Archives for April 2006

Bank of Mom and Dad

The New York Times just ran an article titled ‘The Bank of Mom and Dad‘* about parents giving financial aid to their children well beyond college. Examples range from paying for extended schooling to paying for doggie daycare. Coincidentally, Make Love, Not Debt also posted about how her parents are not paying for their wedding. A very lively discussion ensued, with responses varying from speechless to, um, not-so-speechless. I’ll just say that it brings up my feelings about entitlement.

To be sure, I have made my own withdrawals from the Bank of M&D. Beyond the usual food and shelter up until 18, my parents helped me pay for out-of-state college. In fact, they gave me a choice:
[Read more…]

HSBC Direct down to 4.50% APY, Presidential Savings at 4.75%

Some quick rate announcements: I called HSBC and confirmed that the rate on their HSBC Direct account is going back down to 4.50% APY after April 30th. Presidential Bank’s Premier Savings Account is now up to 4.75% APY (still 4.37% for checking). T-Bills are looking nicer and nicer.

Calculating and Comparing Treasury Bill Returns

Just like when teaching class, if one person asks question, usually multiple people have the same question. Unless it’s that annoying person who always ask questions like “Do I have to put my middle name on the exam? Will you mark down for that?”

Anyways, someone asked how to calculate and compare T-Bill returns to online banks, even without adjusting for tax. I’ll base this off of the recent Treasury Bill auction results. Let’s take the most recent one:

4/27 auction results

[Read more…]

No Grocery Shopping For A Month

pantry.jpgDuring our move, we were shocked by the vast amount of food we had stored away in our cabinets. In addition to staples like flour, sugar, and coffee, we have canned food galore, dried pasta, jarred sauces, rice, stuff like Rice-a-Roni; it was like we were stocking up for Armageddon! In addition, we always have a freezer full of ground beef, chicken breasts, Trader Joe’s pizzas, and various home-cooked food from the in-laws. Which is why I still haven’t tried out Dream Dinners. To the right is an actual picture of our cupboard.

So, other than milk and juice, we decided not to grocery shop for an entire month. Here’s our planned menu so far, along with main ingredients:
[Read more…]

Liability Protection and LLCs / Corporations

On my list of Reasons to Incorporate or Form an LLC, #2 is limiting personal liability. If you are a Sole Proprietorship, there is basically no legal distinction between you and your business. If your business owes Bob’s Hardware money, you owe Bob’s Hardware money. That means that your house, your car, your iPod, your whatever – is at risk if your business has debts.

Corporations and Limited Liability Companies (LLCs) are separate legal entities. That means there is a difference between you owing money to Bob and your business owing money to Bob. If your LLC fails and files for bankrupty, your house and iPod is safe. As usual, there are exceptions:
[Read more…]

Stock Market Observations

While checking in on my IVV order, I noticed Ford is having a bad day. Check out these market caps:

Ford (F): $13 Billion
General Motors (GM): $12 Billion
Google (GOOG): $130 Billion

Ouch. Google could buy both Ford and GM and not break a sweat. Hmm… Google + Cars = ?? Isn’t it weird how GM and Ford used to represent America’s economy, and now Google does instead. I mean, indirectly they employ me and millions of others!

Emergency Cash In 6-Month T-Bill Ladder

Where’s my cash? Back in December, I started forming a ladder of 6-month Treasury Bills by buying $1,000 of T-Bills at the beginning of each month. Soon, I will start reinvesting the first matured T-Bill into another 6-month T-Bill, thus having $6,000 spread out in total. So far, the strategy has worked very nicely, giving me an average equivalent taxable yield of about 5.5% (for my tax situation) in exchange for a little less liquidity. Still, I have access to $1,000 each month, and if I really need to, I can always use SellDirect to sell the rest at market value with a $45 fee.

I plan on ramping up to $2,000 a month, but the rest is mainly in online savings accounts because much of it is from various 0% APR balance transfer deals, and I like to be able to pay off the entire balance whenever I want. The last bit of my cash is in some longer-term CDs and I-bonds.

20/20 Real Estate Hindsight

Our old house officially sold a few days ago. We toyed with the idea of buying it ourselves, but once I found out how much the owners were asking my jaw dropped. When I found out they got an offer for full price my jaw hit the floor. Craziness… The mortgage-to-rent ratio for our place would be 180%!! Definitely not a good time to try and find a cashflow-positive rental around here…

Of course, this also makes us sad that we didn’t buy a place ourselves when we first moved here. By now, we probably would have gained about $60-80,000 in home equity. But of course, hindsight is perfect. When we moved here we had never seen the area, both of us were fresh out of school, none of our friends had houses, and we certainly had no idea what to look for in a house. We also knew that we’d be moving within 3 years, so I was afraid the transaction costs would wipe out any potential gains. Boy was I wrong!

I Want A Beater Truck.

toyota.jpgWe moved a bunch of our stuff over to the new house today, after borrowing our friend’s truck. It was a great little early-90s Toyota Pickup (that’s really what the model was called – “Pickup”) with 150k miles, manual transmission, and not much else. I’ve always wanted a little beater truck to refine my stick-driving skills and to have a 4WD vehicle to ride to the slopes, in addition to all the other useful things a truck offers.

To be sure, it would just be an expensive toy. And yes, I’d have to pay extra for gas, insurance, and any possible repairs. But I imagine I could find one for about $2,000, play with it for a year, and resell it with very little depreciation. Or I might even be tempted to trade in my current car. And even my wife seemed open to the idea… I think because her dad loves trucks too.

Quickie: How To Buy A Treasury Bill

There seems to be some interest, so here’s a very quick example of what happens when you buy a 4-week $1,000 T-Bill.

1) Open an account at TreasuryDirect, link up checking/savings account.
2) Login, and select your amount and maturity date ($1,000)
3) You must schedule the purchase before Noon EST on the auction date (Tuesdays), otherwise you are pushed to next week.
4) Auction occurs on Tuesday, and on Thursday the discounted amount ($99x.xx) is taken out of your account.
5) 28 days later, also on a Thursday, $1000 is put back into your account if you choose so. If there is a holiday both the purchase and maturity dates are moved together. I’ll do a better example later.

Don’t Forget About Treasury Bills To Keep Cash

People who are looking for the next best place for their cash now that ING’s Winter Sale 4.75% APY sale is over, and HSBC Direct‘s 4.80% APY promotion is soon ending, should not forget to consider Treasury Bills. You sacrifice some liquidity, but recent 28-day T-Bills have been paying 4.50-4.60% interest. Since the interest is exempt from state and local taxes, the equivalent return (calculator) can easily top 5% for those in many states. I know you can even link TreasuryDirect up with Emigrant Direct and HSBC, but I’m not sure about Capital One 360. Anyone try?

You can see my T-Bills experiences here in reverse order. Auctions for T-Bills are on Mondays and Tuesdays, so if you want in for next week you should schedule them soon.

Confession: I’m Trying To Time The Market

I am usually very skeptical when people try to time the market. But I must confess, I have been trying to do it this week. As part of my new portfolio, I need to buy $11,000 of IVV (an S&P 500 ETF). That’s a big order for me. On Monday I saw the market going south, with IVV going below 128.5, and made a limit order for 128. I figured, if I could just catch the market on a 1% dip, I’d save over $100!

Fast forward to market close on Thursday, and IVV is at 131.30 (a 2% increase) after the Federal Reserved hinted at an end to interest rate hikes. Oops. Oh well, the trade is good-til-cancelled, so maybe tomorrow I’ll still catch it. Or not. See, this is why I need to just stick with mutual funds! =)