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Senator Chris "Mr. Wall Street" Dodd has been caught red handed. First, he caused a change in the law that made it mandatory for AIG to make the bonus payments. Then, he lied about it. Hopefully, it means I will get a new Senator out of this mess.
Although there is a lot of blame to go around, Congress has managed to completely avoid responsibility for this mess. Maybe we will get lucky and Barnie Frank will get booted as well.
IMHO – savers should always have accounts at different banks. Although I had been building a 1yr at ING Direct, their constant reduction in rates has been annoying. Indeed, the rate on 1 year CD's is a staggering 1.5%. This month, I am getting 2.25% from USAA.
Simply put, USAA is paying 50% more than ING. Over a long period of time, it will add up.
According to Forbes Magazine, Mexican drug cartel leader, Joaquin "El Chapo" Guzman Loera, is the 701st richest man with a net worth of $1 billion. Not bad cash. Of course, to get it one must kill people (many of them innocent), deal drugs to children, and corrupt the Mexican jury system. Furthermore, you have to deal with the fact you are likely to:
As they say, money is not everything.
Many people, and even some people in government, think products automatically go bad once they past the "sell by" date. While it is certainly true for some products, it is not necessarily true for all products. Obviously, perishable products like produce, meat, and dairy should be a concern.
Nevertheless, some products can last forever if they are left unopened. (Twinkies?) How do we know? We have a federal appeals court that tells us so. Basically, the feds prosecuted a guy for allegedly mislabeling (openly – he wasn't sneaking around) salad dressing. Although it was past the sell by date provided by the original retailer, he gave it a new "sell by" date. On appeal after conviction, the US court of appeals states that the original OEM essentially made up the "sell by" date and that the product does not go bad.
Simply put. Cash is king. If you have cash, any bill arising out of a ER stay can be negotiated.
Years ago, after an auto accident, I helped a woman with a staggering problems. Seriously injured, her hospital bill (not counting doctors charges) was a over $120,000. Because she only had $30,000 in insurance proceeds available, we were able to settle the entire amount for that amount. No collection agencies, no bad marks on her credit. Why? The collections people at the hospital want to collect as much money as possible, as quickly as possible, and for the least cost/effort. They understand money in hand is in their best interest.
Last year, I had an unexpected trip to the hospital. Despite having medical insurance, my plan was a high deductible plan and I ended up with a significant amount of uninsured loss to deal with. Since that time, I have been paying off the charges systematically with monthly payments. As of today, all that remained was $650. Instead of continuing to pay $50 per month, I called up the provider. Claiming that I had just received my tax refund, I offered $500 to make the debt go away. They took about 30 seconds to accept my offer.
After thinking about it, I have decided last week's lows are within 5% of the market's ultimate bottom. Obviously, I think there is a good chance of another downward movement. Nevertheless, I am seeing signs that I find encouraging. In particular, the market seems to realize many financial services companies are priced (from an equity perspective) at a low percentage of their book value. Indeed, many of them are priced as if they are automatically going out of business – even if their operating units are making money.
Tomorrow: My moves explained.
For the first time in almost a year, I am smiling after making a nice winning trade. Last week, I bought 100 shares of Wells Fargo for $8.01. This week, they spiked up to $10.70 and I managed to get out at $10.00.
Not bad for a weekend's work.
Seriously, I am not (and do not believe in) a day trader. I bought the stock expecting to hold it for 2-4 years. Nevertheless, I couldn't pass up the opportunity to take some profits for a change.
To my surprise, I just discovered my brick and mortar bank, TD Banknorth, was offering significantly better rates on 1 year CDs than the rates offered through ING Direct.
As part of my plan to redirect my emergency savings, I have been buying a $1,000 (12 month) CD every month since October. The idea is that I will eventually have a $1,000 CD maturing each month.
If I buy this month's CD from TD Banknorth instead of ING Direct, I will make an extra $10 per year.
My Plan: This month, I will probably purchase the CD from ING instead of TD Banknorth. If it is a one-time deal, having 11 CD's at ING and 1 and TD Banknorth would be a hassle. Nevertheless, I am going to monitor TD Banknorth's CD rates carefully. If they consistently beat ING over the coming months, I will probably move all the CD to TD Banknorth.
In my opinion, automatic debit (where the merchant takes money directly from your checking account) should be avoided. In many ways, agreeing to automatic debit is like giving the merchant a blank check. If they make a mistake, you are likely to pay a price. Despite this warning, we allow two accounts to direct debit our checking account:
We do, however, have our cable, phone, oil heat and auto insurance charges taken directly out of our cash back credit card. Why?
Online Bill Pay: Using ING Direct's online bill payment system, we use a mix of automatic and manual payments to take care of our bills. Makes life easier.
According to the Wall Street Journal, the dividend cut and cost cuts at Wells Fargo will save $7 billion per year. If those savings work out, they will have paid off Wachovia ($12.6 billion) in two and a half years.
If the financial system ever gets sorted out, I believe Wells Fargo is the best positioned US bank for long term profitability.
In the interest of full disclosure, I have a few accounts at Wells Fargo and own 100 shares.
On the front page of any business section is the quest by NY AG Mario Cuomo to obtain information from various companies about the bonuses paid to employees. In particular, he is focusing on Merrill Lynch and Bank of America. Although the part of me angry with Wall Street applauds his actions, the "employee" in me feels he has gone to far.
Next week, I get my bonus (not millions). Even though it is not a ridiculous amount, I do not want in published in the local paper.
On the way home, I heard a talk radio host talk about people who are not facing immediate financial problems. He asked if they were feeling Survivor's Guilt. What do you think?
In our family, I cannot say we do not feel some level of survivor's remorse. While my wife's job is secure and mine appears "OK" for now, one of the largest employer's in our city is under severe financial pressure. Even if they survive, there are going to be a large number of layoffs in our city. Needless to say, the mood in the area is not upbeat.
Last week, we dropped some money on an economically priced Ikea sofa and a very nice dresser. Next, we booked a condo in Myrtle Beach for a week in April. While we got a fantastic rate on the condo, it still feels we should feel guilty for spending money. While we are not going into debt to fund this spending, it feels "wrong" to spend money.
Tomorrow, I am sending in my proof of income to my bank for my attempted refinancing of my house. If things work out according to plan, the refinancing will:
Frankly, my bank has been awesome to deal with (so far). If it works out, I will make sure to name them by name.
According to a story in the Chicago Tribune, the median price for homes sold in Detroit was a whopping $7,500. For that amount of money, one would have a hard time purchasing a small travel trailer. If true, it is hard to imagine Detroit rebounding in the next 50 years. With property prices in the tank, they will not be able to generate tax revenues to support their population's needs.
Source: http://www.chicagotribune.com/news/nationworld/chi-detroit-housingjan29,0,5435392.story
I just received an e-mail from ING stating the rate on savings would be dropping to 1.65%. And so the drops continue.
While Dave Ramsey advises everyone to have zero debts, the reality is almost everyone has "some debt." Mortgages, student loans, car loans, etc. Even people who are living within their means have some or all of these payments.
If you have your emergency fund fully funded, what should you do with extra cash flow in today's environment?
My Conclusion:
Simply put, debt is expensive in this deflationary market and extra funds should be allocated towards debt reduction – wherever we can.
Our Loans:
Much to my surprise, my post on teacher salaries attracted a large number of viewers and comments. Rather than respond to the comments and questions individually, I have drafted this follow up post.
Entry-level salaries should be similar to entry- level salaries for college graduates. In my town, starting teachers fresh out of school are paid $33,000 per year. In our state, the average entry-level finance positions pays $40-50K per year.
Until I see evidence people are rushing into the teaching field for the big paychecks, I will not consider them "overpaid."
In judging the salaries our teachers are paid, one should consider the cost of living in our state. When I lived in Texas, I rented a nice apartment for $600 per month. A similar (but not as nice) apartment in my area would have been $1,000+ per month.
Note – I understand many college graduates get stuck in "McJobs" after graduation. These (hopefully) temporary positions involve low pay and no benefits. Nevertheless, these jobs are not meant to be careers and should not be considered comparable (for salary comparison purposes) to a fulltime professional job. When I finished college, I had a "McJob" until I found a permanent position. My first real job (a long time ago) paid $28,000 + benefits.
Frankly, the 2 months "off" is an unpaid furlough. With only 8 weeks available to work a summer job, getting a summer job making decent money is difficult. Almost every teacher I know would love to give up the vacation for 2 months of additional pay.
By any measure, the teachers I know work hard. Each day, my wife gets to school around 7am and leaves after 5pm (often close to 6pm). Most nights, she spends time grading papers and/or working on lesson plans. Growing up, I distinctly remember my mom working almost every Sunday. Years later, my wife does the same thing. Week in week out, my wife spends significantly more time working than just about anyone I know (including me).
When my wife and I got serious, I eventually learned how much she made. Because my mother was a teacher, I knew they didn't make the "big bucks." Nevertheless, it seemed smaller than I expected. I know my old employer paid more to recent graduates for entry level positions than experienced teachers seemed to make.
Years later, teacher pay is a big issue in her school district. It is semi-rural and many of the residents are opposed to spending much on education. Indeed, her district spends less per pupil per year than similar districts and the town has a very low tax rate. Nevertheless, the economic crisis has given anti-education zealots the excuse to try to break open the union contract. Simply put, unless the teachers agree to reduce their pay (despite a contract), the district will lay off a number of teachers. Furthermore, they are making comments that it is criminal for teachers to allow the layoffs to occur.
Watching this drama unfold, I have been struck by the venom of people who want teachers to make as little as possible. If you read their comments in the papers, you would think teachers make CEO salaries with enormous bonuses. While I do not know the exact number, I would guestimate the average teacher in the district makes $50K per year + benefits.
A few days ago, I posted about dealing with friends who get Rif'd in downsizing. Today, I got the good news that one of them landed a job with a good company. It is nice to know some people are landing on their feet.
Looking for "Breakfast for Dinner" after a hard day at work, we decided to meet at IHOP for dinner. Much to our surprise, it was National Pancake Day. Because we weren't in the mood for a two order of pancakes, we even cut our order to one "free" shortstack. It should have been free because we never got it. Simply put, the service was tragic.
Examples:
Guess what moron – our visit to your store was a last time deal. Good luck with no customers.
For the second time this year, I received an e-mail from a current or former co-worker indicating their position had been eliminated. In the first case, the person was a good friend and I offered to be a reference in her next job search. In today's incident, the person was someone from another office who provided me with information. Although I did not know her, I still felt great sadness for her.
When this happens, what is the appropriate thing to do/say?
Although people know the auto industry is in serious trouble, they do not understand the main reason so many of them are in danger of bankruptcy. Simply put, automobile companies face enormous fixed costs. Why?
Bottom Line – unless they can bring down their fixed cost to reflect the lower demand for cars, they are doomed to bankruptcy.
This lesson applies to personal finance. They higher your fixed costs (in real dollars), the greater the chance you will face bankruptcy. Our fixed costs are:
A few weeks ago, I had to hire a bankruptcy attorney for a matter at work. After I heard his rate, I decided I should have taken bankruptcy law during law school. Frankly, all he had to do was present a relatively simple motion.
After reading this story, I think bankruptcy law might be the best racket going.
In Tribune Bankruptcy, Judge Caps Sidley's Fees at $925/hr
Posted by Dan Slater
In a tough economy, rife with bankruptcies and bailouts, fee applications may not be sliding by judges the way they used to.
Bloomberg reports that U.S. Bankruptcy Court Judge Kevin Carey has ruled that Sidley Austin's lawyers may collect a maximum of $925 an hour for bankruptcy work on Tribune Co., instead of the $1,100 the firm originally requested.
Judge Carey reportedly said in a hearing today that any bankruptcy lawyer who tries to charge $1,000 an hour will need to prove he or she is worth that much. "To the extent that this applicant or any other hits that mark I will require evidence in support of that rate," Carey said.
The decision by Carey to lower the maximum fee Sidley can charge is unusual, Lynn LoPucki, who teaches bankruptcy law at the University of California at Los Angeles, said in an interview. "I never saw any of these fee applications not get approved," LoPucki said.
LoPucki maintains a database with samples of high bankruptcy fees. The $1,100 Sidley requested for its top lawyers on the case was higher than any fee in that database, LoPucki said, adding that the $925/hr fee that was approved is still higher than all but a handful of rates in bankruptcy.
A call to Sidley Austin was not immediately returned.
As per my prior post, my wife and I are building a 1 year CD ladder ($500 per month) as part of our cash holdings. Unfortunately, ING Direct lowered the interest rate on a 1 year CD to a whopping 1.75%. I considered skipping this month's contribution (month 5 in the 12 month plan) because of the dismal return.
Nevertheless, the low interest rate reflects the fact lenders and borrowers think interest rates will continue to fall or remain flat. For that reason, we made our contribution. The upside of laddering CD's is the opportunity to profit from higher interest rates. Some of my older CD's are paying in excess of 4%. Our blended rate on all our CD's is in excess of what we would earn in a high interest savings account or a money market account.
Currently, we have accounts at ING and Emigrant Direct. In all likelihood, I am going to find another bank to protect against low rates by ING. As for Emigrant, they seem to favor longer term CD's that I don't want.
Rather than buy "toxic assets," I suggest the government adopt the following plan for banks and mortgage trusts that voluntarily agree to participate.
All banks and mortgage trusts (the things that issued the CDO's) that want some relief from troubled loans would be offered the opportunity to convert existing loans into federally guaranteed loans. This program would be limited to mortgages issued during the problem years (2004-2007).
If they say yes, the lenders would:
The Upside:
With my tax refund in hand, I paid off one of my student loans. By redirecting the payment on my loan to my wife's smallest loan, we will have the loan paid off by next year at the latest. With a little luck and frugality, we may be able to pay it off by December.
Remaining Debt:
If you have invested with Stanford Financial, particularly in offshore "CD's," I strongly recommend moving your money to safer waters. According to this story in Businessweek, they have placed a large portion of their client's money in CD's issued by a "bank" in Aruba. This "bank" pays rates that are significantly higher than rates offered by traditional (and regulated and insured) banks.
As a golf fan, I noticed Stanford Financial moved big in sports marketing a few years ago. Curious, I googled them and discovered the are run by a Texan who goes by the name "Sir Allen Stanford." They don't appear to have any special skills and they spend a ton of money on marketing. I don't have enough money to call him the next Madoff; however, I would not want be his client if he is.
While stuck in traffic, I got to listen to about 1 hour of the CNBC coverage (on Sirius) of the congressional hearings involving the bank CEO's. While the CEO's did not come off smelling like a rose, our congressmen (and women) managed to make themselves look like complete morons.
My favorite part involved a congressman asking one of the CEO's why other banks turned down the TARP money. Although he politely answered "to avoid government interference in their business," one could hear him thinking "to avoid BS like this hearing."
According to news reports, the Musak (aka Elevator Music) Inc. has filed for bankruptcy. The twisted side of me thinks its funny how the recession could kill of elevator music?
The financial analyst in me wonders how they could have become leveraged enough to make bankruptcy a reality. It could not have been a "growth" company and I cannot imagine it would need financing for capital expenditures.
PS – I wish the best for their employees.
Yesterday, I completed the 2nd of a series tests necessary to obtain a professional designation relevant to my field. If you work for a large company, make sure you check your HR website for information on professional designation/testing. In addition to paying for the course materials and/or the class, many companies will pay a bonus for completion of each test and a bonus for completion of the designation.
In addition to making you more marketable with your current employer, a professional designation can open doors to networking opportunities outside your company should you need (or have) to make a change.
Today, I noticed a surprise $11 addition to our Fidelity brokerage account. When I looked into it, I realized it was "Cash Back" from my Fidelity Amex Cash Back card. At 2%, it pays a very fair rebate. Unlike most cash back cards, they pay the rebate monthly instead of annually. If only they used a better card servicer (FIA Card Services is aweful and doesn't direct feed into Quicken), it would become our primary card.
NEVER EVER GO OUT ON VALENTINE'S DAY. A few years ago, a friend explained why he and his wife agreed to celebrate Valentines Day on the Saturday following. It was such a good idea, I adopted it for myself.
Why going out on V-Day is a nightmare?
If you wait until Saturday? All these problems go away. Whatever your budget, you will get more bang for your bucks.
Checking Accounts:
Savings Accounts:
Another day, another Obama appointee has been caught not paying his/her taxes. On a day when I filed my taxes, I have realized John Edwards was right. There are Two Americas. Normal America where we pay our taxes and complain about it. Washington, where the entitled fail to pay taxes and claim we are not paying our fair shared.
Great, we are going to have a tax cheater in charge of healthcare. Although he claims his corrections ($140, 000 in back taxes and interes) were to correct innocent oversights. Do these changes seem like an accident to you?
Source: WSJ.com, http://online.wsj.com/article/SB123335984751235247.html?mod=WSJ_myyahoo_module
As our plan to build our savings plan continues to make good progress, I am 1/3 of the way towards building a CD ladder built out of twelve, $500 CD's that expire each month. Using my ING Direct account, setting it up has been easy. As each CD matures, I plan on rolling over money (and interest) into a new 12 month CD.
Why? By agreeing to tie up my money for 12 months at a time, I get a slightly better interest rate on my money.
In an emergency? This money is not the "oh crap" emergency fund that would be tapped first. This money is the "worst case scenario" emergency fund. Should I need to tap it, I would have at least (remember it is growing) $500 available every month. It could go a long way towards paying monthly bills. Of course, there is always the option (a bad one) of taking all the money at the price of a penalty.
Ultimate Goal? Once I get the ladder set up, I plan on adding additional money each month until I eventually have a $12,000 ladder in place.
This year, my wife and I are planning to take advantage of the town's community garden system. Each year, the town plows up and divides a large parcel of town land into individual plots. The land in question is outstanding bottomland next to the river. They even turn over the land for everyone. Pesticides and herbicides are verboten.
If accepted into the program (first come, first serve), we will pay $15 for a 25x25 plot where we can grow veggies to our heart's content. While it probably will not save us much money, we hope to have some fun and end up with tasty veggies.
Right now, consumer advocates and government watchdogs are pounding Wall Street over huge bonus pools they have or plan to play employees. Frankly, bonus mania has gotten totally out of hand. For top executives, bonus payments (cash, stock and options) reached obscene numbers. Nevertheless, a huge number of workers in financial services firms have pay tied to performance and the anti-bonus mania can end up hurting the little (or middle guy). .
Example: Assume four classes of workers (analysts, directors, avp's, and VPs). Each Tier of workers a target annual bonus associated with it. (5, 10, 15, 20% of salary). Over, I know of business units that had bonus pools funded from 10% to 200% of target. Once the pool is set based upon, individual performance (often office politics) was used to divide the available pool.
While financial services firms (particularly banks) have lost enormous amounts of money, most of the losses have come from units with a relatively small number of employees. While the employees who were working in the "loser" units should expect lower bonuses ('unless you are the idiots who lost all of AIG's money), the employees in the "winner" units expect bigger bonuses because they had a good year.
Thus the problem for the firms, if they do not pay good bonuses to employees in "winner" units, they will leave for better opportunities. In a bad economy, you do not want to be losing employees who are making you money.
The Timing Problem:
Many financial services products have "long tails." In these products, you book the revenue immediately and wait (sometimes years) for the results to come in. In AIG's case, they paid big bonuses to the idiots in London before the devastating results came in.
Employees, however, fear getting screwed out of deferred bonuses by their employers. Let me count some ways:
My Solution:
No cash bonus payments in excess of $100,000 to anyone. Any remaining bonus payments would be paid into an escrow account and paid out over 5 years. Employees would not have to stay employee with the company to obtain their deferred bonus; however, the numbers used to justify the bonus payments would need to "hold up" over time. In cases of dispute, an independent arbitration would be appointed to review the numbers.
My company has never had a defined benefit plan; however, we have a very generous 401k plan. In addition to the standard company match, they have a discretionary company match they "CAN" make each February. Because we are a financial services company and feeling pain like everyone else in our industry, we were concerned they might decide not make this year's discretionary match.
Thankfully, we learned today that we will be getting the match after all. While the last year has been brutal to my 401k balance, the company match has made my losses on 'my money' more tolerable.
In Connecticut, many of us vote on the town's budget every year. Although our elected officials come up with the budget, they must put it to a vote of the people. After thinking about it, I wondered how much the United States government would save if voters had a chance to kick idiotic 'pork projects' to the curb. Wouldn't it be nice?
Yesterday, the northeast got pounded by another snowstorm. The day before, someone sent all of us an e-mail telling us our office would be open hell or highwater. One of my coworkers joked about how we didn't even have the non-essential personnel rule.
It reminded me of my time with my prior employer. We got an e-mail indicating that because of storms, non-essential employees could stay home for the day. After reading it, I decided I was going to work no matter what. The last thing I wanted was anyone thinking my job was not "essential."
While on the way back from a meeting, I noticed a porn store had closed down and the space was available for rent. Have you ever seen a porn store closed (except by authorities), I have not. Thus, I must conclude the economy is near bottom.
When I see new porn stores opening, I will believe the recession is about to be over.
Every day it seems the feds are tracking down another financial fraudster. Does it indicate more fraud is being committed? No. Does it mean they are becoming more diligent in fighting fraud? No.
One of the dirty little secrets of a "bull" market is that it allows fraudsters to cover up their crimes. In the bull market, Madoff was able to draw more "new" money into his scheme year after year. After his clients were hit with other financial problems, they needed cash and Madoff's money was a good source to tap. Unable to keep bringing in "new" money to cover redemptions, he was forced to turn himself in.
Although other fraudsters haven't turned themselves in, the damages of the stock and bond market make it impossible to cover up their crimes.
As part of their earnings announcement (down 79%), Amex stated its customers spent an average of 10% less in the 4th quarter of 2008 than they did in 2007.
In other news, companies are laying off people by the thousands every day.
Using my annual statement, I was able to compare the actual Amex Blue Cash rewards against what my Fidelity Retirement American Express Card is promising.
Fidelity Amex promises 2% cash back on all purchases.
Amex Blue Cash has a complicated formula for determining cash back.
Results: After crunching the numbers, I determined Amex Blue returned a net 1.86% of total spending to me.
Conclusion: For .14%, my family will continue to use the Amex Blue as our primary card. Over a year, the additional interest from the Fidelity card would not likely exceed $25. For that amount, the service and ease of use of the Amex Blue card makes it a winner.
ING Direct customers – our tax forms are online a few days earlier than the promised Jan 31, 2009 date. Now, if I can just get my employer and my wife's employer to send us our W2, I will have a good idea of our tax situation for 2008. Based upon my Quicken data, we should be getting a refund. Nevertheless, the change in tax status (married from single) has me worried. A few years ago, I expected a $2,000 refund and ended up owing $1,000 in additional taxes. It was not a good time.
One of the things I like about using American Express is the year-end summary they provide. Unfortunately, for 2008, we managed to charge north of $20K during the year. Although we charge everything, this amount was larger than normal due to charging significant wedding/honeymoon expenses.
After watching many ads touting HR Block's Emerald Card, I decided to check it out. Originally, I thought this prepaid Mastercard was just a way for them to tack on an enormous fee for a refund anticipation loan. Reviewing their website, I learned it has some value, but it is an enormous fee machine for HR Block. They even charge a $2.50 per month monthly maintenance fee on inactive cards. I expect the managers at HR Block will be happy to take your money.
The Benefits: for people who cannot get traditional bank accounts, it does have some value. Rather than carrying around cash (and risking getting robbed), they do provide "somewhere" to deposit funds. Nevertheless, I suspect anyone who qualifies for this card will qualify for a low-cost checking account.
The Enormous Costs:
Monthly Maintenance Fees Monthly Maintenance Fee $2.50 (per month — begins the fourth month following 3 months of no activity on the card account)
The Hartford Courant reports the state is considering shutting down a children's psychiatric hospital because it costs a mind-boggling $862,000 per child per year to treat the patient. Literally, they can ship the patient to Yale (Yale-New Haven Hospital) and actually save money.
If they do not fix this idiocy, heads need to role.
The Obama government got off to a funny start today. It seems, Obama's nominee for Treasury Secretary (that would be the guy who collects taxes and is in charge of the economy) failed to pay taxes on his self-employed earnings. Testifying before Congress, he blamed ------ TURBOTAX.
In terms of insurance, AARP has one of the largest affinity marketing programs in the United States. Indeed, if you read their literature, access to their insurance programs is one of the "benefits" they brag about when they try to get people to join. It has P&C programs through The Hartford, life insurance programs through New York Life, health plans, and long-term care insurance. Not a senior citizen? You probably qualify for an affinity insurance product from your church, university, professional association, union, and so on and so on. They are everywhere.
With this post, I will provide simplified information on how affinity marketing works and how it benefits/harms consumers.
Bottom Line: Affinity marketing is not a panacea for consumers. Although Affinity Marketing does not offer huge discounts, good programs do exist. You just need to be careful when you choose one. Some are good, some are bad, and some are an abomination.
While loading some podcasts onto my iPod, I noticed a link for DRM-Free songs on iTunes. According to the link, Apple wants to charge me an additional $122.26 to drop the DRM from 492 songs on my iPod.
Not going to happen.
First day of the Obama government and we get a 5% drop. Financials get crushed. It is going to be a long four years.
Yesterday, we purchased a new laptop for my wife. We got a good deal and my wife is very happy with it. Nevertheless, I have been annoyed trying to decode the instructions to get the $100 mail-in rebate. It turns out the $100 rebate was actually two - $50 rebates.
Thinking about it, I have decided mail-in rebates should be illegal.
WTF? BONY-Mellon sent me a letter indicating they had a records breach and they were providing me 2 years free credit monitoring from Experion. Combined with the 2 years that my employer game me – through Kroll, I have the entire belt and suspenders.
Although I am not terribly worried, I would have preferred they had not lost my information.
The bride and I went to Circuit City looking for speakers for an iPod. On the road outside the store, they had a guy standing (in 10 degree weather) holding a sign promising big savings. From what I saw, almost nothing was on sale. Since you aren't going to be able to take anything back, I would not recommend buying anything more complicated than a DVD.
If you are at the post office, check out the packet they have for people changing address. There is a 10% off coupon good a Lowes for up to $500.
Thankfully (and miraculously), everyone survived the crash of the US Air flight into the Hudson. From the fantastic website, http://www.dealbreaker.com/, I found the following post. It is sick and twisted, but downright funny.
Each week, I take out the same amount of cash from the ATM. Whatever I have not spent from the prior week goes in an envelope in the fire safe. This money helps feed the cash emergency fund. Should there be a natural disaster, my wife and I have some ready cash available to get out of town.
Well, my one year of blogging has earned me a whopping $54.30 from adsense. Needless to say, I will not be retiring on my blog money. Indeed, until I hit $100, I cannot even cash out my current earnings. At my current pace, I am hoping to use the money next Christmas.
Today, we watched the market drop as Citibank continues to falter. While they are not the be all and end all, they are a symptom of things to come. Until people are confident they will not face financial ruin, they will not spend again. Until companies are confident they will hit profit targets, they will continue to lay people off.
In an era a frugality, getting the most of one's credit card reward programs is an important way to save revenues. As a Fidelity Brokerage customer, their new 2% cash back program seemed like a good idea and I signed up.
The Amex branded card is actually a card offered by FIA Card Services. Although FIA Card Services is one of the largest credit card issuers in the country, their website is a travesty.
Otherwise, the product does offer what it promises. For every $2,500 spent, they will deposit $50 in my brokerage account.
Nevertheless, I think I am going to use my Amex Blue for most spending. Because a large % of our monthly spending is Gas and Groceries, I end up earning 5% on most of my spending (after getting past the threshold).
As my prior posts explain, I was able to save $600 per year by moving my family's auto insurance from my old carrier to USAA. While it might be tempting to say my prior carrier was trying to gouge me, the reality is their pricing for "my family" just was not as competitive as USAA's. To explain how this occurred, I have written a simplified explanation of how insurance companies determine their rates.
All insurance companies have teams of employees who work as actuaries. They are the bean counters who determine what the company will charge for each potential customer. Their goal is to predict, as accurately as possible, the expected losses the carrier will face from each customer. Once loss costs are estimated, the company will build out its rate quote based upon expected loss costs, expense load, and cost of capital. Obviously, companies with lower cost structures will have a competitive advantage.
While some consumers think there is a grand conspiracy to "get it wrong" and quote the highest rate possible that is simply not the case. If a carrier systematically gets it wrong and quotes higher prices than are necessary, they will lose business to other carriers willing to charge lower rates. If a carrier systematically gets it wrong and quotes rates inadequate to provide a reasonable profit, they take heavy losses and go out of business.
How could USAA charge $600 less than my old carrier?
Simply put, their model predicted lower losses on Toyota Corollas than did my former carrier's model. Why? I have no idea. If USAA's actuaries built the best model for Corollas, they will make a profit off my business. If not, they will lose money on consumers who drive Corollas.
The Model's Change: As a consumer, our job is to get the best combination of price and service for our premium dollar. Good carriers are constantly tweaking their model's looking for better results. For that reason, USAA may not always be the lowest price carrier for my family. Every so often, consumers should shop their coverage to make sure they are getting the best price for them.
DO NOT GO WITH THE LOWEST COST CARRIER ALL THE TIME – SERVICE MATTERS
Although it is tempting to say they are "all the same," I can say with 100% confidence they are not. Before moving your policy to any carrier, research their claims handling and service reputation. Some smaller carriers are a nightmare to deal with. I would not wish them upon my worst enemy.
* Note – in many jurisdictions, insurance companies must have their rates "approved" by the state. Because the rate approval process can distort real economics in a myriad of ways, this post does not address the impact of regulation on rates. Having said that, years of working in the insurance industry tells me rate regulation leads to higher prices.
http://www.google.com/goog411/
With the demise of the phonebook, getting information often means booting up the computer or paying a fee to one's cellphone carrier. This service by Google promises to give us the information we need – free of charge.
Although there are well known guidelines for the appropriate percentage of income to spend on housing cost (one would have though banks would have consulted them before making bad loans – but I digress), I have not found any that apply to car payments.
Because my wife and I have paid off one of the cars, our current (car payment/take home income) percentage is about 4%. If I figure in insurance, taxes and maintenance (but not depreciation), it comes in at 6.7%. To calculate take home pay for this exercise, I added my wife's paychecks to mine.
While I will not benefit from it this year, I just learned that USAA members can get a 25% discount on TurboTax products. I just finished moving my auto policies to USAA and will save almost $50 per month for the same coverage. If you are a member, I recommend surfing their site. They have discounts on unexpected items.
Full Disclosure – I have worked in the insurance industry (claims and underwriting) for 15 years in personal, commercial and specialty lines. In terms of saving yourself money, you should understand pricing models can vary dramatically from carrier to carrier. The company offering best price/coverage for senior citizens might be totally non-competitive for someone with young drivers.
Since I was 16 years old, I had my coverage with carrier A. Because they offer good service and I liked having an agent, I have been very satisfied. When I obtained competitive quotes, carrier A's pricing was competitive and I never seriously considered moving coverage.
When I got married, I moved my wife onto my policy. For reasons that continue to baffle me, carrier A charged more to insure her '04 Corolla than my '07 Highlander.
Annoyed by this pricing oddity, I obtained a quote from USAA for matching coverage that will save us $600 per year.
Apple iTunes Pricing Changes
According to the Wall Street Journal, Apple has decided to make some major changes to its pricing of music on iTunes.
Personally, I love iTunes. In all but a few cases, I do not want to pay for a entire CD and I certainly do not want to store anymore of them. By offering songs for $.99, iTunes allowed me to legally purchase music at a price I feel is reasonable.
For the past two weeks, I have been testing Google's new browser – Chrome. Simply put, it blows Internet Explorer out of the water.
The only negative is it doesn't have an easily accessible "zoom" feature.
Best of all, I am not doing business with a company that believes it is acceptable to release programs with code that has not been properly debugged.
Although I feel a great deal of sympathy for the investors who lost money investing with Bernard Madoff, I am outraged by their desire for the US Government to pay for their loses. In many cases, they want to be compensated for amounts in excess of the SIPC limits. While their losses are tragic, a bailout for them would signal that there is no risk with investments.
Sadly, fraud is a legitimate investment risk. From the Madoff fraud, we have learned the importance of due diligence, skepticism and diversification. An SIPC bailout would wipe away what we have learned.
Do any of my readers have any good information on the "Amish Heaters" offered on TV? Although I talked someone I know out of getting one, I want to have more information to share with her.
A few days ago, I posted about the interest earned on my ING Savings accounts in 2008. On a lark, I calculated the savings from using online bill payments (ING Electric Orange) to pay most of my bills. Last year, I made 166 payments. At 42 cents postage per bill, the minimum amount I saved was $69.72. If you add in the cost of a box of envelopes ($7 for a box of 50) and gasoline to deliver some of the bills to the post office, I probably saved $100.
Furthermore, I could confidently schedule the payment of bills close to the due date without fear of incurring late fees or interest charges.
2008 Late Fees Paid = $0
2008 Credit Card Interest Paid = $0.
Today, I decided to move 2% of my IRA back into the stock market. To do it, I purchased equal amounts of Altria and ExxonMobil. Although I believe both stocks have the possibility to move lower in the short term, I think they are great long-term investments.
Rationale:
Next Major Investment: I will probably add to my TIPS holdings at the next auction. Through Fidelity, I can pick them up without paying any commissions.
By getting rid of the dismal interest rates offered by my local bank, I managed to earn $300 in interest on my various ING accounts (Electric Orange, Savings, & CD Ladder). With my emergency fund coming around, I was hoping to hit $500 in 2009; however, I expect lower interest rates will make $300 a more reasonable goal.
In many ways, I hate the "gift" experience that Christmas brings. Basically, my friends and family spends money on things I do not want and I spend money on things they may not want. For example, I have one relative who keeps giving me decorative items for my home. Simply put, I cannot stand her taste and do not want any of her gifts on display in my home.
It is easy to categorize crimes like murder and rape as violent crimes. With the first documented death related to Madoff yesterday, we have proof of the violence inherent in a Ponzi scheme. While a burglar/robber is likely to take some of what you own, the con man can and will take everything you own. According to news reports, many of his victims have been relatively well-off retirees in places like Long Island and Florida. Now, many of them are not just broke, they are too old to have any hope of earning enough money to restore their lifestyle.
Although I believe in bail until someone is convicted, Madoff's confessions make me feel he should be in jail right now. With a sentence likely to exceed his remaining lifespan, it is time for him to start paying his debt to society.
If you believe Madoff's "I acted alone" story, I would like to offer you a chance to invest your money with an investment advisor known for consistently providing 1-2% monthly returns in good times and bad. Could he run a $1m ponzi scheme by himself? Yes. Could he run a $50 BILLION ponzi scheme by himself? Not in a million years. Just to manage the money coming and going from the fund, he would have needed people to deal with the wire transfers and/or checks. He would have needed people to print and send to the fictitious investment statements.
When everything is said and done, I predict:
Furthermore, the banks and hedge funds that steered clients into Madoff's clutches will face civil liability for the failures related to "due diligence." Simply appalling.
Given the amount of snow that can fall in my area, hand shoveling the driveway is not a viable option. Right now, I have a guy that comes to plow the driver. At about $200 per year, he does the driveway and leaves the porch and walkways to me. Looking to do more of my own work, I considered getting a snowblower. Frankly, it doesn't make much sense. In addition to the $600-1000 for the machine, you have gas, parts, and maintenance. Furthermore, a good machine will take up the limited space in my garage.
Bottom line – having someone do it for me is the best option.
According to news reports, the estranged wife (who claims to be a countess) of former UTC CEO George David is claiming she spends $53,000 per week. Included in her spending: $8,000 for travel and $4,500 for clothing.
Note to self, do not marry a countess!!
http://www.nypost.com/seven/12192008/photos/news003a.jpg
http://www.nypost.com/seven/12192008/news/nationalnews/really_high_maintenance_144934.htm
The one winning investment I made this year was the purchase of a few TIPS back in late October. Because interest rates have fallen, I have made over 8% on my money in less than two months. They mature in 2013. In addition to the individual TIPS securities, I own a similar sized position in a TIPS mutual fund.
In the short term (3-6months), I do not expect the interest rate environment will materially change. For that reason, I am going to hang on to both investments through Spring. Nevertheless, I cannot imagine low interest rates will hold indefinitely and I will sell the TIPS fund sometime next year.
With respect to the TIPS fund, the value can and will fluctuate as the value of the securities in the fund change with market conditions. As rates begin to rise, the fund will begin to lose value. As a result, I have no way to accurately project what they will be worth at any given time.
While the value of the TIPS securities I own will fluctuate from time to time, I know exactly what they will be worth in 2013.
My Strategy: I will favor individual treasuries over bond funds. For no transaction cost, Fidelity will allow me to buy treasuries at auction. By holding them to maturity, I don't have to worry about fluctuating values.
I do, however, think bond funds do have some value. For securities where there is default risk (munis and corporate), good bond funds allow investors to diversify so as to prevent a default event (GM Bonds anyone?) will not be crippling.
If you are considering buying a car, now is the time to close a deal. All of the manufacturers have excess inventory. All of the dealers need to move inventory. If you can pay cash, you are golden. Even if you cannot pay cash, good credit = rock bottom interest rates.
By getting rid of Shotime and the sports package, I am going to save $24 per month on my cable bill. By joining Blockbuster's Online Service (similar to Netflix), we are giving some of the savings back. BUT, with a trip to the movies costing $40 per couple (with popcorn and drinks), our Blockbuster membership is relatively cheap entertainment for two compared to the movies.
Does anyone have any good information on student loan consolidation? I would like to move my wife's graduate student loans from Sallie Mae (aka – the spawn of satan) to someone with better service. Back when I consolidated my loans, the best time to do it was after they reset the rates in August.
The WSJ has an excellent article stating that the Madoff fraud is a Walking Advertisement for Mutual Funds. Frankly, I have to agree. Mutual Funds are highly regulated. Even in the case of a large theft, the fund and/or the advisor is likely to have insurance coverage in place to protect most theft losses.
While they have had their issues (high fees, loads, market timing), there have not been many (if any) cases of outright fraud involving major US mutual funds.
By pushing interest rates to historic lows in hopes of stopping the economic meltdown, the Fed has made in virtually idiotic to throw money in a savings account. Even online banks will have a hard time paying more than 2%.
What to do?
What banks will do?
With free money from the fed to loan, they are going to throw money into loans like there is not tomorrow.
The fallout from the $50B Made-Off Ponzi scheme is starting to become public. From rich socialites in Palm Beach to Long Island Hospital foundations, the losses are turning out to be huge. Sadly, it appears some people placed all their money under Made-Off's management and it appears they are totally wiped out.
As a risk management professional, anyone entrusting their money to an investment advisor needs, at minimum, to adopt the following risk controls:
Dogbert the Financial Advisor is the perfect follow up to my post about fraud and investment advising. IMHO – Dilbert is the best writing on corporate life in America. Best of all, you can sign up for a free – daily e-mail.
There is a saying that says you cannot cheat an honest man. While not totally true, the saying does reflect the fact that most fraud involves things that are "to good to be true." If you haven't seen the news, Wall St. legend Bernie Madoff has admitted to costing investors $50 BILLION (YES BILLION) in an enormous Ponzi scheme. In this case, enormous returns were not the red flag, consistent returns were. Year after year, month after month, Madoff's fund made consistent returns beyond what was reasonable. Chasing these "consistent" returns, investors piled in billions despite Madoff's inability to document his strategy or the inability of anyone to explain how he did it.
Moral to the story: If you do not understand how an investment earns money AND loses money, you should not invest in it.
Sources: NY Post, WSJ.Com Madoff Stories
http://www.nypost.com/seven/12132008/business/madoffs_strategy_was_just_too_good_to_be_143973.htm
With the impending demise of the big three, we know there will be thousands of new additions to the unemployment rolls. Not just with them, but their suppliers. Furthermore, the employees support thousands of additional jobs by spending their payroll dollars on things like food, cable, and even beer.
Within 3 months, we are going to have a brutal unemployment rate. Say a prayer for everyone on the unemployment list.
Listening to the idiots argue about the auto bailout, they keep saying there is no credit to buy cars. Has anyone found this to be true? Toyota is running "Saved on Zero" commercials by the minute. Nissan not far behind.
Once again, I had to deal with not one but two morons with respect to our Sirius Satellite Radio subscription. Simply put, their customer service staff seems trained to avoid answering what you ask. Furthermore, they tend to rush out sentences like "you want to buy …" when you have asked for the pricing.
My Problem: We have two receivers and I would consider adding the Best of XM to my subscription. Unfortunately, I was unable to get a straight answer from the CSR. Ultimately, I wanted two answers:
For a company with no stock price, they do not seem to understand that adding customers should be easy for the customer.
If you have not seen the news, the guy running Enzyte was sentenced to jail for running a fraudulent business. Nevertheless, Smiling Bob and his idiotic Natural Male Enhancement ads continue to run. How is that possible?
Source: http://cincinnati.fbi.gov/doj/pressrel/2008/ci022608.htm
STEVEN E. WARSHAK, age 42, president and owner of Berkeley, of five counts of conspiracy to commit money laundering and various types of fraud as well as conspiracy to obstruct proceedings before the U.S. Federal Trade Commission, 12 counts of mail fraud, three counts of bank fraud, and 73 counts of money laundering for a total of 93 counts.
Why? The company's scheme involved false advertising which included made-up claims about size increases, fake customer satisfaction ratings, and fictitious doctors who the ads falsely claimed collaborated for 13 years to develop Enzyte, the company's leading male enhancement product. The false ads also contained representations about money-back guarantees that the company as a matter of practice would not honor. As part of the scheme, the conspirators placed many consumers who responded to free-trial solicitations on an automatic shipment program without the customer's authorization, knowledge, or consent. Berkeley would then send the product to the consumer and bill the consumer's credit card regularly. When customers called to cancel, the conspirators employed various means to delay or hinder any returns or cancellations from occurring.
Any idiot knows the biggest season for toy stores is Christmas. One would think Toy R'us management would have the brains to offer some sort of "Christmas" packaging for customers shipping items purchased online. One would be wrong.
Thanks guys. My unwrapped present is now heading towards my mom's house. She will wrap it. Next year, I won't be using Toys R'us.com to purchase gifts.
Today, I bought something from Best Buy Online. By making the purchase (which was to be picked up at the store), I was entitled to a $10 gift card. Much to my surprise, I arrived at the store to learn that they were going to "ship" the gift card. Why would they want to spend money to ship the card? For the same reason people hate them, they are run by morons.
Thanks to my Citibank Driver's Edge card, I am going to pick up a full set of weathertech floor mats for my SUV. Although expensive, they work great for keeping the snow and junk off the floor. Makes it easy to keep the car clean (which is important to me).
