Car Trip – Why Renting is a good idea!

The vacation is over and it is time to add up the costs. Instead of flying and renting a car, we just rented a car from Hertz for the long car trip (2,200 miles total in 1 week). For $200, it was money well spent.

1. In terms of wear/tear, we easily saved money at a cost below 10 cents per miles.
   
2. We were a good 14 hours from our home during most of the trip. Had something happened with our car, we would have had to deal with getting it fixed, arranging alternative transportation, and possibly paying for extra hotel accommodations. With a rental car, a mechanical breakdown means calling Hertz and having them deal with it.

My Active Investments Performance - YTD

The vast majority of my retirement portfolio is invested in mutual funds (my 401k) and ETFs (my IRA) with a roughly 80/20 allocation favoring equities. Nevertheless, I do actively manage some of the money by picking stocks and by investing in targeted ETFs. Below, I have outlined most of my actively managed stock picks (I did not include my employer's stock).

 

Description	Change Since Purchase (%)	% of Portfolio
Berkshire Hathaway B	8.58	2.15%
Goldman Sachs	4.12	2.10%
Ford Motor Company	43.15	2.02%
Monsanto	-5.62	1.57%
Microsoft	2.88	1.53%
Cisco Systems	15.17	1.51%
IBM	11.72	1.15%
Bucyrus	5.67	1.05%
Coal ETF (KOL)	42.6	0.94%
Google	31.24	0.89%
Exxon Mobile	-4.33	0.88%
Alcoa	38.09	0.86%
REIT EFT	22.58	0.74%
Honda Motor Cars	20.74	0.73%
Procter & Gamble	-0.3	0.51%
Financials ETF	42.52	0.46%
Target Corporation	3.42	0.41%
Sonic	-0.09	0.18%
CIT Group	-93.62	0.00%
% of Total Portfolio		19.68%

 

 

Comments:

1. Asset Allocation: I will not invest more than 2% of my portfolio in any individual stock. If a stock reaches 4% of my portfolio, I generally will "bank" my gains.
   
2. The Honda gain is a fluke. I bought it for long-term potential and it immediately spiked up. Pure Luck.
   
3. My Ford investments was a speculative bet. All my shares were bought below $5 per share. I have a sell order in a $10 for half the position.
   
4. The CIT shares are worth less than $10. If I sell them, the commission will exceed the value of the stock sale. Will hold them indefinitely.
   
5. Note the EFT positions (Coal, Financials and the REIT). The Coal and Financials performed very well for me. I "took" some of the profit and reduced my positions recently. Bulls make Money, Bears make Money, Pigs get slaughtered.
   
6. Sonic is my favorite fast food restaurant. I have a small position, but it is a speculative bet.
   

Time for Defense – Stagnant Market

Thanks to no small amount of luck and some very good stock/ETF choices (Ford, KOL, Financials) my 401k and IRA have finally recovered to break even levels. To do that, certain investments I made are up 40% in less than one year.

1. That kind of performance is an aberration. It is not sustainable.
   
2. In the coming months, I think the stock market will be stagnant to slightly down.
   

 

My Strategy:

1. With the IRA, to which I cannot add money, I will remain defensive. I have sold some of my big winners. Since I don't have any good "new" stock ideas right now, I am gradually buying total market ETFs. In addition, I am going to buy $5,000 in the next auction of 5 year TIPS.
   
2. With the 401k, I am going to continue to buy equities. Through the power of dollar cost averaging, I will benefit from any market pullbacks (provided they are short term) in the long run.

Budgeting by Courts – Cali Style

Just when we thought California had come up with a budget deal, we learn that people/entities/groups that believe the cuts were wrong have gone to court to block budget cuts. Now, California is going to be forced to spend what little money it has on attorneys. Why have a legislature and governor if the courts are going to tell them what to spend?

http://www.upi.com/Top_News/2009/08/10/Budget-cuts-bring-many-Calif-lawsuits/UPI-92151249925371/

Save the Budget – Release the Convicts

WTF – To balance the budget and deal with overcrowding, California is going to release 40,000 criminals. While it might save some money in the short run, having criminal justice system based upon "Catch and Release."

401K - Performance

Because of the timing of a job change, my 401k has been exposed completely to the downturn in the stock market. As a result, it went down pretty significantly. Nevertheless, I am happy to report that the stock market surge has erased most of my losses. Overall, the account is down 1.6% from what I (and my employer) contributed. Because of the benefit of the company match (I am lucky to have it), it is worth substantially more than what I have actually contributed.

Moral to the story – the company match, if you have the opportunity, is a godsend.

Saved $100 with Amazon

With the GPS on the fritz and a trip coming up in 2 weeks, my search for the best price led me to Amazon.com where I purchased a new unit for $188.00 including free shipping. The local Best Buy wanted over $300 and the best price I could find on fleabay was $275.

Bottom Line – if you know what your want and it is easily shipped, you can save money by searching the internet for the best deals.

Up 20% in 3 Weeks

Sometimes we get lucky with our investments. On July 15, I bought Honda shares (HMC) hoping it would be a good long-term investment. Since they are the best (IMHO) auto maker in the world, I figured they would benefit from a rebounding economy and weaker American competitors.

Three weeks later, my investment is up 20%. While I would love to claim clairvoyance, I simply got lucky. To be honest, I am not sure why it went up so much. As a result, I am considering selling out and banking my profits.

Losing Positions Analyzed

Thanks to the recent upturn in the stock market, most of my remaining positions in my IRA have positive returns. Below, I will analyze the remaining losers:

1. CIT:    At a negative 96% return, it would be my biggest loser but for the fact I only owned 5 shares. Total loss is $106.00 on current shares. Although I believe these shares will eventually go to zero, the transaction cost to sell them would exceed their value. Thankfully, I sold most of my shares before the loss.
   

   
    

2. Monsanto:    I built this position in the last 6 months. At 2.3% of my portfolio, it is a significant position and the 2.5% loss is not appreciated. Nevertheless, I am going to hold onto this stock as a long-term investment.
   

   
    

3. Sonic:    Proving that a good product is not necessarily a good investment, I lost a few hundred dollars on this investment before closing out most of it. My remaining 15 shares are down 5.81%. Because the remaining position is small, I am going to keep the shares and see what happens.
   

   
    

4. Exxon:    Like Monsanto, this is a large position that I built during 2009. The 1.1% loss is the result of an 11% loss on the shares I purchased in June. Shares bought in March and May are performing better. Because I believe some exposure to energy is a risk, I plan on keeping the investment. I expect this position to be "even" by the end of 2009.

Vacation Coming

Well, the parents are coming to town. Hopefully, the weekend in Vermont won't break the bank.

Obamascam – Health Care Idiocy

While the devil is always in the details, the devil can be anywhere. In the case of Obamacare, the premise of the program is fundamentally flawed and un-American. At its basic level, the program is designed to provide health care for a large number of people paid for by a small number of people.

If we want to have socialized medicine, a fair plan would require everyone pay their fair share of the cost.

Buy stock tomorrow?

Today, the market was up big. As a result, stock portfolios should be at/near 1-2 year highs. Unfortunately, tomorrow is going to be a rough day. After hours, Microsoft, American Express and Amazon reported "bad" numbers and a pullback is likely.

For frequent traders, I don't know what to tell you. For people looking to add to their positions with a long term timeframe, tomorrow should give us a decent buying opportunity. Essentially, we will be able to buy stocks at 2-4% less than we could have bought today. Bottom line, start looking towards using the correction to buy. Whatever you do, don't buy on "up" days.

BUT -

Ebay Saved me $150

Thanks to eBay, I was able to save $150 on my wife's first set of golf clubs. For the price of cheapo "Walmart" clubs, I was able to get a new hybrid/iron combo set from Adams Golf. If you know what you want to buy and search hard, eBay can really give you some bargains.

Comcast – Continues to Screw Up

After thinking I had worked things out with Comcast, I found a bill in my mail today from a company often called the Worst Company in America. After waiting on hold to speak to the CSR in their billing department, I received an honest comment: "I have no idea what is happening on your bill." Of course, that is the reason I wrote a letter to the CEO and my state attorney general's office two months ago.

Basically, Comcast's strategy seems to be. If we bill them, they will pay. If they challenge a charge, we will keep our internal billing records incomplete and incoherent so they will give up and send us the money. As I sit right now, I am holding for a "supervisor" in hopes he/she will fix the problem. Would anyone like to take odds on them getting it correct?

Wells Fargo Sues Itself

Having dealt with Wells Fargo Home Mortgage, I have a healthy respect for their ineptitude. Nevertheless, I would never had imagined they would sue themselves. They even managed to hire one set of lawyers to defend themselves from their own lawyers.

Incredible!!

Link: http://www.foxbusiness.com/story/markets/al-lewis-wells-fargo-bank-sues/

Found $120 - Literally

Walking into the grocery store with my wife, I spotted a $20 bill in the middle of the parking lot. Looking around, I managed to find a total of $120. Had I seen someone drop it, I certainly would have returned it to them. Had it been "property" like a watch, I would have returned it to the store in case the owner came back looking for it.

Should I have taken the money into the store?

Domino’s Pizza – 30 Minute Scam

Looking to avoid cooking and hungry, I decided to buy a Domino's pizza. Their website, in big bold letters, proclaims "You Got 30 minutes." Assuming it meant I would get my pizza in 30 minutes, I forgot about it until it took 58 minutes.

Looking at the website more closely, they buried a disclaimer at the bottom that admits their "30 Minute" guarantee is not a guarantee of anything.

They won't be getting any more of our business. If I cannot trust their advertisements, I won't use their service.

ING & Emigrant Direct – Service Review

Last week, I had a problem transferring money from my Emigrant Direct savings account to my ING Direct checking account. The money was to be used to pay my property taxes. Needless to say, I was anxious and expected to have to deal with idiotic customer service reps and mind numbing automated phone trees.

First, I called ING Direct. Without much effort, I was connected to a CSR who was fantastic. In addition to speaking English, he correctly diagnosed my problem ( You cannot "pull" a transfer from savings account to a checking account at another bank) and gave me advise for dealing with Emigrant Direct.

Second, I called Emigrant Direct. Again, I was able to reach a CSR quickly. She quickly and accurately helped me complete the transfer.

After the nightmare that was dealing with Wells Fargo (our mortgage), I was thinking of moving some of our accounts to a local savings bank. The fact both "internet" banks gave me hometown service makes thatless likely.

California IOU’s – Would you take them?

As I understand it, California is issuing some sort of IOU to various parties. Why anyone would accept an IOU from an entity as poorly managed as California is beyond me? Let's say you are the vendor and you get an IOU, can you deposit in your bank? Can you use the money to pay your vendors?

Simply put, they should be ashamed.

Asbestos Lawyers - Mesothelioma

Last night, I spotted an advertisement from a law firm seeking clients with Mesothelioma caused by asbestos. As horrible as the disease is, it is hard to understand how people continue to develop it. Hasn't asbestos been banned for decades?

Comcast Returned My Money

As my prior posts outlined, I had a lot of trouble with Comcast near the end. After writing a letter to the CEO, things have been worked out and they returned my money for the MLB Package.

Debt Kills Legal Career

Should student loans prevent someone from getting a law license? The NY Times has an interesting story about a guy who owes $400,000 on his student loans. After finally passing the part on his fourth attempt, he did not get his law license after all. The New York Bar decided he was unfit to practice law.

My Thoughts:

1. Sallie Mae is a nightmare to deal with – I feel his pain;
   
2. Problems with the lender do not prevent someone from making "ANY" payments towards his loan. I smell a rat.
   

http://www.nytimes.com/2009/07/02/business/02lawyer.html?_r=1&th&emc=th

California - RIP

It seems the California government is going to shut down. If the Democrats would simply agree to cut spending, this wouldn't be happening.

Should Govt make Madoff Victims Whole?

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

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

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

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

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

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

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

U-Verse - $200 cash back

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

Paying Property Taxes without Escrow

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

Simple, easy, cheap, and disciplined.

“Billy Mays Here, …” - RIP

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

BTW - I think oxyclean really is a good product.

Birthday Dinner – Street Meat!!

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

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

Replacing Car Keys – Saving Money

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

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

Virtual Account Numbers & E-Bay

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

USGA Boycott – Golf Tournament

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

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

 

The United States Golf Association
P.O. Box 708
Far Hills, N.J. 07931
908-234-2300

Cash for Clunkers Bill Passes

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

Gold Coin Tax Scheme – Brilliant Idiocy

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

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

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

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

Source: http://www.lvrj.com/news/46074037.html

Housing Near the Bottom

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

Lost Keys – Expensive to replace

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

51.8mpg with Prius!

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

Timing the Refinance – We Got Lucky

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

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

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

Timing the Refinance – We Got Lucky

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

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

Lefty College Rejects Poor Applicants

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

 

http://gawker.com/5285904/hippie-school-bans-poors

Union Commits Suicide

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

Obama is Czar Crazy!!!

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

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

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

Facts about the Czars:

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

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

Taking Profits - 200% Return

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

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

Government Motors

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

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

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

Bristol NASCAR Tickets Arrived

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

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

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

My New Credit Card Scheme

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

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

Teaching is Hard!!

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

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

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

$2,500 Baseball Tickets - Stupid

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

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

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

Best of Breed – Bad Breed

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

Bad Breeds:

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

Mortgage Refinancing Complete – Wells Fargo Grade - D

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

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

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

 

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

Comcast Continues to Stink

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

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

$0 First Mortgage – I Wish

Checking my bank statement online, I verified that my refinancing has gone through. The existing first mortgage has been paid in full and my account statement shows a ZERO balance. Alas, the new mortgage should be showing up any day now.

On the bright side, I replaced my 5 year ARM with a 30 year fixed mortgage. Although I didn't pay any closing costs, my new mortgage is at a slightly higher rate than the ARM (I had a great rate). Furthermore, my payments will be based upon a 30 year term instead of the 25 year term. At first, I was going to "pretend" I had a 25 year mortgage and pay enough to have the home paid off in 25 years. After further review, I have decided to pay all the extra money towards the HELOC. My goal is to pay off the HELOC in 5 years. Once that occurs, I will take my Heloc payment and apply it to the first mortgage.

Goodbye Comcrap – Hello U-Verse

Yesterday, I had the pleasure of 5 hours with the U-Verse guy in my home. For reasons that baffle me (probably related to the age of my home), they could not get the service to work in my office. Otherwise, things are generally working fine.

Thoughts:

1. The package I got has way to many channels. After I get through the summer, I'll cut down the number of stations.
   
2. I get significantly more HD channels with U-Verse. Since I rarely watch regular D anymore, it is nice.
   
3. Comcast has better "on demand" options.
   

Customer Service: For reasons they were unable to explain, I cannot get one of the stations I was promised. (Apparently, they are doing an "upgrade" and I should have it back in a few weeks.) Without prompting by me, they gave me a $5 account credit to compensate me for the inconvenience. At Comcrap, they would probably have charged me $5 for taking my call.

GM Shares - Worthless

With General Motors likely to declare bankruptcy on Monday, the common shares should be worth ZERO. Every time a major company goes under, people end up buying common shares for pennies in hopes they will end up with something. They will NOT. The shares are worthless. If you own any, try to sell them for anything you can get to some other sucker.

Inflation Fears

With the government basically printing money, it is difficult to decide how to allocate funds. Should I save it at horribly low rates? Should I invest in real estate at depressed prices?

Right now, our plan is focused on getting past the Summer. With my wife working as a teacher, I summer income plummets.

GM = Government Motors

Looks like General Motors will end up being the biggest failure in the US auto industry. Ford managed to avoid government intervention and seems likely to thrive. Chrysler is owned by its unions an Fiat. Not good, but there is hope.

Since our government could not profitably sell oil, Government Motors (and the taxpayers) are in for a long slow ride.

California - Armageddon

Voters in California are going to the polls to approve (or not) a series of propositions the Democrats and Arnold . From what I have read, they are unlikely to approve a plan based upon massive tax increases and additional spending. Sadly, the pols in California do not get it. People are tired of being told the sky will fall if budgets are actually cut.

Tomorrow, I predict the pols will go public with plans to "shock" the voters with "scary" plans to release prisoners and/or fire teachers. That is their first choice for budget cuts?

Trump’s Net Worth Fraud

Today's Wall Street Journal has a fantastic story on how Donald Trump has repeatedly lied about his net worth. The Donald doesn't seem to understand borrowing a billion dollars does not make someone a billionaire. Frankly, I suspect if we used current real estate valuations less his outstanding debt, he might be in the hole.

 

Source: Trump on Trump: Testimony Offers Glimpse of How He Values His Empire

By ALEX FRANGOS

It's one of the great mysteries of the business world: How much is Donald Trump really worth?

The world famous real-estate developer and television personality has consistently said it's in the billions. A 2005 book citing anonymous sources said it was between $150 million and $250 million. Mr. Trump sued the writer for defamation. He alleged damage to his reputation that caused him to lose out on future deals in locales from Philadelphia to Kiev.

A hearing in that case will take place Monday in a state court in Camden, N.J. As part of the proceedings, the Donald, as he's known to fans and detractors alike, has provided under oath the secrets to how he values his wealth and treasure. In one case, he says, he does "mental projections."

"My net worth fluctuates, and it goes up and down with markets and with attitudes and with feelings, even my own feeling," he told lawyers in the December 2007 deposition.

The deposition, marked "Confidential," comes to light at a time when some of Mr. Trump's projects, including several condominium developments that bear his name, are struggling. Among the problems are anemic sales, lawsuits, sharp declines in value and troubles with creditors.

In a telephone interview Sunday, Mr. Trump disputed that these are tough times for him. "We have a lot of cash right now. We're starting to buy things," he said while taking a break from playing golf at a Trump course in Bedminster, N.J. He said he stood by the statements he made in the deposition.

In the deposition, given to lawyers representing the book's author, Timothy O'Brien, and its publisher, a unit of French-based Lagardere SCA, Mr. Trump described his public persona. "I'm not different from a politician running for office," he said.

Trump on Business Operations

• Trump on Brand Value, Accounting, Email and More
  
  

  Carrying the Trump Name
  

 

Scott Olson/Getty Images

A city of Chicago flag flies in front of the Trump International Hotel & Tower in the Chicago's business district.

In the deposition, Mr. Trump said that his 2007 estimate of his net worth -- over $4 billion -- is "a very conservative number, in my opinion." He also said $6 billion is a good number, counting his brand value. (In the interview Sunday, he said he was worth $5 billion, not counting brand value.)

Mr. Trump was asked whether he has ever exaggerated in statements about his properties. "I think everybody does," he said in the deposition. "Who wouldn't?"

A follow-up question: Does that mean he inflates the value of his properties in general, nonfinancial public statements? "Not beyond reason," he said in the testimony.

The deposition reveals he told his bankers and New Jersey casino authorities in 2004 and 2005 that he was worth approximately $3.6 billion. In 2005, Deutsche Bank evaluated his net worth as part of underwriting a $640 million construction loan it made to Mr. Trump's Chicago condo and hotel project. The bank said his worth was $788 million, according to information presented by the author's lawyers present during Mr. Trump's deposition.

In his testimony, Mr. Trump discounted that and other low-ball evaluations as "ridiculous." And he noted, "They [Deutsche Bank] still come up with numbers that are many times" what the book's author, Mr. O'Brien, reported. In his interview Sunday, he said Deutsche Bank looked at some of his assets, not all of them, and didn't do independent appraisals. A Deutsche Bank spokesman couldn't be reached.

Mr. Trump said Sunday that Mr. O'Brien, author of "TrumpNation: The Art of Being the Donald," will "wish he never heard of that God damn book" and predicted that "the publishing company will pay me hundreds of millions of dollars" as a result of the suit.

Mr. O'Brien, who is an editor at the New York Times, declined to comment through his attorney, citing the ongoing litigation.

In the deposition, Mr. Trump discussed how he determined the value of a residential development on old rail yards on Manhattan's west side. According to the deposition, when a newsletter reporter writing about the project's 2005 sale for $1.8 billion said Mr. Trump had a "small interest," Mr. Trump wrote him a note. "You're a real loser. Thanks for the nice story. Is 50% small?"

But Mr. Trump had a 30% limited-partnership interest in the project, according to legal documents. A group of Hong Kong investors were the owners. Asked about this during the deposition, Mr. Trump explained that, in his eyes, he owned half because he gets paid fees for managing the buildings and because he didn't have to put up cash in the deal. "In my own mind I've always felt that," he said. "That 30% is equated to 50%," he said. In his interview Sunday, Mr. Trump said he had owned the equivalent of "more than 50%."

Mr. Trump often licenses his name to other developers in return for a fee or a cut of the sales. During the deposition, Mr. O'Brien's lawyer, Andrew Ceresney, noted that Mr. Trump had claimed publicly that he had a major ownership in one such project.

For example, in a November 2007 Wall Street Journal interview cited by Mr. Ceresney, Mr. Trump said he had sold out units at an eponymous condo-hotel project in Hawaii. "The building is largely owned by me," he said in the interview. But in the deposition, Mr. Ceresney produced the licensing agreement for the project. Mr. Trump wasn't a major equity holder in the project, it showed, a fact Mr. Trump didn't dispute.

"Because this is such a strong licensing agreement that I consider it to be a form of ownership," Mr. Trump said. "I'd rather have this than own the building," he said. Moments later he said: "I would say that it could be interpreted to be a form of ownership in the building."

In the deposition, Mr. Trump is asked about the Bedminster, N.J. golf course, which financial statements showed had a net loss of $4.6 million in 2005. Has he ever done a financial analysis of his investment there?

"Yes, I've done mental projections," he said, figuring he'd eventually make $120 million. He never put them down on paper. "You don't really have to," he said. Mr. Ceresney, asks: "Have you discounted in your mind for the risk that you won't sell [memberships] at the prices you are anticipating?"

"I think I will, but it's possible I won't. But I think I will," Mr. Trump said.

At one point during the deposition, Mr. Trump explained the importance of putting his projects in the best light possible. "Would you like me to say, oh, gee, the building is not doing well, blah, blah, blah, come by, the building -- nobody talks that way. Who would ever talk that way?"

Write to Alex Frangos at alex.frangos@wsj.com

Corrections & Amplifications: In the initial version of this article, the Las Vegas and Hawaii properties were misidentified as the other property. The captions now identify the correct property.

Inexpensive Dinner – Rice & Beans

For the price of a value meal at Micky D's, my wife and I had a delicious, healthy dinner of rice and beans. Frankly, pinto beans are one of my favorite foods. On a cold or rainy Sunday, I enjoy cooking a pot of something all day long on the stove. With the possible exception of seafood gumbo, a pot of pinto beans is my favorite comfort food. Reminds me of Texas roots.

2 cups of Pinto Beans - $.50 (maybe)

1 cup of Basmatic Rice - $.25-50 (maybe)

1 ham hock - $1.50 (Used to flavor the beans. We didn't eat it)

Well Water – Free!!

I May Be Running for Office

Anger me and I take action. If the local party accepts me (and I think they might), I will be running for our local planning and zoning board in the Fall. Do I "want" to run for office? No. Why will I run? Yesterday, I received a certified letter providing me notice of a zoning hearing to change the zoning of a nearby property. Not only do they want to go from residential to business, they want a "special permit" to open a gas station and a convenience store.

Frankly, the property in question is in a difficult location. Because of traffic, it is unlikely anyone will build a home on the property. Nevertheless, the property is in a on the corner of a residential area and would add to our traffic woes.

Taxing College Students?

News reports indicate the Mayor of Providence, RI wants to impose a $150 per semester tax on local college students. Allegedly, the tax will generate $6-8 million per year for the city. Simply put, it is a moronic idea. By supporting 9,000 jobs, the students support their fair share of city services.

No to the NY Yankees

Looking for a little fun, I considered going to a NY Yankee game to check out the new stadium. After determining it would take at least $300 (including parking, gas, food, tickets off stubhub) for two of us to attend a game. Instead, we will probably do something local and cheaper.

Big Mistake - Paid Wrong Credit Card

Oops. I accidently paid my large Amex payment to Citibank. As a result, I have a large credit on the Citicard and had to scramble to find the money to pay Amex before I incurred a finance charge.

Moral – Be careful with bill payments.

Should I sell the stock?

As per my prior posts, my employer had a very difficult time the past two years. Our stock fell from the 80's to under 3 dollars. Of course, I had a small position and took a loss during the ride down. Luckily, I became convinced it was worth risking some money to get in. Ultimately, I purchased 400 shares for under $5 per share. With our stock price back above $10, my enormous loss has become a very small gain as our stock tripled in the past few months.

This is my conundrum. Part of me says take (at least some of) the profit. That is a huge move and my $6,000 position is the largest individual position I have ever had in one stock. Nevertheless, most of my portfolio is invested in a diversified basket of mutual funds. Since I think the stock has the potential to double again (if the economy improves), I am going to keep it for now.

Thoughs?

Moved Homeowners Insurance

Although it will cost me about $20 per month extra, I moved the homeowners insurance from State Farm to USAA. Why? USAA offered broader coverage and the convenience of having one bill. I have been very happy with USAA's service and moved my Umbrella policy as well.

Comcast Out – Worst Company in America

Over the weekend, I noticed my upstairs TV no longer received HD channels for Fox and CBS. This TV is in our bedroom and doesn't have a cable box. Basically, we use it to watch network TV before bed. Why pay for a cable box?

When I looked into my "technical problem," Comcrap informed me that they were "encrypting" the HD signal and I would need a cable box to receive FREE TV. Basically, they could have cared less. They want to force subscribers to pay a monthly fee for a box and remote and "HD" gives them a way.

Unfortunately for them, I was able to get a better deal for cable/internet from Uverse. In a tough economy, one would think Comcast would try to keep customers happy. Not give them the shaft.

$1,357 Credit Card Rebates – 12 Months

After collecting a $561 rebate from our Citi Driver's Edge card towards the purchase of our Prius, I decided to run a report on Quicken to track total credit card rebates.

Total Savings: $1,357.

Amex Blue Cash:    $688

Citi Driver's Edge:    $608

Discover More:        $60

Fidelity Cash Back:    $60

TIPS – Purchased at Auction

Using my IRA account at Fidelity, I purchased $5,000 worth of TIPS at last week's auction by the Treasury Department. Normally, I would have executed the order online and would not have incurred any commission. Because I was travelling and unable to trade securely online, I called Fidelity and did the trade with a broker. As usual, Fidelity came through with good customer service. Aware of my situation, they agreed to waive the commission.

Ultimately, I plan to purchase a total of $25,000 in Treasury Income Protected Securities in a 5 year ladder for my IRA. With all the income tax deferred, the IRA is the best place for "income" investments for most investors.

Unexpected Vacation Savings

Fires in Myrtle Beach forced use to abandon our hotel a few days early. As a result, we saved a few hundred dollars in room charges + food for a few days. All in, I think we did very well.

Our Trip Report

1. We decided to dump the rental car and took the SUV on the trip. By doing so, we saved approximately $300.
   
2. We stayed in a budget MicroTel Hotel on the way down. At $62 per night, it was clean "enough" but that is about it.
   
3. We packed cooler with food and drinks for the drive. As a result, we avoided stopping for breakfast and lunch both coming and going.
   
4. We stayed at the Avista Resort in North Myrtle Beach. They were friendly and the rooms were comfortable. With a kitchenette, we generally ate out for dinner. For breakfast (and some lunches), we ate in the room.
   
5. I spent a shipload to play two premium golf courses. Golf is my hobby and they were special courses I will remember for a long time. I do not drink or smoke. I figure golf is my vice and I can live with that.
   
6. Shopping – my wife got hosed by the fires. We were forced out of our hotel on the day we planned to go shopping at the outlet malls.
   
7. Food – Myrtle Beach is the chain restaurant capital of the world. Although we spent more per meal than I would have hoped (given the quality of the food), the overall spending was within our expectations because we did not eat out as much as we expected.
   
8. Gasoline – cheap gas in the South is fantastic!!!
   

 

Trademarking “Octomom?”

According to today's NY Post, the woman called "Octomom" in the press has decided to try and trademark her moniker. Frankly, I think it is a good idea. She needs to look after her family and should take advantage of any opportunities she has to make money.

Did you Tea Bag?

My parents are in their 60's. To my knowledge, they have never protested anything. Although they have voted in almost every election, they are not the "involved" type. Nevertheless, they went to a Tea Party today.

I wanted to go; however, I had a business meeting during the event.

Save on Rental Car Charges

Simply put, negotiate. For our vacation to Myrtle Beach, we are renting a car. Originally, I had rented a car through Avis using my corporate discount (AAA and USAA offered discounts; however, they were not as generous). Unfortunately, picking up the car was going to be a hassle.

Although Hertz's online rates (even with AAA and USAA) were not as good as Avis, I called the Hertz branch (which is located in my office building) and asked them to match the Avis rate. Not only did they match the rate, they beat it by $50 and they will not charge extra for the 2^nd driver.

Do’oh Sold Goldman Sachs

At $92 per share!! Having bought it at $83 .25 earlier in the year, I thought it was a nice time to take a little profit. Having watched it go to $130.15, I could kick myself. Of course, I would rather sell early and not after the fall.

SUV vs. Prius – mpg results

Saturday, I ended up filling up both our cars with gas. Needless to say, the Prius demolished the Highlander in mpg and cost/mile. The chart below illustrates how fuel efficient vehicles can really reduce our dependence on foreign oil.

    Gallons    Miles    Total Cost    Cost/Mile    MPG

Prius    7.14    316    $13.92    $0.04    44.26

Highlander    14.2    276    $27.69    $0.10    19.44

Buy Low - Lowering the Basis

Over a year ago, I began purchasing a certain stock before the market took a dive. My initial purchase was in the low 50's with trades going into the high teens. By this time last year, I had purchased 160 shares at an average price of $23.00 per share. At current prices, those shares are down 67%. Despite a horrific loss on my initial investment, I am only down 24% on my total investment in the firm.

How? I continued to buy shares even as the price fell. All in, I own my shares at a average price of $10 per share.

Although the stock is still in the single digits (it is a financial services company), the recent bounce back means erasing my losses in 2009 is actually possible.

Why did the strategy work? I believed the company was fundamentally sound and would recover if the economy stabilized. As a result, buying the stock at $4 per share seemed like a great opportunity.

Tax Savings on New Cars!

The recent stimulus program passed by Congress had a couple of provisions I was not aware of when we bought our Prius. For new cars purchased between certain periods,

1. We can deduct sales taxes from your federal taxes. (Our state does not charge sales taxes on Hybrids – no benefit).
   
2. We can deduct interest charges on the loan.
   

Since we put a large down payment, the savings won't be huge, but every dollar helps.

Prius Owner Now!!

Despite my prior posts indicating hybrids were not a "good" buy, my wife (and I) now own a 2009 Toyota Prius. How it happened?

1. My wife's vehicle, a Corolla, had 98K miles on it. Because of it got better mileage than my SUV, it was our primary vehicle. Unfortunately, it was not very comfortable. Power locks – nope, Power Windows – nope, cruise control – nope, comfortable ride – nope. While it was perfectly fine for tooling around town, trips over 1 hour were not fun. Furthermore, it lacked some safety features I wanted to protect my wife (and someday a child).
   
2. My wife's daily commute is, and will be, relatively long. We knew we wanted a vehicle with good mileage, but large enough to be baby friendly should we be blessed. Originally, I expected we would get a small wagon (Matrix), or a mid-size sedan (Accord/Camry).
   
3. Although my wife liked the Accord, she hated the Matrix (and so did I). The Matrix was loud, had an awful ride, and had horrible visibility. Since we were at the Toyota dealer, we decided to test drive the Prius. Simply put, she fell in love and I knew it.
   
4. Financially, it was not a "great" decision, but it was not as bad as I thought. Although not apples to apples, we were looking at the slightly larger, faster (4cyl) Accord v. the smaller (but large enough), more Prius. In terms of sticker price, the Prius was about $5K more expensive than the Accord. Luckily, we were able to make up some of it. The Prius had a $1,000 rebate and the dealer was willing to negotiate. In addition, Connecticut does not impose a sales tax on the Prius. Ultimately, I figure we spent an extra $3,000 for the Prius.
   
5. What did we get for our $3,000?
   
   1. My wife prefers Toyotas to Hondas. Her happiness is an important consideration.
      
   2. If gas prices are in the $2.00 range, we expect to save $600 per year. If they go to $4 again, we would save approximate $1,200.
      
   3. We feel the Prius is big "enough" for our needs. With a hatchback, we feel she could easily carry a child in a carseat and any necessary accessories like a stroller.
      
   4. I am a Texan and think big. For once, I get to be an eco-nerd.

Newspaper Industry - RIP

In B-school, we learned about the concept of Creative Destruction. Essentially, Creative Destruction means there will be the creation of something that destroys something else. In the case of newspapers, the destroyer is the internet. If you own stock in any newspaper company, sell it immediately. They are rapidly going the way of the buggy whip manufacturers. Will a few survive in some form? Yes. Will the survivors be good investments? Probably not.

Survivors: Wall Street Journal, NY Times, NY Post, and some local papers (probably in weekly form)

Closures: Just about everyone else.

Refi – Almost Done

As per my previous posts, I am in the process of refinancing my home. Frankly, it has been a baffling process whereby banks seem oblivious to their own best interests.

1. For reasons I cannot understand, the bank did not want to put my wife's name on the mortgage.
   
2. The appraisal was idiotic. All I wanted to do was convert my ARM (4.7%) into a fixed loan. I did not want to extend the term of the loan or take money out. By fixing the interest rate, the bank reduced risk and I reduced my risk. The bank should have been begging me to convert the loan to a fixed rate.
   
3. I ended up having to reduce the principal due on my first mortgage by $3 grand. Since the bank owns the 2^nd mortgage, they should have insisted on having the money applied to the 2^nd mortgage – not the 1^st.

Appraisals – Still on Crack!

Yesterday, I received the results of the appraisal on my house required by my lender. Simply put, the "value" of my home is a fiction. If I could sell my house for the appraised value (or close to it), it would be a miracle. While it will help me refinance my home, it worries me that we may not have learned from our past mistakes.

Inflated appraisals is one of the reasons we got into the housing crisis.

Shamwow Guy and a Hooker

According to news reports, the annoying ShamWow guy was arrested with an "alleged" prostitute. Not really a personal finance topic, but quite funny.

Source: http://www.thesmokinggun.com/archive/years/2009/0327092sham1.html

Hoping for a down day

Because I have a buy order in for today, I am hoping the market pulls back a little bit. I have plans to buy $2,500 in two index funds.

Quitting AIG - Debacle

As I predicted, the AIG Bonus witch hunt has led employees to quit. While it is difficult to feel sorry for someone who received a $700K+ bonus, we should. From what we actually know, he worked all year for a promised wage. We have no evidence he was a crook or even lost money for AIG. Nevertheless, he was subjected to threats by the New York Attorney General and protesters went to home.

There are plenty of villains in the financial crisis ( See Chris Dodd); however, we cannot spend all our time blaming everyone else. In the case of AIG, we own it. We need employees to show up for work and to generate profits. If they do not, our investment will be worth zero.

Dear AIG – I Quit

Sallie Mae – Watch Them Like a Hawk

A few days ago, Frugal Zeitgeist had an interesting post titled "Vigilance Pays Off." Her post and the follow ups are outstanding.

Like her, I am diligent about tracking expenses and bills. Thanks to Quicken's automatic download feature, it is fairly easy. Nevertheless, certain bills require manual monitoring.

In particular, the idiocy that is Sallie Mae demands special attention. Last week, we received a past due notice complete with interest and late charges. Of course, the notice was wrong. After 20 minutes on hold and 20 minutes with their moronic customer service representative, they determined they "accidently" misapplied our last payment.

Do I think they will get it right in the future? No. In every instance, they seem to get it wrong.

U.S. Credit Scores Improving?

Initially, I was surprised to hear on the radio that credit scores in the US are improving. In a recession, how is this possible? Simply put, the Personal Savings Rate in the US has been increasing as US consumers reduce spending and pay down debt. Unfortunately, many people who would typically have good credit are going to see their scores drop because of unemployment.

Consumer Credit Scores Rise in All Geographies and Age Groups During February

http://www.foxbusiness.com/story/consumer-credit-scores-rise-geographies-age-groups-february/

SAN FRANCISCO, CA, Mar 18, 2009 (MARKET WIRE via COMTEX) ----Credit Karma (www.creditkarma.com), a pro-consumer credit score tracking and management service, today released its U.S. Credit Score Climate Report with trend data for February 2009. During the November 2008 to February 2009 time period, Credit Karma saw an increase in credit scores across all geographies and age groups. 39% of consumer credit scores have gone up, 29% have gone down, and 32% remained the same. Of the scores that increased, the average credit score rose 14 points during the time period. Of the scores that decreased, the average credit score dropped 14 points.

The Credit Karma U.S. Consumer Credit Score Climate Report provides a monthly barometer on consumer credit trends, a particularly important economic indicator in today's market. Each month, the Report offers unique and insightful statistics on the health of consumer credit scores nationwide. Trend data in the report is based on a comparison of Credit Karma users' February credit score with their previous credit score at least 30 days prior and no more than 90 days out. Here are some additional findings:

-- Average credit score with no change is 695 whereas 675 and 663 are the respective credit score averages for those with an increase and decrease. This would suggest that people with higher credit scores maintain more stable credit scores while those with marginal credit scores tend to be in flux.

-- Compared with January, more consumers' credit scores are going up. In January 2009, 37% of consumer credit scores went up compared to 39% in February. That average up credit score in January was 674 compared to 675 in February. Fewer consumers' credit scores have also gone down. 31% of credit scores dropped in January compared to 29% in February. The down credit score in January was 662 compared to 663 in February. The percentage of credit scores with no change remains the same.

-- The Midwest had the highest increase with 41% of consumers seeing their credit scores go up in February. The average up credit score in the Midwest is 676. In January 2009, 37% of Midwest consumers saw their credit scores rise and the average up score was 670. Amongst states, Ohio saw the most credit scores go up in February. 42% of Ohio consumers had their credit scores rise and the average up score is 660.

Made $57/month from Amex

Our Amex Blue Cash Card anniversary date was last week. We will be getting $688 for the year which works out to a fantastic $57 in found money per month.

We charge everything to this card that we can including:

1. USAA charges the card for our auto insurance bill;
   
2. Comcast, ATT, and Verizon charge the car for our phone, cell, and cable bills;
   
3. Our heating oil contract hits the card for payment (this saves us $0.10 per gallon on oil.);
   
4. Gas and groceries (after we hit the $6,500 for bonus interest payments)
   

Exceptions:

1. Citi Driver's Edge: During the $6,500 initial period, we charge gas and groceries to a driver's edge card for a 3% rebate. In addition, we charge all auto related expenses. We received approximately $200 in rebates in the past month.
   
2. Discover Card: We got 0% for 12months and managed to make something like $50 in cash back for charges related to our wedding and honeymoon.
   

Obama’s Socialism

According to the NY Times, Obama is going to announce his support for sweeping oversite of executive pay at ALL banks, Wall Street Firms, and "other companies." Is he trying to tank the economy? Is he trying to ruin our companies?

If there is one thing we know, it is that companies do not (intentionally) pay employees any more money than is absolutely necessary. For companies paying their execs big bucks, it means they believe ("rightfully or not") that the executive is worth it to the firm's bottom line.

Now, Obama is going to decide what the executive is worth to the firm? How would he know? Does anyone think Barney Frank, Chris Dodd, and Charley "I don't pay taxes" Rangle know how much to pay these people?

If Obama's plan goes into effect, the highly paid executives will leave for foreign firms. In particular, banks like Deutche Bank are licking their chops at the possibility of picking up top execs of American banks.

While I did not vote for Obama, he seemed to be a very smart man. Unfortunately, it looks like his economic policies are FAR to the left of where we expected.

Congressional Bullies - Incompetence

By any measure, the AIG "bonus" employees are not sympathetic characters. As a result, the congressional bullies were able to pass a bill taxing their bonus payments at 90% for the express purpose of "punishing them."

1. If they can do it to "them," they can do it to us.
   
2. The punishment taxes are designed to distract voters from their own incompetence. Once again the House (Barney Frank) and Senate (Chris Dodd) Finance Committees failed in their oversite roles. Had they done their jobs, the bonus payments would not have been made.

Stopping Courtesy Checks

Yesterday, I got fed up with being forced to shred unwanted cash advance "courtesy" checks. To stop them, I signed onto Amex and Citi websites, sent an internal e-mail to customer, and easily took care of it.

AIG Bonus Upside!! Dodd

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.

50% Increase over ING CD!

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.

Get Rich – Become Drug Dealer

According to Forbes Magazine, Mexican drug cartel leader, Joaquin "El Chapo" Guzman Loera, is the 701^st 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:

1. Die a violent death at a very young age; or
   
2. Get caught by the Feds and spend the rest of your life at ADX Supermax.
   

 

As they say, money is not everything.

“Sell By” Date – Myth?

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.

 

Negotiate Your Hospital Bills!

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.

Market Bottom Call - My

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.

Wells Fargo – My Winning Trade

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.

Brick/Mortar Beats ING

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.

Auto Debit v. Bill Pay

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:

1. Student Loan – one of my loans offers a discounted interest rate for allowing the direct debit. Although I do not like it, it was a good deal and so far so good.
   
2. Insurance – before I knew better, I allowed State Farm to direct debit my account. While they have not made a mistake yet, we are going to cancel monthly bill pay. As a plus, we save the monthly service fee.
   

We do, however, have our cable, phone, oil heat and auto insurance charges taken directly out of our cash back credit card. Why?

1. Cash back from Amex Blue.
   
2. One Bill – Instead of paying multiple bills, I take care of all of them by paying my American Express bill.
   
3. Risk – in the event the merchant makes an error, our credit limit is large enough to prevent any over-limit fees. Furthermore, we should have enough savings available to take care of any mistakes.
   

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.

1. Fixed Payments – since our mortgage and car payment are fixed, our payments go out automatically. By automating, we do not have to remember to send anything out.
   
2. Variable Payments – For the most part, they are our two credit card payments (the Amex Blue and a Gas Discount Card).
   

Wells Fargo – Dividend Cut

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.

Bonus Disclosures – Ethics?

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.

• Public companies must disclose the pay packages for their top executives. Nothing Cuomo does will change that.
  
• Employee Privacy? IMHO – unless there is provable evidence of wrongdoing by the employee, the employee should not live in fear of having his/her compensation package end up on the front page of the Wall Street Journal. Yes. Some of them made enormous sums of money at the same time their company struggled. No. That does not mean the employee (or even the company) did anything illegal.
  
• Pay for Performance: Even when the company (or even the business unit) is losing money doesn't mean the employee should not be compensated.
  
  • Some employees are in businesses that are making money for their employer. If they are top performers and adding to the company's profits, they should be compensated.
    
  • Employees in money-losing businesses. If you have top performers in a money-losing business, you will want to compensate them to prevent things from getting worse. Furthermore, you may need to pay top performers to "fix" things they did not create. For example, I led a project team for my former employer that caused an immediate hit to earnings. They gave me a bonus, a promotion, and an award. How is that possible? Simple, we had a business unit that was losing money every year. Our project team sold the business and improved our long-term profitability.
    

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.

Survivor’s Guilt – Recession?

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.