The Fed Model And The Money Illusion

There are well-dressed foolish ideas just as there are well-dressed fools. – Nicolas Chamfort

Magic, or conjuring, is the art of entertaining an audience by performing illusions that baffle and amaze, often by giving the impression that something impossible has been achieved, as if the performer had supernatural powers. Practitioners of this art are called magicians, conjurors or illusionists. Specifically, optical illusions are tricks that fool your eyes. Most magic tricks that fall into the category of optical illusions work by fooling both the brain and the eyes together at the same time.

Fortunately, most optical illusions don’t cost the participants anything, except perhaps some embarrassment at being fooled. However, basing investment strategies on illusions can lead investors to make all kinds of mistakes.

There are many illusions in the world of investing. The process known as data mining – torturing the data until it confesses – creates many of them. Unfortunately, identifying patterns that worked in the past doesn’t necessarily provide you with any useful information about stock price movements in the future. As Andrew Lo, a finance professor at MIT, points out:

“Given enough time, enough attempts, and enough imagination, almost any pattern can be teased out of any data set.”1

The stock and bond markets are filled with wrongheaded data mining. David Leinweber, of First Quadrant Corp., famously illustrated this point with what he called “stupid data miner tricks.” Leinweber sifted through a United Nations CD-ROM and discovered the single best predictor of the S&P 500 Index had been butter production in Bangladesh.2 His example is a perfect illustration that the mere existence of a correlation doesn’t necessarily give it predictive value. Some logical reason for the correlation to exist is required for it to have credibility. For example, there is a strong and logical correlation between the level of economic activity and the level of interest rates. As economic activity increases, the demand for money, and, therefore, its price (interest rates), also increases.

An illusion with great potential for creating investment mistakes is known as the “money illusion.” The reason it has such potential for creating mistakes is it relates to one of the most popular indicators used by investors to determine if the market is under- or overvalued, what is known as The Fed Model.

The Fed Model

In 1997, in his monetary policy report to Congress, Federal Reserve Chairman Alan Greenspan indicated that changes in the ratio of prices in the S&P 500 to consensus estimates of earnings over the coming 12 months have often been inversely related to changes in long-term Treasury yields.3 Following this report, Edward Yardeni, at the time a market strategist for Morgan Grenfell, speculated that the Federal Reserve was using a model to determine if the market was fairly valued – how attractive stocks were priced relative to bonds. The model, despite no acknowledgment of its use by the Fed, became known as the Fed Model.

Using the “logic” that bonds and stocks are

5 Ways Chase Cards Can Save You Money on Holiday Shopping

Chase cards have several features that can save you big bucks over the holidays, from impressive bonuses to lengthy zero-interest offers.

If you want to keep your holiday spending under control, the right Chase credit card could be exactly what you need. Depending on which card you use, you could get rewards on all your purchases, ample time to pay off your holiday expenses interest-free, and bonuses worth hundreds of dollars.

All you need to do is figure out which offers will be the most valuable for you. To help with that, we’ll go over all the best Chase card offers that can save you money on your holiday shopping.

1. $200 back on your first $500 in purchases

Two Chase cards, the Chase Freedom Flex℠ and the Chase Freedom Unlimited®, offer sign-up bonuses of $200 after you spend $500 on purchases within three months. That’s like getting 40% cash back on the first $500 that you spend.

Not only is this bonus extremely easy to get, it’s also valuable. If you spend $500 or more on holiday gifts, your Chase bonus will save you $200. Even if you don’t spend that much on gifts, you can use your card for other expenses to hit that spending minimum.

2. No interest for 15 months

If you’re a bit short on cash and you want to pay off your holiday shopping over several months, a credit card with a 0% intro APR on purchases is a smart choice. With this type of card, you’re not charged interest on your balance during the intro period.

The two Chase cards mentioned above (the Chase Freedom Flex℠ and the Chase Freedom Unlimited®) also offer 0% intro APRs on purchases for the first 15 months. In addition to scoring a $200 bonus, you could avoid any interest charges if you get your balance paid off within 15 months.

Now, it’s typically a better approach to only make purchases you can pay off in full. But if you’re going to finance any holiday spending, you should use a card with a zero-interest offer.

3. 5% back at Walmart

A special feature of the Chase Freedom Flex℠ and the now-discontinued Chase Freedom® credit card is their rotating bonus categories. If you have either card, you’ll earn 5% back on up to $1,500 of purchases in those rotating bonus categories every quarter that you activate.

From October through December of this year, the bonus categories are Walmart and PayPal purchases.

Walmart, in particular, is an excellent bonus category for the holiday season. You’ll get 5% back on all your gift shopping, both in stores and online. If you spent $1,000 on gifts at Walmart, you’d earn $50 back.

4. 5% back at Amazon and a $100 gift card

Chase’s Amazon Prime Rewards Visa Signature Card is perfect for those who plan to shop for holiday gifts at Amazon.

As soon as you’re approved, a $100 Amazon gift card will be loaded to your account. Your first $100 in

Tech startups run by women of color need funding, money, investments

  • What women of color don’t need is another white person saying “Yes, Black Lives Matter” or “our company rejects racism.” What we need is more investors willing to ask: what can I do to change the system?
  • Dedicating 15% of a venture fund is a platitude, a pat on the head, particularly when you consider that 46% of the country are people of color.
  • This current environment also stifles economic growth and chokes off the true innovation we need.
  • Stephanie Lee is a former staffer to former First Lady Michelle Obama and former product developer at the global brand, MAC Cosmetics.
  • This is an opinion column. The thoughts expressed are those of the author.
  • Visit Business Insider’s homepage for more stories.

Too many women of color are being asked to prove first that our ideas are worthy of investment, while white founders get the benefit of the doubt over and over again. 

What we don’t need is another white person saying “Yes, Black Lives Matter” or “our company rejects racism.” What we do need is more investors willing to ask: what can I do to change the way things are actually run? 

Though the access to investments are especially limited for women of color, female founders in general face challenges that men don’t. A new report on fundraising for women-led startups bears this out. The survey highlights the bias women founders experience, which ironically starts with their pitch decks. 

The study exposes that women-led teams raised 30% less after engaging with investors 23% more than all-male teams. All-male teams also received $18,000 more in investments per meeting. Worse, there were zero — that’s right, zero — all female teams at the series A level — or the first venture capital funding for a startup outside of soliciting funding from friends and family — of investment in the study. All of this points to a dissonance between the makeup of the investment world and the consumers they want to serve. 

Despite these biases, women were the leading force driving the 2008 recession recovery. A 2017 American Express survey found a 164% increase in the rate of Black woman-owned business creation from 2007. The Kauffman Foundation also found that between 2014 and 2019, the number of women-owned businesses grew by 21%, while the number of women of color firms doubled that rate at 43%. Fast Company recently found women-owned businesses boosted job creation at almost seven times the rate of all businesses, and fueled several years of economic expansion.

That same study found that venture capital investment in all-female founding teams hit $3.3 billion, but that only represents 2.8% of capital invested across the entire US startup ecosystem. It also found that fewer than 10% of decision-makers at American venture capital firms are women. 

Those stats smack you in the face when you are a BIWOC (Black, indigenous, or woman of color) trying to raise capital for a brand that is being built with the very intention of serving your peers.


Millennial Money: A new set of shopping tips in the pandemic

Prior to March, shoppers would go to the mall or grocery store — without masks — and scout out the latest sales.

Now, shopping looks much different.

“The way consumers approach shopping has understandably changed as a result of COVID-19,” said Katherine Cullen, senior director for industry and consumer insights at the National Retail Federation, in an email.

“With stay-at-home orders and mandatory store closures, many consumers have utilized digital channels and tools in ways they may not have before.”

As how we shop changes (think mobile shopping and buying online, picking up in store), we have to adapt as shoppers, too.

The best prices and first available inventory go to consumers who are more than just shoppers. They’re also deal-hunting detectives and strategists.

Here’s how to shop smart in the midst of the pandemic.


While some in-demand products, such as hand sanitizer and toilet paper, have become easier to find after initial shortages at the onset of stay-at-home orders, items like disinfecting wipes still aren’t readily available.

To get a shot at any popular products, sign up for in-stock alerts, recommends Saoud Khalifah, CEO of Fakespot, an artificial intelligence platform that analyzes e-commerce transactions and online reviews.

If an item isn’t available, retailers typically offer a field to input your email address. You’ll get notified when the item is restocked and can jump on it right away.

Expand your search, too, advises Charles Lindsey, associate professor of marketing at the University at Buffalo School of Management in New York. He says the first wipes he was able to score were off the beaten path, not at a chain store.

“Diversify your consideration set in terms of the stores where you shop,” he says. That may mean going to mom-and-pop shops or pharmacies instead of grocery stores.

And consult with others. Lindsey says social media networks can provide localized information. Check online sources such as Nextdoor or Facebook to see if any of your neighbors have posted about seeing delivery trucks outside of the warehouse club on a specific day of the week or restocked shelves at a certain time of the day.


It’s also important to avoid overpaying for items, especially as many former in-store shoppers face added expenses, like delivery fees and shipping costs.

If you’re shopping for groceries, avoid delivery to save money, Lindsey advises. Opting for contactless curbside pickup will circumvent some of the fees and tips associated with home deliveries, while still eliminating your time in a physical store.

And there’s no need to overly stockpile, says Andrew Ching, a professor in the Carey Business School at Johns Hopkins University.

At the onset of the pandemic, many consumers panic shopped, buying as much as possible of essential household items. But inventory will come back, so try to stay calm.


You can also learn a thing or two from extreme couponers. These bargain hunters are famous for their thorough research of sales, deals and

GameStop Releases its ‘Ready. Set. Gift.’ 2020 Holiday Gift Guide | Money

Announcesall U.S.storeswill beclosed Thanksgiving Day

Commits tobringing more joy to the worlds of gift-givers by hostingmore pre-Black Fridaysaleeventsthaneverbefore

GRAPEVINE, Texas, Oct. 19, 2020 (GLOBE NEWSWIRE) — It’s the most wonderful time of the year and GameStop is lending a helping hand to assist gift-givers as they begin their holiday shopping with the release of its ‘Ready. Set. Gift.’2020 Holiday Gift Guide. The 60-page gift guide is filled with the hottest video game and pop culture collectibles merchandise that are sure to be on the wish list of all gamers and collectors.

With hundreds of video game software, hardware, accessories, pop culture products, board games, apparel and many other gift ideas listed, the ‘Ready. Set. Gift.’ holiday gift guide is the perfect playbook to help gift-givers navigate through a broad array of merchandise. The holiday gift guide features a complete line of exclusive officially licensed merchandise from many popular franchises, including Star Wars, Pokémon, Marvel, and Fortnite to name a few. Additionally, the gift guide includes a robust list of new video games, including upcoming titles such as Call of Duty: Black Ops Cold War, Cyberpunk 2077, Assassin’s Creed Valhalla, Hyrule Warriors: Age of Calamity and many more, as well as gaming hardware from Sony, Xbox and Nintendo, and an expanded lineup of PC hardware and accessories.

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Dave Ramsey: The love of your life can’t manage money. Should you call off the wedding?

Editor’s note: Money expert Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including “The Total Money Makeover.” His radio show “The Dave Ramsey Show” is heard by more than 16 million listeners each week on 600 radio stations and multiple digital platforms. Each week he answers a question about personal finance in his “Dave Says” column. 

Dear Dave,

My boyfriend lives in a different state, and I’m planning to move there when we get married.


I know I love him, but sometimes he is not what I consider to be responsible with money.

There have been times in the past when he has taken out small loans or paid bills late in order to buy something he wanted.


How can I talk to him about this?


Dear Heather,

If it were me, I think I’d make sure things move a little more slowly in the relationship until he gets his spending under control.

Sometimes when things like this happen it’s just a situation where a person needs to learn the benefits of budgeting and handling money in a mature, responsible way.


You can’t do something if you haven’t been taught how to do it, and hopefully, this is the case with your boyfriend.

You mentioned marriage, so that tells me you’re both taking this relationship seriously—that you’re in the process of making sure you want to spend the rest of your lives with each other.

Bring it up gently, and tell him why you’re concerned. Share your hopes and dreams for the future with him.


You might even offer to help him make out a monthly budget. That way, once he understands the process and value of spending money on paper before the month begins, it will be easier for him to stick to it.

Good luck, Heather!


Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Dave Ramsey Show, heard by more than 16 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.


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Personal Finance: Should I Shop or Save Money in a Pandemic?

Chances are you don’t really need new shoes right now.

Photographer: Rafael Henrique/SOPA Images/LightRocket/Getty Images

You probably want to buy something.

For many households, there is more money at the end of the month. Spending is way down on restaurant meals and entertainment. Excess income over spending is about 14% — up from a 25-year average of 7-8%.

To be sure, online shopping is up. And over the last six months, income-secure households have spent more on sporting equipment (up 29% from last year) and beer, wine and liquor stores (up 22%).

But I am guessing as the pandemic drags on, the boomlet for gardening and home office equipment, furniture, pandemic puppies and other nesting items may wane. You can only buy so many kitchen gadgets. And online buying may be a fleeting relief from the pandemic blues.

But the urge to buy something doesn’t go away. So, if you’re one of the lucky people with a job, enough to eat and a place to live, what should you buy in a pandemic?

First, buy a picture frame. Now print out a bank statement showing you saved money. Put it in the picture frame. Make saving the new status good — flaunt it like a golf club.

Second, satisfy shopping urges by getting anything you want at the thrift store — go wild. Much of the experience will be like regular shopping. You get the same thrill of the hunt. You may not use most of what you buy, but most of us only wear about 20% our clothes anyway. You might as well spend less on the clothes you don’t wear.

Third, buy a book about how advertising manipulates people into buying stuff they don’t need.

Fourth, buy an hour with a fee-for-service financial advisor. A fiduciary, fee-only (not fee-based) financial advisor is legally bound to act in your best interest. Fee-based advisors are not fiduciaries; they receive commissions from the products they sell. A fee-only adviser can only offer products that serve your best interest. One with a Certified Financial Planner (CFP) credential means they have extra education and experience requirements to better address holistic financial needs. Organizations that can help you search for a fee-only advisor in your area include the National Association of Personal Financial Advisors. Robo advisors may help those with limited budgets.

The bottom line is that both robot and person will probably tell you the same thing: Save more.

Look, I know that getting advice to save more has roughly the same effect as advice to eat less. The point here isn’t to produce shopping-shaming to go along with fat-shaming.

And I don’t mean to imply that a failure to save is your fault. Too often,

Giving: Matching gift challenge raises money for Girl Scout STEM van | Local News

STEM van

Girls Scouts will work on STEM activities in this new mobile unit that hits the road Dec. 1.

Girl Scouts of the Virginia Skyline Council is taking STEM on the road with its new Mobile STEM Center.

The Girl Scouts are equipping a $27,718 van for the council’s STEM (science, technology, engineering and math) project.

It is the result of a matching gift challenge in which three anonymous donors, all members of the Roanoke Women’s Foundation, offered matching gifts in the amount of $10,000 to help Girl Scouts close the gap on the Mobile STEM Center project.

Under the project, a $10 donation matched by the donors was worth $20, and a $20 donation was worth $40.

The mobile unit is scheduled to hit the road Dec. 1.

Nationwide, Girl Scouts of the USA has pledged to add 2.5 million girls to the STEM pipeline by 2025. The Skyline Council serves 5,300 girls.

In November 2019, the Roanoke Women’s Foundation awarded the local council a $30,000 grant to launch the Mobile STEM Center, a van outfitted with equipment such as robotics kits, Chromebooks, WiFi and microscopes.

The project’s total budget is $75,000. In addition to the grant funds, individual donors have contributed another $15,000 to the project.

AEP turns scrap metal into donation for Ronald McDonald House

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COVID-19 widens gender savings gap, with women having a third less money

Men now have over £8,000 more in savings than women. (Joe Giddens/PA Archive/PA Images)
Men now have over £8,000 more in savings than women. Photo: Joe Giddens/PA Archive/PA Images

The gender savings gap has widened as a result of the COVID-19 pandemic with women now having a third less saved, research shows.

While the average man in Britain has £24,880 ($32,256) in savings, women have just £16,842 by comparison — 32%, or £8,038 less, according to a consumer study by VoucherCodes.

Just over six months after lockdown was introduced in the UK, the coronavirus crisis has widened the gender savings gap even further, the study found.

More women than men are relying on previous savings to cover essential costs during the pandemic — depleting their already smaller savings pot. Over a third of women (35%) admitted to dipping into their savings over the past six months, compared to just 15% of men.

This figure jumps to more than half (54%) for furloughed women, compared to two in five men on the job retention scheme (40%).

Two thirds (64%) of furloughed workers said the scheme and resulting pay cut has meant they have not been able to save their goal amount each month.

READ MORE: Why women are stereotyped as being terrible with money

Women have seen the biggest hit to their financial security as a result of COVID. Over three quarters of furloughed women (78%) have not been able to save as much money as pre-pandemic, compared to just half of furloughed men.

The widest gender savings gap is among millennials, with women aged 23 to 38 reporting 60% less in savings than their male counterparts — a difference of £16,000.

This is followed by Gen Z, with those under the age of 23 reporting a 47% gender savings gap.

Much of this can be attributed to the UK’s gender pay gap, which currently stands at 17.3%, according to official data.

Just 38% of British women said their current wage is enough to allow them to save their goal amount each month — whereas half (51%) of men said the same.

On top of having the widest gender savings gap, millennials also have the most disparity when it comes to whether their wage allows them to save.

READ MORE: Women take eight months longer to save for first home

Just over a third (36%) of millennial women said they are able to put away the cash they want to each month, compared to over half (55%) of men.

On the other end of the scale, baby boomers have the smallest disparity of any generation, as about half of women (50%) and men (53%) are able to save their goal amount.

Looking ahead, the nation is cautiously optimistic when it comes to predicting whether coronavirus will have a long-lasting impact on their savings, the research found.

Nearly six in 10 women (55%) and men (57%) alike think their savings will be able to recover in the long term.

Earlier in their savings journey, Gen Z-ers predict a tougher time, with just 42% of

This Amazon Prime Day gift card deal gets you free money for holiday shopping

Looking for an Amazon Prime Day gift card deal? Instead of buying something you might (or might not) need with Prime Day deals on TVs, laptops, wearables and more, you can purchase Amazon gift cards now to use at a later date.

The best Amazon Prime Day gift card deal we’re seeing is a $10 account credit when you purchase $40 in gift cards. That means you’ll get $50 in Amazon cash for the price of $40 for future use. With Black Friday deals quickly approaching, you could find yourself appreciating that extra $10 when it comes to securing holiday gifts.

Buy $40 in Amazon gift cards, get free $10 credit
When you buy $40 in Amazon gift cards during Prime Day, you’ll be rewarded with an additional $10 in credit. Whether you gift the gift cards themselves, or use your Amazon dollars towards buying gifts online, you’ll have $50 instead of $40.View Deal

When you enter the code GC20PRIME at checkout with $40 or more in Gift Cards to your cart, your $10 promotional credit will be applied to your account. 

Amazon says you should see the credit within two days after the gift card purchase is completed; or, in the case of physical gift cards, shipped. Although this means you won’t be able to use the credit towards Prime Day, which ends at on October 14, you’ll have it for future purchases.

Sadly, this offer has a limit of $10 promotional credit per Prime account, so you won’t get more credit if you buy more gift cards. On the bright side, if the Prime Day deals under $10 we’ve seen are any indication of what’s to come during Black Friday/Cyber Monday season, the credit will certainly come in handy.

Prime Day isn’t over yet. We’re tracking the best Prime Day laptop deals, best Prime Day TV deals and best Prime Day phone deals around-the-clock. Keep it locked to Tom’s Guide for the latest sales and discounts.

Shop all Prime Day sales at Amazon

  • Amazon devices: save on Fire TVs, Alexa speakers, Kindles
  • Apple AirPods: was $249 now $199
  • Beauty deals: deals from $4 on Revlon, Maybelline, more
  • Bedding & bath: deals on comforters, shower curtains, more
  • Clothing: save on Calvin Klein, Dickies, Timberland, and more
  • Echo Dot: was $49 now $18 
  • Echo Show 5 w/ Cam: was $124 now $49
  • Fitness: save on Gaiam, Bowflex, Nautilus, and more
  • Furniture: deals on office chairs, nightstands, and dressers
  • Google Pixel 4: was $799 now $449
  • Halloween decor: deals on costumes, candy, and decor
  • Headphones: deals from $8
  • HP Chromebook 11: was $285 now $255
  • TV sales: deals from $79
  • Laptops: save on MacBooks, Chromebooks, and Windows machines
  • Lego toys: up to 30% off Lego sets
  • Mattresses: deals on Casper, Tuft & Needle
  • Office chairs: deals from $39
  • Pet food/supplies: up to 40% off food and treats
  • PS4 2TB Seagate Game Drive: was $110 now $65
  • Snacks: up to 35% off Quaker, Starbucks, Lay’s, and more
  • Snow boots: save on