Travel Agent or Internet

My friends insist travel agents save them money on vacation planning; however, I have always planned my trips using intratnet sites (Travelocity/Orbitz/Others). Given the complexity of the trip, I am considering giving an agent the business. Your experiences?

Recession with no Unemployment?

Talking with other people, I don't see much evidence of the unemployment problems most people associate with a recession. Basically, this recession seems focused on the rapid devaluation of homes and the mortgages on those homes. While the recent rate cut by the fed (2% in just a few months) will help, we won't have stability in the economy until the number of homebuyers in the market meets the supply of homes hitting the market.

Simple Tax Law Advice

I am not a tax attorney; however, I want to give everyone some great advice. The Income Tax is real and legal. Despite the rantings of anti-tax hucksters, you must pay income taxes if you are a US citizen.

Following the advice of tax protesters is a recipe for disaster.
1. You may go to jail;
2. You will end up paying taxes, interest, and fines;
3. You will spend a lot of money on lawyers . . . even if you win.

If you don't believe me, look at Wesley Snipes. Even if he avoids going to jail, did he really win??

Home Buyers - Taking advantage?

Given the current housing market, buyers have the upper hand. One of my friends is looking to buy a home. While discussing his negotiations with the current owner, we had a discussion about how much leverage he can ethically assert.

When does hard negotiation become taking advantage?

60 Minutes - Subprime Story

Wow. They actually placed some of the blame on the borrowers. In particular, I was facinated by the couple that was planning to walk away from their home. Although they could make the payments after the resets, they made a cold blooded decision to walk away from the loan. In their mind, it is the bank’s obligation to make the loan a good deal for them.

Basically, there are no innocents in this mess.

BTW - the agent who invented the RepoBus is brilliant. As the mess sorts itself out, people who are buying properties at a discounts are going to make a killing.

Complaint Letter - Getting a Refund

While it probably won’t work well in the manufacturing industry, the complaint letter to the CEO is an outstanding method of receiving discounts/refunds from the service industry. Basically, the service industry makes money from word of mouth and repeat business. If you are unhappy with your experience for a legitimate reason, they are likely to try to make it up to you.

Last week, my fiancé and I decided to get out of town for a day. Using my hotel points, a free night in nice (think Hilton, Marriott, Sheraton) level hotel combined with a nice dinner seemed like a good winter treat. Unfortunately, things did not go well on the service front. At checkin, the hotel recommended their “very nice” steakhouse. Since there was bad weather, it seemed like a good plan until we discovered it was closed. The incident was one of six, documented cases of poor service. When we got home, I sent a letter to the CEO of the hotel chain and to the GM of the hotel.

Four days letter, the GM called me to apologize. He researched my complaints and verified the mistakes. To make me happier, he refunded my hotel points times two. While I would have preferred better service over the extra points, his response to my complaint was definitely appreciated.

Paperless Record Keeping

With most of my financial providers now provide records online in .pdf format, I bought a scanner in hopes of going totally paperless. In addition to saving storage space, I hope my new system will be more secure and allow me to find important documents like receipts when I need them.

No more shoeboxes.

ING Direct Referrals

Follow the links on my site and we both get a nice bonus for opening a new accounts.

Worst Employee EVER - $7.16B Lost through Fraud

Overnight, French bank Societe Generali announced it was taking a $7.16 billion loss caused by fraudulent trades made by one of its traders. According to the WSJ, the bank said a single trader who had concealed enormous losses through a scheme of "elaborate fictitious transactions."

Because of his actions, it appears the bank won't offer any employees a bonus for 2007. I am sure they are happy with the thief and with management for allowing it to happen.



http://online.wsj.com/article/SB120115814649013033.html?mod=hps_us_whats_news

15.93% Trading Profit – Citibank

After the market opens up at 10pm, I am planning on closing out most of a position I took on Citibank.

Why did I take the position?
1. The stock had taken a horrible dive due to subprime markdowns;
2. I did NOT take a huge position. I took a calculated risk.
3. It was not intended as a short term trade. At the reduced valuation, I was willing to wait 2-3 years to profit from their inherent franchise value.

Why am I taking profits?
1. Bulls make money, bears make money, pigs get slaughtered.
2. By reducing my position by 1/3, I bank enough profit to dramatically reduce the risk of my long term investment.

Other strategy: If the stock goes back down below 22 again, I will probably reinvest the position I just closed out.

Tax Rebate amount and New Televisions?

Why is the proposed tax rebate $1,600 per couple? How did they come up with that number. If you look at the Best Buy advertisements, the rebate appears to be the perfect amount to purchase a new HDTV.

Coincidence? I think not.

Fed Move v. Tax Rebate -> Money in Your Pocket?

In the PF blog world, much has been written about the $800 per person tax "rebate" proposed as part of an economic stimulus package. While it may not be the best tax policy, it has one great virtue - simplicity. Get a check = have more money to spend, save, or pay down debt.

Nevertheless, the Fed's loosening policy may put more money in your pocket. In the past 52 weeks, the policy has caused the Libor to drop from 5.82% to 3.90%. Because many variable rate loans (credit cards, student loans, and HELOCs) are tied to the Libor, a person with a combined $50,000 will save in the neighborhood of $1,000 per year.

Bottom Line: The Fed's move favors debtors.

My Easy Bill Payment System - 1 2 3 4

1. All bills are paid online using my ING Account. Although other accounts (especially credit cards) have good systems, centralizing the process with ING makes it easy to logon and see what is in the works.

2. Schedule Payments: If it is always the same payment, automate the payment so it is impossible to miss it. In my case, this means my mortgage payment, student loan payment, and car loan.

3. Other Payments: Pay them all - 1 day a week. Each week, I pay my bills on Saturday morning. Since ING pays interest on the amount in the account, I schedule the payment to go out five business days before they are due.

Extra Credit - Round Up: Instead of sending the electric company $89.13, I send them $90.00. It makes balancing the checking account easier.

Peace

I want my W2's!!

Because I changed jobs during they and had some issues with long-term comp, I do not have a good handle on taxable income for 2007. Complicating matters, my former employer "outsourced" most of their HR functions to a TPA. Given my experiece dealing with the TPA, I am expecting mistakes.

Since I expect a large refund, I don't want any extra delays.

As I understand it, it should be postmarked by 1/31/07. We shall see.

Stimulus Package: What it would mean for me!

According to news reports, President Bush is proposing an economic stimulus package in hopes of preventing us from slipping into recession. Without getting to wisdom of the plan, I decided to analyze what a $500-800 per person would mean to my family.

For future Mrs. FinanceGuy and I, $1,000 to 1,600 would not be life changing, however, it would be a nice chunk of change in a wedding year.

Possible Uses:

1. Savings Accounts: At 5% per year, the $1,600 would grow to $5,400 by retirement.
   
2. Student Loans:     For the highest interest rate loan, we would save about $750 over the next five years.
   
3. Needed Spending Spree: When I bought the house, I was moving from an apartment with one living space to a house with two. Two years later, the living room is completely empty. Using the cash to get furniture would free up savings for other purposes.
   
4. Frivolous Spending Spree: Not our style.
   

Key Understanding: A tax rebate in hand is worth a billion promises from politicians. Until we get the checks in hand, they don't exist and we will not change or plans in "anticipation" of getting something back.

Free TurboTax for State Farm Policyholders

If you have insurance with State Farm, they offer free TurboTax Online through their website for State Farm customers. Having tested the system, I have to say I am impressed with the program. Simple login and you are good to go.

The downside: your data ends up on their system.

website: www.statefarm.com.
You will need your policy number to register to use the website.

Starpoints Coversion Rate Rocks

For only 3,000 points, I am getting a luxury room this weekend. Working from the rates I found online for the room, the Starpoints are converting at a fantastic 13-14 cents per mile.

To date, I haven't found a better conversion rate with any card.

Evaluating Mutual Fund Performance in a Down Market

In this down market, don’t make the mistake of dumping a mutual fund just because it is down. Unless your stock fund made a big bet against sub-prime lending, your stock fund probably is down significantly over the past six months. In this type of environment, two common mistakes are:
1. My fund went down. It must be bad. I’ll sell the fund and buy something that went up.
2. My fund went down. It must be bad. I’ll sell the fund and buy another fund in the same sector.

In a down market, look at how a fund did relative to its peer group. You want the best, risk adjusted, fund in each asset class. If your fund was in the top 10-25% of its asset class in a down market, transaction costs make moving funds a questionable decision.

Tax Form Season - In the Mail

Before you pitch the lastest piece of junk mail, make sure you aren't throwing out a tax form. Today, I got my form from Vanguard. You should have all your forms befor February 15th.

Securities Fraud – A Win for Corporations

Earlier today, the United States Supreme Court decided by a 5-3 vote to limit securities fraud lawsuits. For a detailed analysis of the case and links to the opinion, I recommend visiting www.scotusblog.com.

Basically, a set of vendors agreed to some “wash” transactions with its customer. Although the vendors accounted for the transactions properly, the customer used the sham transactions to commit securities fraud. Years later, the shareholders of the customer wanted to sue the vendors for aiding and abetting the customer in committing the fraud. The Supreme Court decided not to create a private cause of action.

In terms of the facts of this case, the bad behavior by the defendants was truly atrocious. Hopefully, the government will take appropriate action against the companies and their employees.

Nevertheless, I am OK with the result. Had the plaintiffs prevailed, the shareholders of the vendors would end up compensating the shareholders of the customer for the fraud committed by the customer. Furthermore, innocent vendors could spend millions defending themselves from weak/frivolous lawsuits.

Avoid “Branded” Mutual Funds

Simply put, “branded” mutual funds are almost always a bad idea. Why? They almost always replicate a fund available from another source by adding on layers of expense.

In many cases, the bank/insurance company will hire a manager like Putnam, Barclas or Wellington to manage the “branded” mutual fund. Although this might seem like a good idea, they buyer ends up with paying more for the same product.
1. The money manager charges the fund a management fee;
2. The fund sponsor charges the fund various administrative fees;
3. The fund sponsor ensures there are marketing fees built into the fee structure; and
4. The fund sponsor almost always offers the fund with a significant load.

While expenses in funds can never be completely avoided (nor should they be), you can almost always avoid extra fees imposed by “branded” funds.
1. Look at the money manager on the prospectus. In many cases, the “same” fund is available directly from the money manager with a lower fee structure.
2. If you can get the same fund without paying a load, you just made a 5% return the first day of your investment. The Fund industry has many distribution streams. Pick the one with the lowest cost to you.

Can a Gambling Man be a Frugal Man?

Each winter, a friend invites a bunch of the guys to his family’s summer house for a guy’s weekend. Touch football, drinking, cards, and the NFL Playoffs are the agenda for the week.

Because of a knee injury, I beg out of the football game, but I enjoy the card games. Since I don’t go to casinos (unless my company sends me), the annual gambling extravaganza is typically my gaming experience for the year.

How I manage risk, have fun, and keep loses to a minimum:
1. I take out $100 from the ATM on the way there.
2. I play with people who are not high rollers and don’t pressure people to take big risks;
3. We play poker tournaments. At most, you lose your buy-in. Because the games take a long time, it is difficult to lose big.
4. I avoid “three card molly.” Not much skill and a lot of risk.

This year’s results, I returned with $104 dollars.

Tata - Ultimate Cheap Car? Not

For people who don’t live in the NYC metro area, a train car is a car used by commuter train users. Generally, a train car is used to get you to/from the commuter train (PATH, LIE, Metro North) and that is about it. A good train car is: cheap to own, cheap to operate, reasonably reliable, and something you don’t mind leaving unattended in the land of door dings, rain, and sun. l

At $2,500, the Tatas might seem like the right ticket for someone looking for a good train car; however, it is likely to suffer from a problem common to new car manufacturers in the US. Expensive and/or unavailable parts. In the early days of Kia, I know someone who damaged her car in a crash. She had to wait 30 days for Kia to ship a part from Korea for her 3 month old Sportage.

Sometimes you get what you pay for. Until they prove they can build a good dealer network and provide parts for vehicles in need of repair, I would look to other low cost options.

My Fiance is Rich

My Fiancé is Rich

Just joking!! After things got serious with the goddess, we had “the discussion” about money and I determined her personal finances were out of control but not hopeless. First of all, she is a teacher with a steady income and outstanding job stability. Second, she didn’t have any expensive tastes she was unwilling to deal with. Frankly, her biggest problem was a lack of knowledge/interest/time in how to manage personal finances.

After discussing her situation, we implemented a tough, but manageable, plan to get things under control.

1. We consolidated he credit card balances from 6 cards to 2 cards. Although we couldn’t get a zero interest teaser rate, we found 2 low interest rates.
2. We implemented a budget and she stuck to it.

Today, she looked at her checking account statement and got a gorgeous smile on her face. “I cannot believe I have this much money in my account!!”

I love it when a plan comes together.

Fed Cut – Impact on Savers

Today, the Fed signaled it intending to continue to push interest rates down in hopes of stimulating the economy. If it follows through with its plan, we need to have a plan in place for dealing with the change.

Loans:
1. If you are looking to pay off loans in some sort of debt reduction plan, you need to consider reallocating principal payments.

Example: If you have a $10,000 car loan at a fixed 5.9% and a $12,000 car loan a variable 6.5%, I would recommend moving all extra payments towards the fixed rate loan. Although it is currently the “high cost loan,” it will not be for long.

2. Lower minimum monthly payments. Student loans, HELOCS, and credit card interest rates key off LIBOR or other variable interest rates. As the Fed continues to act, we should expect a falling LIBOR and take appropriate action. Even if youcannot increase payments, you still win as each payment includes more “principal” every month.

3. If you have a student loan, DO NOT CONSOLIDATE in the next few months. Once you consolidate, you are stuck with the rates in place at that time. Since rates are going to fall, wait at least a few months to take advantage of a great opportunity.

Savings: Interest rates on everything from savings accounts to bonds will fall. Depending upon your situation, you may want to move money from variable rate products like savings accounts to fixed rate vehicles like Certificates of Deposits.

Financial Records – Make them Prove It

If you haven’t seen the news, Countrywide Financial has been accused of fabricating documents in bankruptcy court. Countrywide Financial.

While the information age makes it is for financial institutions to keep records of everything, it doesn’t mean they can find it. Between ancient computer systems and merger mania, there is a good chance their records are inaccurate and/or incomplete. If they claim you owe money and you are not sure, make them prove it.

Years ago, a client came to me with a problem. His auto lease contained a provision agreeing to reimburse the bank (“Dumb Bank”) for any property taxes paid by the bank on his behalf for the vehicle. A few months after he turned in the vehicle, Dumb Bank sent him a bill for $434 for “property taxes.” Because he knew his jurisdiction rarely taxed leased vehicles, he refused to pay until they provided him a copy of the invoice from the county. Despite not being able to produce the invoice, they sent him to collections and he contacted me.

After I stopped collections, my conversation with dumb bank went something like this:

Bank: According to the lease, he agreed to pay us for taxes paid on the vehicle. We paid $434 in property taxes for 19XX.
Me: Please send me a copy of the property tax bill from the county.
Bank: We did.
Me: No, you sent me a bill from your bank. We want a copy of the actual tax bill from the County.
Bank: We don’t have to send you the tax bill.
Me: Why not?
Bank: Company Policy
Me: Let me get this straight, you want my client to reimburse you for a tax bill; however, you are unwilling to provide him a copy.
Bank: Yes
Me: Good luck with that.

Of course, they never found the bill (if it ever existed) and my friend/client never paid them.

Countrywide Financial – Is it a Buy?

While checking the news online during lunch, I noticed Countrywide Financial (CFC) had taken beating in the market. Later, I learned they were denying rumors of bankruptcy. Having fallen to $5.43 from a 52 week high of $45.26, it might seem CFC is a buy. Without going into a detailed financial analysis, lets look at sources of pleasure and sources of pain for CFC shareholder:
Pleasure:
1. Countrywide has a well-know brand name with multiple channels for bringing in business.
2. At the current price, the dividend provides a huge yield to common stock shareholders.

Pain:
1. While it had something like $35 billion in current assets in September 2007, its current liabilities were in the neighborhood of $83 billion. When Current Assets < Current Liabilities, you have significant bankruptcy risk if you do not have ready access to ST borrowings.
2. To support its short term borrowing, CFC has been using its long-term assets (re: mortgages) as collateral. Since the mortgage market is in trouble, their collateral is in trouble and their access to short-term borrowing must be impacted.
3. While hard companies like General Motors or US Steel have hard assets to fall back on, Financial stocks are literally made of paper. If the paper becomes worthless, they become worthless. They can and do implode quickly and leave investors holding the bag – See Enron.


Conclusion: I don’t have the time to go over CFC’s SEC filing with a fine toothcomb. Despite the attractive price of the stock, it continues to have significant short-term downside risk and little upside opportunity until the mortgage market stabilizes. While some Wall Street wizard is probably doing the work to justify an investment and will make a killing, I am going to sit this one out for now. I will, however, continue to look for the right financial for my portfolio.

Investing in a Falling Market

Like many people, I don’t believe 2008 is going to be a great year for equities. Between the election, the war, oil prices, and the subprime fallout, there is no reason to expect equities to take off.

With these expectations, I have a plan.
1. Taxable Accounts: Because I don’t believe my cash cushion is adequate, I don’t “invest” taxable money. 100% of my free cash flow goes into extremely safe vehicles (savings accounts, CD’s, money market) or debt reductions.
2. Retirement Accounts:
a. IRA: Almost 90% of my portfolio, it is invested roughly 30/30/30% in a ST Bond Fund, a MT Bond Fund, and a Foreign Equity Fund. The remaining 10% is in cash.
b. 401(k): Despite the tough expectations, I will invest 100% in a diversified portfolio of equity funds. Basically, I will treat the company match as insurance and hope to benefit from a long term increase in world equities.

Gene Simmons - Financial Guru!!!

Watching the Celebrity Apprentice, I was reminded of the genius of Gene Simmons. Basically, his business model can be summed up as: Always Be Selling.

More importantly, he finds out who has the money and gives them what they want. If you want to become financially secure, allways be selling.

My Failed Attempt to get an ETrade Savings Account

Although I have been very happy with ING Direct, I had heard eTrade Bank offered good service and competitive rates. With a $25 signon bonus, I though it was worth checking out.

Unfortunately, Etrade's online signup process is not hassle free. After recieving the test deposits (about $1.50), my online account wouldn't let me verify the transaction initiating my account. With no guidance from Etrade (online or by e-mail), I was forced to call the helpline.

After 10 minutes on hold, I spoke with a very nice woman who could barely speak English. According to her, I had to write down a phone number and fax a copy of my SS card and driver's license to it. When she could not explain why, she put me on hold for 5 minutes while she got another person on the phone. Although he spoke better English, he could not explain why it was required and was quite rude.

Feedback for ETrade:
1. I don't fax copies of my DL and SS# to blind numbers provided over the telephone by people I don't know - EVER!!
2. If you need documentation, you should inform consumers during the signup process what documents will be required and an easy way to transmit them (i.e. preprinted forms)
3. If a consumer is halfway through a signup and needs to provide documents, you might want to send him an e-mail telling him what the next step is.
3. You might want to answer your phone in a reasonable time period and you might want to have nice CSR's answer the phone.

Bottom Line - No Etrade account for me.

Advertising on this Blog

As part of my 2008 goals, I plan on increasing the frequency and professionalism of this blog. In addition to my various personal finance rantings, you can expect more content focusing on legal and insurance issues. Although my practice area is insurance for corporations, I plan to bring my experience with Personal Lines Insurance into this blog.

In addition, I will begin testing replacing/supplementing adsense with targeted links to companies I believe in. To start, I will be adding links to some of my favorite financial services providers.

Thank you in advance for all your support.

Coal to heat your home?

Like many people living in New England, I try to reduce my heating bill by burning wood in my fireplace. With the insert, I can pretty much heat the entire downstairs portion of my home.

Since solar and wind power are not viable for my home, I thought coal might be an interesting option. Back in the day, my grandparents heated their home with coal. If prices for oil continue to climb, could coal make a comeback for heating our homes.

Probably Not:
1. Not environmentally friendly;
2. Transporting coal is expensive. Getting it to thousands of homes would be a nightmare;
3. I doubt many people would enjoy feeding the furnace.

"Do you want change" - Tipping?

When a waitress brought me a check for $13.xx, I placed a $20 bill on top of the little tablet. When she came back, she asked me if I wanted change. Frankly, I was shocked.

1. Did she really expect a 65% tip?
2. Given the small size of the bill, do people normally round up?

BTW - when I told her I wanted change, she brought back a single and a five. Of course, it made leaving a normal tip 15-20% a hassle.

Net Worth Change in 2007

Total Net Worth Increase: $32,143

What caused the Increase in Net Worth:
1. Outstanding investment performance in my 401k during the first half of the year. Although it stagnated in the 2^nd half of the year, the overall increase was nice, if not spectacular.

2. Additional contributions to my 401k at my new employer to federal maximum.

3. Continued progress on debt reduction plan.