Do Better Informed Investors Always Do Better?  
The answer is no (if you’re betting on horses). The horse sense in New Zealand is that only those horses sold at auction can compete in the high stakes races–so if you’re a breeder and hope to make race money you offer your horse for sale. If you feel your horse will be a winner you can always buy it back, and many owners do. After all, who knows more about a horse’s potential than the owner? But here’s the rub–the owners that buy back their own horses do 30 percent worse in winning future races than an outsider randomly picking a horse. You would think the owners would do much better since they have insider knowledge, but they do far worse. 

The study’s authors are perplexed by this. The only answer they can come up with– and they agree it sounds banal–is that having a little knowledge can be dangerous.¹

Keeping Up With Joneses
A recent study says that consumers engaging in relative instead of absolute consumption can become financially vulnerable due to the neighbor effect. In other words, keeping up with the Joneses by buying a bigger car or taking a trip to the Riviera instead of Florida because the neighbors did can squeeze the pocketbook of people that can’t afford it. But the study also finds that the neighbor effect is a big driver of our economy and would harm the nation if we all stopped trying to one-up one another.²

Be Happier–Eat Your Veggies
A new study concluded that eating eight daily servings of fruits and vegetables makes one happier–a lot happier. Indeed, it created the same degree of happiness as getting a job when you’re unemployed. Over time those that had the recommended daily servings reported they were far happier than those that didn’t.³

Read Your e-Disclosures (or You Might Wind Up in England)
Birdwatchers on England’s east coast were surprised to see a large truck with Turkish license plates coming down their narrow pedestrian lane. Three days earlier the confused truck driver had set his GPS and headed off from Istanbul, failing to notice that the GPS was set to Gibraltar Point, England, and not where he wanted to go which was Gibraltar on the south coast of Spain. A recent study has found most of us simply click through to the next screen when a yes or no question is asked, rather than reading the material. Indeed, they estimate that less than one percent of people read e-license agreements and simply agree to the terms.⁴

Going to Trial? Hope Your Judge’s Football Team Won.
You’re more likely to get a favorable ruling from a judge if his football team won last weekend–and your mortgage application is more likely to get approved as well. If you’re running for office a home team victory just before the election adds an average 1.5 percent to the incumbent’s voter tally.  It also appears that wins create more goodwill than losses give rise to bad will (however, there is a short-lived increase in bar fights when the hometown team loses in an upset). For agents, the takeaway is: If you have a very important Monday sales appointment and the local team was defeated, you might want to reschedule.⁵

How much does $1 million (U.S.) weigh?

• 2.5 pounds in CHF 1,000 Swiss franc notes.
• 4.5 pounds in € 500 Euro notes.
• 22 pounds in U.S. $100 bills.
• 149 pounds in India 1000 rupees paper.
• 36 tons in Venezuela 100 bolivar currency.
• (Derived from The Economist, 24 December, 2016).

References:

1. G. Boyle & G. Ward. 2016. “Do Better Informed Investors Always Do Better?” WP No. 29/2016.

2. R. Barnett et al. 2016. “Do the Joneses Make You Financially Vulnerable?” Drexel University. WP 2016-11.

3. R. Mujcic & A. Oswald. 2016. “Evolution in Well-being and Happiness after Increases in Consumption of Fruit and Vegetables.” Warwick Economics Research Papers 1128.

4. Y. Roth, M. Wanke & I. Erev. 2016. “Click or Skip: The Role of Experience in Easy-Click Checking Decisions.” Forthcoming in the Journal of Consumer Research.

5. R. Janhuba. 2016. “Do Victories and Losses Matter? Effects of Football on Life Satisfaction.” WP 1211-3298. Center for Economic Research and Graduate Education. 

Jack Marrion

Jack Marrion provides research and consulting services to insurance companies and financial firms in a variety of annuity areas. He also serves as director of research for the National Association for Fixed Annuities and as a research fellow for Webster University.

In 1994 he wrote a book to help banks market investment and insurance solutions to their small business clients. In 1996 he produced the first independent hypothetical return monthly publication comparing all index annuities on the market, and in 1997 created the first comprehensive report of index annuity sales, products and trends, “Advantage Index Product Sales & Market Report” (quarterly).

His insights on the annuity and retirement income world have appeared in hundreds of publications. In 2006 the National Association of Insurance Commissioners asked him to address their annual meeting and teach regulators the realities of index annuities. He was invited back in 2009 to talk to the NAIC about the effects of aging on senior decision-making. He is a frequent speaker at industry functions.

Prior to forming Advantage Com­pen­dium, Marrion was president and owner of an NASD broker/dealer with offices in nine states. Previous to that he was vice president of a life insurance company and vice president of an NYSE investment banking firm. He has a BBA from the University of Iowa, an MBA from the University of Missouri, and a doctorate from Webster University.

Marrion can be reached at Ad­van­­tage Compendium. Telephone: 314-255-6531. Email: ­marrion@advantagecompendium.com.