Just read: ‘Why Retail Investors Still Avoid Stocks’ at BusinessWeek

If you invest, or if you pay attention to the economy, read this article. Period.

Why Retail Investors Still Avoid Stocks – BusinessWeek.

Great insight from Brad Barber of the University of California, Davis. And retail investors (that’s the regular folk who invest their hard-earned money) should particularly pay attention to the answer to the question “What is the track record of smaller investors? Do they tend to buy and sell at the right times?

Just read: ‘Iceland’s Haarde Is First Leader Indicted Over Crisis’ at BusinessWeek

Wow. This is crazy! Iceland’s former Prime Minister Geir Haarde (who served as Finance Minister from 1998 to 2005 and then as Prime Minister from 2006 to 2009) has been indicted for economic mismanagement that led up to the economic collapse of that country in 2008.

Iceland’s Haarde Is First Leader Indicted Over Crisis – BusinessWeek.

Update: BusinessWeek dropped the article a couple of years later so I found a similar article over at Bloomberg: Iceland’s Haardd Indicted by lawmakers over role in crisis.

This is fascinating! As the article points out, political leaders have been indicted for war crimes in the past but they’ve never been indicted for economic mismanagement… until now. The assertion by the lawmakers is that Haarde had been negligent in allowing the finances of the country’s banks to get out of hand and thus broke the law of ministerial responsibility.

Here are my thoughts: Haarde is being held up as a scapegoat for (what I believe is) a populist agenda. Current leaders are conveniently placing blame on the shoulders of former leaders. Yes, politicians should be held accountable for their conduct and misconduct. Yes, politicians need to work with the country’s best interests in mind. Yes, the laws of the land prevail even over politicians.

But, Haarde as the country’s former figurehead and as the former finance minister should not be the only one held to this degree of accountability. This indictment seems singularly focused on Haarde alone. However, he did not work alone to create this situation. Not only is the economic situation the result of a myriad of factors, it also didn’t just take place while he was in office. The economic structure that led up to this collapse was developed well before 1998 (when Haarde started as Finance Minister). So was the desire for banks to accept debt and take an increasing amount of risk. So was the need for people to pay with debt instead of cash. So was the willingness of businesses to accept more debt-based payment options.

Icelandic lawmakers might feel better by pointing an accusing finger at one person and saying that he was responsible for the entire economic collapse of the country but it doesn’t place blame appropriately. If they are truly looking for someone to blame, they need to blame banks, lenders, currency traders, politicians, businesses, consumers, and other countries.

The global economic situation (of which Iceland was an unfortunate, participating victim) is part of the natural ebb and flow of economics. It can be controlled slightly but it is never going to be completely avoidable and indicting one person for a country’s financial woes is unreasonable.

Good news for businesses… in 1 – 3 years

Good news for entrepreneurs (or, at least for people planning to become entrepreneurs in the next 1-3 years).

During periods of economic growth, consumer spending injects cash into the economy, and free-flowing cash is exactly what makes an economy stronger.

Entrepreneurs and economists are concerned right now because people aren’t spending money at levels needed to bolster the economy. According to the Financial Post article “Fed stuck in zero-rate game (Paul Vieira, Sept 20, 2010 — No longer online), “consumers are opting to pay down debt instead of spending on goods”.

It’s one of those things that sounds strange even though it’s true — paying down debt isn’t as good as spending… at least when it comes to economic growth. Instead, consumers are a licking their economic wounds and understandably getting credit histories in order. They’re forgoing purchasing in the short-term to fix their personal credit.

Although entrepreneurs and economists are understandably worried, I think it’s good news — for those with a 1-3 year view. Once people have paid off some debt, they’ll start spending again… And I believe they’ll start spending with exubrance. By the time they start spending again, they’ll have long forgotten why they weren’t spending, AND, they’ll have improved credit ratings and credit limits and buying power.

I believe this is a great time to start a business or deepening the positioning of a current business. If you can survive The Great Debt Payoff, I think you’ll reap some serious rewards down the road.

Just read: ‘The Inevitability Of $300 Socks’ at Fast Company

It wasn’t that long ago that people wouldn’t pay more than about $50 for jeans. Now, $300 plus is a distinct possibility. You can’t just blame inflation. There’s been a transition in how we define luxury.

In this article, Dan and Chip Heath talk about how luxury has changed and why products that weren’t luxurious can become luxurious.

The Inevitability Of $300 Socks – Jeans – Luxury – Connoisseur | Fast Company.

If you sell products, read this article. Find out how your products can become high-end luxuries.

Just read: ‘Why is a bag of weed always $10, man?’ at FT.com

I love the Undercover Economist. I have his book, I read him at Financial Times. He makes economics accessible to everyone.

In this article, someone asks Tim Harford about why a bag of weed is always $10. You can read the question here…

Dear Economist: Why is a bag of weed always $10 man? | Undercover Economist | FT.com.

And be sure to read the comments. There are only two at this point (economics doesn’t attract a lot of readers, I suppose) and the commenter named Matt gives an excellent answer.

The issue raised isn’t about weed, nor is it about some kind of monopoly that weed sellers have. Rather, it’s about supply and demand. An entertaining and informative read!