Property Tax - Reduce Income Taxes

If you don't have your property taxes escrowed as part of your house payment, make sure you pay your property tax bill before January 1, 2009. Even if it isn't due yet, you can often write of the taxes as "paid" in 2008.

Credit Card - Tipping?

For those people who work as waiters/waitresses, do you "know" how much in tips you get from each customer. After leaving a good tip for outstanding service, I noticed the receipt seemed to disappear and I don't know when the server would have been able to notice: Hey, that guy gave me a good tip.

Thoughts?

Post-Christmas Spending

The day after Christmas and the spending continues. Between gift cards, gifts I have to take back, and other money I set aside to buy clothes, it is off to the malls and stores.

Peace to you all.

Ponzi – Crime of Violence!

It is easy to categorize crimes like murder and rape as violent crimes. With the first documented death related to Madoff yesterday, we have proof of the violence inherent in a Ponzi scheme. While a burglar/robber is likely to take some of what you own, the con man can and will take everything you own. According to news reports, many of his victims have been relatively well-off retirees in places like Long Island and Florida. Now, many of them are not just broke, they are too old to have any hope of earning enough money to restore their lifestyle.

Although I believe in bail until someone is convicted, Madoff's confessions make me feel he should be in jail right now. With a sentence likely to exceed his remaining lifespan, it is time for him to start paying his debt to society.

Madoff Acted Alone!!!

If you believe Madoff's "I acted alone" story, I would like to offer you a chance to invest your money with an investment advisor known for consistently providing 1-2% monthly returns in good times and bad. Could he run a $1m ponzi scheme by himself? Yes. Could he run a $50 BILLION ponzi scheme by himself? Not in a million years. Just to manage the money coming and going from the fund, he would have needed people to deal with the wire transfers and/or checks. He would have needed people to print and send to the fictitious investment statements.

When everything is said and done, I predict:

• 20-30 employees at Madoff's firm face criminal charges;
  
• The accounting firm (apparently one guy) who audited his accounts will go to jail for a LONG time; and
  
• His banks will face serious questions about allowing the money to flow out of his accounts.
  

Furthermore, the banks and hedge funds that steered clients into Madoff's clutches will face civil liability for the failures related to "due diligence." Simply appalling.

Plow Guy or Snow Blower

Given the amount of snow that can fall in my area, hand shoveling the driveway is not a viable option. Right now, I have a guy that comes to plow the driver. At about $200 per year, he does the driveway and leaves the porch and walkways to me. Looking to do more of my own work, I considered getting a snowblower. Frankly, it doesn't make much sense. In addition to the $600-1000 for the machine, you have gas, parts, and maintenance. Furthermore, a good machine will take up the limited space in my garage.

Bottom line – having someone do it for me is the best option.

    

Marry a Countess – Go Broke!!

According to news reports, the estranged wife (who claims to be a countess) of former UTC CEO George David is claiming she spends $53,000 per week. Included in her spending: $8,000 for travel and $4,500 for clothing.

Note to self, do not marry a countess!!

http://www.nypost.com/seven/12192008/photos/news003a.jpg

http://www.nypost.com/seven/12192008/news/nationalnews/really_high_maintenance_144934.htm

Bond Fund v. Actual Bonds

The one winning investment I made this year was the purchase of a few TIPS back in late October. Because interest rates have fallen, I have made over 8% on my money in less than two months. They mature in 2013. In addition to the individual TIPS securities, I own a similar sized position in a TIPS mutual fund.

In the short term (3-6months), I do not expect the interest rate environment will materially change. For that reason, I am going to hang on to both investments through Spring. Nevertheless, I cannot imagine low interest rates will hold indefinitely and I will sell the TIPS fund sometime next year.

With respect to the TIPS fund, the value can and will fluctuate as the value of the securities in the fund change with market conditions. As rates begin to rise, the fund will begin to lose value. As a result, I have no way to accurately project what they will be worth at any given time.

While the value of the TIPS securities I own will fluctuate from time to time, I know exactly what they will be worth in 2013.

My Strategy: I will favor individual treasuries over bond funds. For no transaction cost, Fidelity will allow me to buy treasuries at auction. By holding them to maturity, I don't have to worry about fluctuating values.

I do, however, think bond funds do have some value. For securities where there is default risk (munis and corporate), good bond funds allow investors to diversify so as to prevent a default event (GM Bonds anyone?) will not be crippling.

 

Buy a Car?

If you are considering buying a car, now is the time to close a deal. All of the manufacturers have excess inventory. All of the dealers need to move inventory. If you can pay cash, you are golden. Even if you cannot pay cash, good credit = rock bottom interest rates.

Shaving Comcast Bill

By getting rid of Shotime and the sports package, I am going to save $24 per month on my cable bill. By joining Blockbuster's Online Service (similar to Netflix), we are giving some of the savings back. BUT, with a trip to the movies costing $40 per couple (with popcorn and drinks), our Blockbuster membership is relatively cheap entertainment for two compared to the movies.

Student Loan Consolidation

Does anyone have any good information on student loan consolidation? I would like to move my wife's graduate student loans from Sallie Mae (aka – the spawn of satan) to someone with better service. Back when I consolidated my loans, the best time to do it was after they reset the rates in August.

Madoff and Mutual Funds

The WSJ has an excellent article stating that the Madoff fraud is a Walking Advertisement for Mutual Funds. Frankly, I have to agree. Mutual Funds are highly regulated. Even in the case of a large theft, the fund and/or the advisor is likely to have insurance coverage in place to protect most theft losses.

While they have had their issues (high fees, loads, market timing), there have not been many (if any) cases of outright fraud involving major US mutual funds.

Fed Moves against Savers

By pushing interest rates to historic lows in hopes of stopping the economic meltdown, the Fed has made in virtually idiotic to throw money in a savings account. Even online banks will have a hard time paying more than 2%.

What to do?

1. Spend money on depreciated assets: in particular land and beaten down stocks will seem more attractive.
   
2. Pay down any loan balance you have that is not at rock bottom rates. Having high interest loans in the coming year is going to be brutal.
   

What banks will do?

With free money from the fed to loan, they are going to throw money into loans like there is not tomorrow.

Ponzi Scheme - Fallout

The fallout from the $50B Made-Off Ponzi scheme is starting to become public. From rich socialites in Palm Beach to Long Island Hospital foundations, the losses are turning out to be huge. Sadly, it appears some people placed all their money under Made-Off's management and it appears they are totally wiped out.

As a risk management professional, anyone entrusting their money to an investment advisor needs, at minimum, to adopt the following risk controls:

1. Do not trust and always verify;
   
2. Do not allow the firm that manages your money to "hold" your money. Hire a separate firm to serve as "trustee" to hold the funds.
   
3. The trustee will send copies all account statements directly to your accountant (who has no ties to the investment advisor) or yourself. Using this information, you should be able to reconcile the trustee statements to the investment advisor "claims."
   

 

Dogbert the Financial Advisor

Dogbert the Financial Advisor is the perfect follow up to my post about fraud and investment advising. IMHO – Dilbert is the best writing on corporate life in America. Best of all, you can sign up for a free – daily e-mail.

Massive Ponzi Scheme – Fraud Warning

There is a saying that says you cannot cheat an honest man. While not totally true, the saying does reflect the fact that most fraud involves things that are "to good to be true." If you haven't seen the news, Wall St. legend Bernie Madoff has admitted to costing investors $50 BILLION (YES BILLION) in an enormous Ponzi scheme. In this case, enormous returns were not the red flag, consistent returns were. Year after year, month after month, Madoff's fund made consistent returns beyond what was reasonable. Chasing these "consistent" returns, investors piled in billions despite Madoff's inability to document his strategy or the inability of anyone to explain how he did it.

Moral to the story: If you do not understand how an investment earns money AND loses money, you should not invest in it.

Sources: NY Post, WSJ.Com Madoff Stories

 

http://www.nypost.com/seven/12132008/business/madoffs_strategy_was_just_too_good_to_be_143973.htm

Apocalypse Now

With the impending demise of the big three, we know there will be thousands of new additions to the unemployment rolls. Not just with them, but their suppliers. Furthermore, the employees support thousands of additional jobs by spending their payroll dollars on things like food, cable, and even beer.

Within 3 months, we are going to have a brutal unemployment rate. Say a prayer for everyone on the unemployment list.

Auto Loans – Available?

Listening to the idiots argue about the auto bailout, they keep saying there is no credit to buy cars. Has anyone found this to be true? Toyota is running "Saved on Zero" commercials by the minute. Nissan not far behind.

Sirius - Dismal Customer Service

Once again, I had to deal with not one but two morons with respect to our Sirius Satellite Radio subscription. Simply put, their customer service staff seems trained to avoid answering what you ask. Furthermore, they tend to rush out sentences like "you want to buy …" when you have asked for the pricing.

My Problem: We have two receivers and I would consider adding the Best of XM to my subscription. Unfortunately, I was unable to get a straight answer from the CSR. Ultimately, I wanted two answers:

1. How much will the renewal of our services be? Two receivers with Sirius only.
   
2. How much will an annual subscription be if we add Best of XM?
   

 

For a company with no stock price, they do not seem to understand that adding customers should be easy for the customer.

How are Enzyte Commercials Running?

If you have not seen the news, the guy running Enzyte was sentenced to jail for running a fraudulent business. Nevertheless, Smiling Bob and his idiotic Natural Male Enhancement ads continue to run. How is that possible?

 

Source: http://cincinnati.fbi.gov/doj/pressrel/2008/ci022608.htm

STEVEN E. WARSHAK, age 42, president and owner of Berkeley, of five counts of conspiracy to commit money laundering and various types of fraud as well as conspiracy to obstruct proceedings before the U.S. Federal Trade Commission, 12 counts of mail fraud, three counts of bank fraud, and 73 counts of money laundering for a total of 93 counts.

Why? The company's scheme involved false advertising which included made-up claims about size increases, fake customer satisfaction ratings, and fictitious doctors who the ads falsely claimed collaborated for 13 years to develop Enzyte, the company's leading male enhancement product. The false ads also contained representations about money-back guarantees that the company as a matter of practice would not honor. As part of the scheme, the conspirators placed many consumers who responded to free-trial solicitations on an automatic shipment program without the customer's authorization, knowledge, or consent. Berkeley would then send the product to the consumer and bill the consumer's credit card regularly. When customers called to cancel, the conspirators employed various means to delay or hinder any returns or cancellations from occurring.

Toys R’us – Bad Customer Service

Any idiot knows the biggest season for toy stores is Christmas. One would think Toy R'us management would have the brains to offer some sort of "Christmas" packaging for customers shipping items purchased online. One would be wrong.

Thanks guys. My unwrapped present is now heading towards my mom's house. She will wrap it. Next year, I won't be using Toys R'us.com to purchase gifts.

Another reason Best Buy stinks!

Today, I bought something from Best Buy Online. By making the purchase (which was to be picked up at the store), I was entitled to a $10 gift card. Much to my surprise, I arrived at the store to learn that they were going to "ship" the gift card. Why would they want to spend money to ship the card? For the same reason people hate them, they are run by morons.

WeatherTech Floor Mats – Winter Clean

Thanks to my Citibank Driver's Edge card, I am going to pick up a full set of weathertech floor mats for my SUV. Although expensive, they work great for keeping the snow and junk off the floor. Makes it easy to keep the car clean (which is important to me).

Amex Card – Why? Green/Gold/Platinum

Membership has its privileges says the commercial. Really? Watching an American Express Card commercial, I got to wondering why anyone would pay for the privilege of having an Amex card.

In particular, the Green Card seems to offer no real benefit to justify the annual fee.

Plagiarism - NYT or WSJ

Reading the New York Times online, I was reminded about a story that I read in with Wall Street Journal. After rereading both stories, it appears one of the writers basically rewrote the other's "story" (without attribution) and added new information. Literal plagiarism – Not. Plagiarism of the thought behind the story – Yes.

Sadly – both stories are about people who think they have "Health Insurance" only to find out their employer had a "self insured" plan administered by a third party (like Blue Cross). Unfortunately, when an employer backing a self-insured plan goes under, Cobra benefits go out the window. Furthermore, people with existing bills end up as unsecured creditors of that company.

Cites:     When a Job Disappears, So Does the Health Care

    For Workers, Medical Bills Add to Pain as Firms Fail

Insurance Company Shame

As a member of the insurance industry, I am proud of what I do. Furthermore, I can say with complete confidence that most of the people in the industry are decent people. Nevertheless, decent people do make mistakes and do things that seem unbelievable. Recently, Specialty Risk Services (a third party administrator owned by The Hartford) made news with a decision that is simply mind-boggling. In all likelihood, there is a SRS employee who cannot see the forest for the trees.

Source: SF Gate.

 

Taneka Talley was stabbed to death in March 2006 while she was working as a clerk at a Dollar Tree store in Fairfield. Her killer's only motive, prosecutors say, is that she was African American.

That's also the reason the store's workers' compensation insurer is denying $250,000 in death benefits to Talley's 11-year-old son.

The boy's grandmother, the child's legal guardian, said Specialty Risk Services is taking the position that a racially motivated killing is personal, not work-related - even though the man charged with killing Talley had never met her before. The insurance company, Dollar Tree and their lawyers aren't talking publicly about the case but are defending their position before a state appeals board that hears workers' compensation disputes.

"I think it's unfair. It's discrimination," said Carol Frazier of Vallejo, who gained custody of her grandson, Larry Olden, after her daughter's death and is challenging the insurer's refusal to pay in a case that eventually could go to court.

"They're saying (the killing) didn't arise out of her employment, except that in this case she wouldn't have been killed if she hadn't been at work," said Frazier's attorney, Moira Stagliano. "This person didn't know her, just walked into the store and picked her out."

The opposition by Dollar Tree and its insurers to paying benefits to Talley's son represents an attempt to set new limits on California's workers' compensation system, under which a company provides benefits to employees or their survivors for work-related deaths or injuries regardless of whether the firm was at fault.

Businesses have long assailed the system as overly generous to employees and as expensive, complaints that led to passage of state laws in 2003 and 2004 tightening limits on what medical treatment is covered by compensation payments.

The man accused of stabbing Talley, Tommy Joe Thompson, 45, of West Sacramento, is tentatively scheduled to go to trial Dec. 10 in Solano County Superior Court on a charge of murder. If convicted, he could be sentenced to life in prison.

Talley, of Fairfield, was 26 and working full time at the Dollar Tree on North Texas Street to support herself and her young son. She was stocking shelves just after 9 a.m. on March 29, 2006, when a man walked in and stabbed her, authorities said. The killer fled.

Thompson was arrested that evening. He had previously served a prison sentence for beating his young son in 1994, records show.

At a hearing in March in which Thompson was found mentally competent to stand trial, a defense psychiatrist, Herb McGrew, testified that Thompson had told him he stabbed Talley because she was black. Thompson is white.

"You know that he got up that morning, and he said, 'I'm going to kill a black person,' " said Deputy District Attorney Dane Neilson, according to a transcript of the hearing. "She was, unfortunately, the first person he saw, correct?"

"Correct," McGrew replied.

An insurance company lawyer later cited that exchange in a letter to Stagliano defending the denial of benefits to Talley's son.

"The doctors testify that Mr. Thompson's motivation in stabbing Taneka Talley was purely race motivated," attorney Kelly Hamilton wrote. "As such, it is our belief that our denial in this matter is proper."

The compensation law doesn't consider an on-the-job injury to be work-related if the motives were entirely personal - for example, if an estranged lover or spouse comes to the workplace and attacks an employee because of a private grudge.

The line can be hard to draw when one worker assaults another for personal reasons or when the injured employee was on a personal errand or instigated the assault. But Stagliano said Talley's death was definitely job-related.

"Taneka Talley was at work, doing her job, when she was killed," the lawyer said. "If she had not been in that store, she would not have been available to (the killer), and she would still be alive.

"It's shocking that Dollar Tree and its insurance carrier are using the alleged racist motivation of a killer as an excuse to get out of paying benefits," Stagliano said.

Frazier, who works for the Richmond Parks and Recreation Department, said her daughter had a $15,000 life insurance policy. It covered burial expenses, she said, but is nowhere near enough to care for a growing boy who needs new clothes every six months.

"His mother worked hard on her job for him to get a good education, to go to college," Frazier said.

Larry, now in sixth grade, is "a very good student, he loves sports, really good in basketball - a normal little boy," she said. "He misses his mom."

E-mail Bob Egelko at begelko@sfchronicle.com.

 

The case for brick/mortar banking

This morning, I needed to make a deposit and headed over to TD Banknorth. While waiting for the teller to finish the transaction, I started looking at their hours. Most days, tellers are available from 8am to 8pm. On Saturdays, the bank is open until 3pm. Years ago, we had to get off early to go to the bank. Now, ATM's and online banking can take care of most transactions 24/7. When that fails, you are not out of luck.

Although I recommend and use ING Direct, they don't have local branches and sometimes you need a bricks and mortar bank. In our family, our banking situation looks like this:

ING Direct – Primary Savings and Checking Account, Certificates of Deposit

TD Banknorth – Backup Checking Accounts. Free ATMS anwhere and paper checks fill in the gaps ING doesn't do well. For example, ING Direct doesn't offer a safe deposit box. In addition, I think it is a good idea to have some "personal" relationship with a human banker.

Vanguard/Fidelity – brokerage services. IRA and longer term savings.

Emigrant Direct- Backup Online Savings Account

Your $110 gift to GM/Ford/Chrysler

Listening to the morons running to the Big Deadbeats (aka the automakers), I decided to a little math. Our $34 Billion auto bailout will cost approximately $110 per US resident. If you consider only taxpayers (eliminate children and others who do not pay taxes), it probably means closer to $250 per taxpayer.

Instead of gifting them the money, we could buy 1.7 million cars from them for $34 Billion at an average price of $20,000 per car. That would keep the plants churning out Malibus and Fusions.

Heating Oil – Charge It!!

Today, I discovered I could charge my heating oil bill to my Amex Blue Cash card. By doing so, my oil heat provider will give me a 10 cent per gallon discount. Combined with the 1% cash back I get from Amex, I end up with a nice little discount. Furthermore, I get rid of the hassle of send out another check.

Piracy Protection - a new business

Listening to the news on the radio in my card, I heard a story about how pirates tried to take over a huge cruise ship. When I thought about it, I could help but wonder why nobody was selling "protection" to ships in the area. By the time I got home, I could find a story about how a private security firm named Blackwater was pitching protection in London.

Moral to the Story: If there is a need, someone is willing to serve it for a price.

Pelosi’s Bold/Dumb Plans

Obama wasn't my pick for President; however, he appears to be very intelligent. Unfortunately, until he takes over next year, Nancy Pelosi is leading the charge on the auto bailout and a "new stimulus" plan. According to today's Wall Street Journal, she made the following determinations:

1. She determined bankruptcy was not a good option for the auto bailout. We are going to give the auto industry something like $50 billion and are not going to force them to fix their debt/retiree benefits problems.
   
2. She has determined the "new stimulus" plan needs to subsidize internet access. Can you say gift to the telecom industry?

EmigrantDirect v. ING Direct Review

Although I think ING Direct offers great service and I intend to keep using it for online savings, I have been disappointed by the fact the interest rate on savings has been consistently lower than available with other banks. As a result, I have started the process of opening 3-4 online savings accounts and plan on transferring my emergency fund to the one offering the best rate at any given time. Because it has consistently high rankings from other financial bloggers, I opened an account with EmigrantDirect.

Review: First of all, the signup process was relatively easy and the initial deposit, $100, was transferred quickly and without incident. Nevertheless, I am not happy with the overzealous online security they employ. Instead of ING's difficult number and moving cursor keypad, they force users to answer 2 personal questions before logging on. While not a problem when I am logging onto the site, it is an annoying process when I try to use Quicken's online update feature. Every time, it slows down the process. Although the site works well, it is poorly designed and makes it difficult to see the available rates in CD's and other products.

Bottom Line: I probably will disable the online update feature on Quicken and keep the account open. Compared to ING great experience, I give it an acceptable rating.