Not keeping up with the Jonezez

Replacing the 5% Gas Rebate Card

2007-07-15T08:51:00.000-07:00

I finally found a replacement for my Citi Dividends Reward Card. To review, this card used to provide 5% cash rebate on gas, grocery stores, drugstores, and 1% rebate on everything else capped at $300/year. About 1 year ago, Citibank changed the policy to 2% on the gas/groceries/drugstore leaving thousands of card users in the lurch. As gas prices went up, card users were utilizing more of the gas rebate and Citibank likely realized this card was not as profitable as before.

So for about 6 months, I scoured the internet for a replacement card. Finally..! I found the American Express Costco True Earnings Small Business Card. This now also provides 5% rebates on gas (however, no more supermarkets or drugstores), 3% on eating out, 2% on travel-related expenses, and 1% on everything else. It also doubles as a Costco card and if you are reading this blog, you probably already do a lot of shopping at Costco. The added bonus is, you can also use this gas card to fill up your tank at Costco. Costco gas stations tend to be 5% cheaper than neighboring gas stations (this is their stated strategy)... so if you use this card to fill your tank at costco, you will be saving nearly 10% per gallon on gas. So let's say your price/gallon is $3.00 at your local gas station... Costco will tend to be around $2.85/gallon and if you use your Amex credit card, you are effectively paying $2.71/gallon!!!!

I've already racked up quite a bit of rebate ... and it's unlimited. Note, you don't actually have to be a small business owner to apply for one.

Something to consider... now, if only there was a card that would give you the 5% rebate at supermarkets!!

Discount Real-Estate

2007-04-08T22:18:00.000-07:00

We finally took the plunge and bought a house. After 2 years of searching in the over-priced market that is San Diego, we came across a house that my wife and I really liked. I feel that I can talk about a number of things with respect to this process but I will talk about our experience with a discount real-estate broker.

To begin with, we are very hands on whenever we purchase something and like to do our own research. Whether it's buying a toaster to a bed to a house, we like to be as informed as possible (AKA "maximizers" as described in the excellent book, "The Paradox of Choice"). So when we decided to start looking for a house, we utilized a traditional real estate agent. The traditional agent is supposed to provide expertise in providing you with a number of homes to look at that match your taste, knowing the market, providing accurate comparables, and most importantly, negotiating the deal. The traditional agent is supposed to provide personalized service and most importantly, serve as your fiduciary... the cost is typically 2-3% commission paid by the seller but indirectly paid by you, the buyer since this cost is priced into the cost of the property.

We found an agent that molded well with our personality. She didn't seem like a scheister and appeared to be honest. However, we soon realized that we were doing all the leg-work... finding the houses that we liked on different websites, telling our agent that we wanted to see them, looking at the houses with our agent, even making bids on 2 homes with their help but losing out to other buyers.

Of course, when we went with our agent, everything was always so POSITIVE! I say, "this house has road noise," Agent: "Oh, you just need to put a fountain". Me: "I noticed that drainage in the yard is lacking" Agent: "Oh yeah, I noticed the grass was really wet". Translation.."I want you to buy a house as soon as possible so that it is less work for me. I will make every negative a positive. If I notice a flaw in the house, I won't mention it to you unless you mention it to me." Not quite the fiduciary that meets the "ethical" standards of real estate agents. Now, I know there are good real estate agents out there, don't get me wrong, but the whole business model of real estate agents will eventually need to evolve as the internet plays a more prominent role for buyers and sellers.

Which brought us to try a discount broker called Buyside realty. They will provide a 75% rebate to you from the commission they get. How was our experience with them? To be continued.

Gotta love Costco. Toilet paper, TVs, and Financial Services?

2007-02-15T21:05:00.000-08:00

It's been awhile since I last posted but a lot has happened over the last several months. I finally bought a car and will blog on that experience. As part of the car buying ordeal, I came to the realization that Costco offers a whole lot more than cases of soda, digital cameras, and toilet paper by the bulkload. They also offer a bunch of very practical services, including the ability to finance your car.

In buying my car, I knew I would get the best credit offers because my credit score is >780. So I browsed different options including the local brick and mortar banks (i.e. BofA, Wells Fargo, Washington Mutual), local credit unions (San Diego Credit Union, USE credit union), and online banks. I tried meta-searches like Lending Tree. For some reason, the best rate I could get on Lending Tree was 6.49% for a new car, 36 month payment term as provided by Capital One. I then looked at Costco.

Costco offered 5.64% for the same loan terms (i.e. new car, 36 month repayment) ONLY for executive members. The loan is also provided by Capital One. I'm only a regular member with membership dues of $50/year. However, the executive membership costs an additional $50 for a total of $100/year. With executive membership, Costco will give you 2% rebate on all purchases at Costco. This translates to having to purchase $2600 annually to make up that addtional $50 difference.

I was already sold on the executive membership as the $50 difference was more than made up for with the different loan rates (5.64% versus 6.49%). However, Costco makes it a no-brainer. If you do NOT spend enough at costco to make up the additional $50 difference, they will refund you the remainder of that extra $50! It's a no-lose situation.

Not only does executive membership give you 2% rebate and a lower rate on an auto loan, but there are several other perks that executive members get. I'm starting to sound like a Costco commercial but really.... what other company provides such no-risk terms! Something about those companies in the Northwest that just provide fantastic service and products (see Nordstrom, R.E.I., Costco). Extra bonus. Get a Costco True Earning American Express card and you get 3% rebate on travel, 2% on dining out, 1% on everything else (this is in addition to your 2% rebate on costco purchases if you are executive). Awesome.

Spending a load, but still saving (I think)

2006-11-12T00:07:00.000-08:00

Either my mouth is too small or my coordination is still in the developmental stages. Just the other day, I was sitting on the couch, IBM notebook (circa 1999) on my lap with the TV as background noise. I reached over to take a drink of my strawberry fanta soda and as I was drinking, I over shot my own mouth with the majority of the Fanta soda spilling out of the sides of my mouth and onto my beloved computer. This was an "Oh Shit! I'm so stupid!" moment right? Well, the laptop was still working, there was just some liquid in the vicinity of the keyboard. I grabbed a paper towel and starting wiping some of that fluorescent red soda up but unfortunately, the paper towel I had wasn't close to being like that Brawny shit on TV. Minimal absorption onto the towel. Of course, some seeped into the keyboard and suddenly, the IBM notebook was no more. After 7 years of near flawless performance, the IBM failed because I spilled a drink on it like a 7 year old kid would.

I thought, since breaking the computer was completely my fault, shell out some major clams to replace it; especially since I still had a desktop that was fully functional.... That lasted 2 weeks. My web-surfing behavior was completely altered. I was hardly using a computer at home since the desktop was in the "other" room (i.e. the room without the Tivo).

So I finally caved in and bought a new laptop. After much discussion with different people and some intense research, I decided to make the leap to an apple.

My biggest hold-up with making the switch from PC to apple was the price premium one pays for going Mac (after all, this is a personal finance blog isn't it?) But, now that the macbooks had recently come out near $1000 and macs were using Intel processors, I felt it was a near ideal time to make that switch. To sweeten the deal, Macbook just released the 2nd Generation Macbook Pro meaning that the original Macbook Pros must be cheap.

And this indeed was the case. I looked on the apple store website at the refurbished models and found a 1st generation MacBook Pro for $1499 (original price $2499). While it isn't the newest generation, I forfeited only a little processing speed which is fine for me as I do not consider myself a high-end user.

So while it was painful to spend that much for a computer, I still feel like a got a relatively good deal. I'm pretty happy with the purchase thus far, I just get that nagging sense that I've conned myself into believing I've saved money when in fact, I've just lightened my wallet by 15 Benjamins.

Investor Return vs. Total Return

2006-11-07T08:38:00.000-08:00

I read an interesting article in the NY times recently regarding investment return vs. total return. The article touches upon how most investors do not reap the returns that are usually published by the mutual fund companies. A large part of this is due to investor behavior. In other words, most of us are guilty of chasing performance and buying into funds that do well (see Fidelity Magellan in the 1990s, Janus in the late 1990s, international funds in the first half of this decade... are people doing the same with American Funds now?). However, by the time people buy into a fund, much of the great performance has already occurred.

The article mentions that Morningstar will soon be publishing not only total return but also investor return. This will give us a more realistic view of what performance is for a typical investor. Again, we shouldn't let these #s (investment return) dicate whether we should purchase into a fund. Rather, deciding to purchase or sell a mutual fund should be based on a number of factors, perhaps most importantly, whether or not the fund fits in with your overall assett allocation and investment plan.

Despite what academics tell us about how human behavior leads us to make poor investment decisions, it seems that collectively, we are all prone to continue to make the same mistakes by chasing performance. To behave otherwise (i.e. buy and hold), although better for our financial health, would not be very human. Fight those genes and resist the urge to chase performance and you will be in much better financial shape.

Effect of Balance Transfer on my FICO score

2006-10-16T22:17:00.000-07:00

About 6 months ago, I completed a zero percent balance transfer from my MBNA credit card (now it is owned by Bank of America. I previously posted my experience with this. The credit limit on this particular card is unusually high compared to my other credit card balances. I did a zero percent balance transfer of $32000 with a credit limit of $34000 on my card. So essentially, I maxed out 94% of my credit limit on this card.... undoubtedly dinging my FICO score. Apparently, the debt:credit ratio accounts for 30% of your overall FICO score. How did this affect my score numerically?

My pre-balance transfer FICO score was 780-790.

My post balance transfer FICO score was 687, sending me to just about average for the average amercan consumer. A sub 700 score does not provide you the opportunities for the best rates for mortgages, auto loans, APRs.

I was able to check my Fico score by joining "score watch" from Equifax for a 30-day free trial.

An interesting experiment...however, I am going to be in the market for a new car soon and will need to definitely boost my score to have access to better loan rates. I just don't know what the lag time is between paying off my credit balance and the FICO score changing back to my pre-balance transfer level.

My Solution to the end of 5% cash rebate (Citibank Dividend Rewards)

2006-09-16T19:14:00.000-07:00

In continuation of my last post, the end of a 5% cash back rebate credit card has had major discussion among different forums. The easiest card to use was the Citibank Dividend Rewards card... it was simply 5% on gas, supermarket, drugstore and 1% cashback on everything else. Many have received "the letter" indicating that Citibank will no longer offer this generous 5% rebate. This caused quite a bit of anxiety on my part as I was comfortable in my routines of using the Citibank card as my primary. I've finally come to the final solution which I think will work for me.

1. HSBC Direct Rewards Credit card. 5% back on all gas, supermarket, drugstore purchases, 0.5% cash back on the first $3000 spent on everything else. 1% cash back on purchases greater than the first $3000 on everything else. This essentially is the same deal as the Citibank Dividend Rewards card. OK.... the website looks somewhat suspect... and I was very reluctant to apply as it looked very amateurish and potentially like a "phishing" scam. But after I read about this card in Time magazine, I decided to bite the bullet and apply. I was approved but it has taken about 2 weeks since that application before I finally received a letter from HSBC indicating that my application was approved. So despite the crappy looking website and card, it appears to be for real.

2. American Express True Earning. 3% on restaurants, 2% on travelling, 1% on everything else.

3. I've essentially retired all my other cards including the citibank.

No more Citi Dividend Rewards

2006-08-25T14:15:00.000-07:00

Just received a letter from my primary credit card company, Citi Dividend Rewards. As of October 13, 2006, this card will no longer provide 5% cash rebate on supermarkets, drugstores, and gas stations. The 5% will now become 2% on those purchases but will also include convenience stores and utlities (excluding phone).

AARRRGGH! I started researching any other possible 5% cash rewards credit cards but they are few and far between. In fact, I have yet to find a suitable alternative. Discover cards offer 5% cashback only on certain types of purchases. American express has a cash rebate card that will offer you 5% on everyday purchases, 1.5% on everything else AFTER you spend $6500. The whole point of having a visa/master card rewards card is that this is accepted everywhere.... whereas AMEX is not as readily accepted.

Citi Diamond Rewards still offers the 5% rebate but you get it in the form of Thank You Points which you can only redeem with their Thank you Network. They do have a student loan rebate that equates the points you earn to as if you were getting a 1% return (i.e. 2500 points = $25 rebate in student loan).

What to do now? Would appreciate any suggestions... For now, I will still use my American Express True Earning Costco Reward card as the primary but I still want to add a Visa/mastercard reward card that will give me 5% rebates on gas.

Cheap vs Frugal

2006-08-17T09:01:00.000-07:00

I'm really having a bad year... this past weekend, I was riding my bike, minding my own business when this Neanderthal, weekend-warrior, ape-like, a-hole tried to pass me on his bike. Problem was that he didn't know what he was doing and ran into me causing me to fall... subsequently causing me to break my clavicle. I had to call 911 and was taken to the nearest emergency room.(I had my first car accident... not at fault... earlier this year). Needless to say, I can't wait until 2006 is over.

Kind of a long introduction to get to my point which is... there is a difference between being cheap and being frugal. I consider myself frugal...I try to find deals when they are available, save money, etc... but buy quality items for things that are important to me (for example, I would much rather buy soft toilet paper that is more expensive than the newspaper-like shit they have at walmart).

How does this relate to my recent accident? One of those things that I think the majority of Americans skimp on is healthcare. I have a PPO plan which gives me options in terms of seeing people out of network.. it's a bit more expensive than an HMO plan but there aren't as many limitations (to see specialists, etc.) It's amazing to see people pay extra for that warranty on their car or extend the warranty on an ipod... yet have the shittiest healthcare plan that limits your options in seeing who you need to see (i.e. HMO plans). What I think is that most people, especially young people in their 20s and 30s, feel that they are healthy and don't need medical care.... probably true for most people but you just don't want to be at the mercy of your healthcare plan in times of medical need.

With my recent car accident and biking injury... I suddenly feel more vulnerable than I felt in my 20s when you feel nearly invincible. While I skimped (and probably shouldn't have) on my car insurance plan by not purchasing collision coverage... I'm sure glad that I have pretty good health insurance.

I recommend doing the same thing the next time you purchase an extended warranty for any product. Think about your healthcare plan and ask yourself is this really what want when you're lying in bed in an ER hoping that the injury or sickness you have is not serious.

Bogleheads and other books

2006-08-02T17:12:00.000-07:00

I just checked out a book from my local library called, "Bogleheads Guide to Investing" which is written basically by a few super-DIEHARD John Bogle fans. I've read several different investment books over the years and would rate this as one of the best. A bit on the basic side, it's a great starting-off book for those that are in their 20s/30s just about to embark on the adventures of investing. I just wish I read it about 4 years earlier. Surprisingly, the book is pretty thorough and delves into such issues as saving for college, using a financial adviser, thinking about wills and trusts. So a nice background book that will give you a nice foundation for good assett management. And the book doesn't read like a Vanguard marketing pamphlet either.

I would add this to a list of my favorite finance books. Others include:
1. Four Pillars of Investing by William Bernstein
2. Common Sense on Mutual Funds by John Bogle
3. Millionaire Next Door By Stanley and Danko
4. Irrational Exuberance (2nd edition) by Robert J. Schiller
5. Unconventional Success by David Swensen.
6. Articles in Paul Merriman's website under the tab, "Buy and Hold"

My wife always says that I am so "undiversified" when it comes to reading these books because as you will see, the general premise of these reading materials are similar. Is it possible to be closed-minded in supporting passive investing and indexing? Call me one-track minded.

Vanguard Target Retirement Funds

2006-07-23T22:26:00.000-07:00

The one-fund solution is a strategy that many mutual fund companies have pursued over the last several years. Investors have responded by pouring money into these one-stop solutions. The idea is that most people are too busy to keep track of their finances, let alone research and keep track of multiple funds necessary for diversification. Whether it's Vanguard's Target Retirement funds, Fidelity Freedom funds, T Rowe Price Retirement funds, they all have subtle differences but embark on the same concept; namely, provide broad diversification with a single fund that gradually becomes more conservative over time.

The other aspect of these retirement funds is that it allows investors starting out to obtain instant diversification even with low balances.

I currently have my Roth IRA in the Vanguard Target Retirement 2045, mostly b/c you all know how much I like Vanguard. However, the knock on Vanguard's Target Retirement funds was that they became too conservative too early. On the other hand, T-Rowe prices funds were much more aggressive and maintained a higher percentage of equity positions for the equivalent Vanguard fund.

I reviewed these Vanguard funds and now noticed that they added a bunch of new funds, Target Retirement 2050, 2045, 2035, 2030, 2025, etc. However, in looking at the asset allocation breakdown, there seems to be no difference between the 2050 fund through the 2030 fund!!! (They are all approximately 90% stock 10% bond). I am somewhat bothered by this b/c I recommended to my parents that they should invest in the 2035 or 2025 fund but now I'm realizing that them doing so has given them a 90%stock/10% bond allocation. I think a little too aggressive given their age of 58 and 67 respectively. I think I will call Vanguard and ask them about these aggressive positions for target 2035, 2030, 2025 and see what differentiates these funds from the more aggressive 2045, 2050 funds.

Car quest: Still Searching

2006-07-19T21:22:00.000-07:00

Well, it's been awhile since I last posted but much has happened since then.... I moved into a new apt, my wife started a new job, and I've finally been able to go out and test-drive some cars. I appreciate the suggestions from those that have posted regarding their experiences with cars. To recap, my "short list" was: Camry, Accord, TL, Audi A4, BMW 3series, Infiniti G35, Lexus IS 250. In the interim, people have suggested other cars including a VW jetta, Acura TSX, and Honda Accord LX v-6.

I've tested the following: Camry SE v-6, Accord EX V-6, Infinit G35, Acura TL. I must say, I would be happy with any of these... I went from a Altima 1995 that some dumbass crashed into and so now have been relegated to an acura integra... 1991 that is. Old-school.

Of all the cars I've tested, I have been most impressed with the acura TL. Actually, the best car to drive was the infiniti G35... it drove like a real sports car; but the entire TL package is what impressed me. Everything was standard, there is more leg-room/truck space in the back; and the interior feels more luxurious. Of course, the ride is a little mushier which in my eyes, is more of a downside than an upside (I want stiff suspension).

I never got around to the german cars.... I walked into the BMW dealership and not one person seemed willing to show me a car. (Kearny Mesa BMW). Same for the Audi dealership..."um, someone will be with you in 15 minutes". Bullshit. Maybe I shouldn't wear birkenstocks when I go car-shopping but believe me, I'm not walking in there to fool around... I'm a serious buyer.

Lesson taken is that I presume you also have less negotiating leverage with cars that are more popular such as the BMW 3 series and the Audi. In fact, it seems like everyone and their mom has a BMW in san diego.

So, would still like to test drive those german cars but will go to another dealer in the meantime. Stuck-up A-holes.

Fidelity Rollover IRA part 3

2006-06-23T07:59:00.001-07:00

Well, I've finally completed the rollover of my previous 403b retirement account with Fidelity. I had previously posted on this process which began about 1 mos ago. Overall, a pretty smooth process, most of the delay occurred from me getting the necessary signatures from my previous employer. Again, while I prefer Vanguard over Fidelity, I have decided to keep my retirement funds with Fidelity since my current employer retirement plan is also with them.

A few comments about the whole process:

-Fidelity had great service.... very accessible, polite people that actually were helpful.

-As part of the rollover process, they are supposed to provide some guidance with investing options... I found this not as useful. I think it depends on your level of knowledge with mutual funds. For a beginner, it is great...I consider myself intermediate so not that useful. It seems that they mostly promote their Freedom Funds (i.e. fund of funds) which seems reasonable especially since my overall balance is not so large.... however, don't expect much in terms of guidance for individual funds to makeup an overall appropriate asset allocation.

-Entire process is done electronically. Recommend this so as to avoid any possible complications with taxes as you have 60 days from withdrawal of funds from a 403b to rollover your funds into an IRA before paying penalties to the IRS.

-Of note, while all the Fidelity mutual funds I owned rolled-over without hiccups, I had a PIMCO bond fund that did NOT rollover and went into a money market fund. I could repurchase this with my rollover; however, the minimum purchase is $2500 which is more than I wanted to allocate to a bond fund at this time. Given the current environment of rising interest rates, I think it's OK to leave my money in a money market fund for now (yield was 4.75%).....but kinda sucks to not have the same access to my previous Pimco fund.

Active Management and Fantasy Baseball

2006-06-18T08:52:00.000-07:00

I'm very much a fan of indexing and try to read as much as possible by people like John Bogle (Vanguard) and Jonathan Clements (WSJ) who are strong advocates of indexing and passive investing. One of the benefits of passive investing is decreasing transaction costs and minimizing taxes which necessarily should result in higher returns...

How does this relate to fantasy baseball?

At work, I joined a group of co-workers for a friendly game of fantasy baseball this season as provided by Yahoo. Just like stocks, we can add new players to our teams or drop players from our team if you don't think they are putting up the numbers (i.e. performing well in your "portfolio"). Of the people in the league, one guy is actually serving in Iraq so I presume has limited access to information (looking at box-scores, stats, etc) and limited access to the internet. He is the quintessential passive player b/c he hardly makes any moves/transactions in changing his lineup.

The rest of us... depending on how serious the competitor is, spend quite a bit of time "researching" players and re-evaluating our lineups. As part of the game, the league keeps track of how many "transactions" or moves each has made. Unlike my approach to investing, for some reason, I execute a number of transactions for fantasy baseball (29 moves so far this season). I was in first place for the first 6 weeks of the season and of course, trash-talking; however, lately, I have lost the lead to the current first place leader..... notably, the guy serving in Iraq.

He has a total of 8 transactions all season. So while I'm constantly tinkering with my lineup and trying to find "hot" players, the guy that is not adjusting his lineup frequently has eventually overcome all other players and is now in first place.

I finally realized that similar to many investors, I have been chasing performance in my fantasy league team and this eventually caught up to me in costing me the lead. And across all yahoo sports fantasy players, people often do the same thing... namely, chase performance. I noticed this b/c yahoo provides statistics of the most added or dropped player over the previous week and players that are added are often those that have recently caught fire and are putting up big offensive numbers. Similarly, investors have poured billions of dollars into emerging markets and international funds in 2005/6 even though the bulk of gains in these sectors were made in years prior.

So who will be the next hot hitter for the month of July in Major League Baseball? Might as well throw darts as nobody can truly predict this... not even Peter Gammons, Stuart Scott, or Joe Torre.

Credit Monitoring

2006-05-30T07:32:00.000-07:00

Well, as a continuation of my previous post, I went ahead with my 0% balance transfer plan. Just to recap, I've extended myself a $33000 line of credit from MBNA that will go straight to a GMAC savings account and earn interest until January 2007 at which point, I will pay off the entire balance as the 0% offer expires.

As part of a little experiment, I wanted to see how much doing this would affect my credit score. While obtaining a credit report is free from annualcreditreport.com, obtaining your FICO score is not and can run up to $45 to obtain all 3 scores.

So I signed up for a 30-day free trial credit monitoring service provided by Experian which also provides what they call a PLUS score which I had never heard of. According to Experian, it ranges from 330-830 so I thought it is a very similar scale to the FICO score. Now, I think paying a monthly fee for "credit monitoring" is a waste of money; if anything, credit card companies should provide this service for free since they will benefit most from it from not having to absorb any fraudulent disputed charges. Nonetheless, I plan on canceling my free trial but I did obtain my credit score pre-0% balance transfer... a score of 784.

It's amazing how many different credit accounts (many closed) that I have listed on my report. Just my student loans alone are something like 7-8 accounts although I long ago consolidated them into one. Back to the main point. The line of credit has shown up on my MBNA credit card statement but has yet to be transferred to my checking account.... I'll keep updating..

0% balance transfer

2006-05-25T23:27:00.000-07:00

After pondering for several days, I finally decided to take advantage of a 0% balance transfer offered by one of my credit cards, MBNA. Now, I pay off my credit cards every month and never carry a balance, but have come across the notion of making money off balance transfers from other bloggers. It works like this... my credit card sent me a mailer with checks and a 0% balance tranfser promotion. The offer gives me the option for them to either pay off a pending balance or to make a direct deposit into my checking account. I have 0% APR on the balance transfer until January 2007.

The cost: $75 fee for the transfer. And a ding on my credit score because it will increase the percentage of credit I have outstanding relative to my overall credit amount. According to FICO, this will affect 30% of my credit score... how that translates numerically is unclear to me.

Now, I am planning on purchasing a car in the next 6 mos; however, I will likely have my wife apply for any financing that we might do as I likely lowered my score by these antics.

The payoff: I will transfer $33000 to GMAC bank which is currently paying 4.75%. I opened up a new account just for this balance transfer to keep it separate from my other money. This will translate to approximately $130/month or ~$900 in FREE interest for the next 7 mos. It will be slightly less than this as I have to pay 1% of the balance per month to maintain the 0% APR.

The fine print: Pay 1% of the balance on-time every month. Purchases do not qualify for 0% APR. If purchases are made, any payments will be applied to the LOWEST APR first.

What I really debated was whether doing so was worth a ding in my credit score. What I might do is obtain my credit score now pre-balance transfer and then after my balance-transfer to see what happens to my score. If it drops it to < 700 I'm going to be pissed off.

Need new car: Fighting the urge to keep up

2006-05-20T00:49:00.000-07:00

Cell phones and (dumb) drivers just don't mix. While mostly everyone has been annoyed by another driver on a cell-phone, I was never affected directly... until last month. Some knucklehead crashed into my beloved 1994 Nissan Altima with 150k miles on it forcing my hand into needing to replace this car. Turns out, the guy was looking for his cell phone and didn't notice the red light, thus plowing into the side of my car and royally "effing" it up. Now, I love nice cars as much as the next person and this being the first real car that I will have to purchase... I was not nearly as p.o.'ed about losing my Altima as I should have been.

So what to buy? The first thought that came to my mind was a nice German-engineered car ... something like the BMW 3 or the Audi A4. Being in San Diego, I spend a lot of time on the freeways and thought that I should drive something enjoyable. Plus it has to look good right? But then, I decided to make a spreadsheet comparing the price/horsepower/enginesize/MPGs for various cars and to my complete disappointment, it seems that the best values (for my price range <$35k) are either a Toyota Camry, a Honda Accord, or a Honda Civic. But c'mon, I'm in my early 30s and a Camry is just not the car that I envision myself driving AND having fun doing so.

The urge to keep up with the jonezez and go for a nicer car versus pursuing the most "bang for my buck" are completely in conflict. Boring-ass Camry that will likely last 10-15 years versus nice-looking Audi/BMW/Lexus/Infiniti but pay an extra $5k-10K? Man... in the end.. all I really want is my Altima back!!! I still haven't gone for a test-drive but will keep posting how the car-buying process goes.

Fidelity Rollover IRA part 2

2006-05-18T23:23:00.000-07:00

Well, I've initiated the rollover IRA process in my employee-sponsored account held at Fidelity. The transfer hasn't been done yet because my employer requires a notarized signature which I have yet to obtain.

My current allocation in my 403b is as follows:

26.42% FID CONTRAFUND
11.94% FIDELITY LOW PR STK
11.91% FID SMALL CAP VALUE

11.19% FIDELITY NEW MILLEN
10.10% FID INTL SMALL CAP
9.68% FID LARGE CAP VALUE
9.36% FID DIVERSIFIED INTL
5.77% PIMCO TOT RETURN ADM
3.63% FID INFLAT PROT BOND

While my preference overall is Vanguard, I've been pretty satisfied with Fidelity thus far and will keep the rollover with Fidelity.... for now. I'm predicting that completion of the transfer will take place over the course of 2 weeks.

Fidelity Rollover IRA

2006-05-15T23:51:00.000-07:00

When I changed jobs from Cleveland to San Diego, I "left behind" one very important thing... my 403b account. My old employer used Fidelity as the custodian and I basically had access to all Fidelity funds plus a sprinkling of others (some Janus and Pimco funds). When I started my new job in San Diego, the 403b account also uses Fidelity as the custodian. Because both employers used Fidelity, I never felt the need to do anything with my old 403b account. There were no extraneous fees or what I felt was limited access to sub-par mutual funds since I could access the entire Fidelity lineup.

Today, I called Fidelity asking about the pros/cons of rolling over my 403b into an IRA. It boiled down to the following: more flexibility and more favorable status for beneficiaries on the IRA. More flexibility meant that with a rollover IRA, I can access many more mutual fund companies and even ETFs. Apparently, Fidelity has agreements with some companies (Janus and Pimco for example, notably, NOT vanguard) where you can purchase their funds and not pay a transaction fee ($75). The other positive of a rollover IRA was if I happened to be so unfortunate as to die, the rollover IRA would continue to remain in a favorable tax status to my designated beneficiary (i.e. spouse) and not necessarily be cashed-out. If I died and my money was still in the 403b, the employer would most likely cash-out the money and pay out a lump sum to my beneficiary, thus losing tax-benefit status and also incurring a penalty to the IRS.

For these reasons, I have decided to change my 403b over to a rollover IRA (the final option is to not rollover and just cash-out... this was not an option for me). In addition, Fidelity provides portfolio advice!

Now, for those that have read my blog, you know that I am a much bigger Vanguard enthusiast and often criticize Fidelity. However, I have been pleased with my returns in my retirement account at Fidelity so for now, will keep the rollover with Fidelty. I will keep you posted on the whole rollover process. I wonder if during the advice session, Fidelity will encourage their own mutual funds?

Supreme overdiversification

2006-05-11T23:00:00.000-07:00

Found a cool website that lists the investments of all judges. What does chief justice Roberts have in his portfolio? 46 common stocks and 31 mutual funds plus other miscellaneous investments. Granted, I have no doubt that being as busy as he is, he must have professionals managing his investments. While I give him props for owning several low-cost Vanguard funds, there is significant overlap in some of his holdings. For example, he owns Fidelity Contrafund, Magellan, and Scwhab S&P 500. Why own the more expensive Schwab index fund when you can just go with Vanguard 500 index? Just interesting to see that even professionals with professional help often don't get good advice.

Dow near record high: BOO!

2006-05-09T21:05:00.000-07:00

Ok...I must admit, although most "experts" state that once you invest money in the market, you shouldn't follow your investments on a day-to-day basis, I intently track the market on a daily basis. This advice from the experts stems mostly from behavioral economists that have shown we are our own worst enemies and tend to act irrationally when it comes to investing. We have the tendency to buy high and sell low as opposed to the other way around.

But come on, part of the fun is tracking your investments and I am guilty as charged. I find it hard to expect people to not follow their investments. The key is to not act on the day-to-day fluctuations of the market (unless you are a superstar investor). Bill Bernstein gives the analogy of walking your dog to the park. The dog will dart from side to side (day to day fluctuations) but the final destination is eventually the park.

Why am I booing as the DOW nears it's record high? Because I am relatively youngish and am buying into the market for eventual retirement. So I dollar-cost-average into my 403b and a Roth IRA every month. But the analogy of me buying into the current bull market is like buying a pair of jeans that are priced high. When we all go shopping, we look at the sale rack first and try to get those jeans cheap. This is equivalent to investing in a down market. It would be to my advantage if the market was actually tanking right now so that as I continue to invest, I am buying things on the cheap. For those that are near retirement age or are hoping to realize some of their gains, of course, it is to their advantage to have an upmarket so they can sell high.

So while the Dow continues to climb and I feel good about my investments, I really should be more disappointed as it is equivalent to buying those Diesel jeans at regular price rather than buying the Garanimal brand at Sears.

Tax Refund

2006-05-05T00:46:00.000-07:00

Most that have filed taxes for 2005 have already received refunds, especially if the choice is for direct deposit. The numbers are in for the amount of federal income-tax refunds and for 2006, it is $190.52 billion dollars!!!! The average refund was $2237.

Basically, this amounts to an interest free loan that taxpayers are providing to Uncle Sam interest-free. If you did get a large refund, consider changing your withholding (W-4) form to decrease the amount that is witheld from each paycheck and thus decreasing the amount that you are loaning to the government.

Consider a $2000 refund. If you leave this in an internet savings account such as ING direct or Emigrant direct with a 4.5% interest rate, this amounts to about $90 in interest over the course of the year. Not much right? Hey, but $90 can buy you a nice dinner for two, several movies, even a cheap wetsuit if it so interests you.

The only time I think it's OK to get a large refund is for those people that have trouble saving money. Then, having a large amount withheld is sort of a forced savings account. Just make sure that when that big refund check comes, the money should be saved or spent wisely.

Roth IRA for the wealthy

2006-05-03T21:11:00.000-07:00

There is a bill that is currently going through congress that would allow high-income taxpayers to convert traditional IRAs into Roth IRAs. Apparently, the current $100,000 income limit on such conversions will be suspended for 2 years (WSJ, 5.3.06) if the bill is approved. Now, while this legislation will not affect me as my income is below this ceiling and I already contribute to a Roth IRA, I totally support this type of tax legislation. I just don't agree with the message from tax policies that seem to penalize people with higher incomes by taxing them more and/or not giving them the same access to tax-benefits (for example, income limits on Roth IRAs). The message seems to be, "The higher the income that you earn, the more you will get taxed/penalized". Look at the alternative minimum tax.

So legislation like this that removes income ceilings seems and allows wealthier individuals to access the same tax-benefits as everyone else seems fair to me. Of course, the downside will be to figure out how the government will be able to make up for some of the lost tax-revenue that will result from any tax cuts. Unfortunately, given the current state of affairs with worsening deficits, low savings rate, foreign dependence on oil, weakening dollar, the rise of China and India, aging population and slow erosion of social security, we may be in for some serious sacrifices and more than likely, possibly higher tax rates. All the more reason to convert to a Roth IRA if you haven't already done so.

Surfing San Diego

2006-05-02T23:02:00.000-07:00

So much blogging about finance stuff, but still no posts on the surfing as I had originally intended. But choosing to surf has to do with finance... at least indirectly.

So as I enter my 30s, the body just doesn't hold up as well... pants start to get a little tighter, get the occasional sprouting of grey hairs, fatigue kicks in earlier. So I thought, I need to do something to keep physically fit... but preferably something inexpensive, hence the tie-in to my personal finances. Being in San Diego, how can you pass up on the surfing? plus, going to the beach is free and you need minimal equipment. But I'm starting to realize that surfing becomes very addictive, subsequently putting me into a positive feedback loop of more and more purchases.

Expenses thus far:
1)used surfboard $275
2)Oneil psycho 2 wetsuit $200 (hook-up, reg price is $395)
3)Quicksilver backup wetsuit $100
4)Yakima Surf rack set-up for my crappy car $375
5)Leash $25
6)Board shorts x 2 = $40
7)Boat-loads of sunscreen = $20
8)Surf hat to keep sun off = $20
9)Wax $10
10) now looking into another surfboard purchase to diversify ~$300-500

That's well over $1000 and pushing $1500 if I buy another surfboard. Not so cheap afterall... but the way I see it, it will keep me in shape, I enjoy doing it, and there's nothing like the gratification of being able to go at will without having to pay any type of fee (like a course fee or lift ticket, etc). Maybe I should invest more time and energy in learning to play poker well where there is a potential for positive returns.

Nigerian Scam...In Japan

2006-05-01T19:08:00.000-07:00

So some genius felt that it was best to try to scam someone by posting on the comments section of my blog. I can barely even understand what the heck they are trying to ask...of course, how does this relate to personal finance?

There is no such thing as having returns without risk (the closest thing perhaps are treasury bonds, money markets, FDIC savings accounts).

Check out the scam below:
"I need your help.
So I manage as anybody find only your benefit without your loss and risk.
If you can not trust me after you reed this, please teach me how I can trick you.

I want to buy a thing which I can not buy it in my country.
And I can not make a credit card.So I can not pay.
So please buy and send it to me.

In total, I pay you about US$ 2000.
It costs about US$ 450 - US$ 500.
I need two kinds of them. so US$1000 for one.
To trust each other, I send US$1000 whenever I get one of them.

I pay US$ 300 in advance for it and the other after I get it.
So no risk for you.Please send a reply.
Then I can write detail of the thing.

I pay total because I need your cooperation for my life.
I wish you do before it.
--->
rootk9000@yahoo.co.jp"

-Uh... thanks loser. can i call you so I can just GIVE you my credit card #, SSN, and/or bank information?

What's In Your Wallet

2006-04-29T15:57:00.000-07:00

There is a meme going around where bloggers reveal the contents of their wallets. Thought i'd post just for kicks. My wallet (not mine, but what it looks like):

1. American express True Earnings
2. Citibank Dividend Rewards MasterCard
3. Chase Cash Plus Rewards MasterCard
4. Premier Practice $20 Golf Driving range card (last used during Thanksgiving)
5. San Diego County Library Card
6. REI membership card
7. San Diego Blood Bank Donor ID card
8. Student ID card (for discounted movies)
9. Bank of America ATM Card
10. California Drivers license
11. Organ donor card
12. Triple A Ohio card
13. Blue Cross health insurance card
14. Epocrates debit visa card
15. In case of emergencies contact information card
16. Check from Ameritrade..... for 12 cents (capital gains anyone?)
17. $33 cash

Cisco @ 73: An Expensive Lesson Learned

2006-04-28T10:40:00.000-07:00

During the late 1990s, I was living in the Bay Area during the dot.com boom and was saturated with news about how much money people were making on the stock market. I knew nothing about markets/investing.... I was in school with no income other than my student loans. But I didn't want to miss out. So despite not having much money, I couldn't pass on the opportunity for "easy money". So I bought $1000 worth of Cisco @ 73/share March 2000 (just before the bottom-dropped out of the market) . Did I even know what products Cisco made? No, something about routers or switches or some high-tech-type product... I just knew they had cool commercials ("Are you ready?"), were "tech" and thus as good as gold. When people start buying stocks without doing sufficient research, and prices continue to go up despite poor financials on that company, you are then investing in a speculative market or as Alan Greenspan called Irrational Exuberance.

I subsequently watched the price go down... and down... and down... and bought a few more shares to try to recoup some losses... but watched it go down to it's nadir of $8.00/share in October 2003.

In the interim, I reeducated myself, got into mutual funds, and haven't looked back.

I finally sold all my shares at around $20 last month because I was tired of
owning a single stock that was going nowhere despite the bull market of 2003-2006.

6 years later, after having "reeducated" myself about personal finance and investing, I must say that buying Cisco was one of the best things I could have done early in my investing experience. Although I lost ~70% of my initial investment, it forced me to read and learn more about investing. Now, I tend to agree with the opinions of William Bernstein, John Bogle, David Swensen to name a few.

Lessons learned:
1)never buy a single stock
2)don't overestimate your stock-picking ability
3)diversify
4)know when to sell
5)learn from your mistakes
6)buy low, sell high (easiest to do by dollar-cost-averaging and rebalancing appropriately)
7)research before you commit money to something

California: Quick to cash, slow to respond

2006-04-27T18:11:00.000-07:00

My wife recently had to apply for licensure as part of her profession in California. She submitted her appropriate documents to Sacramento in October... She followed-up within 6 weeks to check on her status. Total run-around, no resolution. Needless to say, she finally did NOT get appropriate licensure until earlier this month (approximately 6 mos after initial application).

Now.. I owed the state of California money for 2005 income taxes. In addition, I submitted an estimated tax payment for 2006. Payment submitted via snail mail on April 17 to prolong the pain of paying taxes as much as possible. The checks were deposited by the state of California within 1.5 weeks! Why does it take the state 6 months when you need them to approve something as a condition of your employment; but when it comes to accepting payment, they deposit your money as quickly as they receive it?

How convenient.

Don't you hate it when this happens with other "services"...i.e. cable companies, DSL service, phone bills, etc. They expect payment promptly but when you call customer service, it takes ungodly amounts of time to just speak to a human sometimes. How lame.

Why Mr. Johnson (Fidelity) is no John Bogle

2006-04-26T19:41:00.000-07:00

It seems that Fidelity has been trying to change their business strategy as of late and... hmmm, it smells a lot like what Vanguard has already been doing since the company was founded by Mr. Bogle many years ago. Let's briefly review: Fidelity was the shizznit back in the 80s and 90s when Peter Lynch racked up impressive returns with his Magellan Fund. This vaulted Fidelity into the largest mutual fund company and Magellan as the largest mutual fund. As usual, most investors joined the party too late missing out on those stellar returns, but the fund continued to have severe asset bloat, thus returning less than the S&P 500 for most of the late 1990s and early 2000s. Fidelity is notorious for closing their funds too late as exemplified by Contrafund scheduled to close later this month (current assets ~70 billion!).

As Fidelity started to lose their market share (see American Funds and Vanguard), they started to change their business model to mimic what companies like Vanguard had already been doing, namely lower costs. Their Spartan index funds have expense ratios of 0.10 (less than Vanguard), they recently announced closure of two more of its successful mutual funds (Mid Cap and Growth Company)..... and now, they've provisionally won a contract to manage California's 529 college savings plan. They beat out Vanguard and TIAA-CREF by promising lower fees, more investment choices, and marketing efforts.

But Fidelity does not hold the interests of its shareholders as a priority. In fact, Fidelity has objected to an SEC requirement that fund boards have independent chairs. Looking out for the individual shareholder? I don't think so. For Californians, it's kind of a moot point because there is no state tax benefit for residents to hold a california 529 plan so residents can shop around for any state's plan and still get the federal tax benefit.

After saying all that, would I own any Fidelity funds? I already do.... in fact, all of my 401K is tied up to Fidelity funds. It still offers solid choices... but just like the wolf in sheep's clothing, the interests of (most) fund companies do not lie with those that own its mutual funds.

I-Bond Yield at 6.73%: Not the Whole Story

2006-04-24T18:13:00.000-07:00

One of the safest places to invest money is to invest in US Government bonds. These low-risk investments come at a price that is a general rule to apply to all investments; the lower the risk, the lower the expected return. Wait a minute... what about the current 6.73% yield on I-bonds? This surely blows away any bond yield that is available at this low risk level. But let's look at it closer as this yield is set to expire at the end of this month.

The yield on I-bonds is comprised of two rates: a fixed rate that is good for the life of the bond (30 years) and a variable semiannual inflation rate based on the consumer price index (CPI). Knowing the fixed rate is key because this is the true yield of the bond. For example, the prior 6 months had a relatively high CPI of 2.85%. Multiply by 2 to make it the annual yield (i.e. 12 months) and that results in 5.7%. Finally, add the fixed yield of 1% with some minor adjustments and you arrive at the current yield of 6.73%.

Now, a new yield for I-bonds will occur May 2006 and while we can't predict what that rate is; we can make an educated guess. The CPI for the last 6 months has been ~0.5%; annualize this brings you to 1%. Add this to the fixed rate and your new I-bond yield will be around 2%...still a positive return but definitely not the 6% that you may have expected upon first signing up for the bond.

Of course, I-bonds still definitely have a role in everyone's portfolio as they are a nice hedge against inflation. I allot 25% of my bond portfolio to TIPS (Treasury Inflation Protected Securities) which for my current allocation (90% stock/10% bonds) is 2.5% of my overall portfolio. But it's important to understand how the yield for I-bonds is calculated so that you don't expect the nice return of 6.7% for the life of the bond.

Gold and Silver: Pass the Pepto-Bismol

2006-04-22T10:43:00.000-07:00

The commodities market has been on a tear as of late. In fact, Vanguard's Precious Metals and Mining Fund (VGPMX) has returned > 60% in 1 year! It has been so successful that the fund closed in early February 2006 to limit asset bloat. Gold prices were in the headlines earlier this week as the price went over $600 per ounce. Is it time to invest in these precious metals?

Commodities are known for their volatility and this was demonstrated a few days ago when Gold dropped 2% in one day, sliver dropped 14% in one day! Many experts feel that gold still has plenty of room to go higher as downward trend for the dollar is anticipated over the long-term. Some may ask themselves, how can you just sit this out while people invested in the sector are getting red-hot returns? Personally, I cannot tolerate such volatility. Most investors are irrational investors to what are perceived to be rational markets and tend to invest when prices are high and sell when prices are low. So as gold continues to push higher, there will undoubtedly be a greater influx of investor money into it. Returns may continue to be strong but it may be another case of joining the party too late. Once again, appropriate diversification and dollar-cost-averaging is an easy way to protect against our own irrational behavior when it comes to investing.

Although $600 seems very high, if adjusted for inflation, gold will have to be >$2000 to reach the highs it had in the 1980s. Invest in precious metals in 2006 and enjoy the wild ride? No thanks, I'll pass on the pepto-bismol and the darkened bowel movements that result from it.

Our savings rate is less than 0%: The whole truth?

2006-04-21T15:21:00.000-07:00

Recently, there have been dire headlines in the newspapers regarding our consumerist tendencies in this country. According to these articles, we are a country addicted to debt, our savings rate is negative for the first time since the depression; i.e. as a nation... we're in some deep s!@# and our children will have to pay the consequences via higher taxes, more sacrifices.

Much of these dire predictions do give us a snapshot of where we stand in this country as a whole; however, this isn't the entire truth. For example, my savings rate is >10% (and many of you that read finance blogs likely save more than you spend); I don't think I'm necessarily unique in this aspect. In fact, many Gen X and Gen Yers are not relying on social security for their retirement and are making preparations now in the form of contributing to 401ks or IRAs. Is there a subset of super-savers that has reacted against the current perception of our generation being a generation of materialism and indebtedness?

There is an interesting article in the NY Times that discusses this. It seems that within our generation (age 20-40), there is a growing disparity in savings rate between those with high incomes and those with lower incomes. High income people are contributing more to retirement than ever before whereas those with lower incomes continue to struggle and will necessarily depend on social security and/or pension plans during their golden years. The larger questions are (1) how will this problem be fixed? and (2) is it fair to burden those that have done a good job at saving in the form of higher taxes to compensate those that need assistance? What then is the motivation to save if you get "penalized" for doing so? Where do you fit in? Super-saver, saver, breaking-even, or so far in debt it doesn't even matter anymore?

Got Refund? Now What?

2006-04-20T18:47:00.000-07:00

Unfortunately, I didn't have the fortune of getting a little somethin' from the IRS this year. In fact, I owed the IRS quite a bit of money this year. You can almost say that the IRS loaned me money and this came due on April 15.

For those that do have a little refund or have some extra cash to save... don't just blow it on that plasma TV your neighbor just bought or a down payment for the new set of wheels. The following is a checklist in the order of how you should utilize that money:

1. Emergency fund
2. Maximize the match from your 401K
3. Pay credit card debt
4. Max out Roth IRA
5. Max out 401K
6. Invest wisely in non-retirement accounts...

Notes to above:
1. Have an emergency fund that covers about 6 months of all of your expenses. This is so you don't lose that new house you recently bought or have to start bumming rides from your friends if you have an unexpected lay-off, or medical bill, or (fill in the blank). This should be invested in short-term vehicles, preferably, high yield savings, money markets, or short-term CDs for easy accessibility. Next...

2. Contribute enough to your employer-sponsored retirement plan to get any matching contributions from your employer. This is free money! Don't pass this up! Matching equals 100% returns... you will never get any better return than this. The matching rate can vary anywhere from 1% to 6% of your contributions (if you get any higher, don't lose that job)

3. Pay off credit card debt. The higher the interest, the earlier that debt should be paid off. Credit card interest generally tends to be higher than 15% and higher if your credit score is worse. If you can, transfer it to a new card with a promotional 0% balance transfer

4. Contribute to a Roth IRA (most folks, especially younger ones, benefit from a Roth over a traditional IRA) and max this out. 2006 limits are $4000 for age < 50.

NEXT (if you've gotten this far, you're doing better than the average person)

5. Return to that 401K and max this out. $15000 limit for 2006.

6. Invest to your heart's content. Diversify broadly and be tax-savvy. This usually means no load mutual funds, index funds, low-turnover (<20%), domestic and international equities, tax-exempt municipals. My favorite is Vanguard but there are several other good companies including Fidelity, TRowe Price, Dodge and Cox, Dimensional Fund Advisers, TIAA-CREF... if you insist on paying a load, then American Funds are managed well. Each have their own positives/negatives.

One of the toughest questions is where does real-estate fall into this mix of things. My bias is you shouldn't be considering real-estate if you still have credit card debt although this is a bit controversial. I just wouldn't be comfortable adding a huge mortgage if I knew I still had a lot of consumer debt. Oh... and if you are somewhere around step 5 or 6 and STILL want that TV... you probably deserve it; just make sure it doesn't send you back to step 3.

Publish or perish: #2 on the list of 10 best jobs!?

2006-04-19T21:40:00.000-07:00

CNN/money recently posted the 10 best jobs list in America. Pretty surprising to see some of the professions they listed. The idea of college professor is really cool but when I think of professor, I think of someone that has to "publish or perish". That does not sound like a mantra under which I would want my livelihood to be dependent on. Job insecurity would make me age rapidly as in the way Bill Clinton's appearance transformed from pre-Lewinsky to post-Lewinsky impeachment.

Teaching at community colleges, technical schools is different and likely just as rewarding... but the term professor to me implies research... thus grant applications... thus constant deadlines and the possibility of not being funded. Not cool.

In addition, this list does not have longevity, it's more of what is HOT right now...I doubt "real estate appraiser" will be anywhere near the top 10 next year.

When 6% is Too High

2006-04-18T22:33:00.000-07:00

San Diego is one of those cities that is constantly near the top of cities with the largest increases in real-estate prices over the last 5 years. Unfortunately, I moved here likely near the top of the peak and as luck would have it, am looking to purchase our first piece of real-estate sometime in the near future. While as a buyer, I do not directly have to pay commission on the purchase of home; it indirectly effects the price of the home I am paying as the seller necessarily takes the commission into consideration when pricing his home. This is usually 6%.

Although we have a full-service realtor, my wife and I have been doing most of the legwork in looking for our house (by choice of course as I am not comfortable relying on someone else telling us what we may or may not like). Our realtor does drive us to look at homes, but usually, we generate the list of homes that are interesting to us. Since we do most of the work, why should our realtor get up to 3% of that 6% commission? An innovative company has come up with a solution that seems to be extremely beneficial for the consumer; namely, returning some of their commission to the buyer.

Not sure if I'll try it (yet) but definitely an interesting development in the world of real estate. Like Chuck D said in Black Steel in the Hour of Chaos... (BASS)How low can you go?!

Read My Lips... No New Taxes

2006-04-16T11:50:00.000-07:00

Some of you may remember that statement said by George I during his run for presidency in 1988. While his defeat in 1992 was multifactorial, much of his credibility was lost when in fact he did raise taxes during his presidency. George II, most Republicans and Democrats agree on this, is likely not the most intelligent president this country has seen... but he does learn from his father's mistakes. One of his political successes was to push through substantial (but temporary) tax breaks with some expiring in 2010. Currently, there is debate regarding whether to make these breaks permanent.

Politicians are a savvy group; that is why they are politicians. Increasing taxes requires action that politicians cannot necessarily sneak under the noses of their constituents; most are opposed to having to pay more taxes and will vote accordingly (see George I again). But allowing tax breaks to expire has the same effect as raising taxes... it's just that doing so is passive and most will not realize they will owe more taxes until the tax bill comes due. In 2006, the Alternative Minimum Tax (AMT) Patch expired and "one in four families with children, up from one in 22 last year, will owe up to $3,640 in additional federal income tax come next April" (NY Times). Now while I don't fall into the AMT and this doesn't effect me, it seems disingenuous for officials to state that they do not raise taxes but in fact, allow tax breaks to expire without mention.

While permanently lowering the taxes on dividends and long-term capital gains is great...I would prefer that Congress act to fix the AMT as it effects many millions more. 2008 will be an interesting election...depending on which party gets elected, the approach to balancing the current budget mess will be very different. Will the gap between the haves and the have-mores continue to widen? Probably, but who to elect in 2008 to fix this mess will be crapshoot...most do not practice what they preach during the campaign trail. Smoke and mirrors man... like the last scene in Enter the Dragon.

Tax Day

2006-04-15T16:25:00.000-07:00

Today is tax day. Don't forget to mail your returns or click that submit button by Monday. Unlike most people, I prefer to adjust my witholding so that I owe money to the government every year... just enough to NOT get penalized for underpaying. Unfortunately, I switched jobs this year and tax circumstances changed a bit.. so now I owe a penalty of $22 for underpaying. Can anyone make sense of those insane worksheets the IRS provides to try to calculate your tax payments or witholding? Typical of something the government would publish... verbose, impractical, and useless.

New Links

2006-04-14T00:00:00.000-07:00

I've added new links to my blog. The financial links are the institutions that I am currently using; not necessarily advertising these companies but companies that I feel CURRENTLY give me the most value for my money. With the exception of Bank of America. I only keep this to have easy ATM cash access and usually keep a minimal balance in here. Otherwise, BofA does not have good rates or deals for checking or savings accounts. Currently, I have a "student" account with monthly fees waived and no minimum balance. For some reason, it has not expired. This is the one time that being a career student has financial benefits.

Who ever heard of a bank charging you money for them to keep your money? Apparently, this is more the norm with the large banks in California. Shoot, they don't even give you those cheesy lunch coolers or duffel bags as an incentive to open an account with them.

TIVO, DirectTV, and a SIGH of relief

2006-04-12T19:46:00.000-07:00

I know, I know... owning a tivo is not necessarily consistent with my "not keeping up with the jonezez" philosophy. But this is one of those relatively big purchases that I feel has been worth every cent. I bought the Tivo after moving to Cleveland about 4 years ago and realizing that my work hours were going to be long and the winter was going to be longer. And believe me... owning a Tivo in Cleveland circa 2002 was definitely not keeping up with the jonezez, in fact, I felt like Mr. Jones himself (clevelanders are not necessarily early adopters). At that time, the total purchase was $600 (400 for the machine + 200 for lifetime service).

I had two questions when weighing the risks for purchasing lifetime service: a)will my Tivo machine last long-enough to justify the lifetime purchase? and b) would Tivo as a company endure as a successful business?

When I heard that DirectTV would no longer market Tivo last summer, I thought the days of my Tivo were numbered and I would have to make the transition to monthly fees for a DVR via my cable company. But with today's announcement that Tivo and DirecTV extended their agreement for 3 more years, I felt a nice sigh of relief (Tivo's stock increased 8% on this news and no, I don't recommend it or own it).

Of course, I am still of the opinion that unless Tivo alters it's business model, it's days are numbered despite the word "Tivo" being in the everyday vernacular just as "googling" someone has become. Cable companies have near regional monopolies that will hinder Tivo from continuing to get new customers. Well.... at least 3 more years (I hope), commercial-free.

America's Finest City errr Pension Plan

2006-04-11T20:02:00.000-07:00

Welcome to San Diego. Surf, Sun, Sand... how about a $1.4 billion dollar pension deficit? Not anything you'll read in tourist brochures for this so-called America's Finest City. So how does this happen? Well, in the late 1990s, local politicians decide to vote themselves an increase in the pension plans for city employees including themselves; problem is, the numbers didn't quite add-up. Now, libraries are cutting their hours short, city services are being cut, police officers are changing municipalities. The feds got involved and brought charges against some of our elected "representatives".

unbelievably, those same officials that put the city in the hole want taxpayers to pay for their defense. Are they kidding?

People tend to think of San Diego as this laid back city and in a lot of ways, most citizens are laid-back, apathetic to local politics. This undoubtedly contributes to the sheer blatant stealing that politicians feel they can get away with.

This sort of cheating relates to how I never think an individual investor is on the same playing field as others in the bizznness (i.e. institutional investors, corporations, insiders). These politicians have inside access; namely the ability to increase their own pensions. Similarly, corporations and institutional investors have access to investment/business information that the rest of us small fries can only dream about. Once again, more reason to diversify broadly, choose low cost funds, and track indexes (i.e. see vanguard).

Let's hope those darn pandas at the SD Zoo can draw enough tourists into the area to help get the city out of this mess.

1st quarter 2006 Mutual Fund Performance

2006-04-10T20:53:00.000-07:00

The first quarter for 2006 just came to a close and overall it's been a good quarter for me and most investors. In reviewing mutual fund performance, it seems that international stocks continue to outperform domestic markets and small cap funds have not given up their gains to large cap funds (as most "experts" have predicted). This again reinforces the notion of appropriate asset allocation and diversification; even the experts cannot predict future market behavior.

This reminds me.. in the summer, my brother asked me to help him out with his non-retirement portfolio as he had most of it in cash. His retirement portfolio, by-the-way, is managed by a financial adviser (who happens to live in Bel Air!... hmmm, makes you wonder how many investors are subsidizing his salary). In order to advise my brother accurately, I wanted to get a sense of how his retirement portfolio was invested (stocks vs. bonds, large cap vs small cap vs. international, etc.). Of course, when I spoke to the adviser, he first asked me what I did for a living (not in the financial industry), then proceeded to drown me in a bunch of jargon stating how he was predicting the market would not do well and so he was maintaining a strong cash position, blah, blah, blah. I point-blank asked him, what is the asset allocation in the retirement portfolio so I can plan my brother's accordingly. He then tried to undermine asset allocation strategies and stated that academics had it all wrong.

Yikes.

Regardless, I advised my brother to invest in Vanguard mutual funds, some index, some actively managed... most with low turnover given it was a taxable account.

Needless to say, it has outperformed his retirement portfolio.

I don't take solace in this because the true measure of performance is how a portfolio does over the long-term (10 years +). But at least he didn't discourage me with all his technical jargon from advising my brother in what I think was the right direction. Unfortunately, I'm not living in any place nearly as nice as Bel Air... I wonder who really gets the last laugh?

Jack Bogle's Portfolio

2006-04-08T01:17:00.000-07:00

Most all of you who read personal finance blogs undoubtedly know Jack Bogle, the founder of Vanguard and champion of index funds. Well, I was very interested to read what HIS portfolio is currently comprised of (see link); mostly to see if he practices what he so eloquently argues for in many of his books. For the most part, he seems to be consistent with his beliefs...he has mostly (but not all) index funds, he has the majority of his portfolio invested in Vanguard funds (at least that's what he discloses), and he practices and assett allocation strategy.... for the most part.

However, there are some aspects of his portfolio that are a result of market-timing or perhaps more accurately, following the momentum of the market that surprised me. For example, the article states that in July 2004, his portfolio was 35% stock/65% bond whereas now, his portfolio is 65% stock/35% bond. Was this intentional? Yes... in that he allowed his portfolio to drift towards this allocation that resulted from the strong performance of equities over the last 3 years. Strictly speaking, if he followed his own advice, he would rebalance his portfolio based on his risk tolerance, time to retirement, etc... rather than allow the market to dicate his assett allocation. And if his assett allocation was 35%/65% in 2004, then the subsequent increase in stock allocation should be a result of a change in his risk tolerance or desire for increased returns at the expense of higher risk, or longer-horizon until retirement rather than a passive result of market performance.

I still respect the man and believe that his book "Common Sense on Mutual Funds" should be read by anyone that has a 401k plan. Overall, I am at least happy to see that he puts his money in Vanguard (I just wish Vanguard funds disclosed how much of the fund is owned by the manager of their funds!)

Sentinal Post

2006-04-06T01:19:00.000-07:00

I've recently moved to San Diego for a new job after having lived in dirt-cheap Cleveland and have come to realize... DAMN! San Diego is friggin' expensive. Much of this is just due to your regular cost-of-living expenses (i.e. housing, food, gas, entertainment), but being southern California, there is a constant black-hole-like pull to try to "keep up with the Joneses". In fact, the default pathway is to try to keep up with your neighbors....whether it is driving a nice car, owning the largest plasma television, taking the nicest vacation; you get the idea. Is this a bi-coastal-blue-state thing? or is it a more universal result of the power of American consumerism? I must say, Cleveland didn't necessarily have the same feeling of materialism... but then again, Cleveland is an economic dead-end..i.e. the mistake by the lake.

So now living in San Diego, my mantra has become to not keep up with the Jonezez.... not only for the money that I will be able to save, but also to stay grounded and maintain self-worth without feeling that I have to purchase something to feel worth. Trying to not keep up with the Jonezez will be the underlying foundation from which I will post on various topics on personal finance, investing, consumerism, etc....

Welcome.