Tuesday, June 30, 2009

Should Govt make Madoff Victims Whole?

In a word – NO!! While Madoff's is a master criminal and belongs in jail for 1,000 years, the federal government is not responsible (legally or morally) for the losses sustained by investors in his funds. Although I feel sorry for every one of the Madoff victims, the federal government does not (and should not) insure investments made through investment advisors. Since Madoff cannot make good on their losses, the investors are looking to the blame the government for their problems.

  1. They assert the SEC should have caught him. While probably true, the SEC does not guarantee any investment advisor is "honest." While the SEC can punish offenders it catches, it never has and never will give any investment advisor a "good housekeeping seal of approval."
  2. They assert the SIPC is screwing them. From what I can tell, they have two arguments.
    1. They say their losses should be based upon the "Statement values," not the amount they invested. I will discuss why they are wrong below.
    2. The people who invested in "feeder funds" are not getting much from the SIPC. The reason for this is simple. They invested in hedge funds. To do so, they had to be qualified investors and had to prove they knew (or should have known) what they were doing. They paid their investment advisors to do due diligence for them.

How much have the victims actually lost? They assert they have lost the amount they invested and the amount of investment gains they "thought" they had made.

Example: Let's say you invested $1m with Madoff in 2000.

  • Investor A reinvests the returns and has a statement value of $2m when Madoff is caught.
  • Investor B collects "dividends" of $1m of the years. When Madoff is caught, B's account "value" is $1m.

Victim A would say he is out $2m and Victim B would say he is out $1m. In reality, Investor A actually "lost" $1m and Investor B lost nothing. Simply put, the victims are wrong and the government is correct. The victims are not entitled (legally or morally) to the investment "gains" that never existed.

As SIPC states on their website: "It is important to understand that SIPC is not the securities world equivalent of FDIC–the Federal Deposit Insurance Corporation. Congress specifically considered creating a Federal Broker-Dealer Insurance Corporation, but lawmakers wisely concluded that such a designation would be both misleading and out of step in the risk-based investment marketplace that is so different from the world of banking." Source:

Monday, June 29, 2009

U-Verse - $200 cash back

Today, I got my cash back check from U-Verse for changing my service. The more I deal with U-verse, the more I am happy with the way they handle things.

Sunday, June 28, 2009

Paying Property Taxes without Escrow

For reasons I do not totally understand, Wells Fargo does not escrow my homeowners insurance or my property taxes. Insurance discipline is easy. USAA hits my credit card every month for the payment. With my property taxes, I automatically transfer 1/12 of my estimated taxes to a savings account at Emigrant Savings. Today, I transferred the money to my checking account so I can issue the check.

Simple, easy, cheap, and disciplined.

“Billy Mays Here, …” - RIP

News outlets are reporting the pitchman behind OxyClean has died from unknown causes. While I found his ads annoying, I found his commercials fascinating.

BTW - I think oxyclean really is a good product.

Birthday Dinner – Street Meat!!

Instead of going to a fancy restaurant for my birthday dinner, my wife and I had a fabulous meal of papusa from the street vendors at the Red Hook Recreation Area. In terms of cost, gasoline and wear and tear were the big expenditure.

Please understand, we ended up ordering a giant Horchata, a corn on the cob, two tacos, a tamale plate, and a papusa plate (we couldn't finish it al) for under $20. Best of all, we had a great time during the trip.

Wednesday, June 24, 2009

Replacing Car Keys – Saving Money

In the old days, lost car keys meant spending a couple bucks to have the guy at the hardware store cut you a new set of keys. Today, it means replacing the keyless entry fob and a key with a "chip" built in. Both need to be programmed.

To save money, I ordered replacement fobs from an e-bay vendor (see prior post). If everything works as planned, I will save about $100 by doing so. Of course, I will have to replace the key at a ridiculous price.

Virtual Account Numbers & E-Bay

For an E-Bay purchase, I decided to use a credit card instead of using PayPal. Nevertheless, I did not have to give my credit card information to a vendor I did not know or trust. For just such an occasion, Citi offers virtual account numbers. These one time use credit card numbers are perfect for protecting your credit from unscrupulous vendors.

Friday, June 19, 2009

USGA Boycott – Golf Tournament

While I know many of my readers are not golf fans, I want to bring your attention to the idiotic policy adopted by the USGA with respect to rainouts. Yesterday, fans who paid $100 for tickets to see the US Open were treated to a monsoon. They got to see Phil Mickelson play ZERO holes. Tiger completed a staggering 6 holes before the USGA shut down the tournament for the day. Because play was stopped early, many customers had not even arrived.

Nevertheless, the USGA has decided not to allow fans to attend the event on any other days or to provide a refund of any funds. As a USGA Member (for now), I am shocked at this policy and will be calling them today to cancel my membership. If you have some time, please contact them to express your displeasure with their policy.


The United States Golf Association
P.O. Box 708
Far Hills, N.J. 07931

Cash for Clunkers Bill Passes

According to the WSJ. the cash for clunkers plan has been passed by the senate and will be signed by Obama. If you have a clunker you are looking to get rid of, you need to look into the program quickly. It is only funded through September.

Tuesday, June 16, 2009

Gold Coin Tax Scheme – Brilliant Idiocy

First of all, I believe it is every American's right to pay the least amount of taxes they legally can. Note, I said LEGALLY. By legally, I mean the law as determined by our court system.

Do not take legal advice from some guy on the radio advocating a crackpot scheme to "legally" avoid paying income tax. Recently, I read a story about a guy on trial for concocting a brilliant scheme to avoid taxes. As I understand it, he paid contractors in US Gold Coins for their work. By doing so, the contractors only had to pay income taxes on the face amount of the payment.

Of course, this brilliant plan had a serious problem. Because it is probably illegal, the federal government put him on trial and he faces 57 counts of tax evasion. Even if he manages to win an acquittal, he will spend more than he saved defending himself.

UNLESS you are willing to go to jail and waste all your money on defense attorneys, do not try any of these schemes. A simple rule of thumb, if the deduction is not allowed in TaxCut/TurboTax, it probably is illegal and should be avoided.


Housing Near the Bottom

If you have the money and are considering buying a house, I predict you are going to back on the Summer of '09 as the best time to have bought a home. In addition to low interest rates, the housing market has been battered into submission. In most areas, prices are unlikely to fall much farther because people need places to live.

Monday, June 15, 2009

Lost Keys – Expensive to replace

I appear to have permanently lost my keys. Unfortunately, keyless entry fobs are expensive. It means I need to take better care of my stuff.

Saturday, June 13, 2009

51.8mpg with Prius!

As we are getting used to the Prius, we have been able to learn how to milk better mileage on the Prius. On the current tank, we have managed a very tidy 51.8mpg. One of the upsides of driving a Prius is that you learn better habits for maximizing mileage. As a result of those lessons, I have been able to gain one mpg driving my SUV.

Thursday, June 11, 2009

Timing the Refinance – We Got Lucky

With mortgage rates spiking upward due to excessive government borrowing, it looks like we timed our refinancing perfectly. Going forward, a 5.1% rate (30 years fixed) is looking like it will be a fantastic deal.

Although I would like to say it was the result of my brilliance, it was largely the result of luck.

Nevertheless, anyone considering a refinancing should do it quickly. With the government idiots in Washington borrowing and spending like never before, rates are bound to go up.

Timing the Refinance – We Got Lucky

With mortgage rates spiking upward due to excessive government borrowing, it looks like we timed our refinancing perfectly. Going forward, a 5.1% rate (30 years fixed) is looking like it will be a fantastic deal. Was it fantastic planning on my part? No. It is good to be lucky once in a while.

If you are thinking about refinancing (and are lucky enough to qualify), I recommend you do so. Rates fall when the government does not need to borrow money. With the massive pork and entitlement spending by our fiends in Washington DC, rates are going up.

Wednesday, June 10, 2009

Lefty College Rejects Poor Applicants

According to this story, a college in Oregon known for its liberal/lefty ways has decided not to admit students who need financial aid. As an anti-lefty, I find the hypocrisy funny. Nevertheless, I think they are probably making the right decision. Having graduated from a private university and a state university, I can positively state they both can offer a great education. While I preferred the private university, private universities are a luxury. If a student cannot afford to attend, he/she is probably better off at a one of our excellent state universities. Borrowing $100,000 to go to Reed University is a dismal investment.

Tuesday, June 9, 2009

Union Commits Suicide

Last night, the largest union representing employees of the Boston Globe voted to reject a package of wage and benefit cuts. According to the paper, the cuts were necessary to keep the paper alive. Having lost $85 million in the past year, the Boston Globe is in serious danger of closing for good.

Sunday, June 7, 2009

Obama is Czar Crazy!!!

The other day, Obama named someone as the "Compensation Czar."

First, the idea that the government would have a "Czar" with the authority to control wages paid by private employers is deeply troubling.

Second, I wondered exactly how many Czar's Obama had appointed. It seems like he has one for any problem. Using the magic of Google, discovered a Reuters story indicating he has TWENTY Czars.

Facts about the Czars:

  1. They are not elected;
  2. Unlike cabinet officials, they are not subject to congressional approval; and
  3. They have a lot of power.

Although Dubya had his issues as president, he never tried to take control of so much of our country. Had he tried, the press would have gone apoplectic. In Obama's case, near silence from the press (and the left).

Taking Profits - 200% Return

After taking a brutal beating on my company's stock, I decided to lower my basis by purchasing 285 shares at prices between $4.50 and $3.00. With it now priced in the $10-11 range, I sold 100 shares leaving me with 500 shares.

  1. At $6K, the position was a little large for an individual stock my portfolio. Generally, most of our investments are in mutual funds with $10-20K in individual stocks. For the most part, the positions in any individual stock are in the $1-2K range.
  2. Bulls make money. Bears make money. Pigs get slaughtered. Until you take profits by selling, you don't really have the profits.

Government Motors

My worst fears about the government "bailout" of Government Motors have already been realized. As part of the bankruptcy, GM (and the experts appt by the government) selected a facility for closure. Presumably, it was redundant and/or a high cost facility.

Alas, the facility was located in the same district as Barney "I ruined our financial services industry" Frank. After one call from Barney, the place is not going to close.

As bad as GM has performed over the past 20 -30 years, it will only be worse if business decisions are made for "political" reasons.

Saturday, June 6, 2009

Bristol NASCAR Tickets Arrived

Today, we received our tickets to the "Night Race at Bristol" in the mail. Although I could easily sell them on Stubhub for a tidy profit, they are going to be the foundation of our August vacation. The plan is to drive to North Carolina, spend a few days there (golf for me and pottery for her), before attending the Nationwide race on Friday and the "Night Race" on Saturday night.

Before the economy tanked, it was impossible to get tickets without going to scalpers.

Next year, we will have a decision to make. In all likelihood, we will be offered a chance to buy "season" tickets. Unfortunately, my wife's schedule makes attending the Spring races impossible. Even if I take a small loss on the deal, I will probably elect to purchase the tickets and try to sell them to a third party.

Friday, June 5, 2009

My New Credit Card Scheme

Now that we have reached the "bonus" level on our Amex Blue Cash Card, we are changing our credit card spending pattern to maximize cash back. Going forward, our spending will look like this:

  1. Gas and Groceries – All gas and groceries expenses will be on the Amex Blue card. We will get 5% cash back.
  2. Everything Else – Fidelity Amex Cash Back card gives us 2% on all our speding.
  3. Visa/Mastercard – When places do not take American Express, we use our Citibank Driver's Edge card.

Wednesday, June 3, 2009

Teaching is Hard!!

Today, I spent the day as a volunteer teacher in a local school. Since the students were well behaved, I had a good time. Nevertheless, I am exhausted for the following reasons:

  1. I spent the entire day on my feet and moving around the room;
  2. Keeping 20 kids involved in the lessons for an entire day was difficult and mentally taxing.
  3. Our curriculum was provided by a third-party. Nevertheless, I spent 2 hours preparing for the class.
  4. I do not have any papers to grade tonight. My wife, who is a real teacher, does. Furthermore, she has to prepare her own curriculum.

I love my wife and know she works hard. By spending the day in her shoes, I feel her pain.

Tuesday, June 2, 2009

$2,500 Baseball Tickets - Stupid

Tonight, I am watching my beloved Texas Rangers play the hated NY Yankees on television. Because my Rangers are rarely on television in my area, it is a nice treat. Watching the game, I was struck by the seats behind home plate. In addition to being ridiculously close to the field, they look large enough to double as a Laz-y-boy. They should. Despite a massive subsidy from New York City taxpayers, they cost a whopping $2,500 per seat.

  1. For a Wednesday night;
  2. Against the Texas Rangers: not a big draw in this area.

IMHO – anyone dumb enough to pay $2,500 to see a regular season baseball game (of no particular importance) is a moron.

Best of Breed – Bad Breed

Often, you will hear investment advisors touting a company/stock/mutual fund as "best in breed." Assuming their evaluation is accurate, one would expect to make money following their advice. Unfortunately, it is not so simple. What if the breed is bad? Before they all went out of business, I am sure there was a "best" buggy whip manufacturer. Below, I have listed the "bad breeds" that I believe all investors should avoid.

Bad Breeds:

  1. Landline Telephone Carriers: They face a horrible combination of high fixed cost, competition from other technology, and a dying technology. With the exception of business use, I expect residential landlines to be a rarity within 10 years.
  2. Airlines: Over the past 40+ years, I doubt any industry has destroyed more capital than the airline industry. This industry has a horrible combination of high fixed costs (union contracts, terminals, airplanes) and exposure to price spikes (fuel costs) and low margins. For that reason, the "best" carrier, Southwest Airlines, should be avoided.

Mortgage Refinancing Complete – Wells Fargo Grade - D

Now that my refi is finally complete, I feel comfortable commenting on the dismal performance of Wells Fargo in the refinancing. Time after time, they provided poor customer service and/or failed to act in their own best interest.

With respect to my loan, all I did was convert a variable fixed rate mortgage into a 30 year fixed. I was not looking to cash out. I just wanted to reduce my risk to rising interest rates. Since Wells Fargo already had my mortgage, they should have wanted the same thing.

  1. When we started the process, I was told they would not need an appraisal. Then they decided they needed an appraisal after all.
  2. Frankly, the appraisal was crap (in my favor). If I could sell my home for the appraised value, I would do so today.
  3. Despite perfect credit and income sufficient to support the loan, we offered to put my wife's income into the qualification process. For reasons that still baffle me, Wells Fargo said they couldn't consider my wife's income? WTF??
  4. After the appraisal came in, they said I needed to put $1,000 in equity into the loan to bring the LTV below the threshold for a conforming loan. OK – no problem.
  5. 2 weeks later. I followed up on the loan. By this point the underwriter had changed and he wanted an additional $2,500 towards the first mortgage. When I did the math, they were simply wrong. After about 4 hours on the phone (and numerous failures to call me back), I discovered the problem. They refused to consider any of the payments I had made during the 3 months since my app went in. Furthermore, they insisted the additional principal had to be paid to the 1st mortgage instead of the HELOC. Simply put, their stance was stupid from their own perspective. The HELOC was the riskier loan and Wells Fargo owns it as well. They should have wanted force me to reduce the HELOC, not the first mortgage.


Result of the refinancing: When I bought my home 4 years ago, I was single and expected to be out of the home by now. I selected a 5 year ARM with a 4.7% interest rate. Although my new rate is slightly higher, it is fixed and should protect me from inflation and higher interest rates. With the First Mortgage locked in, I can focus on reducing the HELOC balance.

Monday, June 1, 2009

Comcast Continues to Stink

Have I said that Comcast is terrible? Even with them no longer my cable provider, they continue to provide dismal customer service. Although there is nothing on the website that says my subscription to the MLB package would not be prorated, they have refused to do so. Luckily, I charged the account to Amex and I have challenged the charge. Hopefully, that will work out.

Bottom Line – they are a horrible company to deal with.