How Many Economists Does It Take To Build A Successful Blog? One, if it’s The Weakonomist

I’ve thoroughly enjoyed all the interviews I’ve been fortunate enough to do with my fellow personal finance bloggers, but my conversation with the Weakonomist is one that could easily have spilled over into two, simply because the Weakonomist has so much to say about the world of finance and economics (as his name suggests).  Then again, we all do – that’s why we blog about it!  The Weakonomist, however, like Neal Frankle, is an industry insider – he works at a major US bank.  Thus I had to ask him what kind of perspective that gives him.  You’ll want to, as well, when you read what he has to say!  Be sure to also check out his blog if you haven’t yet and also subscribe to his free feed for updates. [and I'd like to add a bit of congratulations here, since five of the interviews I've done so far (one is still on the way) have been with new bloggers (since January 2009) who were voted into the "Top 10 Best Personal Finance Blogs" by the personal finance blogging community.  Way to go!  Tell everyone you read about them all here!:)]

Your site name suggests you were an economics major — is this where the “College of Weakonomics” comes from? What does the public need to know about economics?

I call the site Weakonomics and myself The Weakonomist mostly because finance isn’t as fun of a word. I majored in finance at college but the two disciplines are very related and I took a number of econ courses.  Were I to pursue graduate work I’d likely again go towards finance, but if a PhD were on the horizon I’d likely go with economics; specifically behavioral economics which is often a cross-discipline with psychology and known as a “decision science”.

In the strictest of terms, there is much to learn about economics beyond supply and demand. On the low end you’ve got the analysis of breaking even on manufacturing widgets and on the high end you have warring factions of economists locked in battle over the policy decisions of countries, and the world. The College of Weakonomics is a special feature of the website that started almost as soon as the blog did.  Many blogs seek to teach you about the various aspects of personal finance but most are unorganized. I set up mine educational series like a college course catalog. The advantage of doing it this way is I can establish difficulties and prerequisites just like a normal college course guide. You shouldn’t try to learn about Though I haven’t done a new one in a month or so, they are published regularly. Whenever I get to around fifty I’m going to go back and retouch them all and turn it into a downloadable ebook. It would be a reference guide of sorts. For example, you shouldn’t be learning about stock indexes until you first know what a stock is.

What got you started blogging, and where do you see Weakonomics going?

In the world of personal finance, you get into blogging for one of two reasons.  A) You’re going through financial hardship and seek to learn more about money and want to catalog your journey, OR B) You’ve got a huge ego that can only be fed by establishing a loyal following of at least a few hundred people that really want to read what you have to say. I’m on the ego side of things. Basically my job wasn’t keeping me informed enough about the topics that interested me so I started a blog to help keep up to speed.  I’ve learned a lot and continue to do so, but I am not going to deny that Weakonomics feeds my ego.

As long as my blog feeds my ego I’ll keep it going. The site makes enough money to cover the expenses of keeping it running and so this is basically a hobby for me. Weakonomics has the potential to be a more powerful brand than simply a small blog, however I would let an opportunity like that come to me because right now I’m just having fun and have enough on my personal plate to keep me busy.

You mention that you work for a large US bank. How has this given you a unique perspective on the 2008 economic crisis? Do you have any good “insider’s stories” to tell?

Aside from the terror of fractured job security, this may be one of the most exciting times I’ll experience in my career. Alan Greenspan is noted for saying this is a once in a century crisis, which means statistically speaking I’ll never witness something like this again in my career, or my life for that matter. I’ve paid careful attention to the mistakes that were made, however I can hardly say anything I’ve learned has come specifically from being an insider. From the inside looking out, we employees can only treat this crisis as any other industry or company with a threatened future. We worry about our jobs, and take notice of who the true leaders of the company are.

My favorite story to tell is of an executive a few rungs up the ladder from me. He wasn’t high enough to know all the details of the crisis as it was unfolding but still needed to project the image of leadership over the 1,500 employees or so he was talking to at the time. He announced he had so much faith in the company and our leadership that he was putting his entire 401(k) into the stock that morning. This was in the fall of 2007, before prices really started to tank. I sent an email to a friend listening on the call and told them to mark this day as the biggest mistake in this guy’s life. Bank stocks have improved over the last few months, but this guy lost a ton of money.

Did you also hear about the night of Sept. 15, 2008 when several Congressmen (I believe) and the Fed met because the initial “electronic run” on the banks was threatening to become an overnight worldwide catastrophe?  Do you think the claim is plausible? And if so, what reasons do we have to worry or not about this happening again in the future?

This wasn’t an event I’d heard of. If it happened I’m glad it did. What would have likely transpired was the Fed believed there could be a huge financial sell-off when markets opened and wanted to brief some big-whigs on what they’ll do to stop it. Stock exchanges have what are called”circuit breakers.” If the markets were to tank 10% trading would stop,perhaps for an hour, or even a day. This doesn’t seem like it would have any impact but it allows for any false rumors to come to the surface. For a sell-off to happen that quickly there must be a crisis of confidence.  The President, Fed Chair, and other important people would seek to restore confidence in the market before it re-opened. This down-time would allow any rumors to surface and the irrational can be removed. Of course if there is a real reason for people to be scared the circuit breakers wouldn’t work.

In order to know more about the events that went on that night I’d probably have to be a fly in Bernanke’s beard, most of my industry news doesn’t filter down through the company, I hear about it just like everyone else.

What’s your take on the US dollar – is it going over a cliff like the bears and Peter Schiff suggest? Will Obama and Bernanke be able (or even try) to mop up all the excess liquidity?

The timing of this question is downright perfect. I just finished a book called Biography of the Dollar the day before this interview, so I’m in a position to pretend I know what I’m talking about. The greenback was granted world control after WWII as the only superpower.  Since then the dollar has decreased in value but increased in acceptance world wide.  Entire countries have abandoned their currency in favor of the US dollar.  The euro and Chinese yuan each have the potential to become world currencies, but each have something holding them back. The euro is full of internal bickering between France who wants it used worldwide, Germany who doesn’t, and Italy who wants a devalued currency to keep from getting killed in their exports. China has spent the last fifty years making their currency mimic the dollar and keeping it cheap so Americans will continue to buy whatever they’re making.

It’s the destiny of a global power to exert their sphere of influence on the world, sometimes it’s wanted and sometimes not. Regardless, doing so puts the country in a pickle. They could risk continuing to finance 1/3of their budget with foreign money and making their currency less valuable and creating the potential for hyperinflation OR they could reign in the debt which increases the value of the dollar making their products and services too expensive for the rest of the world. If there is such a thing as a happy medium between those extremes I’m afraid the US is leaning too far to the devalued side and we need to pull back some on the foreign financing.

Regardless, at this point in history no one stands to gain if the dollar tanks. The entire world will suffer.

What motivates you more: living within your means, or earning more than you spend?  Is there any particular approach you have with your own finances (e.g., do you refuse to use credit cards, etc.)?

I find most frugal people have hit some kind of financial hardship and embrace the lifestyle to help get out of it. I’m cheap. I simply don’t like to spend money. I do abdicate paying off debt quickly, but investing and increasing your income are more important. Embrace money saving habits that are easy, then focus the rest of your time on making more money. I have one credit card that I use for the cash back rewards. I’ve never run a balance. With the new reform laws, we might see a decrease in these rewards. If (not when) that happens, I’ll probably cancel the credit card and use cash.

What kind of an investor are you?  Is stock picking bad?  What about investing before you pay off all your debts?

In March I beat the S&P 500, in April and May I didn’t. This was using the fantasy trading game UpDown.com (full disclosure I am an affiliate but am not providing any links or references that net me any money). This paints an accurate picture of how I feel about stock picking. It’s fun, and you can make money buying and selling stocks, but it’s difficult to do so consistently. For those of you wanting to try, use a site like UpDown. When it comes to my strategies with UpDown (the goal is to beat the market) I index half of my money to the S&P and most of the rest is devoted to value investing. I’m partial to the financial sector mostly because I know it the best, but I’ve also shorted gold and am long tech and energy. My most profitable gains have come from Citi and AIG which were undervalued, but at the same time I just got killed with a 50% drop in GM while I owned it. I cut my losses instead of getting emotional though. Remember this is all funny money. If I had $10 million in the bank I might devote $50k or so to exploiting a covered call, but I’d probably give any proceeds to charity.

For my actual investments I’m indexed up the wazoo. S&P index, emerging markets index, and a target 2050 which hold international and domestic indexes.  I don’t believe in paying off your debts before investing so long as you are meeting your current obligations already. Say you have a mortgage, car loan, and student loan. If you’re paying all regularly I see no problem in you putting aside money for retirement. I don’t advocate debt and do encourage everyone to pay off all loans before you consider scaling up your investments to a level greater than the standard 15%.

Top 3 financial mistakes or good moves you’ve made?

I’ll sound like a pompous jerk, but I’m yet to make any real financial mistakes. While I have no objection to using loans to pay for college I didn’t have to. I bought a car after college and paid it off in 11 months. I bought an engagement ring and used their financing to knock 10%off the price, then paid it off before I was charged interest. I started my Roth IRA at age 20. I’m currently debt free. My emergency fund is good and grows every month. I’m young and still have plenty of time to make mistakes, but thanks to my parents setting a good example of how to live your life, I haven’t yet. I also thank bloggers for sharing their stories of hardship, because doing so allows me to learn from their mistakes.  Like I said I might come off as pompous and thinking I’m better than others, but life is too short to care what other people think about you.

Do you have a favourite investment or finance book you’d recommend?

I wish I could recommend the best “starter” book, but I consider myself classically trained in the art of finance and economics – meaning I bypassed those books and was taught by the authors themselves. This doesn’t mean I know more, I probably don’t, but it does mean regular finance books bore me. However I would recommend Why Smart People Make Big Money Mistakes as the best money oriented book that anyone can read. I am new to this reading thing too, I only started after college to keep myself educated,and I alternate between books like that and Star Wars or James Bond novels.

Got any favorite economist jokes to share, or any economists/analysts you want to make fun of?

So many to pick on, so little time. Paul Krugman is considered one of the top economists in the world, and writes for the NY Times. He’s no more useful than a talking head on CNN. His strong liberal bias feeds the minds of his readers and nothing else. He’s in a position to get paid to be a critic of politics and could serve in an administration to actually effect change. He chooses not to saying he doesn’t want to be involved in politics. If he doesn’t then he should stop blogging about it. I think the real reason is he doesn’t want to be in a position to be responsible for any economic policy that he would help implement. As the son of a professor, I also hate any professor that is employed by a university but doesn’t teach.

Meridith Whitney is the banking analyst that gets credit for making us aware of the problems on Wall Street back in October 2007. She wrote a harshly critical (but accurate) report of Citi that sparked a chain of events that leaves us here today. Truth be told, Whitney had written reports like this before, so had other analysts and economists. It was simply a matter of timing and media coverage that we actually listened on that particular day. She’s ridden this fame so well she was able to launch her own company in 2008. I don’t hate her so much as I hate how CNBC now treats her as a demigod and feeds her the notion that she may be a more accurate analyst than someone else.

I only have a few favorite economist jokes:

(1) How many conservative economists does it take to change a light bulb?  None. If the government would just leave it alone, it would screw itself in.

(2) Economists have forecast 7 out of the last 3 recessions.

(3) An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.

There are more, but I had to cut myself off.♣

_______________________________________

Next up we’ll be talking with MyLifeROI. You can also catch up on some of the other great interviews with bloggers in this series here:

How To Think Like An “Almost” Millionaire (The Almost Millionaire, May 1, 2009)
The Four Pillars of Wealth (Four Pillars, May 8, 2009)
One-Month Blogging Success Story (ManVsDebt, May 13, 2009)
One Guy’s Road From Stale Money to Fresh Finance (Suburban Dollar, May 22, 2009)
Following the Wealth Pilgrim From Adversity to Financial Freedom (Neal Frankle, May 28, 2009)

In the meantime, if you liked this post, why not sign up (it’s free!) for more updates like this one so you won’t miss any posting of mine – just click on my RSS feed here.  [And if you'd like your story to be featured here, let me know by email or just follow me on Twitter @MoneyEnergy and give me a shout!]

• 8 Ways You Can Start Investing As A Student – Part 1
• 5 Money Lessons You Should Make Sure You Learn While Still in College or University
• What Nature Can Teach Us About Personal Finance
• 4 Tips for Having Conversations with Parents (and Others) About Money
• How To Protect Your Wealth From Hyperinflation

• Link roundup: Looming deadline edition
• Managing Your Finances and Your Future
• Develop Your Financial IQ Series: Chapter 1, Foundation in Financial IQ
• Link roundup: Memorial Day edition
• How To Be A Smart Investor In Any Investment Environment

Tagged as: interviews, Weakonomics, Weakonomist