Monthly Archives: July 2012

Law students only do poorly because of cognitive bias

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Many people believe that law school is a “scam” due to the fact that only around fifty-five percent of law school graduates had a job that required their degree after a few months. This means that around half went to law school for no discernible reason. However, the real reason that most people do bad at law school is due to cognitive bias.  Everyone believes that college is a magic bill that will make them a great lawyer, but this is most surely not the case. For instance, schools that tend to attract worse law students, such as the Whittier College of Law, have higher unemployment rates than more esteemed, expensive colleges like Columbia. The thing to take away from all this is that many law graduates have unimpressive test scores and GPA’s and have very little passion. People tend to have a strong cognitive bias towards themselves, believing that they are incredibly attractive or intelligent when this may not be the case in reality. Law students need to seriously consider whether or not they have the drive to be a lawyer, as no matter how much schooling someone with no drive gets, zero multiplied by zero is still zero.

Four ways low interest rates affect you

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The Bank of Canada has been promising lower interest rates for a while, but again it disappoints. There are four reasons that you need to be wary of the current interest rates:

First, the lower interest rates are going to cause investors to not be able to get good returns on their safe investments. If you have investments in them, you cannot expect to get better returns for quite a while thanks to the enormous hesitation to increase interest rates.

Second, you now need to save more money for your retirement, because thanks to having less returns on your investments, you will not have as much money in the future. Even your pension might be affected, as defined-benefit pensions will not be able to meet their obligations thanks to all of the uncertainty out there.

Third, those who are heavily in debt have the risk of losing their jobs due to low interest rates, which are really just signs of global softness.

Finally, the housing market is continually at risk, with fewer people able to afford housing even though interest rates are low.

Interest rates will likely remain low well into 2013, maybe increasing by only one percentage point, so these problems will remain.

Canadians still have a long way to go on their mortgages

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The Bank of Montreal reported today that the average Canadian has about fifteen years left on their mortgage. Twelve to twenty percent of Canadians, depending on the province that they live in, have more than twenty-five years to go on their mortgages. This is all on the heels of new government regulation that are supposed to lower demand and prices on home mortgages. These new regulations will decrease the refinancing limit on houses to 80% of home equity while limiting the amount of help that the federal government can make available for insurance from the Canadian federal government to home owners. The senior economist of the Bank of Montreal estimates that the prices of homes will need to fall an average of three percent in order to neutralize the impact of amortization rule changes on mortgage payments. It is his hope, and the hope of many others in the industry, that these new rules will help th real estate market landing softly back on its feet rather than hardly and dramatically. The study goes on to say that Canadians made larger payments than they had to and some even paid lump sumps on their houses. Unfortunately, twenty four percent of those surveyed could not afford to do so.

The finances of Canadians are mostly on the right track

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The finances have Canadians are definitely on the right track as we look back at them on this Canada Day weekend. While some areas have improved, others have gotten worse. On the positive side, the net worth of Canadians has continued its rise, as have real estate gains and the Toronto Stock Exchange. The Canadian dollar is also increasing in value against the Euro and US Dollar. Canadians may have one of the lowest savings rates of OECD countries, but they still have less debt than most others, so this may account for the lessened need to save. Even the Canadian federal government is doing well, with continued surpluses while other countries, like the United States, have huge deficits. In fact, the Canadian government has continued to post budget surpluses of 1% since the 1990’s. One slightly negative thing is that the appreciation of the Canadian dollar has led to worsened stock market returns from the United States, but the Canadian economy or Canadian dollar cannot really be blamed for this. All in all, Canadians are doing better with their finances on average than those in many other nations, and Canadians all have something to be proud of this Canada Day weekend.