a trustee with a BA (incomplete).

To be sure, the trustees may be qualified electricians, nurses, teachers and the like, but when it comes to overseeing the management of a large investment portfolio, most member trustees of industry funds have no skills apart from their on-the-job learning.

http://www.theaustralian.com.au/opi...from-a-regulator/story-fnbkvnk7-1226986006304

 

[sptrawler]

I think those who are good at managing money understand this, and are able to separate their logic from their emotions when making a decision.

A lecturer on economics, in a post graduate diploma, said buying shares was the same as going to the casino. It cracked me up.
Lucky it was my wife at the lecture, if I'd been there, I would have asked him to expand on the theory.

 

[sydboy007]

You would expect that those managing other people's money would be rigourisly regulated. Not so;

http://www.theaustralian.com.au/opi...from-a-regulator/story-fnbkvnk7-1226986006304

Yet they don't fee gouge like the MBA and "qualified" money managers. Possibly they have their member's interests ahead of their own. Certainly the private sector funds are as much about clipping the fee ticket as actually making money for the benefit of their members. I'd not be surprised if some of the average people actually have a better sense of money management that say the Macquarie high flyers or AMP product sellers.

But wait, you don't actually need any skills to be a financial advisor. No uni degree required, well at least for those who are covered undeneath someone who actually does have a FSA licence.

From the application process to be a financial advisor - 1 day a month seems like a nice pass time.

B1.5 What financial services will this person be a responsible manager for?
Present their selections from A3.2 and allow them to tick one or more
B1.5.1 On average, how many days will this person spend on duties related to the
provision of financial services by the applicant or its related body corporate?
 Less than 1 day per month
 Less than 1 day per week
 1 to 3 days per week
 More than 3 days per week

Have a read of a sample application. Definitely doesn't inspire confidence in the vetting process, especially when considering how ASIC did all it could to ignore the CBA scandal for so long.

 

[sydboy007]

I think one aspect of the whole problem comes down to emotions. A lot of decisions made in spending money are emotional decisions, rather than logical. Money is power, and power is closely related to emotions. It takes a lot for people to have power and not to exercise it. Most people who have power will exercise it, if not abuse it.

I think those who are good at managing money understand this, and are able to separate their logic from their emotions when making a decision.

Very true. Too often people allow their emotions to get the better of them when making financial decisions - whether spending or saving.

But it's hard to follow Buffet and be greedy when others are fearful and fearful when others are greedy.

 

[sydboy007]

A lecturer on economics, in a post graduate diploma, said buying shares was the same as going to the casino. It cracked me up.
Lucky it was my wife at the lecture, if I'd been there, I would have asked him to expand on the theory.

Considering how HFT has corrupted the whole market I can sort of understand what they're saying. When the algos can send tens of thousands of fake orders a second to try and confuse the other algos, the real investment process is being corrupted. What is the "real" demand for shares when over 70% of it is driven by HFT these days?

The last 6-7 years would make any sane person wonder if the odds are stacked against them when investing. With financial repression rampant within the OECD, savers are being force to bail out those who over indulged in debt. Who do you go to for advice? Is self education always the best way forward?

Sometimes it does feel like gambling where the odds are stacked in the house's favour.

 

[Julia]

A lecturer on economics, in a post graduate diploma, said buying shares was the same as going to the casino. It cracked me up.
Lucky it was my wife at the lecture, if I'd been there, I would have asked him to expand on the theory.

Here's another:
A person assured that, although they had zero experience in the stock market, they'd easily be able to get the right advice because he/she 'knew people who had lots of money'. Further questioning elicited the info that said people had
1. Made their money from a piggery and an abattoir.
2. Had inherited family money.
3. Had multiple rental investments.

 

[sptrawler]

Considering how HFT has corrupted the whole market I can sort of understand what they're saying. When the algos can send tens of thousands of fake orders a second to try and confuse the other algos, the real investment process is being corrupted. What is the "real" demand for shares when over 70% of it is driven by HFT these days?

The last 6-7 years would make any sane person wonder if the odds are stacked against them when investing. With financial repression rampant within the OECD, savers are being force to bail out those who over indulged in debt. Who do you go to for advice? Is self education always the best way forward?

Sometimes it does feel like gambling where the odds are stacked in the house's favour.

Well if you think it is bad now, wait untill you have to live on your investments.

Then there is no pay check, just earnings from your savings, the only growth is speculative and losses are non recoverable.lol

 

[tech/a]

Well if you think it is bad now, wait untill you have to live on your investments.

Then there is no pay check, just earnings from your savings, the only growth is speculative and losses are non recoverable.lol

If you don't have a large enough nest egg you need to have a way of generating some income during retirement.
If you haven't got one or more spend time making one tater than accumulating.

It can be done and many are doing it.
Trading is one method----HFT or not.
Housing rental another
Trading on e bay another
Any number of small businesses.

 

[Smurf1976]

Humans by their nature tend to respond only to actual problems whilst ignoring what may lie ahead. There are individual exceptions of course, but that's how we tend to do things. End result = a crisis has to occur in order to get any real action, by which time it's too late.

To pick one random example, bush fires. It's the same every time there's a major fire. All sorts of promises are made that it won't happen again, we'll do all sorts of things to prevent it, we'll buy better fire fighting equipment and so on. But let's face reality - it's July now, an El Nino seems likely, and we're not really doing much at all to prevent fires next Summer. It WILL happen again.

As a species, humans really don't think that far ahead generally. So if someone has a current income which exceeds their genuine needs, and has not personally experienced difficult financial circumstances, then I can understand why they take no action to manage their money well. Only when the elephant really is in the room will they think differently, by which time it's too late to do anything of real benefit.