Stock Picking is Dumb, Buy and Hold Index Funds

Best Investment Advice You'll Ever Get: "The stock-picking mystique is so deeply entrenched in our financial culture that it feels like heresy to suggest that it is, on balance, dumb. The facts are clear, however. For the vast majority of investors—including professionals—stock-picking efforts waste both money and time."

Solution: Buy and hold low-cost (sometimes as low as 1/10 of 1%) stock index funds. After taxes and after expenses, index funds usually outperform more than 97% of actively managed mutual funds.

Read more in Slate.

The Smell of Profits, Here Comes LINUX

Microsoft sells $45 billion of software every year and makes about $12.6 billion a year in profits, about a billion dollars more than Wal-Mart($11.6 billion), and its profit margin is huge (28.5%) and its ROE is high (31%). That level of sales and profitability creates a redolent, attractive smell that permeates the economy, and attracts competitors like bees to a flower.

According to the NY Times, the creation of the Linux Foundation is being announced today. Its mission is to help Linux, the leading example of the open-source model of software development, compete more effectively against Microsoft, the world’s largest software company, for the $45 billion software market.

Online Health Care?

While every service imaginable seems to have found a way to thrive on the Web, health care has always lagged. But things are heating up, as an Internet billionaire is about to launch a site of his own and an online-health pioneer (WebMD) is changing its services to meet the challenge.

In launching RevolutionHealth.com today, Mr. Case says he aims to transform a "broken industry by putting health care back into the hands of the consumer."

Read more in today's WSJ.

WSJ: Milton Friedman on India and China

WSJ: India -- how do you assess its prospects?

Friedman: Fifty years ago, as a consultant to the Indian minister of finance, I wrote a memo in which I said that India had a great potential but was stagnating because of collectivist economic policies. India has finally started to disband those collectivist policies and is reaping its reward. If they can continue dismantling the collectivist policies, their prospects are very bright.

WSJ: Any thoughts on a China versus India comparison?

Friedman: Yes. Note the contrast. China has maintained political and human collectivism while gradually freeing the economic market. This has so far been very successful but is heading for a clash, since economic freedom and political collectivism are not compatible. India maintained political democracy while running a collectivist economy. It is now unwinding the latter, which will strengthen freedom of all kinds, so in that respect it is in a better position than China.

From today's WSJ.

Markets in Everything: Used Underwear in Kenya

The government of Kenya has banned the sale of secondhand underwear, socks and bras. Government officials say the move will stop the spread of skin diseases, but some doctors say the clothes should be alright to wear if they have been properly laundered. Critics say the ban hurts poor people who can't afford to buy new clothes.

Read the news report here.

At Least It Sounds Like a Good Idea

Perhaps no other so-called economic reform has been studied more than the impact of the minimum wage on poor-to-low income, unskilled, undereducated, unemployed Americans. The preponderance of these studies has shown time and again that raising the minimum wage does not live up to its promises. It doesn't create employment for those it is supposed to help; it reduces employment. It doesn't help the most vulnerable Americans, especially poor minorities; it worsens their plight.

Empirical evidence shows that for every 10% increase in the minimum wage:
-- Unemployment among minorities rose 3.9%.
-- Joblessness among Hispanics jumped 4.9%.
-- Teenage minority unemployment increased 6.6%.
-- Unemployment among African-American teens climbed 8.4%.

Read more here.

Amazing Checker-Shadow Illusion

You won't be able to convince your mind, but squares A and B are the exact same shade of gray. Go here for an explanation.