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  • Click Fraud = Friction for Google

    Fraudulent web click are friction in Google’s business. Fraudulent clicks ad costs to the system without a benefit to the performance of the system. Google’s profit is derived from improving the system (of finding customers for advertisers) and taking a cut of the profits that their system creates. Google makes a great deal of money because their system of matching advertisers with dollars to spend to customers. Google does this through ads on their search results pages and on third party web sites. Google engineers will do whatever they can to find ingenious ways to reduce that friction.

    There have been many stories over the last few years about click-fraud. But none I have seen explain the simple idea that Google is the company with the most to gain by eliminating it (and Yahoo next). They often point to companies suing Google about fraudulent clicks instead.

    Companies like Google run ads on web sites and charge the advertisers for each click (anywhere from a few pennies to several dollars for each click). Advertisers want to get potential customers when someone clicks on their ads, obviously they don’t want to pay when there is no chance the “visitor” is going to become a customer. Obviously, fraudulent clicks are bad and those that engage and encourage such behavior are acting unethically and immorally and should be stopped and punished.
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  • Cash Flow

    We will be posting messages on various terms and concepts in investing and economics. Here we offer some information on cash flow.

    Earnings per share include many adjustments to reflect the standard accounting wisdom, beyond the cash taken in and spent by a company (depreciation, expensing options, expensing long term investments over the expected life, writing off inventory…). Cash flow is a measure that tries to more closely measure the increase (or decrease) in cash for a company over a period of time.

    An advantage of looking at cash flow is it is more difficult to distort than earnings per share (though it is still very possible). A disadvantage is that standard accounting practices exist for a reason and often give a better picture than a simple view provided by the cash flow. Therefore cash flow is normally useful in conjunction with the earnings statement – not instead of.

    Operating Cash Flow attempts to eliminate such non-operations impacts (like selling or buying stock) and give a cash flow figure for the operation of the business. Free Cash Flow is equal to “operating cash flow” less “net capital expenditures.”

    Like many accounting terms, cash flow is more complex in execution than it seems but this gives you a start on understanding cash flow.

    More from the Curious Cat Investing Dictionary on Cash Flow

  • China Exports Exceed USA Exports

    You might think that China has been exporting more than the USA but you would be wrong. As Brad Setser discusses in, China tops the US — at least in the goods exporting league table, in August (which is a bit misleading – USA exports are seasonally adjusted, China’s are not) China exported more than the USA. He predicts that next year China will export more than the USA for the first time.

    Suffice to say that if you asked me in the fall of 2004 if Chinese exports would be growing at a 30% y/y rate in the fall of 2006, I would have said no. And if you asked me in the fall of 2004 if China could double its reserves – China will soon reveal that they have increased from around $500b at the end of q3 2004 to about $1,000b at the end of q3 2006 – and also bring its inflation rate down, I would have said no.

    That calls into question my credibility. China has a great capacity to surprise.

    He is right, China continues to surprise. However, don’t forget that the USA is still by far the largest manufacturer in the world (more than double China). And Japan still manufactures more than China too (though that is probably getting very close).

    Related: Manufacturing Value Added Economic Data – Manufacturing Jobs Data: USA and China

  • Washington Paying Out Money it Doesn’t Have

    Aid Is a Bumper Crop for Farmers

    The lawmakers voted to use $8 billion in new taxpayer subsidies to help farmers buy crop insurance to protect them against losses. The insurance would replace the disaster payments and reduce government costs.
    …
    One week before the presidential election, it passed a new $1.8 billion disaster bill to assist farmers hurt by bad weather. Two others followed in subsequent years, totaling more than $6 billion. Today, after a searing drought in the Plains, farm-state legislators are pushing for billions more in aid.

    The result is that farmers often get paid twice by the government for the same disaster, once in subsidized insurance and then again in disaster assistance, a legal but controversial form of double-dipping, a Washington Post investigation found. Together, the programs have cost taxpayers nearly $24 billion since 2000.

    Some politicians talk as though they respect capitalism. They claim to reject taxing people just to give that money to others. Yet they continually increase the debt (taxing our children and grandchildren) and make payments to corporations, farmers and others for no reasonable purpose, other than buying votes. In addition to payments to farmers the government pays those who build million dollar beach house when the predictable storm knocks them down. No rational capitalist or economist would support such behavior (a political consultant might if when voters reward those that buy votes with taxpayer money, which seems to be the case now).
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  • Estate Tax Repeal

    The estate tax is the most capitalist tax that exists. Capitalism, which some seem to think is based on people inheriting assets from their relatives, is not. Capitalism is based on the concept that each person gets to receive rewards for their work.

    Long before Adam Smith, noble rich passed on their wealth to their heirs. It was not Capitalist then and it is not Capitalist now.

    Unfortunately many seem to have skipped economics in school and accepted the claim that Capitalism is about protecting the rich. They seem to believe it is a tenant of Capitalism that those that have the gold make the rules. That is in fact a risk that Capitalists must protect the economy from, not something Capitalist approve of. Those who believe in the wealth being passed from those who earn it to those who they like, believe not in Capitalism but in the state not taxing the idle rich but instead taxing those who don’t have millions given to them. While many have come to believe that such idiocy is Capitalist, it is not. People should read the Wealth of Nations by Adam Smith to get a much clearer idea of what Capitalism is about than those in Washington DC have.
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  • 2006 Nobel Peace Prize to Economist

    The 2006 Nobel prize has been awarded to Muhammad Yunus and Grameen Bank (which he founded). Trickle Up has long been my favorite charity. It is based on a model similar to the Grameen Bank where small micro-loans help people help create an economic future for themselves out of poverty (Trickle Up makes small grants instead of loans).

    Trickle up and Grameen bank are amazing studies in financial literacy. They provide both seed capital and training to help people create businesses and have an absolutely amazing track record. Interview on the Noble Prize web site:

    Question: Is there any particular message you would like to use the opportunity to get across?

    Muhammad Yunus: The one message that we are trying to promote all the time, that poverty in the world is an artificial creation. It doesn’t belong to human civilization, and we can change that, we can make people come out of poverty and have the real state of affairs. So the only thing we have to do is to redesign our institutions and policies, and there will be no people who will be suffering from poverty. So I would hope that this award will make this message heard many times, and in a kind of forceful way, so that people start believing that we can create a poverty-free world. That’s what I would like to do.

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  • Questions You Should Ask About Your Investments

    Questions You Should Ask About Your Investments from the Security and Exchange Commission (SEC). They offer questions relating to: general investments, mutual funds, investment advisers, performance of your investments. Questions such as:

    What are the total fees to purchase, maintain, and sell this investment? Are there ways that I can reduce or avoid some of the fees that I’ll pay, such as purchasing the investment directly? After all the fees are paid, how much does this investment have to increase in value before I break even?

    How liquid is this investment? How easy would it be to sell if I needed my money right away?

    Pretty basic stuff but it provides some questions that you should be able to answer. If you can’t then continue on your path to increase your financial literacy. We hope I site can help with that. In addition we link (on the left) to some good sites including fool.com and Marketplace that are useful in educating yourself.

  • Hidden Credit Card Fees

    Credit Cards’ Hidden Costs by Kathleen Day

    Credit card companies don’t clearly disclose penalties, variable interest rates and other fees, leaving consumers confused about the true cost of using plastic to pay for everyday transactions.
    …
    The report by the Government Accountability Office found many consumers do not understand that if a borrower is late on one payment, companies will not only impose a late fee, which can reach nearly $40, almost triple that of a decade ago, but also significantly raise the interest rate on past and future charges, possibly to as high as 30 percent.

    Credit cards can be a convenient tool but if you do not pay the balance off every month on time that is a very bad sign for your financial health. And leaves you open to onerous fees from credit card issuers. If you do pay off the whole balance every month (as you should under almost all circumstances) you should have a credit card than pays you a rebate (1% of your spending is common) and has no annual fee.

  • Don’t Cash That Check

    Don’t cash that check! It’s a scam:

    Banks are now sharing their customer lists — and account information — with third-party marketers. And from what I can tell, they’re not always picky about who they partner with.

    The surprise check in the mail “A $10 check is a nice surprise,” the letter from Travelers Advantage says. “Especially since it’s yours for just reviewing the benefits and privileges of this national savings network. And there could be more checks coming your way!”
    …
    Last year, California Attorney General Bill Lockyer filed a lawsuit against Trilegiant and Chase Bank, alleging they worked together to create and carry out a marketing scheme that, he says, “unlawfully deceived tens of thousands of California consumers” into paying for these membership programs.

    Don’t cash such checks. The means they are using is so deceitful you can’t trust what else they are going to try to trick you into. Credit Unions are often much less deceitful than banks (though you can’t always trust them either – which is a shame). It is too bad that organizations decide to prey on the financially illiterate. But they do. The easiest thing is not to waste your time trying to find the one good place that actual offers a good value and just chose to use a very bad method to inform people. If they offer something of value let them sell it to you for what it costs (not trick you into cashing a check and then start charging you a monthly fee).

  • I Want My Coffee

    Skip the Coffee? What’s Money for, Anyway?:

    I’m an idiot. Every financial advice columnist seems to be telling me so.

    My crime: buying morning coffee from Starbucks for my wife and me.

    Avoiding the regular cup of overpriced coffee has become an easy cliché for financial advisers, a symbol of money frittered away.

    The author is right. There is nothing wrong with spending some of your money on the luxuries you choose. The problem is too many people spend more than all their money on the luxuries they choose (going into debt to support their lifestyle). The author states:

    And we save. Maybe not as much as we could, I’m sure, and not invested as wisely as it could be. But we put away a fair chunk of change out of every paycheck. So I’m a little tired of hearing this copycat scolding about my coffee.

    In previous post: saving for retirement, we discuss the options for planning for your future economic security. Cutting back on luxuries is only necessary if you are living beyond your means (looking at your whole financial life). If you have incorporated the luxuries you want into a good overall plan, great, good job, keep up the good work. If not, figure our which luxuries you want to cut (or how you are going to earn more money).