Quantitative Easing Is Printing Money

You’ve probably heard the term quantitative easing. You might even have read news or blog articles about what it means. I’ve always thought all that blah-blah-blah about the Federal Reserve buying Treasury Bonds sounded a lot like printing money. How else do you explain a government essentially buying it’s own bonds? Think about it…

Don’t believe me? Well, let’s have Ben Bernanke explain it himself. Once while covering his butt, and once when it was okay to tell the truth. Via The Daily Show:

Hey, maybe it’ll turn out to be a good idea, but at least tell us the truth. Increasing the money supply is as you said Ben, “effectively” printing money.

Bumped On Thanksgiving Eve

Somehow I thought it was a good idea to fly on Thanksgiving Eve. No TSA nightmares. Flight was full. Volunteered quickly for the bump (you can ask to put your name on the list when checking in), and got $400 each in transferable flight credit for the two of us, plus first class re-booking on the next flight 3 hours later. Now I’m pecking away on my smartphone. I hope everyone else has safe travels.

Happy Thanksgiving! It’s still my favorite holiday.

The Rat Race: Does This Cartoon Look Familiar?


Let’s get out of the race!

Image credit to artist Polyp. There’s also an animated version that made me nauseous (perhaps that was the point?).

Take Comfort in Rituals – Starbucks Propaganda

If you’ve walked by your neighborhood Starbucks recently, you may have noticed this new sign on the door:

I guess I was cranky – coffee withdrawal? – but I immediately blurted out:

“Translation: Even though you probably can’t afford it and may even be unemployed, please continue buying your $4 coffee.”

Too harsh?

Photo credit to timstock via Flickr.

My First Shares Of Stock Ever Purchased

I was going through some old financial files and came across an old E-Trade statement which was my first brokerage account and found my first shares of stocks ever purchased in August of 2001. This was after the dot-com bubble burst, and I was still in grad school. I had managed to save up $1,000 and promptly invested it after pretty much zero research:

  • 11 shares of Budweisder (BUD) at $43.04. Budweiser was bought by foreign conglomerate InBev in 2008 at $70 a share, but after that I’m not sure how to evaluate performance.
  • 12 shares of Pfizer (PFE) at $38.31. As of yesterday 9/2/10, PFE closed at $16.40 with about $0.75 to $1.25 a year in dividends.

People were pretty depressed about the markets back too, so I guess I figured beer and happy pills was a growth industry. 🙂

Do you have any special memories attached to your first stock purchase?

How To Sue a Telemarketer (Book Summary)

I’ve been getting an increasing number of telemarketing calls recently, so I readily agreed to a review copy of How To Sue a Telemarketer by Stephen Ostrow, lawyer and judge. I had a vague recollection that you can get $500 every time a telemarketer violates the Do No Call list, and was hoping there would be a quick form or template to fill out and slam these annoying folks. It turns out to be a bit more complicated than that, but the basic steps are outlined below.

Before you do anything else, you should confirm that your phone number is registered at the National Do-Not-Call Registry. While you can file a complaint at the same website, that doesn’t have nearly the bite of a lawsuit with financial penalties.

Step 1: Data Collection

When an unsolicited telemarketer calls and you think they are in violation of the law, don’t yell at them. In a conversational tone, try to extract as much of the following information as possible:

  • Name of telemarketer
  • Name of company
  • Company website
  • Company telephone number
  • Company address
  • What they are trying to sell you

Writing it all down is probably the most simply, having a recording is easier but you can’t tape a telephone conversation without notice in many states. (Here’s is a list of states with one-party consent.)

Step 2: Research and Lawsuit Initiation

Using this information, you can then research the legal names of either the company employing the telemarketer and/or the telemarketers themselves. Now you know who to sue. Next, you must file a complaint through your state’s Small Claims Court. The form is relatively simple to fill out and some templates are included in the book.

Here’s a list of potential violations of the Telephone Consumer Protection Act of 1991 (TCPA), each of which are separate. You can have been a victim of any one or a combination. Federal law allows for $500 per violation, which can be increased to $1,500 per violation if deemed” willful and intentional”.

  • Violation of Do Not Call list.
  • Pre-recorded messages (robocalls)
  • Failure of solicitor to identify themselves.
  • Failure to send the company’s Do-Not-Call policy within 30 days after demand.
  • Blocking a number on CallerID by a telephone solicitor

A third party must then serve the complaint to the defendant, usually via sheriff or process server. You’ll also need to file a Proof of Service to show that the accused was served.

Step 3: Your Day in Small Claims Court

Now that you have filed the lawsuit and the defendant has been notified, a court date will be set and you’ll actually face your defendant in court. The person who actually called you won’t be there, just some representative. Some tips about how to present your case to the court are given, but basically you want to document all the details of the call. Since this is a civil court, you just need to prove that it happened more likely than not.

While searching online, I found another success story for suing rogue telemarketers. In his case, the telemarketer actually called him up before the court date and offered him $500 upfront to settle out of court. Nice.

The most depressing part of the book was the part where I found out what calls are not covered under the Act:

  • Calls from organizations with which you’ve established a business relationship
  • Call by, or on behalf of, tax-exempt non-profit organizations including political compaigns.

So if I get service from Comcast, they can still bug me. And I’ve already decided to vote against any politician who robocalls me. Grrr.

There are many more nuances in the book that aren’t covered here. If you aren’t turned off by required footwork above, then this book may be worth a read. It does try to keep a humorous edge to it, hopefully the energy will encourage you to follow through and get some justice.

Frugality and Decision Making Poll of The Week

Here’s another poll to test your frugality behaviors and decision-making processes. There is no right or wrong answer, I promise. Just answer the poll honestly before reading further. It’ll just take a second.

(Due to some technical hurdles, please click on the “Read the rest of this entry…” link below to vote. Thanks!)

[Read more…]

My Money Blog Readers Are Exceptional Human Beings

After two days of polling for my Are You Smarter Than a Monkey question, here are the results. As I revealed after voting, visitors were each served up one of two different poll questions randomly, with an equal chance of getting either one. This worked out pretty well, with 49%/51% split of voters.

If you compare the questions side-by-side, you realize that they actually ask the exact same thing. Your two choices are essentially:

  • $1,500 guaranteed, or a
  • 50/50 chance at either $1,000 or $2,000

In statistics and gambling, there is a concept called expected value which is the probability-weighted sum of the possible values. In this case, the expected value for both options is $1,500. In other words, over many coin flips, the average person will get $1,500. So there is no “right” answer really, it’s more about how much risk you wish to take on. In general, you all would rather take the sure thing. I would be in this camp as well, but I’d probably take the risk if the expected value was a bit higher (remnants of blackjack self-training).

So if both polls are asking the same thing, a rational human being would answer both questions the same. However, psychologists have found that how the question is posed changes the answer. In the top poll, you start with $1,000 and are faced with either a sure gain or a bigger gain/nothing. In the bottom poll, you start with $2,000 and are faced with a sure loss or a bigger lose/nothing.

This small difference tries to test the phenomenon of loss aversion, which is the human tendency to strongly prefer avoiding losses rather than making gains. In this case, studies found humans hated the idea of losing $500 guaranteed so much that they’d take the risk in order to possibly avoid a loss, even though as we showed above the two choices are the same. Research with monkeys found that capuchin monkeys would also rather avoid the sure loss, indicating that this may be a genetic flaw rather than caused by our environment.

However, you guys were the complete opposite.

More people (38% versus 33%) went for the risky option when they had the $1,000. I don’t have any solid explanation for this, but here are some theories:

  • Readers of this blog are exceptional and don’t have loss aversion, they are of the “nothing to lose anyway, let’s go for it” mindset.
  • My testing was flawed. In the official studies, I am not sure if the same person was asked both questions, one after another. In retrospect, perhaps it would be better to present it in this manner.
  • Readers were already aware of the loss aversion theory, and compensated when answering the poll.
  • People either voted on both polls or multiple times on either poll, perhaps after reading the rest of the post explanation.

Either way, this was fun, and with nearly 1,500 voters, I’ll definitely try another experiment soon. 😉

Are You Smarter Than A Monkey? Answer This

Here’s a quick test to see if you are smarter than a monkey. Don’t worry, it turns out that monkeys are pretty smart. First, answer the poll question, then continue onwards to read an explanation. Vote first!

(Due to some technical hurdles, please click on the “Read the rest of this entry…” link below to vote! Thanks :))

[Read more…]

Conscious Spending: Things vs. Experiences

It’s official: Experiences make people happier than possessions. Okay, not really, but it is the conclusion taken from a recent psychology study as reported in this CNN Health article:

The study looked at 154 people enrolled at San Francisco State University, with an average age of about 25. Participants answered questions about a recent purchase — either material or experiential — they personally made in the last three months with the intention of making themselves happy. While most people were generally happy with the purchase regardless of what it was, those who wrote about experiences tended to show a higher satisfaction at the time and after the experience had passed.

This would suggest that in general, experiential purchases such as eating out, watching a musical, or traveling would produce greater happiness than material purchases. I wouldn’t say this qualifies as a landmark study, as it only surveyed 154 young Californian students (not exactly a large and diverse sample size). However, it should encourage us to look back on our own past purchases and consider carefully which ones had the most value to us. Prioritizing is the first step to spending consciously and cutting out the excess purchases.

A related note is that the researcher also stated that people adapt to a new purchase in six to eight weeks, up to a maximum of three months. That means the initial pleasure we get from a new possession generally fades in a matter of months. That darn hedonic treadmill again.

Hey, doesn’t this just about coincide with Apple’s product cycle? Just in time after the buzz from your new iToy starts to fade, there is another iToy 5G+ to make you happy again. Here’s a quote straight from a recent BusinessWeek article about why Apple is still going strong:

“For many people in this economy, Apple is what makes them happy,” said Shaw Wu, a senior analyst with Kaufman Brothers LP in San Francisco. “Its products make their lives easier and provide some entertainment, at a time when people don’t feel good about a lot of other things in their lives. It sounds silly, but it’s not that far from the truth.”

But again, perhaps buying some happiness every six months is fine, as long as it fits your financial priorities.

Better Financial Motivator: Stick or Carrot?

We all have financial goals that we want to reach. Some of us do better with a reward attached to reaching our goal (carrot), while others may actually try harder if trying to avoid a punishment (stick). We are motivated by personal desire, by our family, by our friends… but how about a website?

For the those that need that extra bit of discipline, check out Stickk.com, which lets you create a “commitment contract” which have real penalties attached to them. For example, you could commit to saving an extra $150 each month in a separate savings account for 6 months. You could set a penalty of $250 if you don’t follow through – send to a friend, enemy, or donated to an organization that you dislike (NRA, PETA, whatever… dubbed anti-charities).

The site is serious, and started by economics professors who all agree that incentives make the world go ’round. You choose a third-party referee (input their e-mail), as well as give them your credit card information. If you don’t follow through, your card is charged!

If you do better with carrots, you can always set that up yourself. If you reach your savings goal, go out and get a manicure or a nice steak dinner.

Deluxe Rent-a-Car of LAX: Worst Car Rental Agency Ever?

I need to rent a car in Los Angeles next month, so I went onto Kayak.com and ran a quick search. The cheapest option at LAX was through a place called Deluxe Rent-a-car, at only about $20 a day including all taxes. It seemed so cheap, I instinctively ran a quick Google search for some reviews of this unknown company.

Wow, I have never seen such bad reviews for a rental car agency before. “Don’t do it!” “Stay far away from this place!” “Worst car rental agency in the galaxy!” “Economic Terrorists!” “They wiped my account clean of over $5,000” And those were only the first 5 entries. I kid you not.

What did the LA Better Business Bureau have to say? Oh, just their worst grade possible of F:

It’s almost comical, as if there was a competition to run the absolute lowest cost car rental agency possible without being shut down by law enforcement. (They’ve somehow been in business for 9 years.) Check out these user reports, including direct quotes from Yelp, TripAdvisor, and other review sites:

  • They don’t seem to actually check that they have the actual car you want before accepting the reservation. They just take all of them to get your business. Then when you arrive, if they have it, great, otherwise, they just give you whatever is available and refund you any difference. “My “standard convertible” became a Toyota Corolla with 65k miles with the check engine low tire pressure lights lit. It also had not been cleaned on the inside.” If they actually have no cars left at all, then oops – too bad!
  • They charge everyone a $400 deposit, which is actually charged first onto your credit card, and then they have to reverse it later if they deem everything acceptable. If you get a parking ticket, they’ll charge you $125 + the cost of the ticket.
  • The shuttle doesn’t actually arrive in the Rental Car pickup section of LAX. It picks you up in the Courtesy shuttle area, with a “Johnny Park” sign instead of Deluxe Rent-a-Car. Does one area cost more to use or something? Finally, they only promise to run every 15 minutes instead of every 5 minutes like the other major agencies. Users complained of 45-minute actual wait times. I lost count of the reviews from confused customers.
  • The cars are dirty. Lots of pictures of stains on Yelp, and also claims of broken glass and bad smells. Don’t expect your “non-smoking” vehicle to actually be that way.
  • Multiple instances of the car registration being expired, yet the car was still rented out. Nice.
  • Rude employees. Too many stories to generalize any other way.
  • Gas policy: You get whatever the last renter left in the car. They apparently don’t have gas pumps at their facility. So you might pick it up empty, 1/4 full, or whatever. If it’s nearly empty, they generously tell you whatever is left is yours. If it happens to be half full, they tell you to bring it back half full.

Let this serve as a warning for potential renters, and entertainment for everyone else. Caveat emptor. As for me, after some more searching I found a coupon for Enterprise that resulted in an even lower rate than “Deluxe” per day. (I also grabbed an additional 2% cash back from Mr. Rebates.) Kayak should really remove this company from their price comparison engine!