How to remember anything: lessons from a memory champion

by Piper Weiss, Shine Staff, on Thu Mar 10, 2011 1:28pm PST 187 Comments Post a Comment Read More from This Author Report Abuse

Email Print

Joshua Foer keeps a Post-it note above his computer that says "Don't forget to remember." The author of the new book "Moonwalking with Einstein: The Art and Science of Remembering Everything" went from a man with an average memory to the official U.S. Memory Champ in 2006 by immersing himself in the world of professional memorizing. After studying the skills to learn entire dictionaries, he became convinced that anyone could have an exceptional memory. You just need to know certain memory techniques. Here are six secrets from his book to becoming a savant. Build a "memory palace": "Housing" a list of things you need to memorize is essential. "The idea is to create a space in the mind's eye, a place that you know well and can easily visualize and then populate that imagined place with images representing whatever you want to remember," writes Foer. It's a method used all the way back in Ancient Rome, when orators needed to commit their speeches to memory and when books hadn't yet become the main method of storytelling. The memory

palace should be a place you know inherently, like the home you grew up in, or the route you take to work every day. Then take the ten things you need to remember, like a grocery list, and plant each item in a different place in your memory palace. For example, put "paper towels" in your parent's old mailbox, then walk inside your old home and put "garlic cloves" on the kitchen counter. When you need to recall those items at the grocery store, instead of remembering the words, walk through your childhood home and find each item where you mentally placed it. It may seem like a lot of effort, but it's a process of embedding one kind of memory into another memory. Foer explains: "Humans are good at using spatial memory to structure and store information whose order comes less naturally." So a list of numbers or words may be hard to remember but if you embed them in a memory that naturally unfolds, like the blueprint of your old apartment, they'll live longer and be easier to retrieve. Get creative: When you're "dropping off" those grocery list items in your "memory palace" it helps to engage all of your senses. Remembering what the garlic smells like, or how the garlic skin crumbles in your hand before you place it on your mentally rendered kitchen counter, will help solidify where you put it. It makes sense in literal life. You're less likely to forget where you put your keys when you focus on their texture in your hand as you're laying them down on a table. When you need to remember where you put them, you'll remember how your hand felt as you put them down and the image of the table will simultaneously appear. As Foer found, engaging a sense in your memory helps solidify it. Get colorful: "Things that grab our attention are more memorable," explains Foer. "The funnier, lewder, and more bizarre, the better." When he was memorizing a grocery list by placing each item in his "memory palace", Foer was advised to get surreal in his thinking. "Paint the mind a scene unlike any that has been seen before so that it cannot be forgotten," Foer's memory coach advised. As he memorized his first grocery list by using the "memory palace" technique" he committed "salmon" to memory by imagining it flopping under the strings of a piano. "The general idea with most memory techniques is to change whatever boring thing is being inputted into your memory into something that is so colorful, so exciting and so different from anything you've seen before that you can't possibly forget it," he writes. Try "chunking": "Chunking is a way to decrease the number of items you have to remember by increasing the size of each item," explains Foer. It's the reason phone numbers are broken up into three sections or why remembering a sentence is easier than remembering each letter in the sentence. If you are given a series of digits to remember, just break them up into parts. It also helps to assign meaning to them. Separating them into three sections as if they were a date and then remembering that specific date (take 021411 and rethink it as 02/14/11 or Valentine's Day), will help solidify the memory. Practice makes perfect: Foer made it to the memory championships not simply by learning these techniques but by replacing them with web surfing or even reading. He'd memorize numbers up to four hours a day before the big championship. But for the rest of us, all it takes is about an hour a day of practicing memory techniques to get our brains working like humming hard drives. Wear earmuffs: We live in a world of distraction, now more than ever. In some ways those distractions serve as our exterior memory banks. Writes Foer: With our blogs and tweets, digital cameras, and unlimited-gigabyte e-mail archives, participation in the online culture now means creating a trail of always present, ever-searchable, unforgetting external memories that only grows as one ages. But those same blogs, tweets and instant messages with their pinging noises and flashing colors, make it impossible to focus on one task at hand, like memorizing a poem. "No matter how crude, colorful and

explicit the images one paints in one's memory palaces, one can only look at pages of random numbers for so long before beginning to wonder if there isn't something more interesting going on in another room." Foer found that an oversize pair of earmuffs worked to block out exterior noise and helped his brain zoom in on one task, like memorizing a series of numbers. But more subtle ear plugs would work just as well.

How to Profit From Inflation

The Scourge of Rising Prices Hasn't Hit Home Yet, but the Underlying Signs Point to Trouble Ahead. Here's What You Should Do Now
Article
Stock Quotes Comments (8)
MORE IN PERSONAL

FINANCE

Email

Print Save This o o o o + More

Text

More

By BEN LEVISOHN and JANE J. KIM

Inflation,long a sleeping giant, is finally awakening. And that could present problemsalong with opportunitiesfor investors. A quick glance at the overall inflation numbers might suggest there is little reason to worry. The most recent U.S. Consumer Price Index was up just 1.5% over the past year. Not only was that lower than the historical average of about 3%, but it was uncomfortably low for Federal Reserve Chairman Ben Bernanke, who prefers to see inflation at about 2%.

What to Do Now

Harry Campbell

Sell
Cash and Bonds: Treasurys, long-term bonds Stocks: Financials, utilities and consumer staples Hard Assets: Gold, real estate

Buy
Cash and Bonds: Floating-rate funds, inflation-linked CDs Stocks: Small-company value stocks Hard Assets: Commodities, real-return funds

Yet it is a much different situation overseas, particularly in the developing world. In South Korea, the CPI rose at a 4.1% clip in January from a year earlier, higher than the 3.8% estimate. In Brazil, analysts expect prices to rise 5.6% this year, exceeding the central-bank target of 4.5%. China, meanwhile, has been boosting interest rates and raising bank capital requirements to keep inflation, which rose to 4.6% in December, in check. "Emerging market economies are overheating," says Julia Coronado, chief economist for North America at BNP Paribasin New York. "They need to slow growth or inflation will become destabilizing."

Even some developed economies are seeing rising prices. Inflation in the U.K. surged to 3.7% in December, while the euro zone's rate climbed to 2.4% in January, the fastest rise since 2008. Much of the uptick has been driven by commodity prices. During the past six months, oil has jumped 9%, copper has gained 36% and silver has shot up 56%. Agricultural products have soared as well: Cotton, wheat and soybeans have risen 100%, 24% and 42%, respectively. That's a problem because rising input prices "work their way down the food chain to CPI," says Alan Ruskin, global head of G-10 foreign-exchange strategy at Deutsche Bank. Of course, the main inflation driver is usually wagesand that isn't a factor in the U.S., where high unemployment has kept a lid on pay for three years. Yet there isn't a historical blueprint for the inflation scenario that seems to be unfolding now. Not only has the global economy changed drastically since the last big inflationary run during the 1970s, but the lingering effects of the recent debt crisis remain a wild card. For investors, that means traditional inflation busters such as real estate and gold might not work as expected, while other strategies might perform better. So how should you position your portfolio? The best approach, say advisers, is to tweak asset allocations rather than overhaul them. That involves dialing back on some kinds of bonds, stocks and commodities and increasing holdings of others. Here's a guide:

What to Sell
Bonds. The price of a bond moves in the opposite direction of its yield. When inflation kicks up, interest rates usually move higher, pressuring bond prices. Even buy-and-hold investors get hurt, because higher inflation erodes the real value of the interest payments you receive and the principal you get back when the bond matures.

'There is no historical blueprint for the inflation scenario that seems to be unfolding now.'
The drop is usually most extreme in longer-dated bonds, because low yields are locked in for a longer period of time. So inflation-wary investors should shorten the maturities of their bonds, say advisers. The safest bonds, especially Treasurys, are usually hardest hit, because those are the most influenced by changes in ratesunlike corporate bonds, whose prices also move based on credit quality. From September 1986 through September 1987, for example, as inflation moved higher, Treasurys dropped 1.2%.

It might even make sense to dial back on Treasury inflation-protected securities, whose principal and interest payments grow alongside the CPI. That's because investors already have flooded into TIPS, driving up prices and driving down the real, inflation-adjusted yields. A typical 10-year TIPS, for example, yields just 1.1% after inflation, compared with an average of more than 2% in recent years. With so little cushion, long-term TIPS carry a higher risk of loss for investors who are forced to sell before the bonds mature. "Even if inflation is rising, you can still lose money," says Joseph Shatz, interest-rate strategist at Bank of America Merrill Lynch. Hard assets. Real estate may be a classic inflation hedge, but it seems likely to disappoint investors this time around. Even though rising inflation should put upward pressure on home prices, the twin forces of record-high foreclosures and consumers reducing their debt loads are expected to mute price gains for several years, says Milton Ezrati, senior economist at asset manager Lord Abbett. That's a far cry from the 1970s, when the median home price rose 43%, according to U.S. Census data. Gold is another traditional inflation hedge that might be less effective now. With prices already having more than quadrupled over the past nine years, many strategists see substantial inflation already factored into the price.

Hot Commodities
Commodities that are more closely tied to industrial or food production seem better positioned now than gold, say advisers.
View Full Image

Associated Press

Wheat

View Full Image

Bloomberg News

Silver

View Full Image

Bloomberg News

Cotton

View Full Image

Xinhua/Zuma Press

Copper

Historically, gold has moved with the money supply. During the last 30 years, the correlation has been about 69%, according to FactSet data. (A correlation of 100% means two indexes move in lockstep all the time; a correlation of minus-100% means they move in perfect opposition.) Based on the money supply alone, gold is priced 25% above where it should be, says Russ Koesterich, chief investment strategist at BlackRock Inc.'s iShares. Stocks. Equities can be a decent hedge against creeping inflation, because companies are better able to pass off costs to customers. But when input costs suddenly jump, profit margins take a hit. At the same time, the higher interest rates that accompany inflation prompt investors to demand more profits for each dollar invested. As a result, price/earnings ratios tend to shrivel. Over the past 55 years, the average trailing P/E ratio of a stock in the Standard & Poor's 500-stock index has fallen to 16.95 during periods with inflation running between 3% and 5%, from 19.24 during periods with inflation of 1% to 3%, the most common inflation range since 1955, Mr. Koesterich says. Sectors that are sensitive to interest rates, including financials, utility stocks and consumer staples, are especially vulnerable, say advisers.

What to Buy
Cash and bank products. Money-market mutual funds are more attractive in inflationary environments because the funds invest in short-term securities that mature every 30 to 40 days, and

therefore can pass through higher rates quickly. In an extreme example, money funds posted yields over 15% during the inflation-ravaged 1970s and early 1980s, says Pete Crane of Crane Data, which tracks the funds. A growing number of inflation-linked savings products are cropping up as well. Incapital LLC, a Chicago investment bank, says it has seen a pickup recently in issuances of certificates of deposit designed for a rising-rate environment. Savers, for example, can invest in a 12-year CD whose rate starts at 3% then gradually steps up to 4.25% starting in 2015, and peaks at 5.5% starting at 2019 until the CD's maturity in 2023. A caveat: If inflation eases and rates fall, investors could get burned, since the issuer may call the CDs and investors would lose out on the higher rates at maturity. Bonds. One way to reduce the impact of rising inflation on bond holdings is to build a bond ladder buying bonds that mature in, say, two, four, six, eight and 10 years. As the shorter-term bonds mature, investors can reinvest the proceeds into longer-term bonds at higher rates. "A bond ladder is best for someone who doesn't mind holding them for up to 10 years," says Jeff Feldman, an adviser in Rochester, N.Y. Highly cautious investors might prefer the I Bond, a U.S. savings bond that earns interest based on a twice-yearly CPI adjustment. Although the current yield on I Bonds is only 0.74%, that yield is likely to move higher on May 1, the next time the rate is adjusted. I Bonds aren't as volatile as TIPS and appeal to conservative, buy-and-hold investors. The interest may also be tax-free for some families for education expenses.

25%
Amount gold may be overpriced based on its relationship to the money supply.

More adventurous types might consider the inflation-protected government debt of other nations, which carry higher yields along with greater risks. The SPDR DB International Government InflationProtected Bond Fund is an international inflation-protected bond exchange-traded fund designed to do well if inflation in overseas countries moves higher. The fund returned about 6.8% in 2010 and 18.5% in 2009, according to Morningstar Inc. Bank-loan funds. Another way to exploit rising inflation is through mutual funds that buy adjustablerate bank loans, many of which are used to finance leveraged corporate buyouts. So-called floatingrate funds are structured so that if interest rates rise, they collect more money. During periods of rising

rates, floating-rate funds usually outperform other bond-fund categories. In 2003, for example, as investors anticipated higher interest rates and a stronger economy, bank-loan funds gained 10.4% while short-term bond funds gained 2.5%. Now, amid expectations of rising inflation, investors are once again flocking to these funds, pouring in about $7.6 billion into loan funds in the fourth quarter of last year, according to Lipper Inc.more than double the previous quarterly record set in 2007. The pace has accelerated this year, with investors putting in about $3.4 billion thus far. After gaining almost 10% last year, the funds shouldn't be counted on for much price appreciation, says Craig Russ, who co-manages $22.7 billion of floating-rate investments across three floating-rate funds and other accounts at Eaton Vance Corp., including the Eaton Vance Floating Rate Fund. But the funds generate plenty of income, yielding about 4% to 5% now, according to Morningstar.

Price Increases
From Aug. 2, 2010 through Feb. 4, 2011:

Cotton: +100% Silver: +50% Soybeans: + 42% Copper: +36% Wheat: +24%

Be warned: Floating-rate funds can get creamed when investors fear the underlying loans are too risky. In 2008, for example, bank-loan funds lost 29.7%, although they zoomed 41.8% in 2009, according to Morningstar. What's more, banks are beginning to make riskier "covenant-light" loans that carry fewer stipulations for corporate borrowersa sign of frothier trends in the market. Given the potential for volatility, floating-rate funds are best viewed as a complement tonot a replacement forinvestors' core bond holdings. Among Morningstar's picks in this category is the Fidelity Floating Rate High-Income Fund, among the more conservative in the category. Commodities. Materials that are more closely tied to industrial or food production seem better positioned now than gold, say advisers. The trick is to find the best investment vehicle. The easiest way for small investors to gain exposure to most commodities is through exchange-traded funds, many of which use futures contracts. But such funds can be dangerous because they often face "contango"when the price for a future delivery is higher than the current price. The result: The ETFs lose money as they buy new contracts, even when prices are rising.

The losses can be extreme. In 2009, for instance, while the price of natural gas rose 3.4%, theUnited States Natural Gas Fund lost 56.5% as a result of rolling over futures contracts. Some firms have rolled out ETFs that aim to address the problem. One of Morningstar's picks is the U.S. Commodity Index Fund, run by U.S. Commodity Funds LLC. The portfolio buys the seven commodities that are most "backwardated"the opposite of "contango," so rolling contracts should result in a profitalong with the seven commodities with the most price momentum. "USCI provides an outlet for investors who want broad commodities exposure but don't want to worry about the daily dynamics," says Tim Strauts, a Morningstar analyst. Other funds play inflation by holding many different assets to protect against rising prices no matter where they show up. The IQ Real Return ETF, launched in 2009 by IndexIQ, aims to provide a return equal to the CPI plus 2% to 3% over a two- to three-year period. To get there, it invests across a dozen or so inflation-sensitive assetsincluding currencies and commodities. Stocks. One corner of the market tends to do better when prices rise suddenly: small-company value stocks. "Because value and small stocks tend to be fairly highly [indebted] companies, inflation reduces their liabilities," says William Bernstein of Efficient Frontier Advisors LLC, an investmentadvisory firm in Eastford, Conn. From January 1965 through December 1980, for example, inflation averaged 6.6% a year. The Ibbotson Small-Cap Value Index posted average annual returns of 14.4%, according to Morningstar's Ibbotson Associates, double the S&P 500's 7.1% gain. Morningstar's picks in the small-cap value fund category include Allianz NFJ Small Cap Value,Diamond Hill Small Cap, Perkins Small Cap Value and Schneider Small Cap Value. Just be warned: Small value stocks have had a good run recently, returning 134%, on average, since March 6, 2009. In the end, the particulars of any inflation-fighting plan may not be as important as developing a plan in the first place. "The real problem you run into with any kind of inflation hedges," says Jay Hutchins, a financial adviser in Lebanon, N.H., "is that if you don't already have them when inflation is around the corner, you've missed the boat."