Portfolio - "Update"

I've done a few things to my portfolio. When a CD came due, rather than roll it over, with interest rates on CDs not as good as dividends for the kind of quality stocks I own, I added more shares of some stocks I already owned and added stocks of Johnson & Johnson (JNJ) and Walgreens (WAG). I added JNJ because it was now selling for much lower than I had previously sold it at and it remains a quality company with a nice dividend which is raised annually, plus it has a super great balance sheet. WAG, I have never owned, but have always wanted to if the dividend was in the range which is acceptable. Now it is, also with a pristine balance sheet and a policy of raising dividends generously each year. So, now with my kind of stocks generally paying more than CDs, stocks now make up about 23% of my assets - higher than my usual goal of about 15%.

Plus, I have sold the shorter term TIPS I owned since they were at a profit and reinvested the funds in longer term TIPS which I was able to buy below par, so I was guaranteed a profit with them, plus they offer protection against future inflation. Plus, some of the profit from the TIPS I sold, I used to buy more shares of the stocks I own.

Stocks are listed in order of largest position to least:

KMB (Kimberly Clark)
PG (Procter & Gamble)
MMM (3M Corp)
PEP (Pepsico)
KO (Coca Cola)
SYY (Sysco)
KFT (Kraft)
ADP (Automatic Data Processing)
T (AT&T)
GPC (Genuine Parts)
BMY (Bristol Myers Squibb)
JNJ (Johnson & Johnson)
WAG (Walgreen)

My major asset remain CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home, especially in the areas which were first to collapse during this Housing decline. I also own US Treasuries, about 6% of my assets. Right now I own inflation protected ones (TIPS). The ones I hold are...

2028's

I like them because they protect both against deflation and moderately against inflation. I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.

The "Joseph Oppenheim Specu-Vestment."

It is possible to speculate with stocks, yet at the same time invest in them. I am an investor - investing being buying stock in a company I would like to own fully if I could, which deals in products or services used all the time. And, the company must pay a good dividend and has a record of raising it each year. As an investor, I don't want to speculate - speculating being hoping for a short-term profit based on the price of a stock rising. But, there is a way to speculate, without really speculating. That is, by buying a stock I would be content to hold long term, no matter what it does in the short term, but I suspect there is an opportunity for a short term gain. So, if I buy the stock and it goes up quickly, I can sell and take a quick speculative profit. However, even if I am wrong about the short-term, worst case is I have just bought some shares in a stock I am content to hold long term at what I think is a good price. It is win-win and what I call a "Joseph Oppenheim Specu-Vestment." Note, that this also includes what I have termed previously, the "Joseph Oppenheim Kicker Theory" to investing - that is by buying a stock which has both a short term price gain potential and is also a long term investment quality - buying a stock at a time when it also has an extra kicker - a speculative one..

This is the only way I think speculating is OK, and like I say, is also an investment if the short term gain doesn't happen.

The "Joseph Oppenheim Kicker Theory" to Investing

For everything in life, including investing, I always look for what I call a "kicker," something extra which increases the chances for success and/or reduces the chances for failure, or just adds something beyond the main goal(s). Let's say you are looking for a job. Maybe one pays less but is located where people come to vacation - with many fun things to do and great weather - I would say it has a kicker. Same with investing. Some investments protect against inflation, some against deflation, but there are also some which protect against both even if the don't offer bigger rewards. This "kicker" is really a built-in hedge or diversification. I like the word, kicker.

For instance, let's say I want an investment which will protect me against deflation, but in case I am wrong and the opposite happens, inflation, then I can also win. This would be different that just buying a hedge or diversifying. Hedging and diversifying are also important tools, however, if one can essentially find the equivalent already built into the investment or decision, that is a "kicker" and in my opinion makes for a better investment.  So, in the case of such an investment, like a higher rate long-term Certificate of Deposit (CD) would be a protection against deflation, however if the CD has a low or reasonable early withdrawal penalty, one could always easily exit the CD and open a new one with a higher rate at a minimal cost, if inflation happens and interest rates unexpectedly go up significantly.

Another example. when selecting a stock, first I look at it as I would in buying a business, essentially shares of a company I would like to own completely if I could. So, thinking along that line, I would want a businesss which would do well no matter what happens with the economy. That would lead me to a company providing some kind of low-priced staple or service which people need all the time.

Another example, I always recommend investing in quality assets, be they stocks, bonds, etc. Even though potential rewards might be less than with riskier assets, there is always a premium paid for quality and due to unforeseeable situations, it might be difficult to dispose of a non-quality asset. So, in such a case, I call quality a kicker. Another case, CDs come without paying a commission, again, a kicker. Same with buying a home, look for a kicker -like it can be also used as a vacation home, etc

Sure, some might want to speculate and thereby obtain a greater return if one is right, that is by taking greater risk, but that is where I separate a speculator from an investor and I only want to think of myself as an investor, that is building in some protection while not getting greedy. Greed is not good and speculation and greed seem to go hand in hand.

Comment on the Economy - "America's Economic Crossroads"

It is a little past the middle of 2010 and we are in what has been called, "The Great Recession," since the end of 2007. Thus far, we have rebounded from the extreme panic which began in 2008 and bottomed in March of 2009, but recently some indicators suggest that we might be on the cusp of a "double dip" recession which could turn from recovery to some severe nastiness. Indicators are the weakness of some European economies, signalling hardship for Europe which could threaten demand for US exports and other assets like US securities, etc. And, there is concern for US government debt levels which could threaten the US currency and the US's ability to issue debt to finance further economic recovery. Plus, US unemployment remains  a concern, with the economy not creating enough jobs, especially by private employers.

So, I say, we are at an economic "Crossroads." I think the most important indicators to watch to see where the US goes from here are 1) The US stock market - I use the Dow since it has been around longer than the S&P and does track the S&P pretty accurately anyway, and 2) The US bond market - I like to most watch the 10-year Treasury Bond interest rate.

As for the Dow, after rebounding to about 115000, it recently declined to around 10,000, an acceptable profit taking from the recovery rally, but further deterioration from there could cause real worry.

As for the Bond market, 10-year Treasuries have an interest rate of about 2.70, which is cautionary of upcoming weak economics, though there is strong demand for the bonds, hence a somewhat healthy sign still for the US economy. So, both stocks and bonds each indicate some good things, but also some worry - in effect the "crossroads" I mention.

It looks like this crossroads will likely be resolved in one direction or the other with the upcoming Congressional elections in November. The way I see it, with the economy still deleveraging (the removal of private debt - foreclosures, bankruptcies, etc), there is no immediate risk for the government to take on more debt as long as the money is well spent. By well-spent, I mean things which are investments, which eventually return more than they cost. Things like education, healthcare, infrastructure, and energy efficiency. So, for sure we should not lose jobs which work in that direction, hence the federal government should help state governments so as not force them to layoff such workers or cut such programs.

Since the indicators I mention are still positive from the depths of the Recession, it does seems Obama and Democratic leadership in Congress can be judged as successful, albeit modestly. Plus, it seems other than a few Republicans, most have been working against the President and Democrats actually hoping they fail, that is America fail. And, what almost all Republicans propose is exactly the opposite which the economy needs now, like I mention above.

Yes, the deficit and national debt are problems, but not right now. And, like I say with the stock and bond markets up from the end of 2007, that should mean improved government tax revenues in 2011 as long as they remain healthy for the rest of the year. So, as for our government debt, all that is necessay now, is to come up with a plan to lower it, and there is a bi-partisan committee chartered with that, in place now.

So, we are at a crossroads and much is to be determined with the November elections and anticipation of what the results might be. Plus, the stock market does usually experience stress in September and October.

My Review of "The Communist Manifesto: A Modern Edition"

The reason I wanted to read The Communist Manifesto now is that I don't remember reading it in school and this current financial mess, called the Great Recession, seems at its core the result of greed gone wild, underpinned with our system of capitalism which seems to have in it the very incentives to bring on this excessive greed. So, I was hoping this book would give me some meaningful thoughts with which to further have clues to the way things might play out during this financial mess including the political ramifications. And, from what I do know about Marx, I suspect what happened here is something he had thought out, in a general way, many years before. The Manifesto and the book's foreword cover things like......

 

1. 1847, Marx and Engels joined the League of the Just (renamed the Communist Party) with its object to overthrow the bourgeoisie with rule by the proletariat and a new society without classes or private property.

 

2. 1871, Civil war in France - Marx defended it and it then gave him notoriety as a dangerous leader of international subversion and feared by governments.

 

3. Over the next 40 years the Manifesto conquered the world and carried forward a rise of new (socialist) labor parties. None were called Communist until the Russian Bolsheviks. Mostly in central Europe to Russia. Small in SW Europe.

 

4. When a major state (Russia) represented Marxist ideology, the Manifesto became a  text in political science and still remains so.

 

5. It was written for a particular time in history

 

6. Marx and Engel's Communist Party was not an organization - more of a historical document.

 

7. Two things which gave the Manifesto its force - a) the vision that capitalism was not permanent/stable, b) The revolutionary potential of a capitalist economy.

 

8. We live in a world where this transformation has largely taken place.

 

9. Capitalism can't provide a livelihood for most of the working class.

 

10. There will always be the oppressors (capitalists - bourgeoisie) versus the workers

 

11 The Bourgeoisie has stripped all occupations down to paid workers.

 

12. The need for constantly expanding market for its products means ultimately global.- effecting even a world literature, cheap prices - will make all nations bourgeoisie.Eventually overproduction leading to barbarism because of too much civilization. The proletariat/workers  become mere appendages and lose all character. Brings more collisions between societies and trade unions will flourish. The worker groups get bigger and more powerful through education provided by the bourgeoisie. Other classes except the proletariat will decay.

 

13. Wage labor rests on the competition between laborers. Communists flourish independently of national borders.

 

14.Communism abolishes bourgeoisie property, no big deal since 90% of private property belongs to the bourgeoisie. Small peasant property is destroyed daily by industry. Average wage of laborers is the minimum wage, just for subsistence. Education is rescued from the influence of the ruling class. Since family is a bourgeoisie thing affirmed by property, family is destroyed - children are transformed into simple articles of commerce and instruments of labor. Working men will have no country. Communism's desire is to abolish countries and nationality. National differences and antagonisms will vanish. External truths like freedom and justice will be common to all states. But, communism will abolish eternal truths like religion and morality - a new basis. Communism will raise the working class to the ruling class.

 

15. Specifically, communism will:

    a) Abolish property in land and application of all rents to public purposes.

    b) Abolish inheritance.

    c) Confiscate property of emigrants and rebels.

    d) Have a national bank.

    e) Centralization of communication and transportation by the state.

    f) Factories and instruments of production to be owned by the state.

    g) Combine agriculture and manufacturing so there will be no distinction between town and country.

    h) Free education.

 

So, I would say the Communist Manifesto, though really just applied to a time in history and times have surely changed quite a bit since then, but I would also say what it was concerned about also shouldn't be ignored when trying to understand the current economic stress we are in. Our capitalism, though obviously very successful especially in many respects, does show strain in the following areas, as Marx could have likely anticipated like a) the gap between the well-off and the poor and even middle-class has dangerously widened such that our political divisions reflect that and has turned more heated and split, making compromise among our politicians very difficult - hard to govern the country efficiently. b) He warned that the bourgeoisie (today's well-off) has been unable to effect the tools to elevate everyone enough, judging by our failing infrastructure, healthcare costs the highest in the world, etc. c) He anticipated the global impact, ever searching for the least cost workers, such that our manufacturing workers are left without jobs. We can even see this global force in our illegal immigration problems - workers from Mexico, etc coming here, somehow even breaking down our borders - something Marx  apparently could see. I did leave off some other things in how the Manifesto was relevant now, in this short paragraph, but from the points, above, it can be seen there are others.

 

In conclusion, I give the book 5 out of 5 stars. It is a short enough book and just its impact has been monumental in history, it is worthwhile to keep in mind as one tries to figure out what might come next from this Great Recession.

My Review of "The Big Short."

The book, by Michael Lewis, is very good at detailing the situations and characters involved in the financial mess caused by the recent housing bubble and how a few people anticipated it and bet big on it happening.

The book starts with a quote by Tolstoy about the importance of being open-minded in order to understand complex things and being close-minded keeps someone from understanding even simple things. The author was amazed how in the mid 1980's, Salomon Bros. would pay him good money, a 24 y.o. with no clue. Yet, he figured out then that the big money was made in the bond market not stocks, leading up to the junk bond collapse in the 80s. He then wrote about it, and here it was essentially happening all over again with the bond people. CEO's knew nothing of the risks their bond traders were taking. He hoped bright college students would avoid Wall Street, rebel against it and just pursue what they loved. But, no, the financial system would again be discredited. He then goes into these key things in this mess like:

1. Meredith Whitney, then an obscure analyst at Oppenheimer & Co, with just a BA from Brown who studied English, said Citicorp was so mismanaged it would cut its dividend or go bust. The so-called experts were still not acknowledging the risk in the sub-prime mortgage market - not that they were corrupt, just stupid. She was trained by Steve Eisman who also gave her a world view - how to see the big picture when analyzing stuff. She read about John Paulson, a hedge fund manager, who made big bets against the bonds and there were a few others. Eisman, U. Penn and Harvard, but also yeshiva trained and loved the Talmud because of its contradictions - he had the mind set to look for investment contradictions. He saw Wall Street going where it never went before - into the debts of ordinary Americans - cash flow from pools of mortgages - the only risk back then was of borrowers paying off soon, but never not at all. So, this new market, never really tapped into to such an extent, homes, and let less credit-worthy people to buy homes, but the real risk was in letting them cash out and refinance to get more money, basically a fast buck business with the issuers of the mortgages just selling them off and not caring what happened long term. Society had changed, with incomes more skewed, more wealthy and more struggling - so this was a way to let those left behind in the economy to prosper, even feel wealthy - letting them borrow easily. Oppenheimer was getting into this new market. Eisman needed Vincent Daniel, from Queens and SUNY Binghamton whose father was murdered - so different roots, to parse data. Found that delinquency rates were hidden, only profits from prepayments were visible.

2. 1997 Russia defaulted, 2002 Eisman saw HFC was a fraud - tricking customers on interest rates, Eisman was aware of ACORN -was a Republican until he saw an entire industry, consumer finance, existed just to rip people off.

3. By 2005, 75% subprime loans were floating rate, fixed for just 2 years. Long Beach Savings was the first to get into this, soon followed by big WS banks - run by the bond departments.

4. In 2004, Michael Burry got into them, seeing decline in lending standards, but hard to short, then he discovered Credit Default Swaps (CDSs). Charlie Munger gave lecture about the "psychology of human misjudgment."

5. 2ndQ 2005, credit card delinquencies at all-time high, but home prices continued going up. Hallmark of a bubble/mania/fraud.

6. AIG on the other side of the bet, issuing the CDSs. Goldman created the CDO and synthetic CDOs which had in them CDSs. Home prices didn't need to fall, just not go up as fast. Tom Fewings, the first in AIG to spot trouble - when seeing WSJ article on New Century. Joe Cassano, head of AIG FP didn't think home prices would fall, at least not nationally, all at once - eventually did change his mind, but still exposed. Mid 2006 home prices began to fall.

7. FICO scores had blind spots - didn't acct. for people's income, could be rigged by getting a new credit card and paying off right away, no differerence between "thin file" and "thick file" borrowers, teaser rates hid risks, averages were used for pools of mortgages which hid the amount of low FICO scores of those who should never have been given mortgages, "silent seconds" allowing borrowers to have no equity in their home.

8. Few used CDSs as outright bets against housing, most were used as hedges while still hoping for the bonds to work out. Exceptions were those who listened to Greg Lippman's pitch, like John Paulson. Paulson/Eisman/Burry understood the risk. Ledley/Hockett/Mai just bet on the least likely possibility - their strategy. Rule of thumb - buy homes when price equal or less than 10X rent and sell when 20X.

9. Names and acronyms hid risks - CDOs not called subprime backed CDOs, but structured finance CDOs, RMBS, HEL, HELOC, ALT-As were just no-doc crappy loans, Rockridge community not called Oakland so homes would sell for more. Actually, 80% of a CDO was overrated, so even better to bet against the higher tranches, since the CDS would be cheaper but the same likelihood of default.

10. Wing Chao, called a CDO manager, which were essentially front men for WS firms, could collect bigger salaries and imply they actually studied the CDOs.

11. Rating agency people were underpaid- should have been paid more to attract talented people - they just made their money by collecting fees for each rating, so just pushed them through quickly. Like a Ponzi scheme - more morons than crooks, but the crooks were higher up. WS just propped up CDO prices while it could - fraud was rampant - neither the WSJ nor SEC was interested.

12. Now Bear Stearns at risk. Merrill had advised Orange county before their bankruptcy, was in the middle of the Internet bust, 80's bond market bust, so naturally they would be in the middle of this.

13. Jim Grant couldn't figure out CDOs then realized that was the story to be told.

14. When Goldman got into the bet against CDOs, then CDOs began to tank. 4/2007 New Century went bankrupt. BS leverage 40:1,Lehman & ML 32:1, Morgan Stanley & Citicorp 33:1, GS 25:1. Only a slight decline could bankrupt them all. 9/2008 Lehman went bankrupt, ML $55B loss - sold to BA. WS firms were the dumb money, CEOs stupid. Bear Stearns Chioffi and Tannin arrested.

!5. It was greed, sure, but more the incentives which channeled the greed. Then, the people who didn't see it happening were the ones to clean it up - H. Paulson, Geithner, Bernanke,etc. Then H. Paulson engineered the $700B bailout of the worst culprits.

An important book, the only criticism I have is that it could have been shorter, but I guess the author did want it to read like a story and illuminate some specific personalities, which will probably make the book easier to make into a movie.

4 out of 5 stars.

My New Book is Just Published - "Become a Private Investor"

It's available at Amazon.com.

Portfolio - "Update"

I've added a position in AT&T (T) to my stock portfolio. The stock pays a high dividend (about 6.5%) and raises it annually. With a PE of around 12 and the price having dropped recently, it was very attractive. Stocks represent about 15% of my investment portfolio.

Listed in order of largest to smallest holdings:

KMB (Kimberly Clark)
PEP (Pepsico)
PG (Procter & Gamble)
MMM (3M Corp)
SYY (Sysco)
KFT (Kraft)
ADP (Automatic Data Processing)
KO (Coca Cola)
BMY (Bristol Myers Squibb)
T (AT&T)
GPC (Genuine Parts)

My major asset remain CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home, especially in the areas which were first to collapse during this Housing decline. I also own US Treasuries, about 7% of my assets. Right now I own inflation protected ones (TIPS). The three I hold are...

2015's
2013's
2028's

I like them because they protect both against deflation and moderately against inflation. I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.

My review of "Drive"

"Drive" is an excellent take on what motivates people in modern society compared with times past. Things it covers are:

1. A couple of decades ago rhesus monkeys solved a puzzle without a reward of food, water or sex. They began playing with it and solved it, implying a thrid drive - some intrinsic reward. They even made more errors when an external reward was used - raisens. Then, more recently similar results were found in an experiment (a Soma puzzle) with humans, implying humans also have this third, intrinsic, drive - for novelty, challenge, with scientific proof counter to what business usally does to motivate workers.

2. Like computers, societies have operating systems - a) Motivation 1.0 - in older times just for survival, b) Motivation 2.0 - the industrial revolution led to rewards and punishments, carrots and sticks to motivate workers, c) Motivation 2.1 - some refinements like flex hours and casual dress, d) Motivation 3.0 - purpose driven rather than monetary compensation - think Wikipedia versus Microsoft's Encarta encyclopedia, Firefox, Apache web server, Linix. Strongest motivation - enjoyment. Vermont - first state to implement a new business organization, "low profit limited liability corporation" with purpose maximized rather than profit.

4. Behavioral economics shows people motivated also by irrational motives. US census showed many non-employer businesses. Financial rewards can turn play into work - reducing performance, loss of creativity. - the Sawyer Effect.

5. Extrinsic rewards can work for left-brain algorithmic tasks, but not for right-brain flexible problem-solving, creative solutions - can lead to bad, even unethical behavior and sort-term thinking like what led to the recent Great Recession - too much pay caused epic problems. Goals which lead to mastery are good - rewarding the activity better than rewarding the result.

6. Rewards best if unexpected, not if-then but now-that.

7. Self Determination Theory (SDT) - Type I person - 3 needs of a Type I person: a) autonomy - over 4 T's - task, time, technoque, and team, b) mastery - a flow - 3 laws to get in the flow - mindset, pain, asymptote - getting closer and closer to perfection but never reaching it, c) purpose - words are important like having an oath, when an employee says "we" rather than "they" for the company.

8. Toolkit for a Type I person - a) flow test - one sentence for a person like freed the slaves for Lincoln, b) small question - like was today better than yesterday, c) take a "sagmeiter" - a sabbatical like every 7 years - do something different like travel, d) do annual personal performance reviews, e) get unstuck by going oblique - by pushing out of a mental rut, f) move 5 steps closer to mastery - deliberate practice, g) 3x5 cards with question/answer to give meaning to each day, h) create your own motivational poster.

9. Nine ways to get your organization to be Type I - have 20% free time, encourage peer-peer now-that rewards, conduct an autonomy audit, take 3 steps to giving up control, play "whose purpose is it?", Reich's pronoun test - we or they, design for intrinsic motivation, Goldilocks for groups - not too easy, not too hard tasks, turn offsite into "FedEx day."

10. Type I compensation - get it right then get out of sight. Ensure internal, external fairness - harder job gets paid more, etc. Pay more than average.

11. Tips for parents on how to motivate kids: homework - autonomy, mastery, purpose, have a FedEx day, Do It Yourself (DIY) report cards, don't combine allowances and chores, praise strategy and effort not IQ, let kids see the big picture of things.

Overall, this book is very insightful and an easy read - recommended - 5 out of 5 stars.

My Review of "SuperFreakonomics"

As a sequel to "Freakonomics" this one is fine, with some insightful behavioral economic thoughts like:

1. A drunk walker is eight times more likely to die than a drunk driver, on a per mile basis.

2. Lower birthrate in India when cable TV introduced because of more autonomy of women.

3. Negative externalities using horses for transportation, too much manure and accidents, led to more modern form of transportation. Title 9 for women's athletics led to more male coaches of women's teams.

4. Averages can be misleading because the "average" person has one breast and one testicle, but a good place to start. People are more scared of sharks than elephants yet elephants kill many more people per year than sharks.

5. Expert performers are almost always made, not born, so best to work at what you love since likely you'll worker harder at that.

6. Terrorists are less likely to come from poor families.

7. "Cognitive drift" can lead to many errors, because people can become distracted easily in just a few seconds.

8. Women ER doctors generally are better than men.

9. Nobel Prize winners live longer, so do baseball Hall of Fame members. Also, do annuity buyers because of incentive to collect more.

10. Chemo for cancer is questionably effective.

11. TV watching increases crime - any kind of TV programs.

12. Humans are naturally altruistic, but affected by context, like when being under scrutiny.

13. Law of unintended consequences is very powerful, Seemingly good laws many times lead to the opposite happening more.

14. Simple and cheap fixes are more frequent than one might think. Ammonium nitrate most responsible for feeding the world. Polio vaccine to conquer polio. Car seat belts to save lives. Book offers some possible simple ways to stop bad hurricanes (send some surface warm water down deep) and solve global warming (send sulfur dioxide high in the sky). Don't have doctors wear ties - ties hardly ever cleaned, have doctors follow good hand hygiene in hospitals.

15. Capuchin monkeys can be taught to use money, hence basic economic laws hold for them, also like humans show irrational economic behavior like favoring loss aversion even if it isn't the wisest choice.

If the book is not as rigorous in its proof of assertions, that is OK with me, as it is an easy read and made me think a little deeper about some subjects worthy of deeper thought.

4 out of 5 stars.

My review of "Predictably Irrational"

This is a behaviorial economics book by Dan Ariely, I listened to the audiobook, which looks at how we are predisposed in certain situations to make irrational choices like:

1. When people are given a third choice, a different version of one of two similar choices, the person will likely chose the choice with two options, like a trip to Paris with or without a free breakfast or Rome with a free breakfast, the person would likely chose Paris simply because the two choices of Paris predisposes the person to thinking of Paris. So, sometimes just adding a more expensive version of the same product will cause more of the product to be sold.

2. Creating a new "anchor" can change the attractiveness of something, like Starbucks creating an attractive ambiance of its shops can make people want to pay more for coffee than at Dunkin' Donuts. Or, when a person moves from a city with inexpensive homes to a city with more expensive ones, the person is conditioned to buy a smaller home because he/she is 'anchored' to a certain price range. The same thing can work in reverse, affected by the particular 'anchor.'

3. Social versus market norms can affect choices. People sometimes are likely to do more work for free if for a social cause, rather than being paid. Sometimes small gifts work better than more expensive ones, because they keep the relationaship more social and less market-driven. The implication is important as companies have become less generous with creating a family atmosphere with free healthcare and other things like free lunches, company picnics, etc workers likely will feel more dedicated and work harder.

4. Ariely shows how sexual arousal alters a person's think so he/she will act less rational.

5. The book also looks at procrastination and how just having a person set his/her own deadlines works better than having no deadlines.

6. Ownership cause people to value something more than not owning it. That's why trial offers and money return guarantees work well.

7. The book covers the placebo effect and why a 50 cent pill might be more effective than the same one costing $2.50.

8. Thje book covers cheating and why simply having people contemplate the morality of doing something predisposes the person to be more honest - like saying, you know we use the honor system here or asking them if they can list the Ten Commandments even if they make mistakes in doing so. Also, context can affect cheating. People are less likely to steal cash than when someting which is removed from actual cash, like pencils at work, getting stock options at work when acting unethically, etc.

Overall, the book amplifies how human psychology must be considered in economics and how we are conditioned to make economic choices sometimes irrationally and in doing so is worthwhile in making a person think a little deeper about some things which have economic consequences.