Reinke Faces Life

http://tinyurl.com/wfabs

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

October 28 2006
My CarsDirect Experience
Michael Arrington

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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.

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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

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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.

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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?

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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.

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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

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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.

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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

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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…..

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

http://www.bc.edu/centers/crr/facts/jtf_11.pdf

How Can the Actuarial Reduction for Social Security Early Retirement Be Right?
Natalia A. Jivan, July 2004
JTF# 11

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Traditionally Social Security’s Normal Retirement Age has been 65, but for the last 45 years both men and women have had the option to claim benefits at the Early Eligibility Age (EEA) of 62. In exchange for claiming early, individuals receive a smaller monthly benefit. The legislation that established the EEA reduced benefits by 5/9 of 1 percent for each month before age 65, so that a person claiming at age 62 would face a 20 percent [(5/9)*36] reduction. This publication explains the factor of 5/9 and why it has remained constant since the establishment of the EEA.

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Now we know the gubamint has a motivation to have a low inflation rate. It keeps the SSI COLA low. That means that it artificially makes a sick system look healthier.

It’s also, like inflation, a hidden tax on the fixed income elderly.

So if they haven’t reexamined the discount rate in light of interest rates, then we have discovered another proverbial “thumb” on the “butcher’s scale” when servicing the old people’s “guaranteed” program.

As I always say, if insurance company executives did what the gubamint as the social security administration does, then they’d all be in jail faster than the Road Runner.

<beep beep>

I does make you wonder how to play the “62.5” versus “65” versus the “full retirement age” versus the “wait til your older and hope you don’t get hit by a bus”?

Beats me!?!