Reinke Faces Life

http://www.aarpmagazine.org/money/Articles/
a2003-01-21-7costly.html

http://tinyurl.com/ywtgfr

***Begin Quote***

Learn the secret lingo

The first phrase you need to commit to memory is “Social Security integration.” Yeah, it’s a doozy. Say it out loud several times so you don’t forget. The phrase signifies that your company uses a tricky formula to calculate your pension that in effect mingles projected Social Security earnings with your company benefit to make your future look rosier than it really is. “It can be completely devastating,” says Hotz. For example, if your pre-retirement company statement tells you you’re going to get, say, $1,000 a month as a pension, and Social Security tells you you’re going to get $1,000 a month, you may logically conclude that you’ll get $2,000 a month to live on. Instead, with Social Security integration, you could be looking at $1,500, since pension pay is reduced by up to 50 percent of the amount of Social Security you receive. About half of all companies use Social Security integration.

***End Quote***

Wow! That’s a new one on me. Seems unfair to claim credit for social security, which one may never get, may be taxable, and could really make it harder to know where you stand.

Argh!

There no “flux”. It’s a cyclic bull inside secular bear market. Yeah, I know “wt…”!

The secular trend (aka the channel) is the very long term trend. It’s bearish. It’s generally accepted that that long term trend is to lower valuations. PEs are at record highs. Oil is creeping back up. The Chinese are out of balance in trade. AND, the gooferment has several structural financial problems — out of balance budget, mounting debt, war costs, inflation, medicare costs escalating, medicare’s drug benefit, social security is unfunded, government pensions, government benefits — that make for bad news! The secular trend is evidenced by lower highs and lower lows. The cyclic trend is bullish(aka were going up inside the channel). There is no evidence of “bad news”. Business still are showing profits. Albeit slowing, but still profits. The structure of the economy seems to be good enough to support the normal course of business.

So, we are looking at is oscillation inside a channel that is sloped down. Watch the charts as the daily results bounce between the boundaries.

What should someone do?

Depends upon your age, and what kind of money it is.

If we are talking tax-deffered retirement money for a young person, then you want to be fully diversified, fully advantaged, and tactically shifting the mix as it seems fitting. If we are talking non-tax-deffered, then one has to be less careful (i.e., losses are deductible). A non-market-timer, buy and hold, average joe should be really careful in this environment. We’re going down. The only question is how far, how fast, and when.

My personal strategy, and I’m an old fart, that doesn’t have the ten years for the market to come back, is to in April 15th, take a conservative position with ½ maybe even more of ALL retirement and non-retirement money. I am expecting that all the IRA contributions to support the market thru April. Like deal or nodeal, I like to look at the upside versus the downside. With the S&P, and most metrics at near records, with PEs in the stratosphere, I postulate ex-cathedra from my belly button, is upside 1500 from 1350 and downside 900 from 1350. Numbers are approximate. That’s 11% up and 33% down.

So, I’d be very careful about taking a big loss in a retirement account.

In tax-protected accounts, I’m moving half or more to cash in April.

In taxable account, I’m confused. If I sell to move to cash, I’ll have to pay taxes ~25%. If the downside is 33%, then the loss would be 8%. I’m much more tempted to roll the dice. I’m reviewing each holding and trying read the entrails of the chickens to determine how the individual will fare in the downdraft.

Hopefull, if you’ve read my book,

https://reinkefj.wordpress.com/2006/06/30/muny-mental-lock-in-or-training-elephants/

then there is no single investment that will put a hole below the waterline.

I try to think about pyramid. Emergency fund and savings should be untouched by any down draft in the market.

If you’re efund and savings are defective, then that’s a different problem.

I was about to buy some cheap tech dodad online when I noticed the price jumped when I went to check out.

Rebate?

I don’t know about you but I’ve learned my lesson. I don’t do rebates! I think it’s an unfair business practice.

As a matter of fact, I punish vendors with this scam. I refuse to do business with them at all.

Good bye Buy Dot Com.

You almost fooled me. But you won’t get that chance again.

http://www.lewrockwell.com/north/north512.html

The Gold-Plated Sting
by Gary North

***Begin Quote***

If a free market gold standard ever arrives, it will be the result of an unplanned response by men and women to a disaster created by the existing central bank cartel. This would require that the switch be preceded by massive inflation, followed by deflation, producing the bankruptcy of the existing banks and brokerage houses.

***End Quote***

Well, I clearly agree, it probably would take some catastrophe to get back to a gold currency. There may be a peaceful solution.

Gresham’s Law, “bad money drives good out of circulation”, ensures that gold can’t circulate alongside FRBies at the same time.

I look at the times of Hyperinflation as the “BIG entrance door” to getting back to gold. It has to be the sudden awakening from the fiat currency delusion. There have been examples of a country’s economy stopping. The Politicians keep inflating, after all it’s free money to them, and eventually the food prices escalate faster than earning power. I have had the phenomena of “wait an hour and your money is worthless” described to me by people who lived thru it. She described going to her husband’s office several times a day, taking what he had been paid for his work, and buying anything in the marketplace. Anything was better than paper. That was an economics lesson for me. Paper is paper. It only has value as long as the marketplace takes it. And, as we know, when the market crashes, the exit door isn’t wide enough for everyone at the same time.

The “little door” peaceful solution might be that people recognize the scam of paper fiat currency and “game” the system. Clearly, owning something is better than owning dollars. Owning something that generates wealth is better than something that doesn’t. Inflation is the hidden tax on holding dollars. If we guesstimate that the inflation rate is 5%, then a dollar to day is .95 next year, .9025 in two years, .8573 in three, .2146 in 30, and .0769 in 50. Suppose that the rate goes to 10%, the progression is 0.9000, 0.8100, 0.7290, 0.6561, 0.5905 with .0424 in 30 years and .0052 in 50! So the actual rate of inflation is very important. So you NEVER want to hold dollars. Envision burying a cash horde in your back yard. Dig it up in fifty years and you’ve got waste paper.

So how does one deal with the reality.

• Holding dollars is always wrong! (i.e., do you want the pirate’s chest to be full of dollars?)
• Having a commodity is a long term store of value. (i.e., two gold coins have historically always bought a fine’s mens suit)
• A productive asset is intrinsically valuable (i.e., the cow gives milk every day).

One “games” the system by not being fooled into thinking that FRBbies are “money”. Money is a store of value.

>Posted by: “Norm Higgs” in MLPF
>Wed Feb 28, 2007 8:00 pm (PST)
>The problem here is that ‘Saved’ money doesn’t do the economy any good –

No, “saved money” is the capital — the foresworn consumption — by which the economy can expand.

Quick trip to Crusoe’s island that economists love so much. If Caruso needs five days to make a better fish catcher (i.e., a net), he needs to “save” five days of “food catching” so that he can “invest” in a better fish catcher. Savings is savings.

So, one of the problems of Keynesian economics is that “inflation”, (expanding the money supply by printing more fiat currency), doesn’t “save” anything to pay for the capital goods. Crusoe can’t print “fish” to eat while he weaves a net.

When money is not backed by a commodity, the market gets confused. (Actually the individuals in the market are confused as to values.) A capital project (i.e., weaving a net) looks more profitable than it really is. (Technically called malinvestment!) So, for example, with artificially low mortgage rates, I buy a house to rent that is unprofitable when there are no renters or when the Fed raises interest rates.

We “save” so little because, for example, in my gut, I KNOW that the house I bought 30 years ago for 47,000 “dollars” is not really really worth 475,000 “dollars” today. Regardless of what the tax assessor or the real estate agent says, I know that the dollars ain’t the same.

Some wall street wag christened bank cds as “certificates of depreciation”.

Sadly, savings doesn’t make a lot of sense in today’s inflationary climate. The talk about “global warming”, that’s nothing compared to all the “financial hot air” that’s being blown into the money supply.

I think this is important to MLPF because it means that business decisions, money, and deals — internationally — have to recognize that there is a significant distortion in the time value of money. So, imho, guesstimates have to have fudge factor added for inflation. I personally think it is 2% higher than the available short term certificate of deposit rate. So, if presented with a cash flow in dollars, then one can’t evaluate it WITHOUT considering the Net Present Value http://en.wikipedia.org/wiki/Net_present_value to bring future “dollars” into current “dollars” for comparison. I think investors, business people, and the ordinary joe six pack ignore the depreciation in value of their “dollars” at their own financial peril.

http://www.thesimpledollar.com/2007/02/25/
why-i-keep-cash-under-my-mattress/

http://tinyurl.com/23s4v4

Why I Keep Cash Under My Mattress
February 25, 2007 @ 9:00 am – Written by Trent
Categories: Insurance

***Begin Quote***

It’s true. After all the financial advice I give out on this site, I keep a decent amount of cash “under my mattress” (actually, it’s in another secure place in my home, but it’s effectively the same thing). At first, this seems to fly right in the face of everything I preach on this site. Why isn’t this money at least earning 4.5% in an ING Direct savings account, if not earning a lot more in a mutual fund or something else? No, because this is a different kind of investment.

***End Quote***

Me too. And, gold coins.

Power outages, political instability, or a bank holiday.

There are all sorts of things that can happen. Bail out a relative? How much is up to you? The Mormons keep a year’s food supply. If you practice stock rotation, it can be a hedge against disruption and unemployment.

Everybody should have a stash!

http://www.opinionjournal.com/editorial/feature.html?id=110009705

Bill Clinton’s AMT Bomb
Why millions in the middle class may see their tax bill explode.
Friday, February 23, 2007 12:01 a.m. ESTtitle

***Begin Quote***

As tax season nears, Democrats in Congress are discovering they have an urgent political bomb to defuse–the alternative minimum tax. The AMT already hits four million Americans, and without new legislation this year it will explode in the pocketbooks of 23 million taxpayers come April 15, 2008.

***End Quote***

What you don’t want to pay “your fair share” “for the children”?

We don’t need “tax reform”. The Fed will just inflate everyone into a straight no deductions one sizes fits all tax.

Shesh.

And, what part of “I don’t consent” does the gooferment gang of thugs not understand?

http://article.nationalreview.com/?
q=MmQ2MDY4ZmFjZDkwZTUyZTIy
NTAwMjIyY2Q5NWM5ZTM=

February 9, 2007 6:00 AM
When You Tax Profits, You Tax People
The economics behind Hillary Clinton’s anti-business Chavezian threat.
By Larry Kudlow

***Begin Quote***

Washington economist Kevin Hassett has shown that the U.S. workforce bears a full 70 percent of the cost of corporate taxes. So, if folks are indeed worried about wage inequality, they should be lobbying their congressional representatives to cut corporate taxes in order to increase worker wages.

***End Quote***

Only “real” people pay taxes.

Anyone, who knows anything about business, knows that they are just conduits of costs. If I make widgets that you buy, you can rest assure that, if I am in an ongoing business, every cost associated with that widget is built into the price you are paying. If there’s an income tax, sales tax, use tax, gas tax, or a tax specifically on widgets, it’s all added into the price.

That’s what makes determining the total tax load so difficult. My widget, Hershey’s candy bar, and Mom’s apple pie from Drake’s all have taxes built into the price. You buy a my widget for a buck. How much tax did you just pay? No one knows and the thieves in Washington, Trenton, and city hall like that just fine.

That’s why taxes like the gas taxes are so insidious. They’re build into every single thing you buy. You couldn’t break that out if you wanted to.

That’s why the cost of regulations are also insidious. They can’t be broken out either. If I can only assemble my widget in Borneo because of environmental regulations, it has to be shipped to you. Now, figure out the cost of that “regulatory” tax. Good luck!

Sigh.

Then don’t forget that there is an “inflation tax”. Regardless if you think inflation is 2% or 15%, or somewhere in between (as I peg it now at about 7% based on 200 basis points over the Certificate of Depreciation rate I can get), that to is an insidious silent tax. So how much of that is in your products that you buy?

No the dead old white guys were quite right in insisting that taxes be on imports only. It’s really easy to see that. Everything else gets buried.

And, it’s not like they do anything useful with the proceeds of their theft.

http://hosted.ap.org/dynamic/stories/E/ECONOMY?
SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&
CTIME=2007-02-01-08-56-21

http://tinyurl.com/3dh2ve

2006 Personal Savings Drop to 74-Yr. Low
By MARTIN CRUTSINGER
AP Economics Writer

***Begin Quote***

WASHINGTON (AP) — People once again spent everything they made and then some last year, pushing the personal savings rate to the lowest level since the Great Depression more than seven decades ago.

***End Quote***

Now we know that the FED (The Federal Reserve Bank which is neither Federal, a Reserve, or a Bank) tells us there is no inflation. We know the politicians tells us there is no inflation. And, we know that we are not in the Jimmy Carter era of runaway 18% inflation.

But, could one explanation for the negative savings rate be that there is an underlying belief that cash is crap?

Why save if tomorrow will be worse than today in buying power?

Could we be seeing the marketplace discounting for an expected future inflation?

In a variation of the “Customer is always right”, the marketplace is always right.

If people are not saving, whatever the reason, they are “right”. Even when they are wrong, they’re “right”.

The cost of the war, the cost of social security, the cost of medicare, the cost of the drug benefit, the cost of all the social programs, and the cost of the TSA’s security kabuki dance is all going to come due.

Hmmm?

ESOP
Posted by: “Reinke’s Networking Persona”
Mon Jan 22, 2007

Posted by: “jairam_sridharan” Sun Jan 21, 2007 6:09 am (PST)

>My company is planning to give me a ESOP.

Be careful to be very precise in your thinking. “Give” could mean: toss you a gold bar, or scrap, for free, invite you to invest in, make it the only option in a 401k or retirement plan, or be real, or “shadow”, options.

(It’s not that I’m so smart, it just that I stayed in a Holiday Inn Express once upon a time. That, and I worked on Wall Street for two decades.)

>My employer wants me to be a part of this program.

Don’t think that they are being solicitous of your welfare. There is probably a legal, regulatory, or financial reason for their “concern”. Legal in the sense to get tax benefits they have to include the peons. Regulatory in that there may be a prohibition against not including a balancing number of peons. And / or financial in that they may want to dump some paper and collect some operating capital from you. All the while making you believe in the Tooth Fairy, Santa Claus, or A Leprechaun’s Pot of Gold.

> What are the pros and cons of a ESOP?

It can be a great investment. Ask the Microsoft millionaires. Or it can be a pile of smelly stuff. Ask the Enron employees.

If I was an “investment advisor”, and I am not, and am not licensed, nor do I play one of TV, I would tell you that:

(1) one should clearly and completely understand any investment (otherwise, double your money by folding it and putting it in your pocket)!

(2) You should have a properly diversified investment strategy. (Don’t put money you can NOT afford to lose into ANYTHING!) Wall Street rule of thumb is not more that 5% in any one thing or type of thing.

(3) Because ESOPs are generally “locked up” for long period of time, have tax ramifications of any escape, and are very illiquid, they should be evaluated with those restrictions in mind. (That is you probably can NOT touch it till you retire; if you do, the tax man will be the big winner; and getting out early will cost you in value).

>What are the important aspects that I must look forward to?

Who pays what? Is it “free”, do you have to kick in a percent, or do you pay everything? Who get the money? (In one case I know it was the execs. You were basically buying their restricted stock. p.s., the CFO went to jail on that one.) When can you exit stage left? (If the answer is “when you die”, then you have a problem. Don’t laff, saw one of those to!)

AND, politically, now that you’ve been invited to “participate”, what are the consequences of saying (politely deferentially and with solemnity “are you kidding me, invest in this chick poop outfit”) “no”. It could cost you your job, your ever getting promoted, and laid off on the next round of cuts as “disloyal”

>My employer says that if I participate in this program, I will get a 60 – 70 % hike in my salary

And, if I buy a winning lottery ticket, I can retire top Aruba and count my interest.

Who are you going to believe your employer or some faceless typist on the end of Yahoo Group?

Seriously, I’d take that one with a BIG grain of salt.

In the USA, it is illegal and a criminal matter to make any such statements.
(It can get the stock’s registration pulled for a “quiet period” violation.)

I would pose the question where is the 65% increase going to come from?

No that’s (charitably) “a misunderstanding”. Again, the Microsofties made grazillions and the Enronites got screwed. Your mileage may vary. Not may — will!

> Please can somebody advise me.

Divide the problem into buckets.

Can I say no politically without losing my job, promotion, or future?

If you can’t say “no”, that’s a different set of problems.

What is my “contribution” into this?

Can I afford it?

If I lose everything, like Enron, will I be eating dog food in my old age?

If I was making an investment, would I have picked this company to invest in?

Does it pass the “sniff test” (i.e., does it smell like poop or pie?) Is everything honest and above board? Is everything “reasonable”?

Is everything I am being told written down on a piece of paper somewhere?

>

Remember I’m a pretty negative guy. I worry about the bad stuff happening. Then, I can be pleasantly surprised when the sky doesn’t fall.

All in all, I’d assess your problem, just based on what have heard, as “mildly negative”, based on the 65% promise.

So I’d investigate further diligently without being nasty like me.

Good luck.

http://www.ft.com/cms/s/
572b41a6-a414-11db-bec4-0000779e2340.html

http://tinyurl.com/ycnuqo

Euro displaces dollar in bond markets
By David Oakley and Gillian Tett in London
Published: January 14 2007 22:08 | Last updated: January 14 2007 22:08

***Begin Quote***

The euro has displaced the US dollar as the world’s pre-eminent currency in international bond markets, having outstripped the dollar-denominated market for the second year in a row.

***End Quote***

Is this the beginning of the end of the US Dollar as the world’s reserve currency?

Try to envision what that means.

(1) Dollars stored overseas will come back to us as sort of IOUs. Foreigners will buy something with those dollars to take home. Anything of value. Remember the Japanese buying Rockafeller Center in NYC? The inflation that we exported overseas will come home to roost.

(2) Imports will get more expensive. Big Time! As we will have to pay for them in Euros, not Dollars.

(3) The general rise in prices caused by too many dollars chasing to few goods will hurt the poor, the elderly on fixed income.

(4) The non-productive parts of our economy (think government) will become more expensive as the prices go up. Government costs will rise faster. (Why? Only real people pay for things. Government and business are really fictions that just pass along costs to real people for payment. There’s “shipping and handling” on every transfer. Corporations, because of competition are motivated to minimize that. Governments are not. Thus if the cost to government goes up a dollar, I’d expect the cost to me goes up four dollars. While me quibble about the multiplier, it’s definitely there.)

Plan your finances accordingly.

Don’t hold dollars; buy things that will “surf” in inflation. Gold, Commodities, Equities, Treasury Inflation Protected Securities, things that appreciate in value.

http://www.brianrwright.com/index_files/feds_fear_liberty_dollar.htm

Monopoly Money: Feds fear Liberty Dollar alternative
01 December 2006
Brian Wright

***Begin Quote***

Live free and flourish!

Part of the noble equation of liberty is honest money. Fortunately the National Organization to Repeal the Federal Reserve Act (NORFED) has given us the Liberty Dollar system to help us achieve just that.

***End Quote***

With the monetary inflation rate being unknown due to the US Treasury no longer publishing the M3 number, one has to guess. To me, it “feels like” between 5 and 10%. My experience has been that the demand deposit rate is usually a smidge less that the inflation rate. During the Carter Inflation in the 70’s when the published rate was 21%, savings deposits were paying 17%. In the 90’s, when inflation was a “low” 4%, demand deposits paid 1%. The sad part is that inflation erodes the purchasing power of savings, “inflates” one into higher tax brackets, and when one sells assets “capital gains” tax is on inflation.

It hits the poor, those on fixed incomes, and the financially illiterate worst.

I like to tell the story of my now deceased Father-In-Law, who was always proud that he had a Fifty Dollar bill in his wallet. He put it there as a kid so that he’d never be broke. It was in there about 50 years. When he put it in, it was valuable. When his heirs took it out, it was worth about a penny in terms of the purchasing power it once had! In an inflationary economy, money fails in one of its key roles as a store of value. He’d have been better off to have used it and been broke. It was an illusion.

At 1% inflation today’s “dollar” is worth 74 cents in 30 years. 10% yields a 6 cent dollar in the same 30 years. I like to think of inflation like a balloon. Want a bigger balloon, just put more air into it. Until it pops!

Imagine playing on a football field, where each year the definition of a “yard” changed. It doesn’t change the same each year. One year the field is really 106 yards in “real yards” and the next it might be 116.1! Talk about nightmare. And what good would records be? Think it would be confusing. Why is it different when the gubamint prints more money? And, it’s not actually the gubamint printing money. It’s the Federal Reserve Bank, which isn’t federal, doesn’t reserve anything, and isn’t a bank. It’s just a private club with a license to steal.

Economists like to reference Robinson Carusoe’s island, Caruso and Friday are on the island. Caruso fishes and Friday picks bananas. They work out an exchange. But put some more people on the island and you need money to have an easy exchange between fish, bananas, and coconuts. So one day a “Federal Reserve Banker” comes along and prints some paper “dollars”. The marketplace finds the right price for fish in terms of bananas, coconuts, or “dollars”. Now suppose our Federal Reserve Banker prints double the dollars. Just lots more “dollars”. Twice as many in fact. Now just printing more “dollars” doesn’t do anything to increase the wealth of the islanders. There are not twice the fish, bananas, or coconuts. Rather quickly the market price will double the price of fish, bananas, and coconuts. Increasing the money supply doesn’t make everyone rich. It just increases prices.

Why do it? Because the printer are unjustly enriched. He gets to spend those dollars before the prices adapt. Money that has nothing backing it of value (i.e., gold; silver; or even tiki lamps) is just paper. Worthless the minute that the fraud is discovered.

Read about John Law, the South Sea Bubble, the post WW1 german hyper inflation, the south american hyper inflation, and the Carter Inflation in the 70s.

So, sooner or later, the Arabs will get tired of getting pictures of dead presidents for oil. Ditto the Japanese for Toyotas. And the Chinese for plastics.

One needs to NOT hold paper money! But what should one “hold”. Things that appreciate in value (i.e., collectables). Real estate. Things that earn value (i.e., stocks that are recession / depression proof). Commodities. And precious metals. Debt in a recession is bad.

That brings us to NorFed and their alternative currency.

I think the jury is still out on that.

Here’s my thinking. The NorFed Twenty “dollar” coin is an ounce of silver that costs $20 FRB. Silver’s volatile. It varies currently from 12 to 18 Federal Reserve Banknote “dollars”. So, why pay a premium for basically an ounce of silver. I’d just buy (i.e., have bought and will buy more) bullion coins from reputable dealers. Is the paper NORFEB warehouse receipt worth that premium? Maybe? It’s better than a Federal Reserve Banknote. Called a FRBbie (pronounced FUR-BE!) by its detractors.

Note: Gold bullion 1 OZ American Eagle coins trade at Kitco who buys at 630.10 and sells at 667.92

http://www.telegraph.co.uk/
money/main.jhtml?xml=/money/
2006/11/29/cndollar29.xml

http://tinyurl.com/y7ur7w

US setbacks see dollar plunge to near 15-year low
By Ambrose Evans-Pritchard
Last Updated: 12:41pm GMT 29/11/2006

***Begin Quote***

The dollar tumbled to a near 15-year low against sterling yesterday on fresh signs of economic trouble in the United States.

An 8.3pc crash in US industrial orders and an admission by the Federal Reserve chairman that Washington does not know how bad housing really is set off another day of wild gyrations on the currency markets.

***End Quote***

Maybe if we had “honest money”, (i.e., backed by something other than the full faith and credit of a dishonest government) then we might not need to be overly concerned. When the printing press runs at the “Treasury Department”, (as if there was anything of value kept there), then everyone who holds a Federal Reserve banknote is taxed by inflation.

No vote in Congress. Nothing signed by the President. No politicians has to “do” anything. The politicians think the market is stupid.

No, even without the government’s M3 number being published any more, the market “knows” exactly how many extra green pieces of paper that the FRB prints. It takes a little time. But eventually there are more FRBies chasing the same amount of goods, so prices rise.

It’s like a great calculating engine; probably the Intelligent Designer’s greatest gift to us.

No election. No counting of “votes”. No so called “laws”.

Just the free exchange of things between people. Eventually everything in the marketplace satisfies everyone. The real economists have all sorts of labels for it. But eventually every need is satisfied. Prices evaluate how much you really need or want something. As something gets “bid up”, people decide that they don’t want it as bad as the next person.

It’s the universal calculating engine, called the marketplace, that decides where scarce resources are allocated.

But, when there is counterfeiting going on, when the money is unbacked, when the standard measure is no longer standard, then the arithmetic is skewed.

And, the people are impoverished.

How are you preparing for the problems that the Federal Reserve is brewing up?

http://www.boston.com/business/personalfinance
/articles/2006/11/25/retiree_provides_the_skinny_
on_how_anybody_can_save_money_when_eating_
out/?rss_id=Boston.com+%2F+Business+%2F+
Personal+Finance+-+Money+Management+-+
Financial+Management+-+Boston.com

http://tinyurl.com/yypydv

Retiree provides the skinny on how anybody can save money when eating out
By Humberto Cruz | November 25, 2006

***Begin Quote***

I’ll give you this example: Save $100 a month for 15 years at a modest 6 percent rate of return and you will have in round numbers $29,000. And $29,000 in turn will earn another $1,740 a year at 6 percent, more than what you save yourself.

***End Quote***

Americans SAVE money? You don’t understand. We want it now. We are entitled to it now. We HAVE a credit card.

Sad to say there is a cliff at the end of this road.

Kinda like Merrill’s Yoddlee, but better promises, and a more “Stubs” for other accounts. So, of course, I played with it.

It took me about 90 minutes to find a flaw that you can work around.

Vangard shows a joint account in both spouses view. Thus Fidelity doubl counts the entry. Thus overstating the holdings. There’s no way to partially exclude something it discovers.

Interesting.

I think you’d only find that IF you took feedback from real world users (They don’t. Tsk,tsk, shame, shame) or you had a crackerjack team.

Sigh.Will I ever find stuff I can’t break.

http://bbs.freetalklive.com/index.php?topic=9717.15

***Begin Quote***

http://www.mises.org/story/2369

Return to a gold standard — or hell, a silver standard or a platinum standard or …

***End Quote***

I read this thread and two thoughts came to mind, actually three.

(1) The german hyper inflation that led to the rise of hitler. It could happen here. Politicians tax, borrow, and spend. (Sound familiar) the Fed runs the printing press. And runs it and runs it. I knew a Jewish family that send their wealth to Switzerland and the US in the form of diamond, postage stamps, and jewelry. Some of them got out; most didn’t. The old gent told me that, and his wife confirmed, that she would come by his office and take any money he collected that morning and go buy something. Anything. Because by nightfall it would be worthless. The hyper inflation was catastrophic. he would do the same thing on his way home with the afternoon’s collections. By the morning it too would be worthless. The country quickly devolved into barter, valuables, and metals. quite scary.

(2) If the us debt becomes to onerous. The Gubamint could just walk away from it. “Oh green funny pieces of paper? You should take that to the Federal Reserve Bank. We don’t have anything to do with it!” Repudiation would have some interesting consequences. If you think that the world is mad at us now, then wait till we pull the rug out from under them. The Chinese, Japanese, Arabs, and Europeans would find themselves sitting on worthless paper. It would be interesting to see it happen.

(3) There’s a “law” in Economics, (Not like a government law, but more like the Law of Gravity), that says something like “In an inflationary economy, bad money drives out good. In a deflationary one, the reverse is true.” Hyperinflation, or demonetization of a fiat currency, will imho act like a deflation (the ultimate kind). AND, if people stop taking FRBies, then money will be redefined QUICKLY into coins, “medallions”, or stuff like that.

I think we can roll back fiat currency if we educate, if we personally refuse FRBies when we can, and if we can “save” in metal backed stuff.

For example, I personally: nag people about “dead presidents” and “pretty green pieces of paper”. I like Mises’ line “only a government can take valuable paper and make it worthless by printing on it”.

For example, I REFUSE to take the dollar “gold” coin. It really annoys the cashiers who want to palm if off on me because it doesn’t fit in their draw.

For example, I make small buys of gold and silver bullion coins as “savings”. If the world goes to “hell in a hand basket”. I’ll have things of value “buried” at home.

The internet retailers all have wish lists, (i.e., nothing more than bridal registries without the sappy flowers). It surprises me that inet savy parents and children don’t use this to make relatives’ lives easier. Open up a registry for the child at WalMart, Amazon, or that ilk and email the relatives. Saves a lot of effort and duplicates. imho

http://tinyurl.com/wfabs

http://feeds.feedburner.com/~r/Techcrunch/~3/42704033/

October 28 2006
My CarsDirect Experience
Michael Arrington

***Begin Quote***

Total time spent researching and buying a car: Four hours over a three day period. Total time spent negotiating: none. And I believe I got a better price than if I had tried negotiating with the dealers directly.

***End Quote***

May be I’ll try that next time.

http://tinyurl.com/yydwkt

http://personal.fidelity.com/myfidelity/
email.html?http://myfidelity.members.fidelity.com
/investorsWeekly/cms/FEA0610fdicenews.dyn

What Does FDIC Insurance Really Mean?
Clarifying the Top 10 misperceptions
Published: October 23, 2006

***Begin Quote***

To help depositors avoid repeating the mistakes of others, FDIC Consumer News has compiled this “Top 10” list of misconceptions that some people have about FDIC insurance. This list is based on discussions with FDIC deposit insurance specialists, including representatives at our toll-free, which handles hundreds of calls a month from consumers asking about their deposit insurance.

***End Quote***

Misconception 11: That when the “barbara striesand” hit the fan you’ll be OK.

When the banks start failing, the FDIC will get hit with so MANY claims the Federal Reserve, which is neither Federal, nor does it have anything in reserve, will have to subcontract to Charmin Toilet Paper to get more “dollars” to placate everyone.

What would cause the banks to start failing?

Loss of confidence in the Federal Reserve Bank Note. (Affectionately called the furbie or FRBie by it’s detractors!) When the foreigners stop sending toyotas for pretty green pieces of paper, then we’re in a world of striesand! When the sheiks want gold of oil, then we’re in a world of striesand! When WalMart wants metal aot furbies, then we’re in a world of striesand!

The Real Estate market falls off a cliff. When McMansions can’t sell at any price. Debtors will walk away leaving the house for the bank. What’s the bank gonna do with it? When the depositor walks in to get their cash, what does the bank do? Give them a basement, bedroom, or kitchen. I don’t think so. Now, we have some experience in bank runs from the Great Depression. And, some modern history in the S&L debacle in the 80s. Every homeowner ASSUMES (and we all know what that means!) that their house will increase in value and that they will be able to pay off their mortgage with dollars that are worth 5% less every year. What if that’s not true?

We, the people, in order to form a more perfect union, decide that we want “real money”. As a nation, if we stop using “dollars” and shift to say gold coins … err medallions … since the Mint thinks that only they can coin … so we use ounces of gold and silver as our “real” money. Envision that you have ten gold coins in your pocket and 70 hundred dollar furbies, which will you dump first? Yup, those furbies. That will KILL the banks. People will not be “saving” furbies with them but converting furbies to medallions. That signals the end to the era of fiat currency.

Misconception 12: That when the “barbara striesand” hit the fan, the Federal Government will stand behind the FDIC

Hmmm, politicians be counted upon to keep their promises. There’s a losing strategy!

Frau went to the local bank to roll her IRA into a cd ladder. Nothing complex. But it seemed to tizzy them AND they made a mistake. Arghh!

For the uninitiated, a CD LADDER is nothing more than the name given to an investment program to maximize your return on a fixed income portfolio, while minimizing your exposure to interest rate fluctuations. It attempts to always have money available for other options, get the “best” rate available, and minimize seasonal fluctuation in rates.

A CD LADDER takes a portfolio of say 40k$ and divides it up into 20 units. The idea is to have five different terms of 1, 2, 3, 4, and 5 years during each of the four quarterly periods.

So, 40k$ divided by 20 gives a unit size of 2k$. One buys: a 12 month cd for 1 unit; a 24 month cd for 1 unit; a 36 month cd for 1 unit: a 48 month cd for one unit; and a 60 month cd for one unit.

Then, to prepare for buys in future quarters, one buys: a 90 day cd for 5 units; a 180 day cd for 5 units; and 270 day cd for 5 units. When each of these matures, you take the proceeds and repeat the annual cd strategy.

At the end of a year, you have your 20 cds all setup. Then, at each individual cd’s maturity, you buy the 5 year cd.

Mission accomplished: 5% of your portfolio is available every quarter AND you are always getting the five year rate. It’s not the roller coaster stock market, but it is “widows and orphans” thinking. Hard to cheat anyone of their life savings when they can only get 5% at a time.

Easy to understand?

Not for our local bank.

Their registered representative obviously has NOT only never heard of a ladder, but can’t implemented it. Argh!

Explained it twice, with pictures when we went to have them move the money custodian 2 custodian transfer. (That only took two weeks! Right, in today’s eft climate. Can you say “dragging feet”?)

So yesterday, Frau went and they spent two hours doing it and, “upon further review” I found a mistake. Argh!

Sigh, not very inspiring.

Questions?

===

On a technical note, when the total portfolio exceeds the FDIC insurance, one should begin to split the account into two different banks. That can be easily done by a partial custodian to custodian transfer of a maturing cd. So for example, pick one quarter, say Second Quarter, and each year transfer that rolling over cd from Bank#1 to Bank#2. Easy, right? Nah, everyone looks at you like you have two heads. One could do it by Year, in that you have Year 2008 at Bank#2 and all other Years at Bank#1, but I like the Quarter approach. Can’t tell you why, but it appeals to me.

You can split into a third and fourth bank should the size warrent. If you need more than 4 banks (i.e., 400k$), then you probably need a better strategy (i.e., a brokerage account with a fixed income specialist). For the little guys, self-designed ladders are fine imho.

Arghhh, I hate what old age does to the “old folks”. Sigh, and it will happen to all of us if we are lucky.

My thought this morning is very bleak. Old age, really old, not what I am, robs people of the facilities. Once vibrant intelligent people, capable of conducting their own affairs, are reduced by old age to mush. As you may or may not know, I have POA (power of attorney) on three old folks who are now in that state where they can’t comprehend their financial affairs and other arrangements. It’s sad. But, at least, I have the paperwork necessary to do it for them.

One should prepare for that day. Make your affairs as simple as possible and as automatic as possible. I am putting all my old folks on Paytrust. That service will receive their bills and present them to me via the web for disposition. I wish I had done that two years ago, when the first one started to falter.

Sigh, I’m not going to fall into that trap.

***Begin Quote***

New Vanguard® logon is available

The newest security enhancement on Vanguard.com®, our new logon, is now available. This new logon will help to further protect your account information and personal data.

How it works
After entering your user name, you’ll select and name a security image. Whenever
you log on, you’ll see your security image—and you’ll know you’re on the authentic Vanguard.com site.

You’ll also answer three security questions. If we don’t recognize the computer you’re using to log on, we’ll ask you to answer one of your security questions.

Next steps
Please log on to see how Vanguard is committed to providing a safe and secure online investing environment.

Thank you for investing with Vanguard.

***End Quote***

It destroys the ability to automatically logon. I objected but as usual no one listens. Arghh! If they weren’t such a good investment option, I’d toss them over the side.

There’s nothing wrong with credit cards as long as you carry a zero balance.

For example, I have all my “old folks” using them for all tax deductible expenses. And, for everything, in general. Since I do their bills, I pay them in full and the end of every month. It captures all the data needed for their taxes and prevents anyone from defrauding them, stealing from them, or doing other bad things (like forgetting to give me the phone bill).

Note: It’s really easy to have the phone company charge their credit card for the phone bill. I may miss the bill and a chance to check that their phone line isn’t being abused by a visitor (It happened!), but they don’t get the phone service cut off for non-pay, and I don’t have to be Simon Legree about the mail.

In my own case, I use the same strategy as a budgeting device. One credit card for techie hardware / software / service stuff. One for books from Amazon. With my CFO’s (Frau Reinke) rare blessing, I use the cards as a free accounting service to ensure that I spend ENOUGH on books and technology. (Yes, that can be a problem!)

Note: One can actually “prepay” a credit card with a monthly automatic payment from a checking account and it will sit there waiting for the offsetting charge. So, for example, I pay my tech visa account XXX$ per month. That’s my budgeted amount. And I buy tools with that card. If you leave a positive balance on the card, eventually the credit card company will send you a check. (Screwing up my system. And leading the CFO to ask about cutting the budget. She’s not like the government. You don’t use, you don’t just lose it; you’ve LOST it forever!)

Prevents a lot of paperwork and arguments.

FWIW YMMV FAIWWYPFI

A relative recently bought a car. I reprise my method for getting the down payment for the next one.

(1) Recognize that a car has a certain life in time and mileage. I like to figure 80k miles and six years. After that point, and sometimes even before, big repair bills can creep in. Note the numbers used in this example are all predicated on these two assumptions.

(2) Ensure that you are not using the car faster than the 80k miles suggests. If that’s true (i.e., that you are using more miles that will not make the car last), then you need to refigure.

(3) Take 3 year financing. Note if you can’t afford the three year payments, then you can’t afford the deal. Revisit the whole decision.

(4) Now envision that you are going to make those payments for six years. The first three years you’ll be paying the financer; the second three years you’ll be paying yourself into a designated savings account. At the end of the six years, you will then have three year’s payments in the bank for your next car.

(5) Specifically, if you are paying 350$ per month, then you’ll pay off your loan in three years. And, if you stay with the program, then at the end of six years you will have 3 times 12 times 350$ or 12600$ for your next car. The theory is that with your six year old car and ~12k$, you’ll be in good shape to get a new car. If you run this program religiously after the second or third time, then you won’t need financing.

(6) After six years, you go into what I call the “bonus period”. Keep paying into the bank. Every month you can make that old car last is another month towards your next car free and clear.

(7) Clearly care and maintenance is critical for getting the most out of what is probably your second most expensive purchase. (House being number 1)

(8) Cars are a necessity. Some argue that buying used cars is a cheaper alternative. I think that buy and run until the wheels fall off is the better strategy. Leasing is advanced as an alternative for those who keep cars three years or less and have low mileage. I think that cars can be the way to the poor house or an intelligent strategy to get to wealth. Cars are NOT an investment, but they don’t have to be a drain.

IMHO

http://www.womenspersonalfinance.net/2006/09/46_things_i_wis.html

Women’s Personal Finance.net: 46 Things I Wish My Mom Taught Me About Money

***Begin Quote***

Don’t Count on Social Security.  By the time the tail-end of the baby-boomers retire in about 25 years (the last of this generation was born in 1968), there isn’t a very good chance that social security will be paying out as much as we have paid in.  A solid back-up plan, like a tax-deferred IRA or 401K will help to keep you from living in a shelter.

***End Quote***

Not a lot of gubamint promises that one can count on. I’m not so sure that the money itself will be the same. Inflation kills senior citizens. It literally eviscerates their savings, their pensions, and their Social Security checks. Don’t make me laugh about the SSI cost of living adjustments. The gubamint has figured how not to trigger those protections.

So planning is a challenge!

http://www.paintercreativity.com/articles/top-10-lies.html

Top 10 Lies told to Naive Artists and Designers
Mark W. Lewis

***Begin Quote***

5 “Well, the job isn’t CANCELLED, just delayed. Keep the account open and we’ll continue in a month or two.”
Ummm, probably not. If something is hot, then not, it could be dead. It would be a mistake to *not* bill for work performed at this point and then let the chips fall where they may! Call in two months and someone else may be in that job. And guess what? They don’t know you at all…..

***End Quote***

That happened to me once when I was consulting. And, I wasn’t even a Native Artist!