Tuesday, 23 August 2016

Marginal Propensity To Consume

A little over a week ago, with tongue firmly in cheek, I wrote:
This all but guarantees that by November, Leicester City will be a top three team, Crystal Palace will be relegated, Alan Pardew will be the first managerial casualty of the EPL season, Donald Trump will win the Presidential Election by a landslide and Article 50 will have been triggered.
Unfortunately, the Crystal Palace related predictions are not looking as amusing as they once were. No goals and no points after two games, and if it wasn't for AFC Bournemouth, last place. Next weekend's fixtures see the first six-point relegation clash of the new season between the two clubs, with Crystal Palace a very generous 2.38 on the Exchanges for the home win, although not as generous as the frankly crazy 2.54 that was available earlier. 

There was a paucity of Draws in round two of the EPL, with just the Leicester City v Arsenal match providing a winner. The basic Draw-4 System (back the draw at 4.0 or shorter) is now up 0.25 points from 14 selections. With 5.25%+ of the EPL season already complete, Draws are at 20% with Aways looking to continue their improvement of recent seasons currently at (an unsustainable) 45%. 

As for Away Steamers this weekend, again the system was profitable with Hull City's 11.11% increase in implied probability a winner at 4.95 (@ Swansea City) more than compensating for the first loser of the season at the Olympic Stadium where AFC Bournemouth failed to beat West Ham United despite steaming in by a massive 27%. Since 2012, Away Steamers of 25% or more have been few and far between, but the 16 selections (including this weekend) are in profit by 11.59 points. Three of those 16 were AFC Bournemouth, (all lost), and three more were Aston Villa (all lost). 

After 5 selections, Away Steamers are up by 9.38 points this season.

The (anti-) Brexit bets are looking good, with the triggering of Article 50 becoming less and less likely as reality and referendum 'time decay' sets in. "Not triggered before July 2017" has traded as low as 1.31 on Betfair, and not being triggered in 2016 at 1.03. We should have more of these advisory referenda.

In the 'you learn something new everyday' category, one item from this weekend was that in 1933:
...a state referendum saw 68% of West Australians in support of leaving the Commonwealth, but the application was knocked back by the British parliament.
The Independent had an interesting article last Friday, although the title wasn't too snappy - "We won't issue Article 50 until after 2017 – and that means Brexit may never happen at all":
Farage, Johnson and Fox have won their 15 year-long battle to obtain a vote for Brexit. But Britain is not out of Europe. And as the UK public realises the damage to their future that isolation represents, there will be a re-think.
May is no Europhile, but she does not want to lead a Britain that become poorer and weaker in wealth and status, with the ever-present shadow of Scotland leaving the UK too. The Europhobes who brought us Brexit may not have the last laugh.
Although what will finally eventuate as a result of the advisory and non-legally binding, referendum is yet to be known for sure, the "win" for the 'Lying Leavers' looks more and more meaningless by the day. 

It's rather schadenfreudey, but discussing Brexit these days with a Leaver is a little like watching an opponent's fans celebrating a goal before they belatedly realise that it has been disallowed. I really should rise above it, but I happened to come across one of my local's more vociferous Leavers (a Charlton Athletic fan for the record) on an alleged WikiLeaks list of BNP members last week.       

Moving on, and there are some crap articles on the Yahoo! Finance site (and many other sites) these days.
Don’t bother clicking on the click-baity link for this one, (I should have known better) which led with the bogus headline "How one couple saved $1 million in 4 years to retire by age 43"

The headline is nonsense, and yes the numbers are in $s, but the principles are the same. 

The couple started with $570k, so they never ‘saved’ $1million in four years.

They committed to putting $2,000 a month toward their investments, which stood at $570,000 when they started, in order to build their portfolio up to $1 million in 1,500 days.

With a decent amount invested, the bulk of an increase in savings is going to come from your return on that investment. 

The broad S&P 500 index has performed well under Obama (Democratic Presidents are historically much better for the US stock market than Republicans) - Go Bernie, I mean Hillary - 2011 was actually a down year (by 0.003%) and 2015's loss wasn't too serious either. 

The couple featured in the article "decided to get serious about their savings goals" in 2013, so if they caught that 29.6% leap of that year, that's a tidy $169k right there.  

The size of someone’s salary is also a rather relevant piece of information which was not revealed, the only reference being:

Carl noted that his programming job paid well, but did not share specifics.

Savings is simply your income less your outgoings, and the larger your discretionary income is, the greater your savings potential, assuming your expenses are the same (which they are often not due to lifestyle creep). If the couple in question were earning $240k a year between them, what’s the big deal about saving 10%?

Financial advice I gave my kids from a very early age was to put at least 10% of everything earned into an index fund and forget about it. 

Keeping that MPC under control as your income increases, helps. I wish I’d had a Dad like me! 

The article does suggest keeping records and analysing your spending habits, which is an excellent idea, but for most of us, saving money is slow and steady and very much constrained by income.  

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