Shamwow Guy and a Hooker

According to news reports, the annoying ShamWow guy was arrested with an "alleged" prostitute. Not really a personal finance topic, but quite funny.

Source: http://www.thesmokinggun.com/archive/years/2009/0327092sham1.html

Hoping for a down day

Because I have a buy order in for today, I am hoping the market pulls back a little bit. I have plans to buy $2,500 in two index funds.

Quitting AIG - Debacle

As I predicted, the AIG Bonus witch hunt has led employees to quit. While it is difficult to feel sorry for someone who received a $700K+ bonus, we should. From what we actually know, he worked all year for a promised wage. We have no evidence he was a crook or even lost money for AIG. Nevertheless, he was subjected to threats by the New York Attorney General and protesters went to home.

There are plenty of villains in the financial crisis ( See Chris Dodd); however, we cannot spend all our time blaming everyone else. In the case of AIG, we own it. We need employees to show up for work and to generate profits. If they do not, our investment will be worth zero.

Dear AIG – I Quit

Sallie Mae – Watch Them Like a Hawk

A few days ago, Frugal Zeitgeist had an interesting post titled "Vigilance Pays Off." Her post and the follow ups are outstanding.

Like her, I am diligent about tracking expenses and bills. Thanks to Quicken's automatic download feature, it is fairly easy. Nevertheless, certain bills require manual monitoring.

In particular, the idiocy that is Sallie Mae demands special attention. Last week, we received a past due notice complete with interest and late charges. Of course, the notice was wrong. After 20 minutes on hold and 20 minutes with their moronic customer service representative, they determined they "accidently" misapplied our last payment.

Do I think they will get it right in the future? No. In every instance, they seem to get it wrong.

U.S. Credit Scores Improving?

Initially, I was surprised to hear on the radio that credit scores in the US are improving. In a recession, how is this possible? Simply put, the Personal Savings Rate in the US has been increasing as US consumers reduce spending and pay down debt. Unfortunately, many people who would typically have good credit are going to see their scores drop because of unemployment.

Consumer Credit Scores Rise in All Geographies and Age Groups During February

http://www.foxbusiness.com/story/consumer-credit-scores-rise-geographies-age-groups-february/

SAN FRANCISCO, CA, Mar 18, 2009 (MARKET WIRE via COMTEX) ----Credit Karma (www.creditkarma.com), a pro-consumer credit score tracking and management service, today released its U.S. Credit Score Climate Report with trend data for February 2009. During the November 2008 to February 2009 time period, Credit Karma saw an increase in credit scores across all geographies and age groups. 39% of consumer credit scores have gone up, 29% have gone down, and 32% remained the same. Of the scores that increased, the average credit score rose 14 points during the time period. Of the scores that decreased, the average credit score dropped 14 points.

The Credit Karma U.S. Consumer Credit Score Climate Report provides a monthly barometer on consumer credit trends, a particularly important economic indicator in today's market. Each month, the Report offers unique and insightful statistics on the health of consumer credit scores nationwide. Trend data in the report is based on a comparison of Credit Karma users' February credit score with their previous credit score at least 30 days prior and no more than 90 days out. Here are some additional findings:

-- Average credit score with no change is 695 whereas 675 and 663 are the respective credit score averages for those with an increase and decrease. This would suggest that people with higher credit scores maintain more stable credit scores while those with marginal credit scores tend to be in flux.

-- Compared with January, more consumers' credit scores are going up. In January 2009, 37% of consumer credit scores went up compared to 39% in February. That average up credit score in January was 674 compared to 675 in February. Fewer consumers' credit scores have also gone down. 31% of credit scores dropped in January compared to 29% in February. The down credit score in January was 662 compared to 663 in February. The percentage of credit scores with no change remains the same.

-- The Midwest had the highest increase with 41% of consumers seeing their credit scores go up in February. The average up credit score in the Midwest is 676. In January 2009, 37% of Midwest consumers saw their credit scores rise and the average up score was 670. Amongst states, Ohio saw the most credit scores go up in February. 42% of Ohio consumers had their credit scores rise and the average up score is 660.

Made $57/month from Amex

Our Amex Blue Cash Card anniversary date was last week. We will be getting $688 for the year which works out to a fantastic $57 in found money per month.

We charge everything to this card that we can including:

1. USAA charges the card for our auto insurance bill;
   
2. Comcast, ATT, and Verizon charge the car for our phone, cell, and cable bills;
   
3. Our heating oil contract hits the card for payment (this saves us $0.10 per gallon on oil.);
   
4. Gas and groceries (after we hit the $6,500 for bonus interest payments)
   

Exceptions:

1. Citi Driver's Edge: During the $6,500 initial period, we charge gas and groceries to a driver's edge card for a 3% rebate. In addition, we charge all auto related expenses. We received approximately $200 in rebates in the past month.
   
2. Discover Card: We got 0% for 12months and managed to make something like $50 in cash back for charges related to our wedding and honeymoon.
   

Obama’s Socialism

According to the NY Times, Obama is going to announce his support for sweeping oversite of executive pay at ALL banks, Wall Street Firms, and "other companies." Is he trying to tank the economy? Is he trying to ruin our companies?

If there is one thing we know, it is that companies do not (intentionally) pay employees any more money than is absolutely necessary. For companies paying their execs big bucks, it means they believe ("rightfully or not") that the executive is worth it to the firm's bottom line.

Now, Obama is going to decide what the executive is worth to the firm? How would he know? Does anyone think Barney Frank, Chris Dodd, and Charley "I don't pay taxes" Rangle know how much to pay these people?

If Obama's plan goes into effect, the highly paid executives will leave for foreign firms. In particular, banks like Deutche Bank are licking their chops at the possibility of picking up top execs of American banks.

While I did not vote for Obama, he seemed to be a very smart man. Unfortunately, it looks like his economic policies are FAR to the left of where we expected.

Congressional Bullies - Incompetence

By any measure, the AIG "bonus" employees are not sympathetic characters. As a result, the congressional bullies were able to pass a bill taxing their bonus payments at 90% for the express purpose of "punishing them."

1. If they can do it to "them," they can do it to us.
   
2. The punishment taxes are designed to distract voters from their own incompetence. Once again the House (Barney Frank) and Senate (Chris Dodd) Finance Committees failed in their oversite roles. Had they done their jobs, the bonus payments would not have been made.

Stopping Courtesy Checks

Yesterday, I got fed up with being forced to shred unwanted cash advance "courtesy" checks. To stop them, I signed onto Amex and Citi websites, sent an internal e-mail to customer, and easily took care of it.

AIG Bonus Upside!! Dodd

Senator Chris "Mr. Wall Street" Dodd has been caught red handed. First, he caused a change in the law that made it mandatory for AIG to make the bonus payments. Then, he lied about it. Hopefully, it means I will get a new Senator out of this mess.

Although there is a lot of blame to go around, Congress has managed to completely avoid responsibility for this mess. Maybe we will get lucky and Barnie Frank will get booted as well.

50% Increase over ING CD!

IMHO – savers should always have accounts at different banks. Although I had been building a 1yr at ING Direct, their constant reduction in rates has been annoying. Indeed, the rate on 1 year CD's is a staggering 1.5%. This month, I am getting 2.25% from USAA.

Simply put, USAA is paying 50% more than ING. Over a long period of time, it will add up.

Get Rich – Become Drug Dealer

According to Forbes Magazine, Mexican drug cartel leader, Joaquin "El Chapo" Guzman Loera, is the 701^st richest man with a net worth of $1 billion. Not bad cash. Of course, to get it one must kill people (many of them innocent), deal drugs to children, and corrupt the Mexican jury system. Furthermore, you have to deal with the fact you are likely to:

1. Die a violent death at a very young age; or
   
2. Get caught by the Feds and spend the rest of your life at ADX Supermax.
   

 

As they say, money is not everything.

“Sell By” Date – Myth?

Many people, and even some people in government, think products automatically go bad once they past the "sell by" date. While it is certainly true for some products, it is not necessarily true for all products. Obviously, perishable products like produce, meat, and dairy should be a concern.

Nevertheless, some products can last forever if they are left unopened. (Twinkies?) How do we know? We have a federal appeals court that tells us so. Basically, the feds prosecuted a guy for allegedly mislabeling (openly – he wasn't sneaking around) salad dressing. Although it was past the sell by date provided by the original retailer, he gave it a new "sell by" date. On appeal after conviction, the US court of appeals states that the original OEM essentially made up the "sell by" date and that the product does not go bad.

 

Negotiate Your Hospital Bills!

Simply put. Cash is king. If you have cash, any bill arising out of a ER stay can be negotiated.

Years ago, after an auto accident, I helped a woman with a staggering problems. Seriously injured, her hospital bill (not counting doctors charges) was a over $120,000. Because she only had $30,000 in insurance proceeds available, we were able to settle the entire amount for that amount. No collection agencies, no bad marks on her credit. Why? The collections people at the hospital want to collect as much money as possible, as quickly as possible, and for the least cost/effort. They understand money in hand is in their best interest.

Last year, I had an unexpected trip to the hospital. Despite having medical insurance, my plan was a high deductible plan and I ended up with a significant amount of uninsured loss to deal with. Since that time, I have been paying off the charges systematically with monthly payments. As of today, all that remained was $650. Instead of continuing to pay $50 per month, I called up the provider. Claiming that I had just received my tax refund, I offered $500 to make the debt go away. They took about 30 seconds to accept my offer.

Market Bottom Call - My

After thinking about it, I have decided last week's lows are within 5% of the market's ultimate bottom. Obviously, I think there is a good chance of another downward movement. Nevertheless, I am seeing signs that I find encouraging. In particular, the market seems to realize many financial services companies are priced (from an equity perspective) at a low percentage of their book value. Indeed, many of them are priced as if they are automatically going out of business – even if their operating units are making money.

Tomorrow: My moves explained.

Wells Fargo – My Winning Trade

For the first time in almost a year, I am smiling after making a nice winning trade. Last week, I bought 100 shares of Wells Fargo for $8.01. This week, they spiked up to $10.70 and I managed to get out at $10.00.

Not bad for a weekend's work.

Seriously, I am not (and do not believe in) a day trader. I bought the stock expecting to hold it for 2-4 years. Nevertheless, I couldn't pass up the opportunity to take some profits for a change.

Brick/Mortar Beats ING

To my surprise, I just discovered my brick and mortar bank, TD Banknorth, was offering significantly better rates on 1 year CDs than the rates offered through ING Direct.

As part of my plan to redirect my emergency savings, I have been buying a $1,000 (12 month) CD every month since October. The idea is that I will eventually have a $1,000 CD maturing each month.

If I buy this month's CD from TD Banknorth instead of ING Direct, I will make an extra $10 per year.

My Plan: This month, I will probably purchase the CD from ING instead of TD Banknorth. If it is a one-time deal, having 11 CD's at ING and 1 and TD Banknorth would be a hassle. Nevertheless, I am going to monitor TD Banknorth's CD rates carefully. If they consistently beat ING over the coming months, I will probably move all the CD to TD Banknorth.

Auto Debit v. Bill Pay

In my opinion, automatic debit (where the merchant takes money directly from your checking account) should be avoided. In many ways, agreeing to automatic debit is like giving the merchant a blank check. If they make a mistake, you are likely to pay a price. Despite this warning, we allow two accounts to direct debit our checking account:

1. Student Loan – one of my loans offers a discounted interest rate for allowing the direct debit. Although I do not like it, it was a good deal and so far so good.
   
2. Insurance – before I knew better, I allowed State Farm to direct debit my account. While they have not made a mistake yet, we are going to cancel monthly bill pay. As a plus, we save the monthly service fee.
   

We do, however, have our cable, phone, oil heat and auto insurance charges taken directly out of our cash back credit card. Why?

1. Cash back from Amex Blue.
   
2. One Bill – Instead of paying multiple bills, I take care of all of them by paying my American Express bill.
   
3. Risk – in the event the merchant makes an error, our credit limit is large enough to prevent any over-limit fees. Furthermore, we should have enough savings available to take care of any mistakes.
   

Online Bill Pay: Using ING Direct's online bill payment system, we use a mix of automatic and manual payments to take care of our bills. Makes life easier.

1. Fixed Payments – since our mortgage and car payment are fixed, our payments go out automatically. By automating, we do not have to remember to send anything out.
   
2. Variable Payments – For the most part, they are our two credit card payments (the Amex Blue and a Gas Discount Card).
   

Wells Fargo – Dividend Cut

According to the Wall Street Journal, the dividend cut and cost cuts at Wells Fargo will save $7 billion per year. If those savings work out, they will have paid off Wachovia ($12.6 billion) in two and a half years.

If the financial system ever gets sorted out, I believe Wells Fargo is the best positioned US bank for long term profitability.

In the interest of full disclosure, I have a few accounts at Wells Fargo and own 100 shares.

Bonus Disclosures – Ethics?

On the front page of any business section is the quest by NY AG Mario Cuomo to obtain information from various companies about the bonuses paid to employees. In particular, he is focusing on Merrill Lynch and Bank of America. Although the part of me angry with Wall Street applauds his actions, the "employee" in me feels he has gone to far.

• Public companies must disclose the pay packages for their top executives. Nothing Cuomo does will change that.
  
• Employee Privacy? IMHO – unless there is provable evidence of wrongdoing by the employee, the employee should not live in fear of having his/her compensation package end up on the front page of the Wall Street Journal. Yes. Some of them made enormous sums of money at the same time their company struggled. No. That does not mean the employee (or even the company) did anything illegal.
  
• Pay for Performance: Even when the company (or even the business unit) is losing money doesn't mean the employee should not be compensated.
  
  • Some employees are in businesses that are making money for their employer. If they are top performers and adding to the company's profits, they should be compensated.
    
  • Employees in money-losing businesses. If you have top performers in a money-losing business, you will want to compensate them to prevent things from getting worse. Furthermore, you may need to pay top performers to "fix" things they did not create. For example, I led a project team for my former employer that caused an immediate hit to earnings. They gave me a bonus, a promotion, and an award. How is that possible? Simple, we had a business unit that was losing money every year. Our project team sold the business and improved our long-term profitability.
    

Next week, I get my bonus (not millions). Even though it is not a ridiculous amount, I do not want in published in the local paper.

Survivor’s Guilt – Recession?

On the way home, I heard a talk radio host talk about people who are not facing immediate financial problems. He asked if they were feeling Survivor's Guilt. What do you think?

In our family, I cannot say we do not feel some level of survivor's remorse. While my wife's job is secure and mine appears "OK" for now, one of the largest employer's in our city is under severe financial pressure. Even if they survive, there are going to be a large number of layoffs in our city. Needless to say, the mood in the area is not upbeat.

Last week, we dropped some money on an economically priced Ikea sofa and a very nice dresser. Next, we booked a condo in Myrtle Beach for a week in April. While we got a fantastic rate on the condo, it still feels we should feel guilty for spending money. While we are not going into debt to fund this spending, it feels "wrong" to spend money.

 

Trying to Refi!

Tomorrow, I am sending in my proof of income to my bank for my attempted refinancing of my house. If things work out according to plan, the refinancing will:

1. Leave my Heloc in place;
   
2. Replace my 5/1 ARM (with one year to go) with a 30 year fixed loan.
   
   1. By locking in my rate, my interest rate is going up to 5.25%. While still a good rate, I am going to miss the stellar adjustable rate that I have been enjoying. The upside – less worry.
      
   2. No closing costs or expenses – nice;
      
   3. No appraisal – I don't even want to know.
      
   4. Because the refinancing will extend my loan term by 5 years, my "mandatory" payment will go down slightly. In a pince, that my help. Nevertheless, I will use excel to determine the appropriate payment to keep the actual loan term constant.
      
   5. With the loan fixed, I will begin paying down the Heloc with a goal of paying it off in 5 years.
      

Frankly, my bank has been awesome to deal with (so far). If it works out, I will make sure to name them by name.

$7,500 Houses – Detroit’s Pain

According to a story in the Chicago Tribune, the median price for homes sold in Detroit was a whopping $7,500. For that amount of money, one would have a hard time purchasing a small travel trailer. If true, it is hard to imagine Detroit rebounding in the next 50 years. With property prices in the tank, they will not be able to generate tax revenues to support their population's needs.

 

 

Source: http://www.chicagotribune.com/news/nationworld/chi-detroit-housingjan29,0,5435392.story

ING Rate Drops Again – 1.65%

I just received an e-mail from ING stating the rate on savings would be dropping to 1.65%. And so the drops continue.

Saving v. Debt Reduction in Current Environment

While Dave Ramsey advises everyone to have zero debts, the reality is almost everyone has "some debt." Mortgages, student loans, car loans, etc. Even people who are living within their means have some or all of these payments.

If you have your emergency fund fully funded, what should you do with extra cash flow in today's environment?

1. Savings – Current high interest savings accounts pay less than 2%. For people living in states with income taxes, the after tax yield is in the neighborhood of 1%.
   
2. Investing – in today's investment climate, stocks and real estate investments are likely to face a short-term decline before they rebound. With very few exceptions, I do not think is the time to put long-term money "at risk" with the possible exception of new 401k contributions.
   

My Conclusion:

Simply put, debt is expensive in this deflationary market and extra funds should be allocated towards debt reduction – wherever we can.

Our Loans:

1. Mortgage - trying to refinance into a fixed loan. We are leaving this alone for now.
   
2. Student Loans – paid off the smallest loan last month. Using the snowball approach, the old "payment" has now been added to the next smallest loan. We should be down to two loans by the end of the 2009.
   
3. Car Loan – one car is paid off. The other loan is a zero percent loan with three years to go. Obviously, we are not rushing to pay off this loan. We are making a "payment" to ourselves (i.e. – savings) for an eventual replacement to our high mileage vehicle.
   
4. Credit Car – we have a $10K balance on a Discover card at a 0% rate due in July. Although we have set aside $10K at ING to pay off this balance, I have decided to send much of our monthly savings to Discover. Why? The after-tax income earned on the money is not worth much. Since I do not like having any balance on my credit cards, the "cost" to send the money to Discover is almost zero.