Numbers Don’t Just Materialize on Their Own

If you have ever invested in an individual stock and performed a stock analysis in advance of your purchase, you are familiar with one of the steps in the evaluation process – “Evaluating Management.”  Not to oversimplify the process and techniques used, but evaluating management really boils down to the answer to the question: “How successful has the management team been at maximizing sales while controlling costs?” After all, effective cost management is how a firm turns sales into profits. On the surface, evaluating management may appear to be all about the numbers. However, it is not. Numbers don’t just materialize on their own – they are a by-product of human intervention. And this leads me to the events of the last few weeks and days, in particular. By now, even if you are on holiday and trying your best to be unplugged, you probably know the United States’ credit rating was downgraded from AAA to AA-plus by Standard & Poor’s (S&P); and that the Dow Jones Industrial Average – the common measurement of the health of the stock market and economy – fell more than 600 points on Monday only to rebound, closing up over 400 points just one day later. Crazy! If you include the debt ceiling debacle (I mean debate), no one was left untouched by the events of the last few weeks – financially or psychologically.  (Continue...

Three Lessons From the Debt Ceiling Debate

An agreement has been reached and passed by the House. Now, we are awaiting the Senate’s vote. Whew…talk about taking us to a precipice! Honestly, I can’t believe it took this long to reach an agreement. In my opinion, choosing to default was never a viable option – especially given our history of having raised the debt ceiling 74 times since 1962 – ten of which have occurred in the last decade! I’ve been riveted by the debt ceiling debates (if that’s what we want to call it) because if nothing else it highlights an ongoing conflict of capitalism – greed vs. self-interest – on both a macro and micro/personal level. I’ll come back to the macro aspect of this in another issue as it is definitely an overlooked factor when it comes to creating financial intimacy. For now, I want to focus on the micro/personal level and put a spotlight on three lessons you and I can glean from the debt ceiling debate and apply to the management of our personal finances: (Continue...