$39.4m Pay Package

Looking to beef up its results, Merrill has agreed to pay former Goldman Sachs trading guru Thomas Montag a staggering $39.4 guaranteed. Keep in mind, this is the minimum he will be paid.

All I can say, it is good to be wanted.

Subprime Mess – Have we hit bottom?

If you read the WSJ and other financial press, there are many stories about bottom of the subprime mess. While I don't think we are there yet, I figure it we are within 6-9 months of the bottom.

My strategy: strategic buyer of equities. I am buying on days when the market is down as I move my portfolio back into the market.

Sample story: http://online.wsj.com/article/SB120976475747763607.html?mod=hps_us_whats_news

Surgery Discounts with Insurance

Weeks after my surgery, the bills are starting to arrive. What has amazed me is the incredible discounts (60-80%) my health insurer was able to negotiate with the providers. Even if I had a 100% of the adjusted balance, my health insurance appears to have saved me thousands of dollars.

While I am glad I received the discount, it is unconscionable that the uninsured get hit with inflated charges. In today's WSJ, they have a story on how cancer centers are charging the uninsured thousands of dollars more than the insured. http://online.wsj.com/article/SB120934207044648511.html?mod=hps_us_pageone

Job Hunting after Huge Failure

Ok, everyone has had some bad moments at work. But to losing billions of dollars in a rogue trading scheme shouldn't prevent you for getting a new job. According to the WSJ, Jerome Kerviel of Soc Gen infamy managed to land a job in computer services. Let look at key resume points he had going for him:

1. Lost Billions in Rouge Trading Scheme
   
2. Spent a month in prison
   
3. Picture on front page of most of the business pages in the world.
   

This guy should set up a company for helping people find jobs.

Health Insurance – Ordering to save Money

Because different services have different co-insurance percentages, you can often save a few dollars by ordering the submission of claims to your health insurer.

Example: You have a $1,000 with 20% co-insurance for medical care and 30% for prescriptions. You incur $1,000 in medical expenses and $1,000 in prescription bills.

Example 1: Submit medical expenses before the prescriptions. You pay $1,000 towards your deductible and $300 towards your prescriptions.

Example 2: Submit the prescriptions first. You pay $1,000 towards your deductible and $200 towards your medical expenses. In this case, ordering saves you $100 in after tax dollars.

General Rule of Thumb: Any Non-Generic, Non-Formulary drug expenses should be submitted first. Although you will get stuck paying 100% of the charges, you avoid paying the typical 40-50% co-pay they have.

12mo IRA Performance Report

One year after transferring my 401k (from my prior employer) to a self directed IRA, my IRA has declined in value by 0.88%. While certainly not a great performance, it beats the minus 5.3% it would have declined had I not moved to a defensive posture in August, 2007. In a down market, avoiding a big loss can be a big win.

Current Asset Allocation:

Cash         = 63%

ST Treas Fund    = 7%

Index Fund     = 10%

International     = 10%

Ind Stocks    = Remaining Amount

 

Goal for the next 12 months: plus 5% as I move cash back into the market.

Credit Card Arbitrage

As an experiment, I tried executing a 0% balance transfer arbitrage using a Discover Card. In 12 months, I made $75 in miles rewards + approximately $300 in interest. While the experiment worked, I didn't find the after-tax profit worth the time to manage the process or the worry it caused me. I won't be doing it again.

Cell Phones for Couples

For couples, a family plan is a great way to save money on cell phone services. Last month, my fiancé cancelled her account with Sprint and got a phone through Verizon. Since most of our calls are to each other (and the minutes don't count), we share a 700 minute plan for a total of $100 per month with unlimited texting. Over the course of a year, we will save about $240 in after tax dollars with this arrangement.

BTW – Verizon has been very easy to work with.

Heloc Borrowers – Libor Shooting Up

According to the WSJ. the LIBOR is likely to shoot up in relation to other money rates. Apparently, there is some concern banks were lying about their rates causing the LIBOR to be artificially low. Now, my HELOC rate is likely to go up again.

PS – I wonder how long it will take Class Action attorneys to file lawsuits on behalf of borrows getting the shaft.

Risk Premium - Investment Losses

Let's say you have a choice of buying a FDIC insured CD paying 4% and an Auction Rate Security paying 4.25%, you must understand the 25 basis points premium is to compensate you for taking some risk. If you are unwilling to take that risk, you must give up the 25 basis points.

Now that the bubble is bursting, we are seeing more and more companies going under and investors are losing money on investments in everything from SIVs, Auction Rate Securities, MBS, or even uninsured investments in banks. Although there were certainly instances of fraud, many lawsuits/complaints involve people who fail to accept the fact they were compensated for additional risk.

Rules to Live By:

1. There is no such thing as a free lunch, especially on Wall Street. Any increase in expected return means you are accepting additional risk.
   
2. Do not take risks you do not understand. If you don't understand the risk you are taking, you cannot possibly determine if you are getting paid a fair return for the risk.
   
3. If an income investment (bonds, CD's, or other savings vehicle) pays a significantly higher rate of interest than "comparable investments," it is not really comparable. No bank is going to pay 6% on a CD when other banks pay 3% unless there is an enormous CATCH.

$100 T-Bill from Treasury Direct

Last week, I placed an order for a $100 4-week T-bill as an experiment. The only problem I have had with the site is trying to swap out my local bank for ING Direct. According to the Treasury Department, a notarized change of bank form is not good enough. For some reason, they want a bank official to witness my signature. At this point, I am waiting for them to respond to my inquiry on how to make that happen.

My Identity Stolen!

While checking with American Express about another matter, the representative mentioned there were two accounts using my SSN open with different names. Needless to say, it was disturbing. A few days earlier, HR informed some of us that a laptop with our personal data had gone missing. PANIC!!!

My Strategy:

1. My company is offering credit repair through Kroll Associates. They are now working with Amex to investigate the incident.
   
2. Although probably overkill, I purchased a year of credit monitoring for Equifax. Probably overkill, however, I want to be sure of where I stand.
   

   
    

Based upon my review of my credit reports, things are not out of control; however, I will be vigilant until I am sure.

CitiCard Hybrid Sweepstakes – No Purchase Necessary

Visiting my Citi to check an online balance, I noticed an offer to enter a sweepstakes for a hybrid vehicle by doing a balance transfer. If you are interested in the sweepstakes, check out the rules because they offer other ways to participate.

By Mail: To enter without engaging in any of the above banking actions, hand print your name, address, day and evening phone numbers, email address (if any), and age on a 3" x 5" piece of paper and mail it with proper postage to: "Citi EcoSweepstakes," c/o ePrize, LLC, P.O. Box 8070, Royal Oak, MI 48068-8070. You will earn three (3) entries into the Sweepstakes per 3" x 5" piece of paper. Limit: One (1) 3" x 5" piece of paper per envelope. Nine (9) entries total. All mail-in entries must be handwritten. All mail-in entries must be postmarked by May 16, 2008 and received by May 23, 2008. All entries become the exclusive property of Sponsor, and none will be acknowledged or returned. Proof of sending or submission will not be deemed to be proof of receipt by Sponsor. Sponsor is not responsible for lost, late, incomplete, invalid, unintelligible, illegible, misdirected or postage-due entries, which will be disqualified. Use of any automated system to participate is prohibited and will result in disqualification.

Altima Hybrid Review

My company allows us to rent vehicles for business trips. Much to my surprise, today's vehicle was a new Altima Hybrid. What did I think? As per my prior posts, I don't think hybrids are a good economic or environmental choice. Today, I covered 270 miles including a significant amount of time stuck in Manhattan traffic. Gallons used = 9.02. Although pretty good, my fiancé's 3 year old Toyota Corolla would have had similar results over the same course. Economically, the Corolla is a no brains winner over the Altima.

What about size? In a pinch, the Altima could probably seat 5 while the Corolla can only seat 4 (with less overall room). With respect to trunk space, the Corolla probably has 75-100% more space than the Altima. IMHO – a hybrid with reasonable trunk space would likely need to be a wagon or hatchback.

Below: I have posted a link to a review by Car and Driver. For some reason, they got horrible mileage with the Altima.

http://www.caranddriver.com/reviews/hot_lists/car_shopping/green_machines/2007_nissan_altima_hybrid_short_take_road_test

Free HD – Saved $15mo on Cable

After the upstairs TV finally kicked the bucket, we bought a nice 32" HDTV on sale. After CrapCast Cable said it would be an additional $15 per month to get a HDTV cable box, I decided to do a little research. From the web, I learned my TV should be able to pick up network HD signals for network programming without a box. Sure enough, I can get all four networks in HD.

Although I don't get some of my favorite channels in HD upstairs, I get enough channels to enjoy saving $180 per year.

$6 Billion Gift to Homebuilders – Congress!!

If you have not heard, the idiots in Congress are looking to pass a bill giving homebuilders over $6 Billion (yes, BILLION) of our hard earned tax dollars as a bailout. If we want housing prices to go back up, the best idea would be to stop increasing supply. Bankrupt homebuilders would lead to less supply and higher prices on existing housing stock.

Please call you congressman and complain!!

25% TurboTax Discount – Fidelity Customers

If you have brokerage or netbenefits account with Fidelity, they have an online link entitling you to a 25% discount on TurboTax products. Not bad.

Thanks Comcast

Although I would love to fire Comcast, they occasionally do something right/nice. Thanks to a free preview of MLB League Pass, I am watching my beloved Texas Rangers on opening day. It almost makes me forget the high prices and bad service I am forced to endure.

Thanks Calphalon and Bed Bath Beyond

The other day, I found my bride cooking eggs in a pan instead of the nice, Calphalon griddle we have. When I asked why, she said the eggs run to the sides. It turns out it was bowed up in the middle.

After checking out Calphalon's website, I called the warranty line to find out what to do as I no longer had the receipt. After my experience with Citibank, I was pleasantly surprised to get quickly connected to a pleasant CSR. During our conversation, he quickly determined it was probably a warranty related issue and asked me to mail it back to them. When I said it didn't make since to spend $10 to pack and ship a $27 item, he offered to pay for postage. Nevertheless, I asked if I could take it back to the retailer, Bed Bath Beyond, instead. Although he couldn't speak for them, he said BBB had great return policies and would probably take care of me.

To make a long story short, BBB took care of me, no questions asked. Makes us glad we are registering with them for most of our wedding gifts.

Citibank Cards = Poor Customer Service

In today's mail, I received an incredibly unprofessional letter from my friends at Citibank. According to the notorious customer service representative "S. Larsen," they "would like to assist me; however, your request is not clear. Please send a signed letter detailing how we may help you." With the exception of my account number, the letter contained no other information. It doesn't say what prompted their letter or what or even how I requested their assistance.

With no information to go on and having little idea what the letter was about, I was forced to contact customer service (Thankfully, I had my card with me because S. Larsen didn't think providing a contact number was a good idea).

When I finally reached a CSR, I was informed the letter was generated after my request to transfer available credit limits from my American Airlines Card (which I rarely use) to my Driver's Edge Card (which I often use) had been rejected. When I asked how my request was "not clear," she admitted my request was quite clear and the letter was not an appropriate response to my request.

When I asked why my request was rejected, she informed me that the Driver's Edge account had an available 0% balance transfer on it and "company policy" precluded making my requested change. Of course, I responded by saying I did not request, need or plan to use the balance transfer and asked that it be removed. After she gave me an idiotic story about how it was impossible to remove the balance transfer offer and do what I asked, I got a supervisor on the line and got the request completed.

Bottom Line:

1. Citibank sent a letter to a customer (and shareholder) that conveyed little or no useful information. What little information it did convey was incorrect.
   
2. Citibank failed to comply with a request from a customer (and shareholder) to do something that had little or no cost to Citibank, but would have met the customers' needs.
   
3. They had a CSR answer the phone with no clue about actual company policy or how to assist a customer.
   
4. They wasted at least 30 minutes of CSR and manager time (and my time) dealing with a request for no particular reason. Including overhead, it probably cost Citibank $10-15 to handle my call.
   

Wonder why my stock price has gone down?

BTW = professional correspondence from a top-notch company is often mailed in an envelope addressed by hand and with the return addressed affixed by a stick on label created on a dot matrix printer. My plow guy sends correspondence on more professionally prepared envelopes.

CIGNA Health Insurance – So Far So Good

Often (for good reason) health insurers are the focus of criticisms from policyholders. As I work my way through paying for my medical procedure, I certainly expect problems with things like what is covered, co-insurance, deductible, and in/out of network providers.

Having returned from the hospital, I called CIGNA to find out what is necessary to file a claim under my HSA-style health plan and to find out my deductible/co-insurance performance.

Having dealt with the hassle of dealing with a knee surgery, I was expecting the worst. Nevertheless, I have to give the CIGNA CSR a thumbs up. When I explained what happened, she verified the surgeon and the hospital were "in network." With respect to other professional services, she warned me that they might charge me the "out of network" deductible for the anesthesiologist; however, she said I should appeal the charge. Under the circumstances, they usually waive the "out of network" charge since I was at an "in network" hospital.

HSA Account – Real Life Example

Later this year, I am getting married. Once we are married, I will cancel my health insurance and go onto my wife's plan. Overall, this will give us the best combination of benefits and cost.

Since I did not expect any large healthcare charges before the marriage, I elected to sign up for my company's HSA instead of the traditional plan. By combining my contributions with my company's funding of the HSA balance, I expected to save money on premiums and end up with a small balance in my HSA when I switch plans.

Unfortunately, I had an unexpected trip to the hospital for emergency surgery and even had to spend the night in the place. In terms of cost – that is gonna leave a mark. I figure I will have to come up with the entire deductible (I think $1,200) + 20% of everything above that up to $2,400.

Despite my bad outcome, I still think a HSA is a good choice for many single people. Had I been in the plan a few years, I would certainly have had enough money saved in my HSA account to pay off the entire deductible.

If you have an HSA, I would recommend the following strategy:

1. Do not tap your HSA for small, infrequent charges such as a one off doctor visit (cold, flu, etc) or a one off prescription.
   
2. Build up the HSA balance to the deductible amount so any large loss (such as a hospital visit or surgery) doesn't impact your normal lifestyle. Remember, this fund is for emergencies, not a $10 prescription for generic antibiotics.

Boston Globe – Horrible Customer Service

A few weeks ago, we received a letter from the Boston Globe indicating the paper was now available for home delivery in our area. With weekend only delivery available at good price, we called the subscription office and signed up.

Three weeks later, we have received exactly ZERO papers. We have, however, been hit with two charges against our credit card. When I called to complain last week after the first charge hit our credit card, the customer service rep promised us home delivery was available and promised to refund our account. She even promised to call the delivery department to find out what went wrong.

Of course, this weekend came and went with no paper and another charge against our credit card. Because their customer service department is closed on weekends, I was forced to send an e-mail about our problems. To date, they have not responded with an e-mail or with a phone call.

And newspaper management wonders why traditional newspapers are losing money.

1. When a customer enquires about service promised, but not delivered, the custom (unless you work for the cable company) is to respond.
   
2. It is not customary to bill someone every week for their newspaper. Most companies have figured out how to do monthly/quarterly/bi-annual billing to reduce costs to the company and hassles for the customer.

State Farm Dividend – 2008

As a Mutual company, State Farm is owned by its policyholders. Earlier this month, they announced a $614m dividend for many of their life insurance customers/owners.

Unfortunately, it looks like P&C customers won't get big dividends we got last year. According to their news release, the combined companies had a net income of $5.46 billion. Although the press release is not clear, it looks like they will be investing the profits in growing their loss reserves. Given the decline in underwriting profit on their large auto book and the uncertainty in the investment market, it is probably a good strategy.

 

Cite: http://www.statefarm.com/about/media/media_releases/sf_net_income.asp

Idiotic Housing Market Plan

According to wsj.com, the idiots in Washington have come up with a plan to save us all. They are considering a tax credit for buyers of new home construction and foreclosed homes.

If your home is not in foreclosure and you want to sell it, you will have to compete against banks and homebuilders who have a "tax credit" in their pocket. In order to compete, you will have to lower your price by the amount of the tax credit.

Genius!!

Citation: http://online.wsj.com/article/SB120614866511156783.html?mod=hpp_us_whats_news

Funny Bear Stearns News

A little dark humor from the guys and gals and Dealbreaker.com. Sick, twisted, and funny.

http://dealbreaker.com/2008/03/how_to_think_about_how_a_potsm.php

Nice Bounce – What to do?

Despite the market bounce, I am going to keep my portfolio's bear bias in place for another 6 months. Nevertheless, I will do a little strategic buying on down days.

Wall Street Wizards - Not

How many Harvard MBA's does it take to destroy all the value in one of the world's premier investment banks?

Because they failed mitigate risk properly, thousands of people (many of whom are not rich) are going to lose their jobs.

Microsoft Home Use Program – MS Office for $20

If you work for a large company, check your intranet site before you purchase Microsoft Office for your home computer. Your company may participate in the some sort of discount program with them. I purchased a full version of Office Professional for only $20.

If your intranet site has a search function: Try "Home Use Program" or "Microsoft Discount"

Bear’s Run on the Bank

In the Depression a "Run on the Bank" occurred when shareholders literally ran to the bank to take their money out before they got stuck holding the bag.

Yesterday, the Fed and JP Morgan worked to prevent the modern equivalent. Because of the perception of financial instability, Bear Stearns was perceived to be a risky trading partner. Because of the perceived counterparty risk in dealing with Bear, trading partners vanished and its ability to earn money evaporated.

Although the Fed sponsored bailout will buy them some time, they are unlikely to survive on their own. Unless someone buys the bank, they are likely to go away soon.

IRS is Taunting Me

Why is the IRS sending out letters saying they will be sending out stimulous checks sometime? Why not just send the checks and be done with it? Since I am unlikely to get any stimulous (no Spitzer jokes please), it felt like they were taunting me.

3 mo savings ideas?

With wedding expenses about 3 months away, I would like to park some money somewhere VERY safe. Any ideas? So far, the best, reasonably convenient rate I have found is my ING Savings account. 3 month CD's don't seem common.

Sprint Contract Terminated!!

My fiance wanted to drop Sprint and join Verizon so we could share minutes on a family plan. When we called to cancel, the idiot CSR claimed her contract didn't expire until November. Luckily, I don't take BS for an answer. After browbeating the first and second CSR into getting a manager on the phone, I got them to admit they couldn't prove she had a 2 year contract. As a result, Sprint is gone and Verizon has both our accounts.

Spitzer's Fall

NY Governor Elliot Spiztzers fall from grace is sad. As AG of New York, he really did some great things for the retail investors out there. Unfortunately, he tended to be an arrogant, bully who could do no wrong (in his own eyes). With the fanaaticism of "certainty," he attacked his political enemies without mercy (or regard for the law). If news reports are true,it is is a sad fall.

Hopefully, someonew without his persoanily problems, will pick up the mantle of everyday investors.

Splurged on Laptop - 10% Discount

The hated iBook finally was giving up the ghost. Before it totally failed, I bought a new Dell laptop to replace it. By using my bride's rewards card, we get 10% back in the form of a coupon.

Black Friday Tomorrow

With the turmoil in the credit markets, tomorrow is going to be a very bad day. Between the hedge funds being squeezed by lenders to Jefferson County, Alabama facing bankrupcy, the only safe havens appear to be oil, gold and treasuries. Can you say Black Friday 2008?

Fiance Credit Report Results

Before our wedding this Summer, my fiance and are working to clean up our fiances. As part of the project, we ordered her free credit report from Equifax. Thankfully, there were no nasty surprises.

In terms of clean up, she had a couple of old credit cards we didn't know were still open. Although they have zero balances, there is no reason to keep them open and we will close out the accounts.

By staggering our free credit report requests over the next 6 months, we can have all three reports for free and be very confident everything is fine.

Bought $90 in Lottery Tickets

With the jackpot at over $160 million, my officemates and I chipped into a pool with hopes of winnings. Because of my luck in the Super Bowl pool, I was picket to get the tickets.

While winning the lottery is not a good personal finance strategy, it can certainly be fun. Wish us luck.

Health Insurer Loses $9m Arbitration

An arbitrator recently awarded a California woman $9m dollars in damages from health insurer, Health Net Inc. for rescinding her policy while she was fighting breast cancer. Although news reports provide some interesting information about the incident, I took the time to actual judgment issued by the arbitrator. It made interesting reading.

Summary of Facts:
Patsy Bates, a hairdresser, had health insurance through another carrier when an agent approached her about saving some money. While she was busy cutting hair, the agent completed the Health Net Inc. application and she signed it. Mistake 2: For reasons that are not clear, the agent changed her weight listed and “he” initialed the change. Although it had an authorization to pull her medical history for underwriting purposes, Health Net chose not to do so and issued the policy. Ms. Bates canceled her old policy and everything should have been fine. Unfortunately, it wasn’t.

Instead of underwriting policies properly before issuance, Health Net had a program where employees investigated applications for possible rescission. Ms. Bates application was flagged after she had a health problem. Her policy was rescinded and she was stuck with $129,000 in costs from cancer treatments.

My Conclusions:
1. The agent could probably be prosecuted for violating California law by changing the application. Nevertheless, the evidence suggested he was guilty of a mistake and not an intentional attempt to defraud Health Net or Ms. Brady.
2. Health Net got what it deserved. Her weight was obviously changed on the application by the agent. If it was a big deal to Health Net, they had a legal obligation to investigate the issue BEFORE they issued the policy.


Nevertheless:
Despite Ms. Bates “win” in the arbitration, she wasn’t a winner. She was lucky California had a program to help her get the treatment she needed. Without it, she could have died. Please be sure to read any insurance application carefully (even if you don’t fill it out). Insurance companies take applications seriously and so should you. If the application has inaccurate information (even if you didn’t intend to lie), the insurance company may deny your claim and/or rescind/cancel your policy. If it is accurate, it is nearly impossible for them to rescind a policy, cancel the policy, or otherwise deny a valid claim.


Link: http://www.latimes.com/news/local/la-fi-insure23feb23,0,187355.story (a link to the order is included at the site)

Effective Customer Service Complaints

Today's, Fiscally Fit Column in the Wall Street Journal has an outstanding story on how to complain effectively to get satisfaction for a problem. I highly recommend it.

Key Links:
http://online.wsj.com/article/SB120413183493397095.html?mod=pj_main_hs_coll
http://www.gethuman.com/

Timing and Large 401k Contributions

Yesterday, my employer made its profit sharing 401k contribution for the year. At 3% of my salary, it was a nice chunk of change. Unfortunately, they made the entire contribution yesterday when the market was up instead of today when it was down. While a 1% difference in the initial investment value may not seem huge, over time it could add up to a nice chunck of change. Such is life!!!

Living with a HSA

Until I switch to my fiance's group policy after the wedding, I will be part of my company’s high deductible with an HSA. If I understand the paperwork I have been provided, I am supposed to use the debit card for covered items. Nevertheless, I wonder how they tell if I follow the rules.

Ka-Ching - Refund In Hand

Only one day after the promised, my tax refund hit my bank account this morning. Although I would love to use the money for savings or debt reduction, the money has been stashed in my wedding/honeymoon fund. She is worth it and I am looking forward to the vacation.

Save on Taxes – Tax Haven Style

In Lichtenstein!!! Apparently, people from all over Europe (and the US) hid money in the principality of Lichtenstein hoping to take advantage of bank secrecy laws. According to published reports, German (and possibly other) tax authorities bribed a former employee of the LGT Group to turn over stolen bank records.

My thoughts:
1. Saving money on legitimate tax strategies is moral and a fundamental right. When you cross the line into tax evasion, you are likely to face IRS prosecution. Even if you avoid jail, any tax savings are going to be dwarfed by your legal bills.
2. Do not hide money in foreign tax havens. The world is shrinking and you are not likely to get away with it. If you have already done it, I recommend hiring the best lawyers you can afford to get you out of this mess with as little pain as possible. He/she will tell you what to do/say if the feds coming knocking on your door.
3. While the German and UK tax authorities might get away with bribing an employee to “steal” records, US authorities are likely to have trouble getting any evidence gathered by bribing a witness to break the laws of another country. Without researching the issue closely, I suspect a Motion to Suppress would have a 75-80% chance of success.

Other links:
Liechtenstein defies German pressure over banks
Tax experts say German push on Lichtenstein omits own failings

Substitute Goods – Savings Strategy

By taking advantage of Substitute Goods, we can save money on goods we do purchase. For example, I love to play golf. Because of the weather in New England, I can stay home or deal with rain. I choose to play through rain and cold weather.

The best golf specific raingear in the US is made by Zero Restriction and I needed some rain pants. Not wanting to spend $250 on pants, I found a similar pair at a hunting and fishing supply store, Cabelas, for $85.

Bottom Line:
1. Same Color (blue)
2. Same Material (GoreTex)
3. Great warranty – Cabelas is fantastic in this respect.

Saved $150 and got what I wanted by using a substitute good – fishing pants.

Frugal? Buying Winter Clothes in February

Despite the 8 inches of snow we got on Friday, spring is in the air and the immediate utility of winter clothes is limited. Combined with the new spring lines, most retailers have winter items available at deep discounts.

Why we should buy? For staple items like coats, gloves, hats, sweaters, you can buy something that will not be out of style soon for a song.

Why we should wait? By purchasing an item now for use next year, you need to consider the impact of finance charges, storage, or lost interest for 8-10 months?

What I just bought? My Columbia snow boots had a great 7-year run. Warm and waterproof, they were easy to slip on/off and great for doing tasks like shoveling snow in a Northeast winter. Earlier this month, I noticed they were about to leak but thought I could make it through the season. Unfortunately, the late winter storm hit and they leaked. Today, I went to Dick’s Sporting Goods and got some replacements for $40 off some nice Merrill snow boots. Had I gone shopping 2 weeks ago, I could have had more choice and got a great buy on a cheaper model.

When Numbers Don’t Add Up: OMBIX

When Numbers Don’t Add Up: OMBIX

I stumbled upon OMBIX (JP Morgan Mortgage Backed Securities Fund) doing some research. Morbid curiosity caused me to look up its performance. Much to my surprise, Yahoo Finance reports returns of:
YTD: +1.83%
1YR: +8.46%
Is difficult to understand how a firm with holdings (per Yahoo) in Mortgage Backed Securities, even AAA ones, could be doing so well.

While I don’t have information suggesting the fund is being run by crooks, I am suspicious. If they did manage to keep their investors out of losing positions, the managers deserve an award.

Wall Street always a Winner

According to stories, there has been a major failure of the auction rate securities market. As a result, entities like the The Long Island Power Authority are moving to refinance debt with longer-term issues. What isn't mentioned, every time they refinance, a Wall Street investment bank collects more fees. Every time a client loses, they make more money from fees. Every time a client wins, they make more money from fees. Great business model.

Unfair Shoplifting Penalties

    

Back in the day, I had a client stopped for shoplifting in a local store. Although we quickly worked out a reasonable deal with the prosecutors, I was surprised when the store went after him for penalties. In today's WSJ, they have an outstanding storing on the process. The money quote:

• "In an escalating battle against theft, retailers are going after anyone suspected of shoplifting, turning over their names to lawyers and collection firms, who pursue the suspects for stiff penalties and split the take with the retailer. There is little oversight of a system retailers call "civil recovery," created by special laws passed in all 50 states. With no proof of theft, the retailers demand money -- often $200 but sometimes far more -- and promise to avoid suing if it is paid quickly. Laws vary by state, but in general, retailers can demand these sums even if the item at issue was worth far less and was quickly recovered and put back on the shelf.
  

When to Buy Life Insurance!!

Simple - Before you need it. Tomorrow, we are buying life insurance while we are young and insurable.

Saved 10% on IRA - Market Timing

Months ago, I posted my intention to move my money out of the market into cash and cash equivalents. Fearing a train wreck, it seemed like a good plan. Happily, it worked out. Since moving my money from my 401k to my IRA, my account is down 1.5%. Using my original asset allocation (low-cost index funds - diversified), I would be down 12%.

New plan, I have begun a plan to dollar cost average back into the market to take advantage of the depressed prices.

Keeping Illegal Trading Profits

Sometimes, the Law is dumb as a post. As the story below details, laws are written by people (often stupid people) who don't think of everything.

Make Big Profits Illegally (and Maybe Keep Them, Too)
http://www.nytimes.com/2008/02/15/business/15norris.html?_r=3&oref=slogin&oref=slogin&oref=slogin

Borrower Risk – Mortgage v. Student Loans

Lets say you have to decide on defaulting on your student loans or defaulting on your mortgage. In many ways, the mortgage may be the good choice:
1. Student loans are generally not dischargeable in bankruptcy;
2. After foreclosure, the lender (in some states – check with you attorney) may not be able to go after you for any remaining balance.

While I do not condone or otherwise recommend going to foreclosure, I do not the “risk” student loan borrowers have. For people like doctors, they may have hundreds of thousands of student loan debt. Faced with a choice between paying down the mortgage or paying down the student loan balance, the student loans are a no brainer.

Borrower Risk – Mortgage v. Student Loans

Lets say you have to decide on defaulting on your student loans or defaulting on your mortgage. In many ways, the mortgage may be the good choice:
1. Student loans are generally not dischargeable in bankruptcy;
2. After foreclosure, the lender (in some states – check with you attorney) may not be able to go after you for any remaining balance.

While I do not condone or otherwise recommend going to foreclosure, I do not the “risk” student loan borrowers have. For people like doctors, they may have hundreds of thousands of student loan debt. Faced with a choice between paying down the mortgage or paying down the student loan balance, the student loans are a no brainer.

Feb 25th - Refund Day!!!

If you were one of the many people impacted by the IRS' decision to reject tax returns until Feb 11th, Feb 25 may be your lucky day. My confirmation indicated I can expect a Direct Deposit on that day.

Mojo Network - Wall Street Warriors

If you want to get a good view of Wall Street scumbags, check out Wall Street Warriors. Day Traders, Boiler Room Brokers, traders and hedge fund managers. In the episode I watched, some traders had a rousing conversation on how to deal with guys who have lost money - liquidation - even if it is their friends.

$18 eFile for $4 Refund???

Getting ready to file my taxes tomorrow, I noticed TurboTax charges something like $18 each to e-file state and federal taxes. Although I am getting a good refund from the Feds, my $4 state refund request is going by mail. Paying $18 to get $4 is never a good deal.

BTW - I think it is a little sneaky for Intuit to charge $18 for each E-File.

Note: This year, I used the download version of TurboTax for my return and the online version (free from State Farm) for my fiance's return. By using the online version, you avoid the e-file fee. Next year, we will both use the online version.

eBay Feedback Change - No Buyer Negatives

If you haven't heard, eBay is taking away "negative" feedback for buyers. In adopting the new rule, eBay stated they want to protect buyers from retaliatory feedback from sellers.

All in, I support the change. A few years ago, I had a problem with a seller who's posting was misleading with respect to how he took PayPal. I wanted to give him a negative feedback; however, I gave him a neutral review. Of course, he retaliated with a neutral. This guy sells 100's of items per month. If I give him a negative rating, his overall rating will go down by less than 1 percent. If he retaliates, my rating goes down by almost 5 percent.

Since seller feedback is incredibly important, eBay was right to give people the opportunity to comment on sellar behavior without fear of retaliation.

DealBreaker.com - Funny site

Check out: http://www.dealbreaker.com/. Satire and Wall Street are a great combination. In particular, the fictional Goldman Sach trader "Thad" is a riot. See his "FAKE" Post at: http://www.dealbreaker.com/2008/01/post_684.php

NOTE - some readers may be offended by Thad's view of the world, and you would be right. Finance Guy does not condone or otherwide endorse "Thad's" view of the world, race, money, or class. Unfortunately, guys like "Thad" do exist.

Free Tax Software - State Farm

http://www.statefarm.com/main/tax.asp

We used this software for my fiance's tax return. It worked like a charm.

Greed is Good!!!

Anyone who watched Wall Street remembers the great, "Greed is Good" line by Gordo Gecko. Whether you believe it or not, you must understand ALL companies are money making entities and are looking to make money. When you deal with anyone in the business world, assume they have the same attitude. Once you make this assumption, it is easy to adopt the right strategy for dealing with "them."

Thoughts on Gambling

Like many people, I put a few bucks on my office Super Bowl pool. Luckily, I hit the number (Pats 7 and Giants 3) for 2 quarters and got a nice check out of it.

Despite my good fortune, a key moment drove home the “pain” suffered by serious gamblers. At the end of the first quarter, it looked like I was in the money as the Pats moved towards a score. Unfortunately, they stopped with ONE INCH to go and allowed the quarter to run out. Bottom line – one inch stood between a payday and me

For me, any winnings were “found” money and it was all fun and games. For the degenerate gambler, that one-inch could change his/her life. Imagine betting $10K on the Pats, because it is a sure thing. $50K on the over because nobody can stop Moss and Brady.

Out there, some poor man/woman lost rent/food/mortgage money on the game. For them and their affliction, I say a prayer.

IRS Delays Accepting Tax Filings – For EVERYONE

If you read the press releases, the IRS announcement that it will not accept tax filings until February 11 for people with complicated returns. From my experience helping a friend, I suspect just about everyone is impacted by the delay.

My friend’s return was extremely simple with the standard deductions and education credits. With the exception of the eductation credits, he could have filed a 1040 EZ return.

If his got rejected, just about everyone's will be.

Giants 3, Patriots 7 - I need the number

In the Superbowl office pool, I got two decent numbers for a change (My poor buddy got 5 and 8). Hopefully, luck will shine on my fiance and I and drop $400 into my pocket. 10% of a Roth IRA contribution would be a nice.

Go Giants!!! Normally, I hate the Giants (I am a Cowboys and Steelers fan); however, I don't want the cheat'n Patriots to have a perfect season. It might spoil the greatness of the Steelers 4 in 6 dynasty.

Valentine's Day - Money Savings Tip

Being frugal isn't just about not spending money. It is about getting the most value from the money you do spend. For example, going out for dinner on Valentine's Day is a poor use of money.
1. Restaurants rush to turnover seatings. Basically, they rush you in/out as fast as possible.
2. They may have a special V-Day menu where they tell you what your are going to have. At most, you get the fish or beef option.

My fiance and I avoid the problem by always celebrating V-Day on the Saturday following the actual holiday.
1. We can get a reservation at any restaurant in town.
2. We can select anything we want from the menu.
3. We are never forced into an overpriced, fixed price menu.
4. When we have kids, it will be easier to get a babysitter.

Bonus Time - Waiting for the News

Like many people, I am now waiting to find out how the 2007 Bonus will turn out. With the performance review in the bag, it all comes down to the size of the pool. It is going to be a long month and a half.

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.