Monday, October 26, 2009

LendingTree.Com – What is it?

Simply put, LendingTree is a loan broker. Using their online process, they help borrowers find lenders willing to offer loans. At its best, their process should allow borrowers to find the best terms available from their partners. Unfortunately, the number of lenders participating in their programs are not unlimited. Borrowers are limited to their partners – for better or worse. Furthermore, their system could be "optimized" to find the best deal for lenders – not borrowers. Unless we know their system for matching, there is "some"risk they might not work in your best interest. To prevent this, shop around.

As loan brokers go, LendingTree does a good job. Just remember, every company that appears on their site paid them to be there.

Quicken 2010 Review

First of all, I am a loyal user of Quicken. Since 1993, I have religiously tracked my spending using their software. Once you go through the trouble of setting up your accounts, you can easily track your spending and investment performance.

With respect to Quicken 2010, my review is easily broken into two parts.

  1. If you are not a Quicken user or use Microsoft Money, the new product is fantastic. It is an excellent product. The setup features are easy to use and the reliable interface works great. With the exception of two accounts, I can download all my bank, credit card, and my IRA transactions over the internet directly from the program. The other accounts require logging onto the vendor's site and downloading the data from them.

  2. If you are a current Quicken user, the decision to upgrade or not upgrade is a difficult one. Generally, I upgrade every 2-3 years and continue to support that strategy.



    1. Faster setup times will not matter.
    2. The "At-a-glance" Homepage is nice, but not worth the price of the upgrade.
    3. Automatic Categorization: To be honest, I could not really tell the difference. Furthermore, I want to control the categories used on my spending. For example, dinner at Chili's could be: Dining, a business expense, or vacation:meals depending upon the circumstance.


    Why should you upgrade?

    1. The new program does seem to work faster than Quicken 2008.
    2. The download times for accounts is quicker than Quicken 2008.

From Quicken: Upgrade Features

Friday, October 23, 2009

5 Year Tips Auction – My Ladder

If you are interested in purchasing 5 year TIPS, they are going to be auctioned off next week. Many brokerages will allow you to purchase them at the non-competitive price without paying any commission.

I am gradually replacing some of my bond fund holdings with 5 year TIPS. With next week's purchase, I will have TIPS maturing in 5,4, and 3 years. Every year, I will do the same thing until I have a completed 5 year ladder.


Treasury Inflation-Protected Securities (TIPS)

Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater.

TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation.

You can buy TIPS from us in TreasuryDirect and Legacy Treasury Direct through non-competitive bidding. Starting in January 2007, the 20-year TIPS is no longer sold in Legacy Treasury Direct, but it continues to be available in TreasuryDirect.

Wednesday, October 21, 2009

Citibank – Trying to go bankrupt

After accepting billions of dollars in support from our government, the morons who ran the bank into the ground are at it again. Despite a stellar credit rating, they are raising my rate to 29.99%. Since I don't run a balance it is not a huge deal, but I am going to move my account.

  1. By raising rates to obscene levels, they are going to lose good customers who pay their bill on time.
  2. They are going to be stuck with customers who have large balances that "cannot be moved." These customers are going to default in large numbers do to the obscene interest rate they are being charged.


Worst of all, the morons that made the idiotic business decision are getting paid huge sums of money to be stupid.

Tuesday, October 20, 2009

29% Interest Rate – Thanks Citi

Yesterday, Citibank, which our tax dollars are keeping afloat, raised my Standard Purchase APR from 8.74% to a variable 29%. Mind you, I have never missed a payment in the past three years. Indeed, I pay my entire bill every month.

In the grand scheme of things, it doesn't matter because I do not run a balance. Nevertheless, their action does not make me happier.

Sunday, October 18, 2009

Branded Credit Cards- Do you care?

Bank of America is running ads for NASCAR branded credit cards. Apparently, they come with designs featuring Nascar themes. Although I am a NASCAR fan, I cannot imagine why I would want to have a NASCAR theme on my credit card. In terms of credit cards, my priorities are:

  1. No fees – Period
  2. Good rebates
  3. Good Service (this is why I favor American Express)
  4. Finally, interest rates (Because I normally pay in full, it is not a key issue for me.)

The design on the card: I could care less.

Saturday, October 17, 2009

Tax Break Idiocy – Golf Carts?

Apparently, the morons who run our government managed to pass a bill that heavily subsidizes the purchases of golf carts. Indeed, it seems the government may actually pay people to buy golf carts.



Cash for Clubbers

Congress's fabulous golf cart stimulus.

We thought cash for clunkers was the ultimate waste of taxpayer money, but as usual we were too optimistic. Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama's stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart.

The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart. Even in states that don't have their own tax rebate plans, the federal credit is generous enough to pay for half or even two-thirds of the average sticker price of a cart, which is typically in the range of $8,000 to $10,000. "The purchase of some models could be absolutely free," Roger Gaddis of Ada Electric Cars in Oklahoma said earlier this year. "Is that about the coolest thing you've ever heard?"

The golf-cart boom has followed an IRS ruling that golf carts qualify for the electric-car credit as long as they are also road worthy. These qualifying golf carts are essentially the same as normal golf carts save for adding some safety features, such as side and rearview mirrors and three-point seat belts. They typically can go 15 to 25 miles per hour.

In South Carolina, sales of these carts have been soaring as dealerships alert customers to Uncle Sam's giveaway. "The Golf Cart Man" in the Villages of Lady Lake, Florida is running a banner online ad that declares: "GET A FREE GOLF CART. Or make $2,000 doing absolutely nothing!"

Golf Cart Man is referring to his offer in which you can buy the cart for $8,000, get a $5,300 tax credit off your 2009 income tax, lease it back for $100 a month for 27 months, at which point Golf Cart Man will buy back the cart for $2,000. "This means you own a free Golf Cart or made $2,000 cash doing absolutely nothing!!!" You can't blame a guy for exploiting loopholes that Congress offers.

The IRS has also ruled that there's no limit to how many electric cars an individual can buy, so some enterprising profiteers are stocking up on multiple carts while the federal credit lasts, in order to resell them at a profit later. We should note that some states, such as Oklahoma, have caught on to the giveaway and are debating whether to cancel or limit their state credits. But in Congress they're still on the driving range.

This golf-cart fiasco perfectly illustrates tax policy in the age of Obama, when politicians dole out credits and loopholes for everything from plug-in cars to fuel efficient appliances, home insulation and vitamins. Democrats then insist that to pay for these absurdities they have no choice but to raise tax rates on other things—like work and investment—that aren't politically in vogue. If this keeps up, it'll soon make more sense to retire and play golf than work for living.

My Corny Dog Fetish

Having lived in the Dallas area until I was in my early 30's, I had a fantastic annual ritual. Every Fall, I would attend the State Fair of Texas and eat my "Annual Corny Dog." Hand dipped at the Fletcher's stand, they are meat perfection on a stick. Because of the obvious health issues, I limited myself to just one. I miss my Corny Dog greatly and it makes me homesick.

New England's "Big E" Corn Dogs are not hand dipped and served fresh. They might as well be frozen corn dogs fresh from the microwave. Not the same thin.

Watching the Texas-OU Game today, my wife has been amazed at my focus on my beloved State Fair Corny Dog. During an aerial shot of the entire stadium, I felt the need to inform her (she has never been to a State Fair of Texas – so sad) that the Corny Dog stand is just on the other side of the pressbox.

I am a sick man, but she married me anyway. While I enjoy living in New England (except when it snows), I really miss living in Texas.

Don’t Friend the Boss - Facebook

One of my wife's friends got themselves into a sticky situation. When she first started using Facebook, she made the mistake of "Friending" her supervisor. Last month, she realized that she was uncomfortable with having her boss access to some of her personal information. Along with another co-worker who had the same problem, they ended up "unfriending" their boss.

As you might imagine, it did not end well. When the supervisor discovered the change, they both ended up having a tense conversation with her. While nobody got fired or disciplined, the incident harmed their relationship.

If you participate in social networking sites, you must understand that your actions can have consequences.

Thursday, October 15, 2009

Going Short - Duration

If you have money in long-term bond funds, now would be the time to get shorter. Why?

  1. When interest rates fall, the value of bonds goes up. When rates increase, the value drops. With rates at historically low levels, there is little or no chance of "upside" and significant risk that rates will rise.
  2. In terms of time sensitivity, long term bonds will react more to interest rates than will short term bonds.

In the current interest rate environment, long term bonds are a bad investments. BUT – you can hold them to maturity and get your money back. With long term bond funds, you don't have that option and your fund's NAV will drop as interest rates rise.

Simply put, I would avoid any bond fund with a duration greater than 5 years.

Tuesday, October 13, 2009

Madoff Wins Prison Fight

Sadly, it looks like Bernie "Ponzi" Madoff was in a prison fight and won. Can you imagine the poor guy who lost a prison fight to a 71 old man named Bernie?

I know there are a lot of people on Long Island and Palm Beach who hope Madoff gets in a fight with the "Tossed Salad Man" described by Chris Rock in a comedy routine.

Monday, October 12, 2009

Bought Truck – Saved $11k

Tonight, I finalized a deal on a Chevy Silverado. After rebates, a USAA incentive, negotiating, and GM Card earnings, I ended up paying $11K under sticker. Not bad!!

Sunday, October 11, 2009

GE Interest Plus – Just Say No?

Following a link, I was directed to something called GE Interest Plus. From what I can tell, investors are allowed to lend money to GE Capital Corporation on a short-term basis. In return for a whopping 2% interest rate, you get to take on the risk inherent in GE Capital.

Is GE Capital solvent? Probably. I have, however, read reports that indicated GE Capital has been severely hurt by the financial crises.

Bottom Line:     Return – marginally better than available from an insured bank. Zero chance of profiting from an upside move.

        Risk – much higher than an investment in a CD at an online bank.


While not a scam, the risk/reward is out of balance against the investor.

Friday, October 9, 2009

Pope declares Obama a Saint

Despite the fact Obama is not Catholic and has failed to accomplish any miracles, the Pope decided not to wait and declared him a Saint today.

Thursday, October 8, 2009

Free School Breakfast = Dumb Idea

Our friends in Philly have concocted another stupid idea in a desperate attempt to improve our public schools. They have decided to hold principals accountable for the number of students who eat breakfast at the school. WTF?

  1. Spending scarce education dollars to provide a "free" breakfast to every student is wasteful. There are plenty of families who can, and do, provide breakfast to their children.
  2. If the principal is spending time policing breakfast, he/she is not spending time on other priorities. For example, he might spend "breakfast time" meeting with teachers to improve performance.


Tuesday, October 6, 2009

Leaving Cash – Taking Risk

Over the past week, I have rebalanced a few of my investments away from cash into riskier assets.

Brokerage Account: In addition to my traditional savings vehicles (Savings and CD's), I have had cash (approximately $5,000) invested with Vanguard in a tax-free money market mutual fund (VMSXX) for years. When yields were healthy, it provided a nice, tax-free savings vehicle with negligible risk. Unfortunately, money market rates are essentially zero. As a result, I decided to take a little risk and invested the money a riskier asset, Vanguard High-Yield Tax-Exempt Fund (VWAHX).

Rationale: Definitively a risky move, the risk premium over the money market rate justifies the risk. I will watch the fund's performance carefully. I expect to be out of the fund in 12 – 24 months.

IRA Account: When times got scary last year, I moved a very large percentage of my IRA to cash. Gradually, I have been moving the money into the market while maintaining a slug of cash. Although I will retain a small trading reserve in cash, I moved the remaining cash into (PLDDX) the Pimco Low Duration Fund.

Rationale: By pushing out the duration (1-3yrs), I expect to double or triple the yield (compared to the MM fund) on this slug of money. Over the years, Pimco has proven to be an outstanding steward of investor funds. I considered using their Total Return fund; however, I am believe interest rates will rise. In a rising rate environment, a lower duration is better.


Monday, October 5, 2009

Private Equity – Warning 4 bondholders!

Today's NY Times, had a great article on how private equity firms used "special dividends" to profit while bankrupting some of America's greatest companies. Simply put, do not loan money (through bonds) to companies owned by private equity firms.

This is how it works:

  1. Let's say a company is for sale. A private equity firm decides to buy it for $500m. To finance the purchase, they will borrow $400m and will contribute $100m in cash. Since the company is generating free cash flow of $60m per year, this seems like a reasonable capital structure. Debt payments are $40m per year.
  2. A few years later, the company decides to pay shareholders a "special dividend" of $150m. Since the firm is generating free cash flow of $80m, it can pay the $40m annual interest on the original debt + the additional $15m in new interest.

At this point, the PE firms owns 100% of the firm and has made at least $50m on the deal. Going forward, they are playing with the house's money and additional profit is a bonus.

Unfortunately, the economy has a downturn. Although the company generates $40m in cash flow each year, it cannot make its debt payments and it goes into bankruptcy.

While my example is simplified, it is very real. After the special dividend, the bondholders face all the risk of the firm. If the firm succeeds, the PE firm gets all the upside. If it fails, they bondholders face the loss.



Sunday, October 4, 2009

Saved Thousands on Truck!

By not purchasing a new truck yesterday, I saved my family thousands of dollars over the life of the loan. While we can afford a new truck, it just is not a smart move.

  1. My Highlander is good for another 3-4 years of daily use. Considering the 0% financing and the amount of our payment, it is a reasonably low cost vehicle for our family.
  2. Once the Highlander is paid off, we will probably buy my wife a new, economy car to replace her Prius. The Prius will become my vehicle.



Bottom Line: New Cars are almost never a good idea.

Saturday, October 3, 2009

Michael Moore Capitalism Movie Bombs!

Looks like the American public have finally realized that Michael Moore makes worthless movies. Between his hypocracy (he is rich and uses non-union labor) and the half-truths he bases his movies on, his films are pointless and boring.



Friday, October 2, 2009

Another USAA Benefit - Hertz

When I rent a car from USAA using the discount code provided to USAA members, I get some very nice discounts. While the rate reduction is very good, the huge discount comes from the fact my wife is added to the rental at no additional charge. On vacation rentals, that works out to something like $50-90 in savings.

In addition, I was able to sign up for Hertz #1 gold club for free. This saves me $60 per year.

Thursday, October 1, 2009

Surgical Center v. Hospital

Earlier today, I had my knee repaired at a surgical center instead of a hospital. Thankfully, I came out of the surgery in good condition and did not have a torn ACL. Compared to my surgery in a hospital a few years ago, my thoughts are:

  • Cost from a co-pay perspective, there was no difference to me. I strongly suspect my insurer will get a much better deal.
  • Convenience: Had I elected to have the surgery at the hospital, I would have had to deal with parking in a garage and paying for parking, walking into the hospital, and dealing with hospital admissions. In my last surgery, it seemed like I got rolled all over the place.
  • Today, we parked for free within 25 yards of the front door. The admissions office was located 10 feet from the door. The operating room was maybe 50 yards from the front door. You could see the recovery room from the operating room.
    • The operating was clean and appeared fully equipped to handle my case. The recovery room was nice and comfortable with nurses everywhere. Much better than the hospital.
    • Because the surgery center is not a "teaching hospital," I know my surgeon did the entire surgery. I did not have to worry about a resident/fellow learning on my case.


The downside: Had there been a serious complication, I was probably 20 minutes from the major hospital. If you are a high-risk patient, it is probably not the best choice.