Archives for July 2007

Stock Picking Contests Are Stupid

Posted on July 14, 2007 // 11 Comments

Why do stock-market contests continue to exist? I even had them in my high school Economics class, as if they were a useful learning tool. The goal is always to have the most money within just a few months. Since it’s always done with fake money, there is no punishment (like say, poverty?) if you lose everything. Only the top 0.01% win, and the rest lose. How is this applicable to real life at all?

I was reminded by how much I dislike such fake contests when I read about how CNBC’s Million Dollar Portfolio Challenge ended with a whimper. A quiet announcement revealed that waitress who’d never owned any stock before beat out 377,000 other participants to win the $1 million prize. But what got the most attention was the fact that people figured out a loophole in the system (being able to trade after the markets had closed) and cheated their way to great gains.

What have I actually learned? First,such short-term stock picking contests are about luck, not skill. A slot machine pull would be both faster and easier. Second, there will always be people trying to cheat the system, and many will get away with it. I find it very hard to believe that the SEC catches the majority of insider trading or other short-term manipulations of the market (you know, like Mad Money guy Jim Cramer used to do.)

I continue to ignore short-term variations of the real stock market as a result, and I often urge my family and friends to do the same. It feels like a lost cause though, as watching stock market gyrations has become America’s new favorite pastime and water-cooler material.

Added: The Motley Fool also has a nicely written article on what they term the CNBC’s “Portfolio Challenge” Fallacy.

Filed Under: Investing //

Sign-up Bonus: Free $15 OboPay PrePaid Credit Card

Posted on July 13, 2007 // 32 Comments

Free $10 Obopay Prepaid MasterCard?In celebration of getting $29 million in new financing from investors, Obopay is offering a free $15 Prepaid MasterCard for signing up for their service. They seem to also be a money transfer service like PayPal mobile.

Never carry cash again.

Send money instantly from your cell phone, online, and even AOL Instant Messanger.

Receive money in 10 seconds and spend it with Obopay Prepaid MasterCard?.

The $15 offer expires at the end of July 13th.. The $15 promo is expired, but they are still offering $10 free. There are no monthly maintenance fees for the card. Thanks to Sri for the tip.

Filed Under: Deals & Offers //

Suze Orman: Tips For Getting Paid What You’re Worth

Posted on July 12, 2007 // 11 Comments

While traveling today I was reading in a local newspaper an article by Suze Orman (couldn’t find it online) about how to close the wage gap between men and women. The tips to getting a higher salary were equally applicable to everyone, so I took some quick notes:

Don’t expect them to recognize you automatically. Seriously, you may think you are on the same page as your boss, but if you don’t talk about it specifically, you may be terribly disappointed. I’ve seen lots of coworkers come out of their performance reviews in shock.

Make goals and document your accomplishments. Everything is driven by numbers these days. Work with your boss to identify goals, and then record the steps you took to reach them, and which ones you accomplished. Your boss will likely need to justify any raise to his/her boss as well, and concrete reasons help. I think this is critical.

Argue your case, and don’t be afraid to ask for a future commitment. If you don’t get what you want even after stating your case, discuss reasons why they refused, and ask “what would it take next time” to get what you feel you deserve. Get a commitment that if you reach certain benchmarks, then you will get that 10% raise or whatever.

Be prepared to quit. Sometimes you just can’t see eye-to-eye with a company. While it is often easier to find a new position while still at your current one, having a healthy emergency fund can also give you the flexibility to avoid settling for another dead-end job.

As I’m going back to being a W-2 worker again soon, I’ll definitely keep these tips in mind.

Filed Under: Career //

25,000 WorldPoint Bonus For Bank Of America Credit Card

Posted on July 12, 2007 // 14 Comments

Bank of America is offering 25,000 Worldpoints for signing up for the University of Iowa WorldPoints MasterCard and spending $250. You can redeem 25,000 Worldpoints for $250 cash or a plane ticket. Via Fatwallet.

?To qualify for this offer, your new account must be used to make any combination of purchase, cash advance or balance transfer transactions totaling at least $250 (exclusive of transaction fees, if any). Please allow 8-12 weeks for the 25,000 bonus points to be credited to your account after qualifying.

Alternatively, American Express has their New Business Gold Rewards Card® from American Express OPEN which offers 3X points on airfare, 2X points on advertising, gas, and shipping and 1X point on everything else.

Filed Under: Deals & Offers //

What Happens When You Have More Money Than Time?

Posted on July 11, 2007 // 31 Comments

You go on at $50,000 trip touring the world by private jet. One of my oldest (and obviously, most successful and busy) friends is actually doing this next year, the deposits have already been sent in.

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Join National Geographic on an unforgettable expedition, traveling in ease and comfort by private jet. While circling the globe, explore the world’s most treasured and legendary natural and cultural wonders. Visit Peru, Easter Island, Samoa, the Great Barrier Reef, Cambodia, Tibet, India, Tanzania, Egypt, and Morocco on this once-in-a-lifetime adventure.

* Meet with National Geographic Explorers-in-Residence Meave or Louise Leakey in Tanzania and Dr. Zahi Hawass at G?za.
* Explore 12 UNESCO World Heritage sites, including Machu Picchu, Angkor Wat, the Taj Mahal, and the Pyramids of G?za.
* Discover Easter Island’s giant moai statues and famously lost culture with resident archaeologist Edmundo Edwards.
* Delve into the natural world on game drives in the Serengeti Plain and while snorkeling in the Great Barrier Reef.

This is me being jealous green with envy. :mrgreen:

Filed Under: General //

Dad’s Retirement Plan: Learning About The TIAA-CREF Traditional Annuity

Posted on July 9, 2007 // 67 Comments

While visiting the parents, I was also asked to provide some input on their retirement savings. I don’t want to invade their privacy, but I’m sure they share common concerns with others out there. My father, who is in the non-profit/education sector, has much of his retirement money with TIAA-CREF (Teachers Insurance and Annuity Association – College Retirement Equities Fund). They are one of the biggest financial services companies in the U.S., and are operated on a non-profit basis.

As you might guess from their name, a very popular option for members is the TIAA Traditional Annuity, holding over $163 billion. I was not at all familiar with this beast, so I decided to learn more about it. Here’s a quick rundown from the website:

A guaranteed annuity backed by TIAA’s claims-paying ability, TIAA Traditional guarantees your principal and a minimum interest rate, plus it offers the opportunity for additional amounts in excess of the guaranteed rate. TIAA has credited additional amounts of interest every year since 1948.

The annuity primarily invests in publicly traded bonds, commercial mortgages, direct loans to business, and real estate. It has no loads, no surrender charges, no maintenance fees, and very low annual operation expense ratios of about 0.25%. (Sources: SURS, Dixie State Univ. )

Accumulation Stage
So you invest in this annuity, your account value will never decrease as long as TIAA is around. In fact, it will go up in value by at least 3% every single year, and most likely more depending on market conditions. Think of the savings on antacids during the next stock bubble! There are two tiers of performance – From what I understand, the higher paying tier is for money that is contributed directly by the employing company or group, whereas the lower paying tier is for voluntary contributions from the individual. Here are the historical returns:

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For comparison, the venerable Vanguard S&P 500 Index Fund (VFINX) has a 10-year trailing return of 7.05%, and the Vanguard Total Stock Market Index Fund (VTSMX) has a 10-year return of 7.60%. The Vanguard Total Bond Market Index Fund (VBMFX) has a 10-year return of 5.74%.

Withdrawal Stage
When you reach retirement and are ready to start take money out of your annuity, you have a variety of options. There are one-lifetime income options, two-lifetime income options, fixed-period (ex. 10-year) income options, interest-only payments, and also a few others involving taking a lump-sum or just the required minimum distributions.

Of course, all annuities are simply a promise, not a 100.00% guarantee. In this regard, TIAA does have the highest possible credit ratings from all the major agencies: A++ by A.M. Best, AAA by Fitch, Aaa by Moody’s, and AAA by S&P.

Summary
Overall, it was very interesting learning about this additional investment option. Here were my tentative opinions:

  • There is an expected trade-off of lower long-term performance in exchange for a guaranteed minimum return if you purchase this annuity. For those with longer time horizons and the discipline to ride out the market’s ups and downs, it may be better to invest in low-cost stock/bond mutual funds or ETFs instead. Those that are very risk-averse will love this investment.
  • The lifetime income options are nice and reliable, but you could also do the same with a portion or all of any retirement portfolio. Just cash out your stocks and bonds, and go buy an immediate annuity with a lifetime payout option.
  • Still, if you’re going to buy such an annuity, TIAA-CREF offers some of the best and safest returns along with the lowest fees available in the annuity marketplace.
  • As my father is nearing retirement and I think the safety of this investment is very comforting to him, I think this option will work adequately for him. The majority of his annuity holdings are also in the higher-paying tier. I am, however, providing him some guidance in the rest of his portfolio to provide some diversification, as well as telling him what questions to ask his group’s financial advisor.
Filed Under: Investing, Retirement //

Adding Gold To My Investment Portfolio… Kind Of

Posted on July 9, 2007 // 35 Comments

While I’m back home, my parents took the opportunity to transfer possession of some family gifts. Included in them were two one-ounce 24 karat gold bars. I don’t know much about them, except one was given to me when I was born and the other when I graduated high school. The have the words “Swiss Bank Corporation” (now UBS) and a serial number on one side, and here is a picture of the other side:

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At about $650 per ounce, my two ounces would be worth $1300, or about 1.6% of my current investment portfolio. Some sources indicate I may even be able to charge a slight premium for my minted bars. In truth, I’m probably going to end up passing them along to future generations. Is it okay for me to just store these in safety deposit boxes?

I know there is heavy debate in this area, but I personally have no plans to buy any more gold. This is not to say they can’t be a useful part of a portfolio, but I’m still not really convinced of the long-term utility of buying any inanimate objects, including other precious metals and commodities. I’m keeping an open mind, however, if people want to make reasoned arguments either way.

If you are into Modern Portfolio Theory and mean-variance optimization, you might be interested in this Efficient Frontier article on gold:

Make no mistake about it: over the very long term, precious metals equity should provide your portfolio with a mean-variance boost. Just be sure that you?re prepared for the long term?the very long term?behavior of this asset class.

Filed Under: Investing //

$100 Bonus For New Citibank Ultimate Savings Account

Posted on July 7, 2007 // 100 Comments

Here’s a good promotion from Citibank if you are a brand new customer: You can get a $100 signup bonus for opening a Citibank Ultimate Savings account that pay 4.65% APY with no minimum balance requirements.

To qualify for this offer you must apply for and open a new Ultimate Savings Account by 08/31/2007. $100 will be credited to your Ultimate Savings Account within 90 days from the end of the statement period in which your account was opened. Account must be in good standing at the time of the $100 credit.

Keep in mind that Citibank has historically always done a hard credit pull for new bank applicants (for no good reason). Thanks to Vijay and Sharon for the tip.

Now, there are certainly other online banks that may be more convenient or pay more interest, so you may just want to sign up for the Benjamin.

Filed Under: Deals & Offers //

Overspending On Pets, Social Security, and Best Beater Cars

Posted on July 6, 2007 // 18 Comments

Think you spend too much on pet products? Read this post about pampered pets at The Digerati Life first, and then make your decision. Got neuticles?

JLP at AllFinancialMatters discusses when you should start taking Social Security benefits. I think Social Security will be around when I retire, but I think it could very likely be restricted to those with little or no savings.

GetRichSlowly mentioned a post on Jalopnik talking about the best cheap beater car for non-car folks. This caught my eye because now my new idle fantasy is to buy a $1,000 car and learn how to drive a manual transmission.

Filed Under: General //

14 Free Brochures To Help People Understand Home Mortgage Loans

Posted on July 5, 2007 // 8 Comments

It seems that many people have strong opinions about the subprime mortgage fallout. One common thread was that people really do need to get better educated about the mortgage lending process. What wasn’t agreed upon was who should shoulder that responsibility – the lender, the borrower, or the government? My view was that better transparency is in order, and the FTC concurs:

The Federal Trade Commission today released a Bureau of Economics report presenting the results of a study that found that mortgage disclosure forms fail to convey key mortgage costs and terms to many consumers. The study also concluded that better disclosures can be created to help consumers understand the costs and terms of mortgages to enable them to make informed decisions about mortgage products.

?Mortgage disclosures designed more than 30 years ago can be confusing even for simple loans, and they do not address the variety and complexity of today?s mortgage products,? FTC Chairman Deborah Platt Majoras said. ?Although mortgage disclosures, alone, will not prevent deceptive lending practices, consumers who understand mortgage terms and choices are less likely to fall victim to these practices.?

Even if you disagree, the fact is that the government already does have some helpful information out there, and hopefully if we spread the word around the tax money already spent on making them won’t be wasted. 🙂 I sure wish Ms. Williams read a couple of these beforehand.

First up is the U.S. Department of Housing and Urban Development, whose mission is to “increase homeownership, support community development and increase access to affordable housing free from discrimination.” They have a whole section on Buying A Home, and even a brochure on finding the best mortgage [pdf]. Inside, it shows you how to compare all the costs involved in obtaining a mortgage. There is even a helpful Mortgage Shopping Worksheet included to help you out.

Shopping around for a home loan or mortgage will help you to get the best financing deal. A mortgage? whether it?s a home purchase, a refinancing, or a home equity loan?is a product, just like a car, so the price and terms may be negotiable. […] Shopping, comparing, and negotiating may save you thousands of dollars.

Next, you have a Guide to Mortgage Products [pdf] from the Federal Reserve Bank of Boston. It’s presented through a true/false question-and-answer format which makes it very digestible, and has a nice glossary of lending terms at the end.

What you should ask the lender:
? Which of your products offers the lowest interest rate?
? Will my interest rate be fixed or variable (change periodically)?
? If the interest rate can change, when will it change and how high or low can it go?
? If the lender offers an introductory or ?teaser? rate, ask, When does the rate expire and how will the new rate change my monthly payment amount?
? If the rate expires, what will the new rate be, and will it be fixed or variable?

Finally, check out these 12 others from the Federal Citizen Information Center:

– A Consumer?s Guide to Mortgage Lock-Ins
– A Consumer?s Guide to Mortgage Refinancing
– Buying Your Home: Settlement Costs and Helpful Information
– Consumer Handbook on Adjustable Rate Mortgages
– Guide to Single Family Home Mortgage Insurance
– Home Buyer?s Vocabulary
– Home Mortgages: Understanding the Process and Your Rights to Fair Lending
– How to Buy a Home with a Low Down Payment
– How to Dispute Credit Report Errors
– The HUD Home Buying Guide
– When Your Home Is on the Line

Filed Under: Real Estate //

LifeLock Review: DIY and Protect Your Identity For Free

Posted on July 4, 2007 // 33 Comments

You’ve probably seen commercials for a service called LifeLock, which offers identity theft protection services ranging from $10 to $30 a month. After a $12 million settlement with the FTC over deceptive marketing practices, they are again in trouble with the FTC over… their deceptive marketing practices. The main problem that I have with this service is that they are charging you for things you could do yourself, and often you will have to do it yourself even if you pay them.

Here’s what they used to say:

First, we ask the credit bureaus to set fraud alerts on your behalf. Usually, this is done through our automated systems and the alerts are set within an hour. From time to time there may be a hitch and we have to do the first one manually, usually because they have a different address on file for you. If this happens, we’ll tell you right away and do what needs to be done to get the alerts set.

Since then, I believe the credit bureaus have gotten angry at Lifelock (making money off of your data is their job!) and now you have to set the credit freezes yourself.

Free – Just call the numbers below. Technically, alerting any single bureau should automatically initiate fraud alerts on all of them, but it may be more reliable to simply call each one separately.

* Equifax: 800-685-1111; Fraud Dept. 800-525-6285
* Experian: 888-397-3742 (same for Fraud Dept.)
* Trans Union: 800-916-8800; Fraud Dept. 800-680-7289

I should note that this will also hinder your ability to get quick approvals for things like auto loans or credit card applications. One good tip is to use your cell phone as the contact number so that the bureaus can quickly verify your identity when you really do want to apply for credit.

Second, unless your circumstances change and you tell us not to, every 90 days or so we ask the credit bureaus to do it again.

Free – Use Google Calendar (also free) to e-mail you a reminder to call again in 90 days. Rinse and repeat.

Third, we request that your name be removed from pre-approved credit card and junk mail lists and we keep making the requests as they expire. Statistics show that this is one of the most common ways that thieves hijack identities. Plus, all that mail is just so irritating. Many of our clients tell us that this alone is worth the price.

Free – Just go to OptOutPrescreen.com to get removed for 5 years. I’m probably in the minority here, but I kind of like getting pre-approved offers myself, it helps me track trends in interest rates, special offers, and gives me an idea of how good my credit score is.

Fourth, we order your free credit reports on your behalf from the major credit bureaus and they are sent directly to you. We do this every year.

Free – Yet another feature that is free to all by the Fair Credit Reporting Act, and can be found at AnnualCreditReport.com. In fact, here are 4 more ways to get a free credit report. One of them is simply placing a fraud alert as described about. If you keep setting one up every 90 days, you can technically get a total of 15 free reports every year (3 credit bureaus x 5 each).

Last, but certainly not least: If your Identity is stolen while you are our client, we?re going to do whatever it takes to recover your good name. If you need lawyers, we?re going to hire the best we can find. If you need investigators, accountants, case managers, whatever, they?re yours. If you lose money as a result of the theft, we?re going to give it back to you. We will do whatever it takes to help you recover your good name and we will spend up to $1,000,000 to do it.

Not free. But, you can get lower levels of identity theft protection for free at various financial institutions like your local credit union or at many major banks, just for having an account with them.

So, is the convenience of LifeLock, as well their $1 million dollar insurance policy worth $110-120 a year? My vote is no. Although I’m sure that identity theft can be very painful and costly, if you really did all the free things above your chances of being affected are very slim. The time saved is minimal and the “million dollar guarantee” seems to be overkill and more of a marketing ploy. If anything, I’d use the money to go buy a good paper shredder instead.

Filed Under: Credit Cards, Deals & Offers //

OhMyGawdWhereDidAllThisCrapComeFrom!?!?

Posted on July 4, 2007 // 16 Comments

After living with a basement for the last two years, it seems that we have really accumulated way too much stuff. Deuce Bigalow on DVD, REM on CD, Christmas decorations, three different rakes, two different types of fluorescent light bulbs, two right ski boots (the left ones were stolen)… packing is going to be painful.

Since we’re going to be wandering nomads for a few weeks, we are stripping ourselves down to:

– safe shelter with bed and hot shower
– a laptop with a wireless network card
– a week’s worth of clothes
– critical documents like passports
– wallet with credit cards and ID

It feels nice to celebrate our independence from clutter. You know, before I give in and buy the 2nd generation iPhone 😉 Happy 4th of July!

Filed Under: Frugal Living //
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