Archives for October 2017

Amazon Cash: Add $25, Get $5 Bonus Credit

Posted on October 11, 2017 // 9 Comments

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Updated. Amazon is running a new promotion that gives you $5 Amazon bonus credit if you add $25 via Amazon Cash. Amazon ran a similar promo earlier this year that expired, so note that this one is only valid if you haven’t used Amazon Cash before.

Amazon Cash let you load cash into your Amazon account and buy things online. You get a unique barcode linked to your Amazon account, and then bring it in to a participating physical store. You can either print it out or use your smartphone. There are no fees. Participating stores include GameStop, CVS Pharmacy, KwikTrip, Fred’s Pharmacy, Cumberland Farms, and more.

Ask the cashier to scan your barcode like you’re buying a physical item. The cashier may not be familiar with the program, but as long as they scan it/see screen/enter $25, and you pay, it will go through. You can pay with pay with cash or credit card, and the funds will be loaded onto your Amazon balance (same place as where gift cards go).

Try Amazon Cash for the first time by adding $25 or more to your Amazon Balance and earn a $5 Amazon Credit towards your next purchase on Amazon.com. Your discount will automatically be applied at checkout. This is a limited time offer, one per Amazon customer account. The promotional credit expires on December 31, 2017.

Something easy to do if you are already in a mall with a Gamestop or shopping at CVS. Note that the $5 free credit must be used on products shipped and sold by Amazon.

Filed Under: Deals & Offers //

Barking Up The Wrong Tree: The Benefits of Being Mostly Optimistic

Posted on October 9, 2017 // Leave a Comment

barkingEric Barker writes at Bakadesuyo.com and his talent/skill is synthesizing hundreds of different sources of academic research and historical anecdotes into actionable ways to improve your life. That’s kind of a crowded field these days, but I enjoyed reading his book which combines a lot of his past work: Barking Up the Wrong Tree: The Surprising Science Behind Why Everything You Know About Success Is (Mostly) Wrong.

If I had to sum up this book in one word, it would be “nuanced”. Be nice but not too nice. Work hard but not too hard, especially on one single area of your life. Grit is good, but time is finite. Thus, quitting and working on a better thing instead can also be good. Is it better to be an extrovert or introvert? It depends. (The book details why.) With so many tips and examples, this was one those books that kept my attention when reading it, but after I finish I had trouble remembering something specific to carry with me.

After looking back on my notes, I decided to make this my takeaway: Be mostly optimistic. For the most part, being optimistic opens you up to more opportunities that more than offset any failures. If I had to use a number, be 80% trusting, 80% optimistic. However, don’t be 100% trusting as that opens you up to abuse. Here are some examples.

Your great weakness may also be your greatest advantage. Consider what makes you unique, and look at it optimistically. You might not make a lucrative career out of your quirks, but it’s still your best shot. You have to align your life and environment to maximize your differences. If you love working within structure, use that. If you need to blaze your own path and can’t stand structure, use that. If you happen to love one thing 1,000x more than anything else, well you better get on that.

Prisoner’s dilemma. This game theory experiment involves two individuals faced with the decision of whether to trust or betray the other person (from Wikipedia):

Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of communicating with the other. The prosecutors lack sufficient evidence to convict the pair on the principal charge. They hope to get both sentenced to a year in prison on a lesser charge. Simultaneously, the prosecutors offer each prisoner a bargain. Each prisoner is given the opportunity either to: betray the other by testifying that the other committed the crime, or to cooperate with the other by remaining silent. The offer is:

If A and B each betray the other, each of them serves 2 years in prison
If A betrays B but B remains silent, A will be set free and B will serve 3 years in prison (and vice versa)
If A and B both remain silent, both of them will only serve 1 year in prison (on the lesser charge)

As one of these prisoners, what would you do? What if you had to do it 20 times in a row? You could always trust. You could always betray. You could do something in between. It turns out that a really simple algorithm does nearly best overall: tit-for-tat. The strategy is simply to cooperate on the first iteration of the game; after that, do what your opponent did on the previous move. If they trust, then you trust. If they betray, then you betray.

You know what is a even a little bit better? Tit-for-tat plus occasional forgiveness. Once in a while, you should trust again even if they betrayed last time. This stops a negative feedback loop of repeated betrayals.

The lessons: Start out nice (be optimistic!) and hope to stay nice, but don’t be a doormat if abused in return. Be consistent. Forgive once in a while.

Optimist vs. Pessimist explanatory style. The book includes an interesting contrast as to how each would react to a setback. Pessimists tell themselves that bad events:

  • will last a long time (I’ll never get this done)
  • are universal (I can’t trust any of these people)
  • are their own fault (I’m terrible at this)

Meanwhile, optimists tell themselves that bad events:

  • are temporary (This happens occasionally, tomorrow will be better)
  • have a specific cause (It is just because the weather is bad today)
  • are not their own fault (I’m good at this, but today wasn’t my lucky day)

It is suggested that you can indeed change your natural optimism/pessimism levels by altering your explanatory style.

This is not to say that you should be only optimistic. Here’s a good post exploring the pros and cons of both sides. The overall conclusion:

The majority of the time, think positive. Happiness and health trump pretty much everything else. There are situations where negativity can help, like when we’re making high-stakes plans or trying to improve skills.

Be optimistic socially. Even if you aren’t a natural extrovert, you can still build your network in a positive way without being sleazy. Meet new people by finding shared interests and/or shared challenges. Help others first when you can, without expecting anything in return. Most people are good and will look to reciprocate. Join groups. Try to maintain contact.

Luck school = try new things. Dr. Richard Wiseman studied “lucky” people and found that the most important characteristic of lucky people is that they are much more likely to just try new stuff, which opens them up to opportunity. In other words, luck wasn’t random; it was due to choices. So he started a “Luck School”, teaching a group of people to act more like lucky people. It worked. Yes, trying more being failing more too, but people tend to regret a failure to act, while the failures didn’t really do any damage. You can often learn from failure, anyway. Finally, we tend to remember the good things and forget the bad. (This selective memory is probably why I have three kids.)

Bottom line. Being mostly optimistic appears to be the best available strategy for many things in life. Try a lot of new things. Meet new people. Optimists are more likely to create opportunities for career success and personal happiness. You will also fail more, but those failures don’t tend to cause permanent damage. Optimism is even associated with better health and longer lifespans. Don’t go overboard. Don’t be a overly-trusting doormat, and don’t be dangerously overconfident. Think 8/10 optimistic. (I’m not naturally this optimistic, so I’ll have to consciously try and change my attitude and explanatory style.)

Filed Under: Book Reviews, Inspirational //

S&P 500 Total Return: Still Doubled From October 2007 to 2017

Posted on October 5, 2017 // 17 Comments

In early October 2007, the S&P 500 index hit just over 1,500 – an all-time high. You might have been concerned, or you might not have even noticed. Less than 2 years later, the financial crisis occurred and the S&P 500 dropped 50% down to 750 (March 2009). If you were a lump-sum investor, October 2007 would have been the worse month to invest in a rather long time. However, consider this chart via Bloomberg article:

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If you held on through the panic, you broke back even some time in mid-2012 if you include dividends (total return). Four years after hitting bottom, you were again hitting an all-time high. After that, basically all of 2013 was spent reaching new “all-time highs” over and over again. You might have gotten nervous again. Is it time for another drop?

Yet, if you continued to hold on until now (October 2017), even if you had the worst possible timing an pushed all your chips in on October 2007, you would have doubled your money. Over the last 10 years, even after both pushing your chips in at an all-time high and experiencing a 50% drop, you would still have earned over a 7% compounded return.

You could interpret this as pro-stocks, but my takeaway is instead that all-time highs don’t mean much. The price could drop by 50%. The price could go up 100%. We’ve seen that, and thus should be prepared for both. Instead of worrying, try considering either possibility and make a plan.

If stocks keep going up from here, I will ______. If stocks drop 50% from here, I will _______.

In my case, my portfolio could be described roughly as 67% stocks and 33% bonds. If all my stocks dropped 50% and my bonds held steady, then I would end up at 50% stocks and 50% bonds. After a 50% haircut, I would be shaken but hopefully remind myself that stock valuations would look a lot better as well. If I can get up the courage, then I will rebalance back to 67/33. If I turn out to be a scaredy-pants, simply staying at 50/50 should still keep me adequately exposed to any recovery.

Filed Under: Investing //

Kelly Criterion and Your Fun Money Allocation

Posted on October 4, 2017 // 3 Comments

chipsDo you think you’re a below-average driver? I didn’t think so. In the same vein, Jason Zweig had a funny tweet the other day that hit home:

His linked article ends with this advice:

Put 90% of your money in low-cost index funds and lock yourself in by adding a fixed amount every month through an electronic transfer from your bank. […] Speculate with just the remaining 10%, and use a checklist of buying criteria to make sure you never buy a stock purely because it has been going up.

This coincided with me reading stuff about the Kelly Criterion, a mathematical formula used to determine the optimal size of a series of bets. Basically, the greater your “edge”, the greater your bet size should be. If you have zero edge, then you should bet nothing. If you have negative edge, you should theoretically bet against yourself (if only casinos allowed that).

Here’s an interesting example that involved a special coin where you have the advance knowledge that it has a 60% chance of heads and 40% chance of tails. In short, with this edge you should consistently bet 20% of your bankroll each time. That’s it! If the coin was 52.5% heads/47.5% tails, you should only bet 5% of your bankroll. Most people do not find this intuitive.

What’s your own edge? Consider that some folks think that only 5% of Active Investment Managers Will Add Value. This is where I insert a couple of Charlie Munger quotes:

I think it is roughly right that the market is efficient, which makes it very hard to beat merely by being an intelligent investor. But I don’t think it’s totally efficient at all. And the difference between being totally efficient and somewhat efficient leaves an enormous opportunity for people like us to get these unusual records. It’s efficient enough, so it’s hard to have a great investment record. But it’s by no means impossible. Nor is it something that only a very few people can do. The top three or four percent of the investment management world will do fine.

If you stop to think about it, civilized man has always had soothsayers, shamans, faith healers, and God knows what all. The stock picking industry is four or five percent super rational, disciplined people, and the rest of them are like faith healers or shamans. And that’s just the way it is, I’m afraid. It’s nice that they keep an image of being constructive, sensible people when they’re really would-be faith healers. It keeps their self respect up.

Bottom line. In stock market investing, most of us lack an edge and thus should stick with index funds. But we all like to think we have some edge, so maybe a 5% or 10% fun money allocation is acceptable. Anything higher would be claiming to have some crazy, unreasonable edge. I would say it also depends on how aggressively your fun money is managed. Berkshire Hathaway stock is relatively low risk. Mine is invested in short-term loans backed by real estate with conservative loan-to-value ratios and a target return of 7%. The latest cryptocurrency promoted by celebrities on social media? Not low risk.

Filed Under: Investing //

Consumer Reports: Top 10 Cars Reaching 200,000 Miles (Updated 2017)

Posted on October 3, 2017 // 6 Comments

cr1704Consumer Reports has an updated for 2017 list of the 10 vehicles (including cars, SUVs, minivans, and pickup trucks) that reached 200,000+ miles according to their big annual car survey. Here’s the list based on the total number of responses (ignoring model years), with the Toyota Camry the top model.

  • Toyota Camry
  • Honda Accord
  • Toyota Prius
  • Honda CR-V
  • Toyota Sienna
  • Honda Civic
  • Toyota Corolla
  • Toyota 4Runner
  • Toyota Highlander
  • Ford F-150

There are a couple of wrinkles to consider:

  • This is a raw list based on the number of responses, but the Toyota Camry is already the best-selling model in the US. It would be interesting if they adjusted for the overall number of vehicles sold. You might then find some hidden gems. What if Mitsubishi made a really solid car but nobody noticed since there are so few of them? Also, any new model names like the Buick Encore will not have been around long enough to get to 200,000 miles.
  • The demographics or other characteristics of a Toyota Camry or Honda Civic owner may be different. Maybe Toyota and Honda owners tend to be more frugal, more diligent at regular maintenance, and not buy new cars every 3-7 years. That would be a big factor in getting to 200,000 miles as a new car. Perhaps the more often a car is sold, the less likely it will reach 200,000 miles. If you only plan on owning a car for a couple years, why spend a lot of energy taking care of it?
  • As noted in the article, a specific car model can go through period of higher or lower reliability, especially when a new generation is released. A specific Toyota or Honda model year may have a known issue with transmission, etc.

I’ve been a participant in the online reliability website TrueDelta for a while. It uses crowd-sourced data, but it often needs additional data points to be accurate enough to be useful. I recommend contributing if you find it useful. To their credit, they do try to make the periodic reporting as quick and easy as possible.

Filed Under: Frugal Living //

Best Interest Rates on Cash – October 2017

Posted on October 2, 2017 // 7 Comments

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Interest rates are slowly waking up from their multi-year slumber. Don’t let a megabank pay you 0.01% APY or less for your idle cash. Here is my monthly roundup of the best safe rates available, roughly sorted from shortest to longest maturities. I focus on rates that are nationally available to everyone (not restricted to certain geographic areas or specific groups). Rates checked as of 10/2/17.

High-yield savings accounts
While the huge brick-and-mortar banks rarely offer good yields, there are many online savings accounts offering competitive rates clustered around 1.0%-1.2% APY. Remember that with savings accounts, the interest rates can change at any time.

  • The Mega Money Market accounts of both Redneck Bank and All America Bank (they are affiliated) are paying 1.50% APY on balances up to $35,000. Note that amounts over $35,000 earn only 0.50% APY.
  • Other sample top rates: DollarSavingsDirect at 1.40% APY, CIT Bank at 1.35% APY up to $250k, Synchrony Bank at 1.30% APY, Goldman Bank at 1.20% APY, and UFB Direct at 1.41% APY ($5k min).
  • I’ve experienced the “bait-and-switch” of moving to a new bank only to have the rate lowered quickly afterward. Until the rate difference is huge, I’m sticking with a Ally Bank Savings + Checking combo due to their history of competitive rates (including CDs), 1-day interbank transfers, and a overall user experience. I also like the free overdraft transfers from savings that let’s me keep my checking balance at a minimum. Ally Savings is at 1.20% APY.

Money market mutual funds + Ultra-short bond ETFs
If you like to keep cash in a brokerage account, you should know that money market and short-term Treasury rates have inched upwards. It may be worth the effort to move your money into a higher-yielding money market fund or ultrashort-term bond ETF.

  • The Vanguard Prime Money Market Fund currently pays an 1.12% SEC yield. The default sweep option is the Vanguard Federal Money Market Fund, which has an SEC yield of 0.98%. You can manually move the money over to Prime if you meet the $3,000 minimum investment.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 1.46% SEC Yield ($3,000 min) and 1.57% SEC Yield ($50,000 min). The current average effective duration is 1.0 years.
  • The following bond ETFs are not FDIC-insured, but if you want to keep “standby money” in your brokerage account and have cheap/free trades, it may be worth a look. The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 1.58% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 1.60% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months. More info here.

Short-term guaranteed rates (1 year and under)
I am often asked what to do with a big wad of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). My standard advice is to keep things simple. If not a savings account, then put it in a short-term CD under the FDIC limits until you have a plan.

  • Ally Bank No-Penalty 11-Month CD is paying 1.50% APY for $25,000+ balances and 1.25% APY for $5,000+ balances. The CIT Bank 11-Month No-Penalty CD is at 1.45% APY with only a $1,000 minimum deposit and no withdrawal penalty seven days or later after funds have been received. The lack of early withdrawal penalty means that your interest rate can never go down for 11 months, but you can always jump ship if rates rise.
  • Advancial Federal Credit Union has a 6-month CD at 1.63% APY ($50k min) and a 12-month CD at 1.78% APY ($50k min). If you don’t otherwise qualify, you can join with a $5 fee to Connex Professional Network and maintaining $5 in a Share savings account. Via DepositAccounts.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. There are annual purchase limits. If you redeem them within 5 years there is a penalty of the last 3 months of interest.

  • “I Bonds” bought between May and October 2017 will earn a 1.96% rate for the first six months, and then a variable rate based on ongoing inflation after that. While that next 6-month rate is currently unknown, at the very minimum the total yield after 12 months will around 1% with additional upside potential. More info here.
  • In mid-October, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with high interest rates. The negatives are that balances are capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). The other catch is that these good features may be killed off without much notice. My NetSpend card now only has an eligible balance up to $1,000.

  • Insight Card is one of the best remaining cards with 5% APY on up to $5,000 as of this writing. Fees to avoid include the $1 per purchase fee, $2.50 for each ATM withdrawal, and the $3.95 inactivity fee if there is no activity within 90 days. If you can navigate it carefully (basically only use ACH transfers and keep up your activity regularly) you can still end up with more interest than other options. Earning 4% extra interest on $5,000 is $200 a year.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with some risk. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Rates can also drop quickly, leaving a “bait-and-switch” feeling. But the rates can be high while they last.

  • Northpointe Bank has Rewards Checking at 5% APY on up to $10k. The requirements are (1) 15 debit card purchases per month (in-person or online), (2) enrolling in e-statements, and (3) a monthly direct deposit or automatic withdrawal of $100 or more. ATM fees are rebated up to $10 per month.

Certificates of deposit (greater than 1 year)
You might have larger balances, either because you are using CDs instead of bonds or you simply want a large cash cushion. Buying finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider a custom CD ladder of different maturity lengths such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account.

  • Advancial Federal Credit Union (see above) has increased their rates a bit since last month, with their 18-month CD at 1.96% APY ($50k min) and a 24-month CD at 2.04% APY ($50k min). The early withdrawal penalty is 180 days of interest.
  • Ally Bank also has a 5-year CD at 2.25% APY (no minimum) with a relatively short 150-day early withdrawal penalty and no credit union membership hoops. For example, if you closed this CD after 18-months you’d still get an 1.64% effective APY even after accounting for the penalty.
  • Hanscom Federal Credit Union is offering a 4-year Share Certificate at 2.50% APY (180-day early withdrawal penalty) if you also have Premier Checking (no monthly fee if you keep $6,000 in total balances or $2,000 in checking). HFCU also offers a 3% APY CU Thrive “starter” savings account with balance caps. HFCU membership is open to active/retired military or anyone who makes a one-time $35 donation to the Nashua River Watershed Association.
  • Mountain America Credit Union has a 5-year Share Certificate rate at 2.60% APY ($5 minimum) with a 365-day early withdrawal penalty. Anyone can join this credit union via partner organization American Consumer Council for a one-time $5 fee.

Longer-term Instruments
I’d use these with caution, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10+ years? You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer the same FDIC-insurance. As of this writing, Vanguard is showing a 10-year non-callable CD at 2.65% APY (Watch out for higher rates from callable CDs.) Unfortunately, current long-term CD rates do not rise much higher even as you extend beyond a 5-year maturity.
  • How about two decades!? Series EE Savings Bonds are not indexed to inflation, but they have a guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.10% rate). You could view as a huge early withdrawal penalty. You could also view it as long-term bond and thus a hedge against deflation, but only if you can hold on for 20 years. Too long for me.

All rates were checked as of 10/2/17.

Filed Under: Banking, Deals & Offers, Treasury Bills and Bonds //

Amazon Prime: Spend $25, Get Free Caramel & Cheddar Popcorn

Posted on October 2, 2017 // 4 Comments

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Amazon Prime members who spend $25 or more can now get a free bag of Sweet ‘n’ Cheesy Popcorn Mix, Caramel & Cheddar. The page for a free bottle of Amazon Elements vitamins is still up, but readers report the code coming back as expired. Many readers have reported that you can get the deals multiple times (with a separate $25 order) even if you have gotten it before.

To redeem, you must add $25+ worth of products that are sold by Amazon.com or Amazon Digital Services LLC to your cart. Amazon gift cards don’t qualify, but the a $25 physical gift cards from Whole Foods, Starbucks, or Panera Bread should work.

Next, add the bag of Amazon-branded Chicago Mix popcorn, which appears to just be a private label version of the caramel and cheddar popcorn made by G.H. Cretors. (That brand is available at Costco, which I have tried and liked.) You should see the popcorn charge removed.

Filed Under: Deals & Offers //
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