Archives for July 2008

United Rentals (URI) Stock Tender Follow-up

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Well, the United Rentals tender offer that I participated in went through successfully. As expected, the offer was oversubscribed (press release), which means that more shares were offered than they were looking to buy. Only an estimated 34% of shares tendered will be bought, which left many would-be arbitrageurs holding shares of URI they didn’t really want. The stock price dropped to $16.83 as of the end of Friday.

Most Larger Investors Didn’t Do So Well
This means that even if you bought more than 100 shares at the lowest price available after the tender offer was announced ($18.95), sold whatever you could at $22 and sold the rest for the best price available afterwards ($17), you wouldn’t have made any profit. In fact, you would have lost about 4%. While you can always hold onto the stock and hope for a rebound, that leaves you as a stock investor, not an arbitrageur.

In practice, trying to game one of these tender offers on a large scale is very difficult. Even if you have confidence the offer will not be revoked, there are too many smart people playing. If the offer price is close to the current share price, the expected profit would be so low that the risk wouldn’t be worth it. If the offer price is significantly above the share price, then everyone will rush will tender their shares, ironically resulting in nobody being able to sell their shares.

Better Opportunity For Smaller Investors
However, if you bought an odd lot of 99 shares, which are given priority in many cases including this one, you would have gotten all your shares cashed out. Buying perfectly at $18.95 and selling at $22 would be a 16.1% gain in about a month’s time. Of course, your actual profit before commissions and fees would have only been $301.95. $300 is the cost of a schmoozing business lunch with a few martinis on Wall Street. Therefore, this is a great chance for small-time investors to have an edge.

My timing wasn’t quite perfect – I bought at $19.81 per share, resulting in a profit after fees of $191.91 (9.8%) in less than a month. Annualized return is likely to be north of 100%. Even after taxes, that will be buy me over 25 meals from the lunch carts. 😉

I’m pretty picky about which of these offers I decide to jump into, so we’ll have to see if any other interesting ones pop up.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


10% Off With Discover, Buy 1 Get 1 Jamba Juice, iPod Promotion at KeyBank

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Quick links to more offers that may be of interest…

$10 Discover Gift Card for every $100 Spent
Get a $10 Discover Gift Card for every $100 you spend on your Discover Card at participating malls from August 1 through September 7, 2008. The mall list is pretty short, tough. See this post on a similar promotion for more information. Don’t forget your buy 1 get 1 free movie tickets with Discover as well.

Buy 1 Get 1 Free Jamba Juice Smoothie
I work hard to avoid Jamba Juice these days, as I am susceptible to overpriced smoothie addictions during these hot months…

Purchase any Jamba menu board item and get an additional menu board item of the same or lesser value free. Baked goods and snack items are not included in this offer. Expires 7/30/08.

Free iPod Nano or iPod Touch with new account at KeyBank
Open a free checking account + some other hoops, get a free iPod Nano. Open a Privilege (higher balance requirements) + some other hoops, get iPod Touch. KeyBank has a limited geographical footprint.

Between 7/12/08 and 8/15/08, you must open a Key Express Free Checking (this is the basic banking account in NY), Key Advantage Checking or a Key Business Free Checking Account and by 10/31/08 make one debit card transaction and a combination of two direct deposits or automated payments each of $100 or more to get an iPod® nano.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Brown Bag Lunch Idea: Simple Chinese Chicken Salad

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

There was some interest how to keep food costs down, so here’s another brown bag lunch idea that I use. Previously I did my Simple Custom Sandwich Edition, which probably could have been cheaper but I tried to price things at retail.

This time it’s Simple Chinese Chicken Salad, a recipe stolen from my sister. Prices are still from retail grocery store, frugal shoppers should be able to beat these prices easily. Salads from lunch joints are really expensive for some reason, at least $6.

Ingredients and Costs

$0.53 for 1/3 head of romaine at $1.60/head
$0.83 for 1/3 lb of frozen chicken breast at $2.50/lb
$0.40 for 1/3 can of mandarin oranges at $1.19/can
$0.10 for handful of crunchy noodles at $1.29/can
$0.35 for sesame ginger salad dressing at $3.50/bottle
———————-
$2.11 total for each salad

* Optional: Chopped green onion, or bit of slivered almonds. Minimal additional cost, I chop up an entire green onion and keep it in the freezer to sprinkle on stuff.

** You could probably save more money by making your own salad dressing (sample recipe).

Recipe (if you can even call it that)

  1. Rinse and cut up lettuce. One head usually makes 3 lunches.
  2. Cook the chicken however you like (boil, grill, saute) and season with salt and pepper. Rip or chop chicken into small bite-size pieces.
  3. Drain can or mandarin orange wedges (or unhealthily drink the syrup like I do), separating into 3 portions as well.
  4. Put all these dry ingredients into reusable plastic container. Keep chow mein noodles separate to preserve crunchiness. Keep salad dressing into smaller container, or keep in fridge at work.

In one session, you have made 3 Chinese chicken salads that cost ~$2 each, ready to eat and bring for lunch or eat as any other meal. You can either spread it across Mon-Wed-Fri, or if you live with a spouse/partner, it’ll be gone in no time. I put a lot of chicken in there, it prevents me from getting hungry too soon. If you need more calories, use larger portions or add some carbs with bread or toasted bagel.

I forgot to add my crunchy noodles when taking pictures this time, but here it is:

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Buy 1 Movie Ticket, Get 1 Free With Discover Card

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Fandango and Discover Card have a promotion going where you can get one free movie ticket with the purchase of one movie ticket at regular price. Thanks JI. Hmm… Batman or Wanted?

Terms & Conditions: This offer is only valid for Discover® Cardmembers who purchase at least one movie ticket on Fandango.com. The one free movie ticket must be used at the same time as the first movie ticket purchased on Fandango.com. This offer is valid from a limited time from 07/01/08-09/30/08, while supplies last. The one free ticket is up to a $12.50 value, including a convenience charge. Limit one free ticket per customer.

Best Discover Cards
Here is a list of no fee 0% APR balance transfer credit cards, including Discover.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


How Much Do We Spend? Breakdown of Current Expenses

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I understand that revealing our net worth is not enough to fully explain our entire financial picture. That is by design; I like keeping the picture fuzzy. Blogs are very hard to keep anonymous, and I’ve been doing this since 2004. This is why I continue not to share our respective salaries, occupations, employers, and geographical location. Besides, I am not here to be better than you, or the next dude. Anyone out there could earn more than me, save more than me, or spend less than me. I’m only trying to track our progress, and to consistently try to make our situation a little bit better each day.

But I’ll give in a little bit. I think tracking expenditures is a good idea for everyone, so I might as well share what I have discovered. Besides, I’ve already revealed that our goal for an Emergency Fund is 6 months of expenses, or $30,000. That means my wife and I spend $5,000 a month? How? Here’s the lovely pie chart:

Housing: We spend $3,500 a month housing, 70% of our total monthly expenses. (Note that this is not the same as 70% of income!) This includes principal, interest, taxes, and insurance (PITI). Yes, it is obscenely high. The median price of a home in our area is over $500,000, so don’t go thinking we live in a multi-acre 5,000 square foot estate. At the same time, incomes here are also a lot higher, especially in certain fields. So there is a give and take.

Given that this one area skews the graph so much, I made another graph of all non-housing expenses:

Food: $450/month includes both groceries and dining out. This is where the “fat” is in our spending, and we know it. We love food and do our best to “consciously spend” and enjoy every dollar put into this pleasure. I’m okay with making many simple foods at home, but I still go out when I want to eat freshly baked naan, perfectly seasoned pad thai, authentic pizza, or hand-wrapped tamales.

Insurance: $200/month includes two cars and umbrella liability insurance policies. Our deductibles are $1,000 to keep costs low, but our liability limits are high ($250,000/$500,000) due to the requirements of the umbrella policy.

Utilities: $200/month includes electric, gas, sewer, and water. Gasoline: $200/month. Cable TV + Internet: $80/month. Cell Phones: $75/month for two lines.

Gifts: $100/month. This might be somewhat unique to us, but given our big family events like birthdays, weddings, graduations, usually end up costing us $100 per month.

Other: $200/month usually covers the other smaller categories including clothing, entertainment, and pet expenses.

That ends up with the total being $5,005 per month. $3,500 to housing, $1,505 to everything else. Health insurance is provided by our employers. Non-monthly expenses like home improvement projects, travel, charity, car purchases/depreciation, or medical procedures are not included.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


FDIC Insurance Q&A: Businesses, Joint Accounts, CDARS, WaMu, and More

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I’ve had a lot of questions about FDIC insurance recently (for obvious reasons), and have been getting a good share via e-mail as well. Took some research to find all the answers, but here they are:

Will multiple accounts at the same bank, like having both a checking and savings account, increase my coverage limits?
Depends. It’s how the account ownership is titled that matters. If it is an individual account, then you get $100,000 per individual at that bank, no matter how many different accounts you open up. To get more coverage, you could open up an account at another bank. However, if you open up a joint account with someone else that can increase your limits.

How much FDIC coverage can a couple get at one bank?
If structured properly, a couple such as a husband and wife can shield up to $400,000 at one single bank without involving legal trust vehicles. In addition to the $100,000 per individual account, if two people open a joint account then each will have up $100,000 in coverage ($200,000 total for the account) [Source]. If you throw in revocable trust accounts, a couple can theoretically shield up to $600,000 at one institution:

altext

Are business bank accounts covered by FDIC insurance?
Yes, but you have to be careful. Since legally there is no difference between a sole proprietorship and an individual, one cannot gain more coverage at a single bank by opening a “business” account when you are a sole proprietorship. The business account would still fall under the $100,000 individual cap. However, in the case of partnerships, corporations, and LLCs, because these are separate legal entities, they do get a separate $100,000 per entity.

The deposit accounts of a corporation, partnership or unincorporated association are insured up to $100,000 provided the corporation, partnership or unincorporated association is engaged in an “independent activity.” The term independent activity means that the entity is operated primarily for some purpose other than to increase deposit insurance coverage. [Source]

Where would you put $1,000,000 in cash if you had to? Spread across 10 banks (or more to cover accrued interest)?
First of all, there are very few scenarios where I’d want $1,000,000 sitting around in cash. I’d probably choose to take more risk with it. But I really don’t think I’d bother with 10+ banks. Most likely, I would place it in a retail money market fund at a reputable firm, like the Vanguard Prime Money Market Fund. That way, even if Vanguard goes bankrupt, this will not affect the underlying conservative investments. A retail money market fund has never “broken the buck”. Alternatively, I would buy traditional US Treasury Bonds or TIPS either directly or through a Treasury money market fund.

What about the Certificate of Deposit Account Registry Service (CDARS)?
Another way to increase FDIC insurance are services like that of CDARS.com. Essentially, they spread your large deposits into $100k chunks across a network of banks, but without any effort on your part. From their website:

In general, the FDIC insures up to $100,000 per customer per financial institution. So, you could run around to many institutions to deposit your funds to receive the same coverage you get using CDARS. Or you can place your large-dollar deposit with a network member. The member bank breaks your funds into smaller amounts and places them with other banks that are members of a special network. Then, those member banks issue CDs in the amounts under $100,000, so that your entire deposit is eligible for FDIC insurance. By working with one member bank, you can receive insurance from many.

According to this Bankrate article, due to the added costs of this system CDARS rates are usually about 0.15% lower than the “normal” CDs from the network banks. Also, the network banks seem to be smaller local banks, which may not offer the most aggressive rates in the first place.

Am I worried about my money at Washington Mutual?
Not really. WaMu is much better financially than IndyMac was. But again, due to the realities of fractional-reserve banking, if people panic and start pulling out tons of money from WaMu, then they can still fail due to liquidity issues. I am not going to be one of those people. If it fails, it fails. Most banks on the FDIC “problem list” do not fail. I have faith in the FDIC process, and I still have much less than $100,000 in my accounts. Finally, I never keep all my funds in any one bank. I can still run my day-to-day cashflow needs from other banks.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Ask The Readers: Is This Affordable Housing Opportunity A Good Deal?

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Despite the drop in housing prices in many areas, I have still been noticing an increase in “affordable” housing projects that are meant for people earning around the median income level – not only low-income households. Even back in 2005, for many areas the median house cost between 6 and 12 times the median annual income. A cousin of mine had to line up and enter a lottery simply for the chance at buying an affordable housing development, but didn’t “win”. I saw a model unit of the condos, and they were very nice.

However, the obvious catch is that because you are buying well below market price, you can’t just turn around and sell it at market price. A reader AM recently e-mailed me some details about an opportunity in his area below. (I have edited it minimally for spelling and brevity.)

I am asking for your view on one of my biggest financial purchase – the home. It’s a newly built home in a great community, offered under affordable housing scheme of the county & city, so there are restrictions about selling the house and the price of resale. As buying a house is an investment also so I wanted to be double sure that is it a good ides to buy such a house. The covenant for resale says:

The “Resale Value” shall be derived from the Base Price of the property. The “Base Price” is the original price paid by the buyers now intending to sell the property. The Resale Value shall be equal to the Base Price plus an amount equal to 1.125% per calendar quarter for each year from the date of the original sale to Buyers to the date of the agreement for the resale from the buyer to a new purchaser, compounded quarterly.

Does this seems a reasonable enough return. Price of house under this scheme will be around $350,000 but similar new houses in the same community costs around $550,000. Obviously as per the covenant when I offer the house for sale at a later time first right of purchase is of County’s if county declines or doesn’t responds in 30 days it can be offered in market but only buyers with income restrictions can buy it (which will be lifted if it remains unsold for 3 months) but the new buyer will have to abide by resale value set by county. The term of covenant is 15 years, I can sell it at market price after 15 years but i can keep only the price as described above in the resale price, rest will go to county.

Does this sounds like a reasonable option both from getting a house and investment perspective? Reason I am interested in this is because I can not buy a normal house now for another couple of years and from next year I will be above the qualified income limit.

This must be near an urban area, if “affordable” housing is $350,000! This development also seems to be separate single family houses instead of the condos I am more familiar with. On the surface, the agreement seems to guarantee a yearly return of 5%, assuming the property is indeed priced at such a steep discount. A year or two ago, 5% might have been scoffed at – but now, I’m sure lots of people wish their house would appreciate 5% each and every year.

But is this a good deal, all things considered? Some thoughts:

  • How’s financing? If you are getting a mortgage with 6% interest on something that will appreciate 5% per year for the first 15 years, is that good? Don’t forget the upfront costs to a mortgage like closing costs.
  • How much to rent a similar place? I asked, and the reply was $2000-$2200 per month. Even with no money down, this would make the mortgage payment about the same as rent. (Assuming 30-year fixed-rate mortgage at current averages of ~6.1%.)
  • Do you plan on staying? Is this house really what you want, or are you changing your desires (either making them bigger or smaller) to fit into this opportunity. If so, you might not need to worry about what happens in 15 years or so.

I’m sure I’m overlooking some things. Please, ask more questions about details of the offer and/or add in your own opinions in the comments below.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


IndyMac Bank Failure Highlights: Another FDIC Insurance Example

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Well, it finally happened. IndyMac Bank has been taken over by the FDIC, becoming the second-largest financial institution failure in U.S. history. I’ve been reading a bunch of new stories about it, and here are what I think are the highlights:

Customers: Don’t Panic!
Most people with regular checking or savings accounts don’t have too much to worry about. The FDIC has set up this official information page for customers. You can still use ATMs. Checks you write will still be processed. Electronic deposits and withdrawals will still go through. Online banking, phone banking and even the physical branches will re-open on Monday. You won’t even lose past interest:

All interest accrued through Friday, will be paid at your same rate. IndyMac Federal Bank will be reviewing rates and will provide further information soon. You will be notified of any changes.

From the LA Business Journal:

The Office of Thrift Supervision transferred control of the company to the Federal Deposit Insurance Corp. The FDIC said it will transfer insured deposits and assets of IndyMac Bank to a new federally operated institution called IndyMac Federal Bank that will open Monday. […] Regulators said that customers of IndyMac will have uninterrupted access to their accounts beginning next week at the bank’s 33 branches.

This is consistent with when I explored What happens if my bank fails? The FDIC seems to do a pretty good job of cleaning things up.

…Unless you exceeded the FDIC insurance limits

Customers are insured 100 percent for deposits up to $100,000. The FDIC said the bank has about $1 billion of “potentially uninsured deposits” held by 10,000 depositors. The FDIC said it will begin contacting uninsured customers on July 14. The agency said it plans to give customers with more than $100,000 at least 50 percent of their uninsured deposit amounts.

Wade Francis, president of Long Beach-based Unicon Financial Services, said there is “very little” chance that uninsured depositors will get all their money back because IndyMac had a large number of home loans, which will be difficult to sell off.

It boggles the mind that so many of the very same people who have enough money to exceed FDIC limits in the first place, don’t bother protecting it properly. The whole point of keeping money in banks is so that it is safe… Instead, people are getting 50% and go home and pray to see the rest again. Ouch.

Ouch For the FDIC, Too
From the LA Times:

Federal authorities estimated that the takeover of IndyMac, which had $32 billion in assets, would cost the FDIC $4 billion to $8 billion. […] The agency’s insurance fund has assets of about $52 billion.

That’s a big chunk of the FDIC’s own “emergency fund”…

Reality vs. Perception of Reality
There is a great quote from the 1992 movie Sneakers:

Cosmo: Posit: People think a bank might be financially shaky.
Martin Bishop: Consequence: People start to withdraw their money.
Cosmo: Result: Pretty soon it is financially shaky.
Martin Bishop: Conclusion: You can make banks fail.
Cosmo: Bzzt. I’ve already done that. Maybe you’ve heard about a few? Think bigger.
Martin Bishop: Stock market?
Cosmo: Yes.
Martin Bishop: Currency market?
Cosmo: Yes.
Martin Bishop: Commodities market?
Cosmo: Yes.
Martin Bishop: Small countries?

This is basically what happened to IndyMac bank. From CNN:

The banking regulator said it closed IndyMac after customers began a run on the lender following the [very public!] June 26 release of a letter by Sen. Charles Schumer, D-N.Y., urging several bank regulatory agencies that they take steps to prevent IndyMac’s collapse. In the 11 days that followed the letter’s release, depositors took out more than $1.3 billion, regulators said.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


FNBO Direct Video Contest: $10 For Most, $500 For Top 20

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Back in June, online bank FNBO Direct launched a video contest called the Pay Yourself First Challenge where users are asked to submit a short YouTube clip about what you are saving for. The first 500 entrants get a $10 Amazon.com gift card, regardless of quality. On top of that, the top 20 submissions get a $500 cash prize, and the top 5 get up to $25,000 in matched savings. Apparently, they overestimated the tech-savviness of their customers, because as of today only fifteen video submissions are up on their group. That means everyone so far is winning $500 by default! Deadline is July 31st.

So, if you have a webcam, why not mess around and make a quick video and get $10 from Amazon. Use some creativity and get a solid chance at $500. My friend borrowed a Mac with iMovie and we whipped up the clip below. Given that we had never used iMovie before tonight, I’m actually quite happy with how it turned out. Remember, you can’t use copyrighted material. Of course, if I really wanted to win the smart thing to do would be to not blog about it here, but I’m not that bright.

FNBO Direct is actually paying 0.85% APY with no minimum balance requirements or fees, which sadly enough is pretty good these days. I do have some money there, and here is my FNBO Direct review.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


New Bonuses: Bank of America $75, PNC Bank $100

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Here are some sign-up bonuses for bank accounts. Both seem to be for new bank customers. Thanks to Neerav and Mike.

Bank of America is offering a $75 bonus for opening a MyAccess checking account online. No monthly maintenance fee, no minimum balance, no direct deposit required. It says it is for BofA credit card customers only, but not sure if they really check.

You will receive your $75 credit to your new account within 90 days of opening your new personal checking account online. Limit one $75 incentive per household every 6 months. This is a special offer to existing Bank of America credit card customers and only valid only for new MyAccess Checking® accounts. This offer does not apply to current checking customers or student checking accounts. You must use the Offer Code CH75TAD and fund your account with the $25 minimum opening deposit requirement within 30 days in order to qualify for this offer. We may report the value of any premium to the IRS. This offer expires on 11/30/2008.

PNC Bank is offering a $100 Bonus for new customers opening a new Personal Checking account and making a direct deposit of $500. The Free Checking version has no minimum balance and no monthly service charge.

The payout of $100 will be credited to the qualifying account within 7 days of the first Direct Deposit, which must occur before 9/30/08. The payout will be identified as “Direct Deposit Reward” on your monthly statement. A qualifying Direct Deposit is defined as a Direct Deposit of a paycheck, pension, Social Security or other regular monthly income electronically deposited into a Free, Performance or Performance Select Checking account. The minimum amount of any single Direct Deposit must be at least $500. The Direct Deposits must be made by an employer or an outside agency. Transfers from one account to another or deposits made at a branch or ATM do not qualify as Direct Deposits. Offer available to new PNC Bank Checking account customers only.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

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United Rentals (URI) Stock Tender Offer: A Calculated Gamble

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Yesterday, I bought 99 shares of United Rentals (ticker URI) stock for $19.81 per share, in the hopes that the company will buy it back from me next week for $22. Huh?

Quick Background
Sometimes companies choose to buy back their own shares for a variety of reasons. Often this is done via a Dutch auction process where each shareholder will indicate at what price they wish to sell (“tender”) their shares. The company will then start buying back starting with the cheapest price and going up until they get enough shares. If you indicate a higher price, you balance getting more money with the risk of having them not be sold.

United Rentals Details
URI is the largest equipment rental company in the world. In early June, United Rentals told shareholders that they wanted to buy back 27 million shares using a Dutch auction with a range of $22 to $25 per share. The offer period ends on July 16th. At the time, the stock price was only $19.50. You can find more in their Letter to Shareholders, part of a larger SEC Filing.

Risks and Rewards
The price of URI stock has been wavering recently between $18 and $21. Given that the $22 minimum offer price is currently a ~10% premium over the current market price, one risk is that too many people will tender their shares for $22, which means URI will only buy a partial amount of your shares. Your remaining shares may then drop below the price at which you bought. This risk is alleviated if you buy an odd lot of 99 shares, because according to their stated buying process your shares will be bought first.

Another related risk is that this tender offer will be canceled or amended. The company might lower it’s offered price. So then it becomes a fuzzy skill to “read between the lines” and make an educated guess as to how the management will handle this.

I am not an expert at this process by any means and am not recommending that anyone else follow my example, but here is why I think it will still happen:

  • The day before the tender offer came out, the share price was only $19.50. With less than a week to go, the stock price is around $20. The stock has not plummeted or anything, but has been moving up and down with the overall market a bit. The picture remains about the same, so there is no new reason for them to change their minds if they haven’t already.
  • The company had the ability to back out on this offer on July 1st (and technically every other day so far) based on one out-clause, but declined to do so.
  • The current P/E ratio of the stock is only 6. It is not an overpriced growth stock, although it does have some debt issues. Most examples of fundamental analysis that I found have reported this company to be at least somewhat fairly valued.
  • The financing for this deal appears to be taken care of already. So they don’t need to find anyone to lend them the money for this.

Again, I am primarily a passive index fund investor; I am not an expert in this area (not even average) and I do not consider this stock part of my portfolio. This more of a calculated gamble with a short-term resolution (offer expires July 16th), with the added bonus of learning more about stock markets in the process. I am always interested in learning more, and have been waiting for a good opportunity to try another one of these. (Kaizen!) Besides, you tend pay more attention when you have some skin in the game. 😉

Personal Details
I bought my shares yesterday for $19.81 with a limit order set at $20 before market open. Upside: If all goes well, I will gain $216.91 (minus $25 in fees) with an initial investment of $1961.19. Basically I’m trying to make $200 while putting up $2,000. That is a return of 10% over what should take a few months. Annualized that’s still over 30%. Downside: The tender offer is canceled, and I am left with 99 shares of URI. I can either keep them and hope for positive return down the road, or I can sell them. If I really want to minimize potential losses, I can set a sell stop order.

Although I have an account with Zecco Trading (review) for my other fun money plays that has free trades, I decided to buy these with my Scottrade (review) account because I have used them for similar arbitrage transactions in the past and I have a few free trades left over from their referral program. I will need to contact Scottrade today and let them know that I wish to participate in this tender offer. I will be subject to an additional $25 fee for “non-mandatory reorganizations”. In cases like this, I like having a local branch to talk to so I can make sure things are done in a timely manner.

More References
» Fat Pitch Financials Contributor’s Corner – An excellent resource for such arbitrage deals, but requires a paid subscription of $125/year (or $15/month). I recently bought a year’s subscription when it was still $100/year.
» Stable Boy Selections – His 7/8 post reminded me about this offer, which I had actually forgotten about.
» New York Times DealBook Blog – More discussion on the probabilities of this offer going through.

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One Way To Track Your Progress Towards Financial Independence

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Another more conventional definition of financial freedom is when you have “passive” income that covers your expenses so that you no longer have to work. Usually, this comes from paper investments like stocks, bonds, or annuities. In the book Your Money or Your Life, the authors outline a somewhat unique way to track your progress towards financial independence (FI).

First, you should go out and buy a huge wall-sized piece of graph paper and put it up somewhere you’ll see every day. Create a chart with the horizontal axis being time, and the vertical axis being money. Each month, you should record the following items:

  1. Your monthly income
  2. Your total monthly expenses
  3. Estimated investment income

Here is a sample of what it might look like:

Line 1 – Graphing Your Income Each Month
While many personal finance articles focus on spending less, the book does a good job of reminding us that income matters and we can always do something to increase it. It also tells us that the path towards a happier life and a career you enjoy of also tends to increase your income. The book summarizes this with the following:

“Increase your income by valuing the life energy you invest in your job, exchanging it for the highest pay consistent with your health and integrity.”

Line 2 – Graphing Your Expenses Each Month
Note that we are not making a budget here. A budget often seems to suggest a goal of “I will spend this much”. Instead, here you are first making an assessment of your situation from last month. You then attempt a few (or several) changes, and re-assess again a month later. This continual feedback should ideally help you see what is working and what’s not.

For those dealing with debt, the Expenses line might even be higher than your Income line at first. This should provide a nice incentive to get to the first “crossover point” where you at least earn what you spend. Gradually, we can shave off those lower priority expenditures as we keep seeing that gap between income and expenses grow wider and wider.

Line 3 – Graphing Your Expected Income From Investments
Here, the simple formula given for finding the income you can derive from your investments is this:

savings x interest rate / 12 = monthly investment income

The suggested investment here is to use is that of the 30-year U.S. Treasury Bond, currently yielding somewhere around 4.5%. This means if you bought $100,000 of these bonds with your savings, you would earn $375 reliably every month for 30 years without risking your principal. Other people might use dividend payments from stocks, or use a historically-safe withdrawal rate.

Either way, the big goal is to make this third line meet up with the expenses line. As time goes on this line will hopefully curve up exponentially, providing inspiration to reach this “crossover point”. The idea of working for only a finite period of time can be very motivating.

Given that this book was written in 1992, I am going to guess that doing this using a spreadsheet program like Excel is also acceptable. While a physical chart may work better for some people and provide a more constant and tangible reminder, I think perhaps making the chart your Desktop wallpaper might serve a similar purpose. (Or you could create blog about it…)

This is a pretty cool idea. Perhaps I should stop tracking net worth and simply do this? For us, as mentioned before, once our mortgage is paid off the expense line should drop dramatically. Separating out the non-housing expenses into a separate line might help me focus better.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.