MONEY Hit Peak Performance

Why You Shouldn’t Overplay a Hot Hand — in Basketball or Investing

Miami Heat's LeBron James
© Mike Stone—Reuters

New research says there is such a thing as a hot hand in basketball — like momentum in investing. Trouble is, hot hands lead to overconfidence, which leads to cold spells.

A couple of winters ago, Larry Summers gave a 30-minute talk to the Harvard’s men’s basketball team over pizza. During the peroration, per Adam Davidson in the New York Times, the former Treasury Secretary and Harvard president engaged in a bit of Socratic dialogue.

He asked the students if they thought a player could have a “hot hand” and go on a streak in which he made shot after shot after shot? All the players nodded uniformly. Summers paused, relishing the moment.

“The answer is no,” he said. “People apply patterns to random data.”

In this case, Summers may be wrong.

A new study by three Harvard grads — using data based on tracking cameras in 15 arenas that captured 83,000 shot attempts in the 2012-13 NBA season — found that “players who are outperforming (i.e. are ‘hot’) are more likely to make their next shot if we control for the difficulty of that shot.”

When you account for the difficulty of the shot, the authors discovered “a small yet significant hot hand effect.” To put a number on it, a player’s chance of making his next shot increases by 1.2% for each prior shot he made.

So what?

While your basketball skills may never carry you to the NBA, there is a lesson to be learned from the paper’s findings.

And it has to do with how you invest.

The study’s authors concluded the following: “Players who perceive themselves to be hot based on previous shot outcomes shoot from significantly further away, face tighter defense, are more likely to take their team’s subsequent shot, and take more difficult shots.”

This basically means when someone makes certain shots (think three-pointers) at a higher percentage than they normally do, the opposing defense reacts by guarding the player more closely. And as defenders start paying more attention to the shooter, he has to take shots from longer range, which are inherently more difficult.

What does this have to do with your portfolio?

Well, consider what’s going on. A player makes a few shots and gets “hot.” He’s in the zone, so he starts growing overconfident. Not only does he start to take more shots, but he starts taking increasingly difficult shots.

While he may be more likely to make those difficult shots at the outset since he’s on a roll, the more difficult shots come with a lower percentage of accuracy. Which means he will eventually start to miss more and cool down. In other words, his overconfidence leads him to take shots that eventually take him “out of the zone.”

This is a lot like momentum investing.

Momentum is a real force in the markets. History, for instance, shows that investors — at least in the short run — are much better off riding last year’s winners than the laggards, says Sam Stovall, managing director for U.S. equity strategy at S&P Capital IQ.

So investors who ride the market’s momentum invest in a winning stock or sector. Those investments rise in value. This trend repeats a few times and before long investors believe their skills as a trader are leading to the gains, rather than the momentum effect. Before long, these investors are trading more frequently to capitalize on their “hot hands.” But this has the effect of racking up trading costs and mistakes, which are a headwind to investors that eventually cools them down.

This doesn’t mean you should eschew momentum altogether. As MONEY’s Paul Lim noted in his March 2014 article, “A decent body of research suggests that entire asset classes that shine in one year have a better-than-average chance of outperforming in the next.”

The trick is to find a way to ride the hot hand without taking increasingly inefficient shots.

One idea is to minimize your trading costs by limiting your trading to just once a year. According to researchers at the asset-management firm Leuthold Group, a time-tested way to do this is to buy last year’s second-best performing asset class and hold that for a year (last year’s second-best asset class was large, U.S. stocks). Then repeat the process the following year. Historically, such a strategy returned five points more annually than the S&P 500, while experiencing only slightly more volatility. (Of course, you shouldn’t tilt your entire portfolio toward momentum sectors. Think 10%.)

By incorporating a little bit of the “hot hand” into your investing strategy, you should be able to book slightly higher returns. And you don’t even have to go to the gym.

MONEY First-Time Dad

These Are the Countries with the Best Maternity Leaves

Luke Tepper
Mrs. Tepper took off four months to take care of this guy—and was paid dearly in smiles and dirty diapers. Ken Christensen

New dad Taylor Tepper argues that America needs to catch up with the rest of the world in terms of providing paid time off to new moms.

Two weeks ago, Mrs. Tepper returned to her full-time job—almost six months after giving birth to our son Luke.

She wasn’t altogether excited about the idea of leaving Luke in the hands of someone else while she relived paler experiences like commuting. Nevertheless, Mrs. Tepper soldiered on, and we ended our four-month experiment of living in an expensive city with a new child and without the income of the chief wage earner.

Right up there with “Is it a boy or a girl?” and “What name are you going with?” is another question every new mother should be prepared to answer: “How much paid time off do get from work?” If your answer is anything longer than a few weeks, you can pretty much guarantee kind words and jealous eyes in response.

We were fortunate. Mrs. Tepper, who works as a teacher, received around two months of paid maternity leave and was allowed to take the rest of the school year off unpaid. I got two weeks paid.

Most Americans are not so lucky. The land of the free and the home of the brave is one of two of the 185 countries or territories in the world surveyed by the United Nation’s International Labor Organization that does not mandate some form of paid maternity leave for its citizens. Many are familiar with the generosity of Scandinavian nations when it comes to parents bringing new children into the world, but who would believe that we trail Iran in our support of new families?

Iran mandates that new mothers receive two-thirds of their previous earnings for 12 weeks from public funds, according to a the ILO report. In America, mothers are entitled to 12 weeks of unpaid leave—but only if they work for a company that has more than 50 employees, per the Family and Medical Leave Act. And, for some context, more than 21 million Americans work for businesses that employ 20 people or fewer, per the U.S. Census Bureau.

The ILO report is full of unflattering comparisons that will leave American workers feeling woozy. Georgia—the country—allows its mothers to receive 18 weeks of paid time off at 100% of what they made before. Mongolia gives its new moms 17 weeks of paid time off at 70% of previous earnings. (Mongolia’s GDP is $11.5 billion, or about a third of Vermont’s.)

Lest you think paid time off for moms is a poor-nation phenomenon, Germany’s mothers receive 14 weeks of fully paid time off, while Canadian mothers can look forward to 15 weeks of 55% of their salary.

There are pockets of help stateside. Five U.S. states provide paid maternity leave: New York, New Jersey, Hawaii, California and Rhode Island. In Rhode Island, for example, mothers receive four weeks of paid leave—ranging from $72 to $752, depending on your earnings.

Meanwhile, however, the ILO’s maternity leave standard states that all mothers across the board should be entitled to two-thirds of their previous salary for at least 14 weeks.

Look, I’m not really saying that American women should defect to Iran or Mongolia or Georgia to push out their progeny. But it defies logic that we are the only developed nation not to have a national system in place that helps new families adjust to their new lives.

The benefits of implementing some compulsory system of continuing to pay women for a defined period of time after they give birth are known. Based on California’s family leave policy, which was instituted in 2004, economists found that employment prospects for a mother nine to twelve months after childbirth improved (meaning: more moms at that stage were employed after the bill than before it). Additionally, other research has found that mothers who return later to work are less likely to be depressed.

New York Senator Kirsten Gillibrand and Connecticut Representative Rosa DeLauro (both Democrats) introduced the Family and Medical Insurance Leave Act last year which, among other things, would provide new mothers with 12 weeks of paid leave at two-thirds of their previous salary up to a cap. But the Act is not yet a law.

A few years ago, Mrs. Tepper was in graduate school, and I waited tables. We made much much less than we do now and enjoyed no financial security. Often when I’m playing with Luke I find myself thinking, “What would we have done if he was born then?”

Taylor Tepper is a reporter at Money. His column on being a new dad, a millennial, and (pretty) broke appears weekly. More First-Time Dad:

MONEY College

4 Best Credit Cards for College Students

Mom helping her daughter move in to college dorm
Make sure she's packed one of these cards. Blend Images—Alamy

Send your kid off with one of these options this fall, and you'll sleep better at night.

You’ve no doubt heard harrowing stories of college students applying for their first credit cards, then racking up thousands of dollars in debt. It’s the stuff of parents’ worst nightmares.

The CARD Act of 2009 lessened the potential trouble students could get themselves into. The law mandated that, in order to qualify for a card, applicants must be over 21, get an adult to co-sign or prove they earn enough money to make payments.

But it’s left many parents of underclassmen with a tricky decision. Do you sign on the dotted line for your kid—thus putting your own credit score on the hook if your kid doesn’t pay the bill?

Shielding Junior from having his own credit card may seem sensible, but it’s penny-wise and pound-foolish. Length of credit history accounts for 15% of one’s FICO score. So by protecting your son or daughter from plastic, you are inadvertently hurting his or her creditworthiness. You also miss out on the opportunity to handhold him or her through an important financial lesson.

Of course, striking a proper balance between the value of credit and the dangers of its excess is paramount. Revolving debt hurts a credit score, too, and can be very costly to a kid living on a ramen budget—with APRs averaging 15% and as high as 23%.

Three options for you to consider, depending upon how much risk you think your newly emancipated child can handle:

The Training Wheels: A secured card or a low-rate, low-limit unsecured card.

If you are worried that terms like “credit limit” and “due date” will be lost on your child, you might want to sign him up for a secured card, which uses cash as the credit limit collateral.

The benefit is that Junior won’t be able to spend beyond the cap, so it’s a good way to give him practice using a card of his own without doing a lot of damage to your finances or your credit score. The downsides: You’ll have to front the cash. And unless you set a large credit limit, he may use a high percentage of his available credit, which is bad for his credit score (ideally he should use no more than 20%).

Alternately, if you don’t want to put up your cash as collateral—or your kid has enough income to qualify on his own—you might start him off with an unsecured card that has a low rate and a low credit limit. This also pens him in until he demonstrates reliability.

Once he proves himself able to handle either of these cards, have him shift to one of the advanced cards in the next category.

The picks: MONEY’s Best Credit Cards winners Digital Credit Union Visa Platinum Secured or Northwest Federal Credit Union FirstCard Visa Platinum.

The APR on Digital Credit Union’s Visa starts at a low 11.5%. To apply for this secured card, you do have to be a member of the credit union, but that be accomplished with a $10 donation to Reach Out for Schools.

The FirstCard’s rate is even lower—a fixed 10% APR (most cards today are variable rate). This card, which has no annual fee, is designed for people who don’t have a credit history: It requires applicants to take a 10 question quiz on credit knowledge and has a credit limit of just $1,000.

The 10 Speed: A rewards card

Cards that offer rewards typically have higher APRs than those that don’t. So if you child revolves debt on one of these cards, he’ll likely erase the perks earned.

Thus, rewards cards are best reserved for those students who’ve already proven themselves capable of paying off a secured or low-limit card in full and on time for a year or so. These are also good choices for those students who are over 21.

The picks: Capital One Journey Student Rewards Card and Discover It for Students.

The no-fee Journey gets your kid 1% cash back on everything, but the reward is bumped up by 25% every month he pays his bill on time. “This is a good card for incentivizing students to have the right behavior,” says NerdWallet.com’s Kevin Yuann. There’s no foreign transaction fee (a plus for those studying abroad), but a late payment fee of up to $35 and a steep 19.8% APR should scare away parents who aren’t sure about their child’s bill-paying vigilance.

The It, which also has no annual fee and no foreign transaction costs, gets your kid 2% cash back on the first $1,000 at gas stations and restaurants each quarter, and 1% for everything else. Because of the extra rewards for gas, the It is a good card for commuters, says Yuann. Cardholders also receive a free FICO score, derived from TransUnion data, on monthly statements.

While there is no fee on the first late payment, your child will pay up to $35 after that; and after a six-month no-interest window, the APR ranges from 13% to 22%.

Whichever card you end up co-signing for your child, definitely make sure you ask to get account access—and sign up for balance alerts so that you know when you need to swoop in for a teaching moment.

RELATED:
Best Credit Cards of 2013
Money 101: How Do I Pick a Credit Card?

 

MONEY The Consumer Economy

The Real Reason You’re Not Shopping at Walmart

Female shopper in Wal-Mart store aisle
Patrick T. Fallon—Bloomberg via Getty Images

Despite the improving job market, workers still don’t have that much walking around cash, which means they have less to spend at retailers.

The summer has not been kind to some of America’s largest retailers.

Traffic at Wal-Mart’s U.S. locations, for instance, was down, while sales at stores that had been open for at least a year failed to grow. Macy’s lowered its full-year sales growth projection, and sales at Kohl’s dropped 1.3% in the last three months. Nordstrom’s earnings per share were basically flat.

If you’re noticing a trend, that’s because there is one: Merchants are struggling.

The Commerce Department recently announced that retail sales decelerated in July for the fourth consecutive month, despite the fact that more workers are finding jobs, and the unemployment rate is hovering around 6%. So what’s going on?

Well, one potential answer is that you, the consumer, just don’t have that money to spend. Yes, employers have added more than 200,000 workers a month to their payrolls since February. And yes, the unemployment rate has dropped to 6.2%—about the same as in September 2008. But workers really haven’t seen the benefits of job growth in their bottom lines.

For instance, take a look at real disposable income for U.S. workers. The year-over-year change in disposable income is only 3.9%, below pre-recession levels. “While stronger job growth has played a role in sustaining consumer spending, the slower income growth has served to keep a lid on real spending activity over the past several quarters,” per a recent Wells Fargo Securities economic report.

disposable income

 

Another way to gauge the plight of workers is a metric called the Employment Cost Index (ECI), which is published by the Bureau of Labor Statistics. The ECI measures what it costs businesses to actually employ their workers—so, wages, salaries and fringe benefits like medical care. Before the Great Recession struck in 2007, the ECI gained nearly 3.5% over the prior 12 months. Since the economic recovery, however, employee costs have not risen above 2%.

wages
BLS

Rising wages are a lagging indicator; people only see raises after the jobs picture improves. Which is happening now. Fewer people are filing unemployment claims, and the number of job openings continues to nudge higher. (And traditionally, job openings have an inverse relationship with wage gains.)

So, hopefully, sometime soon demand will pick up, businesses will start giving their workers substantial raises, and those workers will go out and spend their newfound dollars. (After all, my spending is your income.)

What’s good for the economy is sometimes what’s good for Wal-Mart.

MONEY First-Time Dad

Why Millennials Aren’t Lazy, Spoiled or Entitled…

Luke Tepper

...At least not any more than other generations are.

Mrs. Tepper and I spent the better part of the past week trying to induce our six-month old son Luke to sleep through the night. After a parade of co-sleepers, swings, night feedings and magic sleeping suits, it was time — our doctor told us — to go medieval and let the little guy cry in his room until he woke up the next morning.

The (seemingly) endless sobbing was difficult to endure, but within a few nights, Luke slept all night. He did it! And so did we.

Luke’s accomplishment not only put our minds at ease, it helped stroke our parenting egos. Now when other parents ask us how he’s sleeping, we’ll be able to look them dead in the eyes and with not a small amount of satisfaction say, “We got him to sleep like a log.”

Parenting, much like sports and everything else, is competitive. If you think your kid is cuter than mine, well, we might just have a problem. Of course, this is silly. Whether a kid sleeps through the night, rolls over, or cries incessantly is largely a matter of luck and circumstance. Some parents happen to have a newborn that sleeps well, while others don’t and there are millions in between.

The mistaking of luck for skill, the conflation of happenstance for personal achievement, is pervasive in our society. You even see this play out in the management of mutual funds. In fact, I think this natural phenomenon is one reason that older generations think mine is narcissistic, instead of simply unlucky.

More than a few readers have responded to my articles with a common refrain that kids today are given much more than older generations — and thus are much more willing to spend and less principled in saving. And that this deficit accounts for Millennials’ current economic struggles.

Fine, though older generations complaining about the lives lead by their children and their children’s children is just as much a cliché. Nevertheless, a few facts and figures may help to enlighten the perception of today’s young adults and help align the views of those from different ages.

We Grew Up During the Great Recession

Millennials graduated college in the teeth of the worst economic downturn since the Great Depression. While people of all ages felt its impact, Millennials were a little more vulnerable — if not economically, then psychologically — than other groups.

In a recent speech, the chairman of the White House’s Council of Economic Advisers highlighted just how rough the Great Recession was on Millennials. “While the unemployment rate for those over 34 peaked at about 8%, the unemployment rate among those between the ages of 18 and 34 peaked at 14% in 2010 and remains elevated, despite substantial improvement,” Furman said.

Graduating into a recession leads to lower wages, which has been especially true for those who had the misfortune of turning 22 in 2008. In fact, per a recent Pew Research Center survey, “Millennials are the first in in the modern era to have higher levels of debt, poverty and unemployment, and lower levels of wealth and personal income than their two immediate predecessor generations had at the same time.”

We Pay More to Raise Our Kids Than You Did

If you had kids in 1985, and the mother of those kids worked, you paid on average $87 (in 2013 dollars) a week in child-care expenses, according to Pew. In 2010, the figure grew to $148. That means, on average, working mothers today pay over $3,000 more a year on child care than their mothers paid for them.

Of course, child-care expenses, like real estate, differ zip code to zip code. We live in Brooklyn and teamed up with another family to hire a nanny. The total cost to us? Almost $400 a week.

And it doesn’t look like families like ours well get help anytime soon. A few months ago, the International Labor Organization put out a report which found that the U.S. and Papua New Guinea are the only two countries in the world that have “no general legal provision of maternity leave cash benefits.”

Not only is it more expensive to raise your kids now, but we live in one of the two countries in the entire world that doesn’t offer any help.

You Are More Entitled Than We Are

Despite the fact that some think that seniors have earned their Social Security and Medicare benefits, entitlements have always been a transfer of wealth from the working to the elderly. Ida May Fuller was a legal secretary who retired in the end of 1939 having paid $24.75 in social security taxes. A couple of months later, she received the first retirement check and would go on to accumulate almost $23,000 in Social Security benefits.

Ida is not alone. According to the Urban Institute, a couple that earned $71,700 (in 2013 dollars) a year from 22, and retired in 2015, will receive more than $1 million in lifetime benefits (including Social Security and Medicare.) This despite paying nearly $650,000 in lifetime entitlement taxes.

Now, I’m fine paying taxes to fund a social program that has so effectively reduced elderly poverty and improved the lives of millions of people. I just don’t want those recipients of public funds to think of my generation as entitled.

Look, so much of our success is defined by luck.

If you graduated college during the Carter or Reagan presidencies, you entered an economy that was adding between 150,000 and 250,000 jobs a month. Over the past 14 years? Not so much.

Of course, you can’t do much to control your macroeconomic environment. The only thing non-policy makers can do is hope — hope that in 28 years your son is luckier than you were.

So when you think about Millennials in terms of living at home and deifying self-aggrandizing behavior, remember the economic hardships that we endured and you didn’t. Remember that others who receive Social Security and Medicare may not have really earned those funds. Remember “there but for…” and appreciate the luck you have in this world.

Taylor Tepper is a reporter at Money. His column on being a new dad, a millennial, and (pretty) broke appears weekly. More First-Time Dad:

MONEY Credit

Here’s Why Your Credit Score Is About To Improve

Sunlight coming out from behind a cloud
A Schneider Mark—Getty Images

Unpaid medical bills will carry less weight on FICO scores -- and late bills that get paid off won't count at all.

A change in the way credit scores are calculated means consumers may soon have an easier time getting a loan and could begin paying lower interest rates on their credit cards.

Fair Isaac, the company behind the widely used FICO credit scores, announced Thursday that it will no longer reduce a consumer’s score for late bill payments if those bills have been paid off.

It will also reduce the impact of unpaid medical bills on FICO scores. Under the new model, which will become available this fall, consumers with a median credit score would generally see their score rise by 25 points if their only major late payment is an unpaid medical debt.

“The new ruling looks great,” says Credit.com’s Gerri Detweiler. “These are changes consumers and consumer advocates have been hoping for for a long time. The one big warning is that these changes won’t happen over night.”

The changes comes after May report from the Consumer Financial Protection Bureau found that consumer credit scores are “overly penalized” for medical debt, which it said often does not accurately reflect their credit worthiness.

“Getting sick or injured can put all sorts of burdens on a family, including unexpected medical costs. Those costs should not be compounded by overly penalizing a consumer’s credit score,” said CFPB director Richard Cordray in a statement at the time. “Given the role that credit scores play in consumers’ lives, it’s important that they predict the creditworthiness of a consumer as precisely as possible.”

It also comes two weeks after the release of a study by the Urban Institute found that more than 35% of Americans have debt that has been reported to collection agencies.

Related:

9 Ways to Outsmart Debt Collectors

Money 101: What is my credit score and how is it calculated?

Everything You Need to Know About Managing Credit and Debt

MONEY First-Time Dad

Why New Parents Deserve to Splurge on Themselves Sometimes

Illustration of parents eating at elevated table above baby toys
Leif Parsons

Living in an apartment stuffed with all kinds of toys for his son, this reporter found that spending $350 to create an oasis for himself and his wife was totally worth it.

Part of the joy of raising an infant is accumulating his toys and books and play mats and teethers and clothes and pacifiers and chairs and bottles and strollers and carriers and … well, you get the idea. Clutter is a part of life, and the fact that Luke, our 6-month-old son, is gathering enough junk to take over our apartment means he’s becoming a person. I own, therefore I am.

Still, there is one tiny section of our tiny Brooklyn home that’s off-limits to Luke’s stuff. It’s an alcove just big enough to hold a circular marble table and two tall cushioned chairs. If the rest of our home is a Gymboree, this patch of paradise is the Four Seasons.

We carved out this island of adulthood a few weeks ago, buying the $200 marble table secondhand and plucking the marked-down chairs off the Internet for $150.

Spending $350 on ourselves might not sound like a big deal, but Luke’s goodies aren’t cheap, so most of our discretionary spending is earmarked for the little guy. My wife is a teacher and I’m a journalist. We’re in the early stages of our careers and must make rent while still chipping away at our student loans. In our world of limited sleep and vanishing funds, a vacation, dinner out, or even a night at the movies is a rare treat.

Yes, we could have used the dining set we already owned. But our old furniture felt as though it belonged to cohabitating grad students, not a married couple. My wife and I tied the knot a few months before Luke’s birth, so our friends and family look at us more as new parents than as newlyweds. That’s usually the way we see ourselves too. Marriage, though, requires as much attention and devotion as parenting. You can easily get lost in the wonder of watching your son explore the world around him and forget that less than a year ago you stood in front of the people you love and pledged to be with each other forever.

Now, after Luke falls asleep, Ali and I sit down in our new cream-colored chairs. We rest our glasses of wine on the table and talk about our day. And for a moment, it’s only us.

Taylor Tepper is a reporter at Money. His column on being a new dad, a millennial, and (pretty) broke appears weekly. More First-Time Dad:

MONEY Jobs

What’s the Deal with America’s Declining Workforce?

140801_INV_Workforce_2
Getty

The dwindling percentage of Americans who are employed or looking for work is partly due to the economy—but mostly not. Here's what that means for the recovery and you.

If you feel like the economy has finally started to gain steam, you’re not alone. U.S. gross domestic product (GDP) grew by 4% last quarter, and today the Labor Department announced that employers added 209,000 jobs in July, after posting 298,000 in June and 229,000 in May.

One theme, though, that has persisted throughout the slow recovery: The share of Americans working or looking for a job is dropping, despite the improving employment picture.

LFPR

While this trend has been used to illustrate how sluggish the rebound has been, it actually predates the Great Recession. Today 62.9% of Americans participate in the labor force, compared to 66.1% six years ago and more than 67% in 2000.

So, what exactly is going on?

The White House’s Council of Economic Advisers set out to answer that very question.

Last month, it issued a report dryly titled: “The Labor Force Participation Rate Since 2007: Causes and Policy Implications” in which economists cite three key developments:

#1) America is just getting older

About half of the decline in worker participation over the last seven years is due to demographics — the workforce is simply aging. About one-sixth of the population was at or above retirement age in 2009, according to the report. By 2029, that number will increase to 25%, per the Social Security Administration.

Older workers generally work less than their younger counterparts.

But, interestingly, this group is working more than it used to. From 2007 to 2014 the only age group that saw labor-force participation rates rise was the 55-and-older crowd.

Old lfp

Why? One reason is this generation of older workers is better educated than its predecessors. In fact, “between 1876 and 1950, the average years of schooling for each birth year cohort increased steadily every year,” per the CEA. More education means higher wages and less physically demanding jobs.

#2) Normal post-recession issues

When the economy is going well, labor participation rates tends to increase. Faster growth means businesses are more apt to hire, which means individuals without jobs feel more confident in their chances of finding work — and hence send out more applications.

When the economy shrinks, this virtuous cycle turns vicious.

“Economic contractions historically result in both greater unemployment and lower labor force participation, as nonparticipants become less likely to enter the labor force and the unemployed (who always exhibit a higher tendency to exit the labor force) become more numerous relative to the unemployed,” per the report.

The CEA estimates that about 16% of the drop in labor force participation rates can be attributed to the fact that fewer people work and look for jobs when the economy is shaky.

#3) Other Stuff

The last third of the decline is traced to two elements — one of which predates the recession, while the other may be a result of it.

The bit related to the Great Recession is long-term unemployment. Right now, more than 3 million workers have been without a job for 27 weeks or longer. While that’s down from almost 7 million in 2010, it’s still 2 million more than before the downturn.

L-TUnemploed
BLS

The other rationale is a combination of long-term trends affecting different groups of workers.

For instance, younger Americans (aged 16-24) — especially those from lower- and middle-income families — have eschewed entering the work force for going to college for years now. As the value of a college education for future earnings increases, more youngsters are hitting the books.

Also, older workers who’ve been hit by the dearth of middle-skilled jobs, according research from Fed economist Christopher Smith, are now taking jobs that would have normally gone to younger workers.

After growing dramatically for the better part of 50 years, the rate of female employment has leveled off and begun to fall since the end of the 20th century, down almost three percentage points.

What’s going on? Well more women are staying home to care for their children, according to the Pew Research Center. In 2012, the percentage of stay-at-home moms increased 6 percentage points to 29% from 13 years earlier.

This is a phenomenon that’s uniquely American.

Since 1991, the participation rate of prime age working females in the Netherlands, Germany, Canada and Japan has all made significant gains, while the U.S.’s has remained flat. “Research has found that family-friendly policies are partially responsible for the rise in participation in other advanced countries, and the lack of these policies explains why the United States has lost ground,” according to the CEA.

women labor force prime

While a higher percentage of women entered the workforce after World War II (until the 2000’s), pretty much the exact opposite is true of males. In 1948 almost 97% of men aged 25-54 worked or were looking for jobs. That number has been declining for over 60 years and is now closer to 88%.

male rate

The causes of this precipitous drop are not exactly clear, although some research shows that the decline is in part due to the fewer jobs based on brawn.

manu

The implications

This picture of the labor market complicates recent reports showing an accelerating economy and increased employment. It also helps explain why the Federal Reserve, led by chair Janet Yellen, isn’t that eager to quickly raise interest rates despite positive economic reports and slightly higher inflation.

And while a certain percentage of the decrease in labor force participation rate can be attributed to the recession, a lot of the decline is bigger than that.

The question now is will Americans return to the labor force in greater numbers without new policies by the Congress and the White House that address long-term headwinds facing American workers?

MONEY Travel

5 Great Places for Your Fantasy Football Draft

Starting this weekend, fantasy footballers across the country will be gathering to draft their teams. Here are 5 great places to go for the annual ritual, and ways to have (more) fun after you've picked your players.

The arrival of August may mark the middle of summer, but for many people it can mean only one thing: the start of fantasy football draft. Across the country, owners of virtual teams will be gathering to pore over stats, pick their players, and talk strategy. Also drink beer, talk trash, and generally make merry.

Like bachelor parties without the wedding, these gatherings are morphing into full-blown guys’ weekends, complete with travel opportunities and fantasy football-themed special activities. If you want to know where to go to find some of the best action, check out our 5 top picks for draft-weekend destinations.

 

Las Vegas at night
Cindy Costa—Flickr

Las Vegas

Yes, it’s a cliche, but with good reason: Vegas is an awesome place to be a fantasy football fanatic. The city is one of the few to host big draft-day parties and events, drawing sports fans from all over the country. And of course, there’s great food, tons of shows, packed clubs, and raging pool parties. Oh, and did we mention casinos? There are a few of those, too.

Where to Draft
How hardcore does your league want to get? If you want to be immersed in football mania, head to the Ultimate Fantasy Football Draft Party, thrown by the Yahoo Sports and Hard Rock Hotel on August 23. To attend, RSVP here. You can also book a FF package at the hotel, with discounted rates starting at $59 to $149, between August 21 and August 24. Packages include entrance to the party and a slew of other perks, like passes to the Hard Rock’s daytime pool party and nightclub.

If a corporate blowout doesn’t appeal, there are plenty of good ways to “freewheel it,” says Joe Fortenbaugh, a writer for VegasChatter.com and co-owner of news site National Football Post. On the high end, you could rent a suite or cabana. Fortenbaugh recommends cabanas at the quieter pools, such as Boulevard, at the Cosmopolitan Hotel. For something a bit cheaper, he suggests a big table or private room at Carmine’s, an Italian restaurant that recently opened at Caesar’s Palace and serves up giant family-style portions of lasagna and chicken parm for about $35. To go with something more bar-centric, try the Eastside Lounge at the Wynn. This low-profile spot has plenty of room to spread out and set up camp. “No one recognizes how great it is,” Fortenbaugh says.

When You’re Done
Well, there’s plenty of gambling to be done, but you already knew that. What you might forget is just how much great food the city has to offer, so be sure to branch out beyond the draft-appropriate spots. John Curtas, author of Eating Las Vegas: The 50 Essential Restaurants, recommends Five50 Pizza Bar, an “absolute must” for everything from your basic margherita to the “Picante,” featuring ghost chili salami. There are also a ton of affordable shows to choose from. For instance, Travelzoo is now offering a deal for the latest Cirque du Soleil, starting at $55, down from $99. Finally, take a break from the Strip. Head over to Fremont Street to check out the Gold & Silver Pawn Shop made famous by the “Pawn Stars” TV show. Fortenbaugh also suggests seeking out Sigma Derby, the old-fashioned horseracing game you’ll still find at The D Hotel and Casino.

Where To Stay
The Hard Rock is far from the only hotel offering fantasy football discounts and packages. Caesars Entertainment, for one, has deals at hotels like Harrah’s, Bally’s and Planet Hollywood (costs vary by date and property). In general, room prices tend to spike on weekends, says Travelzoo editorial director Andrew Young. However, right now the Palms is offering some August weekends for as low $99, he notes. Don’t forget to factor in “resort charges,” which can easily add $20 a day to your booking. To avoid them, try a property off the strip. Young suggests the Platinum Hotel, which lists mid-August rooms starting at around $130 per night.

 

Miller High Life Cruiser
Flickr

Milwaukee

This Wisconsin city has a reputation for cheese and beer, perfect for a weekend draft. But it’s the outdoor activities and proximity to Lake Michigan that make Milwaukee the perfect spot for those fantasy leagues looking for a little activity in between picks.

Where to Draft
If you want to draft next to the beautiful waterfronts in town, then look at Stubby’s Gastropub. With views of Lake Michigan, it has “a nice patio over the Milwaukee River and plenty of TVs,” says Milwaukee Journal Sentinel dining critic Carol Deptolla. They offer 53 craft brews on tap, including some local favorites like Fixed Gear ($5) and the Black Husky Howler ($8). While there, take advantage of a Wisconsin tradition by ordering the cheese curds appetizer ($9.95), with Stubby’s bacon Parmesan dipping sauce on the side.

For a more local sports-scene feel, check out Steny’s Tavern. Located in the downtown area, near many hotels and local attractions, it’s known for chicken wings ($8.99 for 16 wings) and Bloody Marys ($4.50). Plus, after you select that starting quarterback, you can even catch a free shuttle to the Brewer’s game if the team is in town.

When You’re Done
Known as the Great Place on a Great Lake, Milwaukee Bay is ideal for burning off that post-draft energy. You can charter a fishing boat to take you out for an afternoon of reeling in salmon or trout. Silver King Charters charges $500 for five hours, but if you don’t catch any fish it’s free. Big groups take note: the boats only fit six people.

You can also rent your own pontoon boat to take you up and down the Milwaukee River. Edelweiss Boats takes 10 people ($240 for four hours) and you can bring food and any Brew City beverages you would like.

For landlubbers, Milwaukee and its surrounding area is home to over 40 miles of hiking trails. In town, check out the Seven Bridges Trail in Grant Park. This two-mile trek will get your mind ready for the regular season, as you wander through rocky trails before hitting a clearing where you can capture views of Lake Michigan.

Where to Stay
You can find some great deals from big name hotels in the heart of Milwaukee for much less than you would pay in other cities. Downtown, the Intercontinental offers double rooms for $150, after taxes. Check out the downstairs coffee bar Clear, which turns into an indoor bocce ball court on Tuesdays and offers live music on weekends.

There’s also the DoubleTree by Hilton, which is located blocks from the Milwaukee Public Museum and Marquette University. Double rooms run about $190 after taxes. But you can save 20% by paying the full amount upfront; you lose your money, though, if you’re unable to make the trip.

 

140731_FF_FantasyDraftTravel_Louisville2
Stacy Lynn Baum

Louisville

The Gateway to the South and home to the Kentucky Derby offers nearby beautiful rolling hills and quiet southern living. But for a fantasy draft, it’s the bourbon and food that will have you convinced you made the right pick.

Where to Draft
Louisville has plenty of bourbon and barbeque, so finding spots that offer both—along with Wi-fi—is key to a successful draft in the Gateway to the South. Against the Grain, a brewery and smokehouse in a former train station, has the Louisville Bats minor league baseball stadium as a backdrop. While it’s worth tasting the beer brewed in-house, ATG also offers more than 35 bourbons, all bottled just hours away. It’s great for groups, with space for private events, and the beef brisket ($14) or pulled pork ($10) will leave you in a food coma following your last pick.

Momma’s Mustard, Pickles & BBQ is another option. Created by a lover of Kansas City BBQ, the owner took horse race winnings—it’s Derby City after all—to buy a food truck. With its success, he opened a location in the heart of Louisville. In true Kansas City fashion, try the burnt ends ($10 with two sides).

Want a slightly classier setting? Try Sidebar. Choose from more than 50 bourbons and upscale burgers like the Hung Jury ($13), which is layered with bourbon mushrooms, onions, and beer cheese.

When You’re Done
If your group wants to stick with the bourbon theme following the draft, then take a trip out to the Bourbon Trail. Two hours south of Louisville is official bourbon country, with distilleries including Maker’s Mark, Jim Beam, and Four Roses, among many others. They offer daily tours for as little as $5, which often include a taste or two of the local product.

Without a car, getting out to the Bourbon Trail can cost a penny; expect to pay $100 or more for private bus tours. As an alternative, you can stay in Louisville and follow the Urban Bourbon Trail, 20 bars and restaurants with an historical link to Louisville’s drinking tradition, like speakeasys that sold liquor to Al Capone or hotel bars that F. Scott Fitzgerald frequented. And by staying in Louisville, you can honor the end of your baseball fantasy league by stopping into the Louisville Slugger Museum. There you will see how the bats that have been used by professional baseball players since the late 1800s are made. It’s $12 to get into the museum—and don’t forget to pick up your free mini-bat on your way out.

Where to Stay
There’s no shortage of great hotels for cheap in Louisville, like the Marriott Downtown ($179 per night). But if you don’t mind close quarters, there are also a number of AirBnB homes that can accommodate a group of eight or 10. This AirBnB condo sits near the Louisville Slugger Museum, and the owner says it fits 10 beds, so the loser of the draft won’t end up on the floor. It’s an “industrial chic” condo that has glassmaker studios and galleries as neighbors. With all-in charges running $1,611, the split is a reasonable $161 per person.

If you don’t mind sleeping on a couch, this Airbnb option is only an 11-minute drive to downtown and priced at less than $500 total. A steal, about which other large groups have said, “we had plenty of room.” And there’s a fire pit outside, so you can even end the weekend with your own style of BBQ.

 

Baltimore harbor
Ken Stanek—Visit Baltimore

Baltimore

Home to the 2012 NFL Super Bowl Champion Ravens (as well as Edgar Allan Poe and Carmelo Anthony), Baltimore offers fresh seafood and host of entertainment in the Inner Harbor. It’s also an easy 20-minute drive from international hub BWI Airport, making it easy for friends spread across the country to reconnect.

Where to Draft
Former speakeasy The Owl Bar, inside the Belvedere Hotel, offers a host of craft beers on draught, in addition to classic cocktails (think Moscow Mule) and signature drinks. In between sips, you can feast on an assortment of pizzas, like one topped with crab dip ($14), or go for the Umami Burger ($11), which comes with truffle garlic aioli.

Seafood lovers can check out Ryleigh’s Oyster, in Federal Hill. Starters include crab pretzels ($11)—three pretzels topped with a blend of crab, cheese and seasoning—and cast-iron crab pot ($13). For family-style dining, dig into a pound of mussels ($10) or a half-dozen oysters ($12) between roster selections.

When You’re Done
Catch a baseball game at Camden Yards, one of the most aesthetically pleasing ballparks in the country. If you’re still hungry, grab an authentic Maryland crab cake and some Boardwalk Fries.

Or, if you’d rather get some exercise after four or so hours compiling your team, check out the BWI bike trail. It’s a 12.5-mile scenic trail that encircles BWI and passes the Thomas A. Dixon Jr. Aircraft Observation area and the historic Benson-Hammond House, built in 1820.

For the more culturally inclined, there’s the Walters Art Museum in Baltimore’s historic Mt. Vernon cultural district. The museum is free of charge and is currently featuring an exhibition on music in the Middle Ages.

On your night out, sign up for a two-hour tour on the Charm City Pedal Mill. This 16-person bike is a great way to see historic Fells Point in downtown, and with 10 people only costs $31 per head.

Where to Stay
A member of the Historic Hotels of America, the Hotel Brexton offers rooms for $160 a night (with internet and parking included), and is only 10 blocks north of the Inner Harbor. (Wallis Simpson once stayed here.)

Of course, you could also use your group’s numbers to your advantage and stay in a house. This AirBNB.com listing smack dab in Little Italy costs around $240 a person for three nights and sleeps eight to 10 in its three bedrooms. Plus you’re just a quick jaunt from the Inner Harbor.

 

Sea Lions in San Diego marina
JD Lasica—Flickr

San Diego

Want to draft in your flip-flops? You’ve come to the right place. This hopping college town has a gorgeous beach, top-notch Mexican food, and plenty of football fans (go Chargers!). Hops heads will also dig it: San Diego has emerged as one of the nation’s best craft beer destinations.

Where to Draft
San Diego is packed with sports bars. Bub’s @ the Ballpark is hosting draft parties on a couple of August weekends. The bar will be offering food specials and $14 pitchers. The Tilted Kilt is also taking reservations; drafters will get happy hour prices ($3 drafts and $2 to $5 apps) and can connect their laptops to the bar’s big-screen TVs to put the action on full display. Want a spot that focuses on craft beer? Mike Shess, publisher of West Coaster Beer News, recommends The Beer Company, a brewery and restaurant.

When You’re Done
If you’re not tired of beer, take a beer tour. Brewery Tours of San Diego runs a variety of itineraries, starting at $65 a person. Shess suggests choosing a tour that hits spots like The Lost Abbey and Stone Brewing Company.

Now that you’ve got that out of your system, get outdoors and enjoy the SoCal sunshine. San Diego Bay Adventures rents jet skis for $99 an hour. For a more affordable (and quieter) version, try a standup paddleboard ($35 for two hours). Or take an Xplore Offshore tour. You can spot whales, porpoises and other marine life from a “tricked-out” Navy Seal-style boat that puts you very close to the water’s surface, says Ann Wycoff, a contributing writer for San Diego magazine and the co-founder of travel site Wandermelon.com. Prefer to stay on land? Spend a few hours hiking Torrey Pines for amazing views.

Where to Stay
Try The Pines, a “groovy” boutique hotel, says Wycoff. The retro-chic downtown hotel is a quick ride to the bar-packed Gaslamp district. In mid-August, rates start at about $160. If you’d prefer to stay right in the heart of the action, the swanky Hotel Solarmar is another good choice, with August rates ranging from $157 to $400 on the most popular weekends. Don’t miss the property’s swim-up bar, says Travelzoo senior editor Gabe Saglie.

 

MONEY Investing

Use This Trick to Beat Your Friends at Fantasy Football

Minnesota Vikings running back Adrian Peterson
Jeff Hanisch/USA Today Sports—Reuters

The start of the football season is close and fantasy football drafts have begun. Here's why thinking like a long-term investor can ruin your season.

Last November, one National Football League running back had a particularly good day.

Strong, agile, and quick, this player absolutely tore apart the Atlanta Falcons defense on Nov. 17 to the tune of 163 rushing yards and three touchdowns. Fantasy football owners fortunate to have him on their rosters were awarded almost 35 points from his performance alone—more than a third of the total usually needed to win a whole game.

So who was this guy? Future Hall of Famer Adrian Peterson? The Philadelphia Eagles buoyant halfback LeSean McCoy? Jim Brown? No, no, and of course not. He was an undrafted second-year player out of Western Kentucky named Bobby Rainey. Who, you ask? Exactly. On that same day Peterson himself, perhaps the greatest running back since Jim Brown, ran for 100 fewer yards than Rainey and never touched the end zone en route to a pedestrian 8.5 fantasy points.

It’s hard not to look for a lesson in this episode. And for someone like me, immersed in the investing world, the inclination is to draw a parallel to value investing, the discipline made famous by Warren Buffett. Value investing involves looking for companies that the market does not fully appreciate in hopes that, over time, they will outperform expectations and send the stocks soaring.

But as the fantasy football season gets under way, with millions of fans around the country drafting players over the next few weeks, I’m here to tell you that a Buffett-like approach to fantasy football probably won’t lead to glory.

Why not? Well, to start, value-focused buy-and-hold investing is all about ignoring short-term market fluctuations and sticking with your investment philosophy over the long-haul. Coca-Cola THE COCA COLA CO. KO -0.1449% has a bad quarter? Johnson & Johnson JOHNSON & JOHNSON JNJ 0.1546% delivered poor earnings-per-share growth? No matter. Value investors often see these rough patches as buying opportunities. And one of the foundational principles of value investing is that no investor can consistently predict exactly when to buy this stock or trade that one. When investors do engage in this perilous behavior, they generally end up losing money.

That ethos, however, falls flat when it comes to fantasy football. For one thing, there is no long-term in fantasy football. The season only lasts 17 weeks, which means you have only 17 chances to maximize your total scoring output. While one or two days of poor returns won’t hurt your portfolio, one or two weeks of fantasy football failure could ruin your season. Most leagues have around 10 teams, and, in order to make the playoffs, you’ll usually need seven wins. So if one of your players isn’t performing well, or hasn’t reached his full potential, you don’t have the time to wait.

In other words, don’t be scared to grab onto a hot player until he cools off. For instance, take another look at Peterson and Rainey. Going into the 2013 season, ESPN ranked Peterson the top fantasy football player to draft. Bobby Rainey is not Adrian Peterson. For his career, Rainey only has 566 rushing yards. Peterson has 10,115.

Nevertheless, Rainey was the superior running back over the last seven weeks of the 2013 NFL season. Using the NFL.com scoring system, Rainey earned 79.3 points from week 11 to 17, while Peterson (due in part to injury) only scored 54.8. Even if you take out Rainey’s career day against the Falcons, the two running backs scored pretty much the same number of points.

This isn’t an isolated example, either. Two weeks earlier, Nick Foles, who began the season as the Philadelphia Eagles second-string quarterback, threw for seven touchdowns and garnered 45.2 points for his fantasy owners. Foles would go on to accumulate a total of almost 260 points for the season (more than superstars Tom Brady, Ben Rothlisberger, and Matt Ryan) despite starting in only 11 of 16 games.

In fact, last season, 15 different players scored the most points in a given week (Peyton Manning and Drew Brees each did it twice). Of those 15 players, not one was listed in the top five on ESPN’s pre-season best fantasy football players list. Brady never scored the most points in any one week, for example, but Bears back-up quarterback Josh McCown did, in week 14.

In short, buying the football equivalent of Coca-Cola shares (one of Buffett’s most beloved and long-held stocks) and hanging on through thick and thin can be a losing game.

I learned this lesson the hard way, having drafted Buffalo Bill running back C.J. Spiller with my first pick last season. Ranked the 7th best player by ESPN going into last season, Spiller scored 3.5, 11.7, 3, and 7.7 over the first four weeks. Unwilling to give up on such a high pick, however, I kept him in my starting lineup for most of the season. I ended up in the bottom of my league and learned a valuable lesson in sunk cost theory.

Of course finding seven weeks of Rainey, or spotting the next Foles off the waiver wire, is difficult. Some up-and-comers are just flashes in the pan and will deliver worse returns than your first-round pick. But when this season’s Foles takes off, don’t be surprised. If you play fantasy football you must learn to embrace the shooting star—and if that star burns out, find another.

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser
Follow

Get every new post delivered to your Inbox.

Join 45,308 other followers